The state’s top economic development official said Tuesday (Aug. 28) he is still trying to digest the specific implications for Arkansas following Monday’s announcement by President Donald Trump that the U.S. has reached a preliminary agreement in principle with Mexico in the renegotiation of the North American Free Trade Agreement (NAFTA).
“It looks like there are a lot of nuances in [the agreement with Mexico],” Mike Preston told Talk Business & Politics on Tuesday in Fayetteville. “There are certainly going to be winners and losers, but I am excited to see something was done. The thought of NAFTA going away completely was going to be devastating to our farmers and our agriculture industry here in Arkansas.”
Preston, head of the Arkansas Economic Development Commission, was in Northwest Arkansas to deliver remarks Tuesday morning at the Arkansas Economic Developers and Chamber Executives (AEDCE) annual conference. It convened Sunday at the Chancellor Hotel in downtown Fayetteville.
President Trump announced the preliminary deal with Mexico as an update to the 24-year-old NAFTA agreement. Trump officials said the new deal will lead to freer markets and stronger economic growth in North America. The president said that while agriculture has generally performed well under NAFTA, improvements in the agreement will enable food and agriculture to trade more fairly. Tariffs on agricultural products traded between the United States and Mexico will remain at zero.
Notably absent, though, from the deal is Canada, which stepped away from the negotiating table earlier this year. The trilateral trade pact that came into force on Jan. 1, 1994, also needs to be finalized by U.S. and Mexican trade negotiators before it is sent to Congress, where it must be approved and then ratified.
Preston said he is hopeful the new partnership between Mexico and the U.S. will help bring Canadian officials back to the negotiating table.
“Trade between all three countries is very important to Arkansas,” he said.
Arkansas exported over $851 million in goods to Mexico in 2017, according to the World Trade Center Arkansas in Rogers, and Arkansas exports to Mexico are growing 3.5 times faster than exports to any other country. Arkansas exports nearly $1.5 billion in goods and services to Canada every year, and trade with Canada supports nearly 69,000 Arkansas jobs.
Preston also commented on Monday’s U.S. Department of Agriculture (USDA) announcement that it will provide $4.7 billion to agri producers to help offset losses tied to the federal government’s ongoing trade disputes with China. It’s the largest chunk of the $12 billion in assistance announced in July to aid farmers impacted by the trade disputes.
Payments totaling $4.7 billion will be made to to corn, cotton, dairy, hog, sorghum, soybean, and wheat producers starting Sept. 4, according to the USDA. An announcement about further payments will be made in the coming months.
Soybean farmers will receive $3.6 billion in payments, according to the USDA. Soybeans and soybean products are Arkansas’ largest agricultural exports, according to the Arkansas Farm Bureau. Arkansas currently ranks 10th in the nation in soybean production, producing more than 150 million bushels annually valued at more than $1.5 billion.
The subsidies are an obvious impact to Arkansas, Preston said. Ultimately, though, subsidies are only a short-term fix.
“We need to have that trade opportunity there for soybean farmers,” Preston said. “Ultimately, they want to sell their soybeans. They want to open that market into China and sell them around the world. And the governor has mentioned before — I think we have made enough progress to where at some point, we can declare victory on a trade war and get things normalized again. Hopefully we can come to an end on the trade war with China and the tariffs are lifted.”
In his remarks to economic developers and chamber officials, Preston reviewed the economic development highlights of 2017 and discussed challenges for the state in the coming year.
“We’ve got a lot to brag on,” he said. “We’re at 3.7% unemployment and that’s 25 consecutive months under 4.0%. We continue to bring in competitive projects to the state representing more than $8 billion in investments. The last 3.5 to 4 years we’ve got great numbers. A lot of people are working together trying to move the needle.”
Preston said updating the state’s “outdated” tax structure is not unique to Arkansas, but it is high on the list of challenges facing the state.
“We have incentives that are available, but that just helps us offset a bad tax policy,” he said. “We could improve our tax policy, but we have to lessen the dependency on those incentives.”
Other speakers at Tuesday’s breakfast included AEDCE President Mike Harvey, chief operating officer of the Northwest Arkansas Council in Springdale, and Steve Clark, President and CEO of the Fayetteville Chamber of Commerce.
The AEDCE represents professional and volunteer economic developers and chamber executives throughout the state, with a membership that includes 411 members and 61 organizations. It was previously organized as two separate entities, (Arkansas Economic Developers and Arkansas Chamber of Commerce Executives) before merging in 2016.
The AEDCE also approved new board leadership and members for 2019. Replacing Harvey as president of the organization next year will be Tim Allen, president and CEO of the Fort Smith Regional Chamber of Commerce.
At the AEDCE Awards Luncheon on Monday, the organization recognized Crystal Johnson as the Outstanding Chamber Executive, Steve Cox as the Outstanding Economic Developer, Jim Petty as Volunteer of the Year and Michael Maulden with the Maria Haley Lifetime Leadership Award for Economic Development.
Johnson is CEO of the Batesville Area Chamber of Commerce. Cox is senior vice president of economic development for the Rogers-Lowell Area Chamber of Commerce. Petty is president and CEO of Strategic Realty in Van Buren. Maulden is the former director of business and economic development for Entergy Arkansas, having served as the director from 1996 until his retirement this past January.