President Donald Trump’s move to “modernize” the North American Free Trade Agreement is seen by Arkansas trade officials as an opportunity to include more service exports and update the 1994 agreement between the U.S., Mexico and Canada to include new technology applications such as 3D printing.
There are also more expansive intellectual property rights to be considered when the negotiators sit down to tweak and/or expand the terms, according to Melvin Torres, director of Western Hemisphere Trade at the World Trade Center Arkansas.
Torres recently presented testimony at the NAFTA Hearings held in Washington, D.C., last week. Torres and the World Trade Center Arkansas recently surveyed 50,000 Arkansas companies about NAFTA asking them to disclose why they believe NAFTA should be renegotiated.
“First let me say NAFTA is working well for Arkansas as it’s written now, and while I am optimistic that changes can be made to modernize the agreement, I would hate to see present terms revamped to the extent that they no longer work for Arkansas companies. We must proceed carefully so that no harm is done,” Torres told Talk Business & Politics on Wednesday (July 5).
He said 80% of Arkansas exports come from small to medium-size companies that could be hurt if trade was disrupted or discontinued. Torres said Arkansas is unique in that it enjoys a trade surplus with Mexico and Canada which has flourished since the trade agreement was implemented 23 years ago.
“Arkansas exports to Mexico have grown by 700% and are growing 3.6 times faster than exports to any other country in the world,” Torres said.
About 85% of Arkansas rice is exported Mexico and more than $1.5 billion a year in cross-border trade between Arkansas and Mexico supports 42,000 Arkansas jobs, according to the Trade Center website.
“There are significant industries that we manage with Mexico,” Torres said. “For example, certain aircraft parts for companies are manufactured by Mexico for Arkansas companies. Arkansas companies use these parts in their manufactured products, then turn around and sell a more complete product to Mexico. This is a good example of what our symbiotic trade relationships look like.”
While it is working for Arkansas has a whole, there are some businesses who welcome the change to renegotiate. In his recent NAFTA Hearing testimony Torres shared some feedback from Arkansas businesses about their concerns with NAFTA.
Darin Alexander of ArtCords in Gentry makes saddle girths and equine cinches. He said cumbersome labeling requirements should be streamlined. Drew Wallis, director of sales and education for NWA D in Fayetteville, which manufactures 3D printing parts and services, said he could be more competitive if import customs procedures were consistently followed and import duties on 3D printing parts were eliminated.
Cobb Vantress Export Manager Albert Torres said inspection and SPS standards at ports of entry should be simplified and expedited. When a load a baby chicks and fertilized eggs are held up at the border it can have negative repercussions on animal welfare and the company’s revenue.
One of the areas Torres sees as an opportunity for growth is in services. He said barriers to service exports need to be lifted. He can see Arkansas companies benefiting from selling insurance products, photo imaging services, engineering, 3-D printing services, design and consulting, and tax and accounting. Arkansas exports about $200 million in services each year to Mexico, but Torres said there more room for growth.
Arkansas companies also want rules of origin, certificates of origin and import licensing requirements streamlined or removed. Industries that could benefit include photo imaging, automotive parts distribution, recycled building materials and agricultural equipment, according to the recent Trade Center survey.
THE CANADIAN MARKET
Torres told Talk Business & Politics that Canada is the state’s largest trading partner, buying Arkansas exports valued at more than $1.4 billion a year. The exports support roughly 66,600 jobs across the state. Arkansas exported $285 million of agricultural products to Canada in 2015, according the state officials. The majority of that — $63 million – was rice, but the poultry industry also enjoys trade with Canada totaling about $55 million for fertilized eggs ($21 million), fresh/frozen chicken ($18 million) and prepared chicken meat ($16 million).
That same year Arkansas imported $73 million in goods from Canada which included: $15 million in alcoholic beverages, $8 million in prepared vegetables and nuts, $7 million in refined canola oil and $5 million in baked goods.
Torres said exporting services to Canada also could be a win for Arkansas companies if the trade agreement is updated. He has planned two trips to Canada to pursue expanding trade opportunities there.
He said recent meetings held in Washington gave him hope that the previous rhetoric about junking NAFTA and starting over with a new deal was just talk. He said NAFTA is working for states like Arkansas in middle America. While there is always room for improvement as the world evolves, he said when a state the size of Arkansas has trade surpluses with Canada and Mexico it proves the trade agreement is working as it is.