UA economist discusses trade deals, job growth

by Roby Brock ([email protected]) 562 views 

Despite breakthroughs on two international trade deals and low unemployment in Arkansas, economist Mervin Jebaraj doesn’t expect much to change with the Arkansas economy in 2020.

Jebaraj, who appeared on this week’s edition of Talk Business & Politics, said that the USMCA deal between the U.S, Mexico and Canada, will provide much-needed certainty to American manufacturers.

“I think, as much as some people would not like me to say that, I think that we’re going to see more of the same than anything else,” he said. “I think what USMCA accomplished is provides some continuity from NAFTA. There was a time in 2018 when we were threatening to leave NAFTA behind and all of our trade between Canada, Mexico, and the United States behind and there was a lot of uncertainty for businesses because all of our supply chains are very much global… All of that had a huge question mark behind it while NAFTA was being negotiated, re-negotiated and all of these things.”

The USMCA has provisions to aid American manufacturing, but Jebaraj sees the thresholds as too steep for major business migration across the borders.

“Within the trade agreement, there are some clauses to increase more manufacturing in the United States, but I think what is likely to happen is that [foreign] manufacturers will probably pay the penalty than move manufacturing to the United States,” he said. “I don’t expect to see a whole lot more movement in jobs. I don’t expect to see a whole lot more increased exports or increased imports as a result of the trade deal, but just more certainty for suppliers and manufacturers that were relying on the provisions that were in NAFTA going forward over the next 16 years.”

With Phase 1 of the China deal closed, Jebaraj sees certainty as well for the state’s soybean farmers, who have been shut out of China during the trade wars.

“China’s committing to purchasing soybeans again from the United States. If you’ll remember, back in 2018 when we imposed tariffs on them, they cut their soybean imports from the United States down to zero. Arkansas produces a lot of soybeans that does go to China and that pretty much tanked that particular market along with the weather problems that soybean producers have had in Arkansas,” he said.

“The fact that this trade deal has been agreed this early, well before planting season, means that soybean producers have some level of certainty that they will get those Chinese markets for soybean back this year. There is some possibility that soybean imports from China will increase over time,” Jebaraj added.

He said some factors remain unclear affecting U.S. soybean markets, such as Chinese pork production, which uses soy meal, as well as how Brazil and Argentina – markets that absorbed some of the U.S. production loss – may respond.

Jebaraj doesn’t expect Phase 1 to have a large impact on manufacturing. U.S. companies cut jobs during the heights of the tariff battles and “none of those jobs are going to come back.”

He’s adopting a wait-and-see attitude on if Phase 1 restarts stalled Chinese investment in Arkansas. While some Chinese investments are up and running, at least two major projects are still in limbo.

“The other thing in Arkansas… that was on hold indefinitely while the tariff war was constantly escalating was all the Chinese investments in manufacturing facilities in Arkansas, especially in southern Arkansas and eastern Arkansas, where they really could’ve used those jobs,” Jebaraj said. “I haven’t heard any progress on those, but let’s hope that the lull in hostilities means that some of those projects are put back online and we get those jobs in southern and eastern Arkansas.”

They could be used because Jebaraj’s analysis shows that of the 14,000-15,000 new jobs created in Arkansas over the last year, the supermajority of them occurred in Northwest, Northeast and central Arkansas.

You can watch more of Jebaraj’s full interview in the video below.