The U.S. Senate overwhelmingly approved a new North American trade agreement Thursday that rewrites the rules of trade with Canada and Mexico — key markets for the United States and for $12.7 billion in exports from Louisiana.
The International Trade Commission projected in April that the trade agreement would boost the U.S. economy by $68 billion and add 176,000 jobs six years after taking effect. That's barely a ripple in a $21 trillion-a-year economy, but many senators noted that key industries in their state supported the agreement.
“Increased market access is vitally important,” said Edward T. Hayes, international trade attorney and international trade law professor at Tulane Law School.
Mexico is Louisiana's top export market, at $9.2 billion, and Canada, fourth at $3.5 billion. Together, they account for 20% of Louisiana's total $66.2 billion in global exports, according to the World Trade Center New Orleans.
Major exports from Louisiana to Mexico and Canada are petroleum products, $6.9 billion; chemicals, $2 billion; agriculture products, $1.4 billion; and oil and gas, $1.3 billion, according to the U.S. trade representative’s office. The remaining top 10 are transportation equipment; processed food; machinery; minerals and ores; fabricated metal products; and paper.
The vote on the United States-Mexico-Canada Agreement was 89-10 and goes to President Donald Trump for his signature, also giving him a major policy win before senators turn their full attention to his impeachment trial. Mexico has already approved the agreement. Canada is expected to do so in coming months.
The pact would replace the 25-year-old North American Free Trade Agreement, known as NAFTA, which tore down most trade barriers and triggered a surge in trade. But Trump and other critics blamed that pact for encouraging U.S. companies to move their manufacturing plants south of the border to take advantage of low-wage Mexican laborers.
The USMCA, which took more than a year to negotiate, aims to have more cars produced in the United States, where workers earn an average of at least $16 an hour. It also secured changes that require Mexico to change its laws to make it easier for workers to form independent unions, which should improve worker conditions and wages and reduce the incentive for U.S. companies to relocate their plants.
“The most important piece of this is that we’ve got certainty with our trade relations with North American trading partners,” said Caroline Castigliola, vice president of government relations and public policy at the World Trade Center New Orleans.
“Uncertainty delays investment, hiring, (business owners) don’t know when the shoe is going to drop,” said J. Edwin Webb, the trade center's CEO. “We’re hoping to see some activity that’s been on the shelf or in a waiting pattern that will start moving forward here with our businesses in the state.”
"There’s also favorable provisions for oil and gas, which is huge part of our economy as the potential future for LNG here is huge. All of this will be important for manufacturing on a broader scheme,” Castigliola said.
Louisiana has an abundance of petrochemical and oil and gas service businesses, which may find friendlier trade relations with Mexico and Canada as a boon.
“It’s a huge step in the right direction given the amount of time that we’ve kind of been in limbo. It’s a relief certainly to our farmers,” Castigliola added.
For Louisiana agriculture, the money maker has historically been in rice exports. More than 30% of rice in Louisiana is exported to Mexico, Hayes said. The U.S. is expected to have more access to markets in rice, wheat, dairy, poultry and eggs.
There’s another part of the agreement that updates sanitation rules, which govern how each trade partner can either limit or prohibit imported foods for public health and safety reasons, Hayes said.
“Many countries use these measures as a hidden, or non-tariff, barrier to trade under the guise of public health,” he said. “The updated rules go a long way to ensuring that … measures are science-based and applied in a transparent manner.”
Passage of the trade bill came one day after Trump signed a new trade agreement with China, easing trade tensions between the economic powers.