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Utah Business

The End of NAFTA: How Trump’s Trade Wars Will Affect Rural Utah

Amid tense renegotiations of the North American Free Trade Agreement (NAFTA), 27 Utah companies set out on a business trade mission to Mexico led by Governor Gary Herbert and organized by World Trade Center Utah (WTC Utah). Their goal: establish connections and expand their economic reach in Latin America. Although the future of the trade agreement hangs heavily over many Utah industries, business opportunities with our closest neighbors are still very much available.

Mexico was chosen for the location of the trade mission because, with approximately $850 million in exports each year, it is the fourth largest export market for Utah goods and the second largest export market for US goods. Economic growth in Mexico is closely connected to the United States and has enjoyed stable growth at or over two percent since 2010. Under NAFTA, Mexico has become one of the US’s top trading partners.

How Changes To NAFTA Could Affect Trade

In its 24-year history, NAFTA, which was established to set rules for the exchange of goods and services between the United States, Canada and Mexico, has remained unchanged. Though mostly favorable, reception of NAFTA has been mixed. During his presidential campaign, Donald Trump declared NAFTA as the worst trade deal in US history and cited it with the demise of the nation’s manufacturing industry. While all three countries agree that NAFTA should be updated to reflect our modern economy, Mexico and Canada were reluctant to participate as President Trump spearheaded the renegotiations in August of 2017.

Conversations so far have been cumbersome. An agreement was originally expected to come at the end of last year, however, new projections for completion are creeping into 2019. Also uncertain is what the finished product will look like. While a modernized NAFTA could increase market opportunities for American businesses, there is a possibility the agreement will cease to exist. Losing NAFTA would have serious repercussions for Utah’s economy. This is especially true for Utah’s agricultural and food industry, which attributed 17.6 percent of its total exports to Mexico and Canada in 2016.

How NAFTA’s End Could Affect Rural Utah Businesses

Andy Pierucci, Director of the Marketing, Communications, and Economic Development Division at the Utah Department of Agriculture and Food, felt that a Governor-led trade mission to Mexico was more important than ever. As a delegate of the mission, Pierucci saw an opportunity to make connections that will positively affect Utah’s agriculture industry as a whole. “When we talk about trade deals, people naturally focus on the big picture,” says Mr. Pierucci. “But we have to remember the details and the impact on real people and real places like farmers and ranchers throughout rural Utah.”

An integrated North American market is essential to Utah producers’ economic vitality, especially in rural Utah. The end of NAFTA would negatively impact $31 million annually for beef producers, $15 million annually for the dairy industry, and $72 million annually for edible food manufacturers. Regarding the uncertainty of the negotiations, Mr. Pierucci says, “The best outcome is that we still have an agreement in place.” Agricultural producers in rural Utah need the stability and predictability provided by rules-based trade. Additionally, it is important that gains made under the current agreement are preserved ensuring our North American neighbors can continue to flourish.