ROGERS -- Representatives of the state's two largest trade partners brought Arkansans up to speed on what to expect when or if a new trilateral deal between the U.S., Mexico and Canada takes effect.
After seven rounds of negotiations over a replacement for the North American Free Trade Agreement between officials of Canada, Mexico and the U.S., a proposed agreement was published on Oct. 1. An event Tuesday drew trade dignitaries and state officials to Northwest Arkansas to talk about what the public can expect if the new plan is ratified next year.
"Global trade is something we are proud of, it is something that is important to us and it is something that the governor has led on," Carlton Saffa, senior strategist for Gov. Asa Hutchinson, told attendees at the World Trade Center Arkansas in Rogers. "We're proud of the way things are progressing and we are proud of the White House's role and that they are listening to the governor."
The North American Free Trade Agreement was ratified in 1994, and Arkansas is a leading producer of chicken products, rice and soybeans for the Mexican and Canadian markets.
"Agriculture is our number one economic sector, and without free and fair trade with Canada and Mexico, the disruption in agriculture would be almost insurmountable," Saffa said after the presentation.
Census data show Canada and Mexico are the state's largest and second-largest export markets, respectively. In regards to agriculture, Mexico imports more from Arkansas than Canada. Exports to these countries also support the state's transportation, chemical and forestry industries.
"Arkansas is great for us why? Because it's a great provider. We are buying stuff from you and we are getting extra value," said Fernando Marti, Trade and Investment Commissioner of ProMexico in Dallas.
Trade between Mexico and Arkansas surpassed $1.5 billion in 2017, with more goods leaving the state than entering.
According to government data from Mexico, Arkansas exported $847 million worth of goods to Mexico under NAFTA last year, a 710 percent increase from 1994, when exports were about $161 million. Most of the 2017 exports from Arkansas were eggs ($127 million), fresh and frozen meat and poultry ($68 million), rice ($63 million), and iron and steel ($42 million), among others. Top imports to Arkansas were insulated wire and cables, tractors, lamps, air conditioners and alcohol and spirits.
The presidents of the U.S. and Mexico and Canada's prime minister are expected to sign the new agreement, known as USMCA, before Dec. 1. Then it goes on to each country's legislature for a ratification period of three months.
If changes don't happen to the metals tax President Donald Trump enacted earlier this year, countermeasures from other countries are expected to drive up the cost of everyday goods. Even with the new agreement, Arkansas exports still face a 25 percent and 10 percent retaliatory tax imposed by Canada because of tariffs implemented by the U.S. on foreign aluminum and steel. The president said the tariffs on aluminum and steel imports are matter of national security.
"To say that we could possibly be a threat to national security because our steel and aluminum is coming down to the United States makes absolutely no sense," said Vasken Khabayan, the consul general of Canada in Dallas. "Which is why we view that as something that has to be removed. Unfortunately during the negotiations to update NAFTA, that issue was not resolved. It is still out there and because of that we are in a situation where we are going to be continuing on with our retaliation."
Countermeasures from Canada affect about $262 million worth of exports from Arkansas, according to data from the Canadian Embassy in Washington, D.C. The tariffs range from a 25 percent tax on casings used to drill for oil and gas and fish-plates for tramway track, to a 10 percent tax on paperboard, pizza and quiche.
"International trade is something that's much wider than just Canada-U.S., be aware of that, because your number one customer is able to buy somewhere else and if you want to keep that number one customer you work to keep that relationship going and working well," Khabayan said. "Having said that, we do have a good relationship with Arkansas."
Canadian companies have stake in Arkansas and vice-versa. Bentonville-based Walmart operates more than 400 stores in Canada and investments from El Dorado-based Murphy Oil comprise over a quarter of the company's annual budget. Canadian-based manufacturers also have facilities and supply chain segments in Arkansas.
The representatives of Canada and Mexico could not estimate on Tuesday the effects that tariffs have had on sales numbers.
Khabayan said he saw costs go up for tire manufacturers in Arkansas who use steel-belted radial tires and companies that make aluminum boats for fishing.
"What we know is a lot of companies here have kind of absorbed some of those extra costs because they were hoping it would be a short-term thing," Khabayan said. "What we are hearing from companies is that if this continues past the new year they can no longer continue to absorb those costs and consumers are going to start seeing increases in prices very soon after the new year."
Business on 10/24/2018
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