Gov. Hutchinson, Union Pacific CEO talk trains, trade and technology

Gov. Asa Hutchinson and Union Pacific Chairman and CEO Lance Fritz told a luncheon crowd in Little Rock on Monday (July 8) that open trade is central to the continued growth of the Arkansas and U.S. economy, citing risks that President Donald Trump is taking with ongoing trade wars between China and U.S. neighbors in Canada and Mexico.

In a 45-minute fireside-style chat moderated by former White House Chief of Staff Thomas “Mack” McLarty, Hutchinson and Fritz offered their thoughts on trade, trains and technology and everything in between before a crowd of nearly 300 people celebrating the 60th anniversary of the Little Rock Port Authority at the downtown Robinson Center Auditorium.

In one poignant back-and-forth prompted by a query from McLarty on U.S. trade with China and the push by the Trump administration to ratify the U.S.-Mexico-Canada Trade pact (USMCA), Fritz told the noonday luncheon crowd that the state’s manufacturing, agriculture and industrial industries are largely dependent on exporting Arkansas-made goods abroad.

“Trade is critically important to your state,” Fritz said in response to McLarty’s probing questions on the Trump administration’s ongoing trade imbroglios. “So, in your state, one out of every two acres of beans are planted for export. When you think about the ability to connect, your manufacturing base, your industrial and ag base, not just to the rest of the country but to the world, that’s the real support for the economic engines that we’ve got here in your state.”

Turning to the USMCA, Fritz said the Trump administration’s efforts to renegotiate and replace the longstanding North America Free Trade Agreement (NAFTA) with the new $1.2 trillion trilateral trade deal was a success. However, the Union Pacific CEO said President Trump must now shepherd the first trade pact since NAFTA was passed in 1994 through both the U.S. House and Senate under a process known as fast track authority.

“The new agreement is a better agreement – it is modernized,” said Fritz, whose company employs about 2,500 in Arkansas. “The biggest lift right now is ratification of the USMCA.”

Fritz said the Trump administration now has three options on USMCA: ratify it, stay in NAFTA, or exit NAFTA and rely on the World Trade Organization or a different trade regime to handle global trade tariffs and disputes. “That’s a horrible outcome for us,” he said.

The railroad executive also said that the Trump administration is taking “a very significant calculated gamble” in trade negotiations with China. In a visit to the White House two weeks ago, Fritz said he had a long dialogue with President Trump on the USMCA, the ongoing trade war with China, and other trade and business-related issues.

“He [President Trump] understood clearly how we as manufacturers and transporters in the industrial economy saw the risk, but equally and clearly he was making a judgment call that he believes is the right call,” Fritz said of Chinese trade talks. “At the end of the day, our admonition to him was ‘Great, I hope you are right because you have to be right. You can’t gamble with the U.S. economy.’”

Hutchinson immediately replied: “I agree with what Lance said,” as the business-friendly crowd roared with laughter. The Arkansas governor also provided similar views on the USMCA agreement, saying that the trade pact is essential to the state’s economy.

“That’s the reason why I’ve written the leadership of the U.S. House and Senate asking them to bring USMCA to a vote,” said Hutchinson. “Whenever you look at what President Trump has done, he has been very successful in renegotiating a more favorable NAFTA agreement.”

Hutchinson then shared a story of when he lived in Fort Smith and Whirlpool employment had peaked, reaching a record 4,600 jobs in 2006. However, six years later the appliance manufacturer closed its refrigerator plant in the city, laying off about 1,000 workers at the time.

“Whirlpool was a staple of the Fort Smith economy. It closed and a 1,000 jobs were lost and they were lost to Mexico, and it was result of the first NAFTA,” Hutchinson said. “But we have adjusted our economy and integrated our economy with Mexico and Canada, so that if you did away with it, it would be detrimental to our state.”

Like Fritz, Hutchinson said “low or zero tariffs” should be the result of ongoing trade negotiations with China and other countries. He also said the stability of U.S. trade markets should be the end-goal once the trade agreements have been renegotiated and signed.

“We’ve got to have stability. So, let’s work, let’s get them down and let’s get the agreements in place and let’s stick with them,” Hutchinson said. “That’s what Arkansas needs because as Lance said, we are exporters, we are part of the world marketplace and we can’t not recruit the industry here and have a place for our goods if we don’t have those agreements in place.”

Earlier during the informal chat, McLarty — the former chief advisor to President Bill Clinton who now sits on the Union Pacific board of directors — engaged Hutchinson in a back-and-forth discussion on the importance of Little Rock as a regional transportation hub, and then prompted Fritz to provide several interesting anecdotes on how technology has changed the railroad industry and the way trains operate.

McLarty, who was inducted into the state’s business hall of fame in 2014, is also vice chairman of RML Automotive Holdings, a $1.8 billion automobile holding company founded in 2007 with Black Entertainment Television Founder Bob Johnson.

“I kind of thought about that movie, ‘Planes, Trains and Automobiles’ for today’s luncheon. I should quickly add that being raised in the automobile business …, I should add ships and barges to that and underscore railroads,” said McLarty, who is also chairman of McLarty Associates, a Washington, D.C.-based diplomatic consulting firm.

Earlier during the luncheon event, the attendees watched a five-minute video detailing the 60-year history of the public-private partnership organized in 1959 to oversee the intermodal transportation services for the Port of Little Rock. Port Authority Executive Director Bryan Day said there are now more than 42 businesses employing over 4,000 people on the 4,000-acre industrial site on the banks of the Arkansas River.

Day and Gov. Hutchinson also touched on the recent flooding that affected the Little Rock port that has halted all barge traffic on the McClellan-Kerr Arkansas River Navigation System.

Hutchinson said that he had named 10 members of his Arkansas Levee Task Force to study the state’s levee system and then to incorporate best practices, use technology and look for other ways to strengthen them. This task force will report its findings and recommendations to the governor by the end of the year, he said.

Earlier Monday, Hutchinson also held his first cabinet meeting with the recently appointed secretaries of the 15 new departments of state government. Under Act 910 of 2019, the secretaries assumed leadership of the new cabinets on July 1, replacing 42 executive-level agencies.