New trade deal met with relief in Arizona

Firms feared disruptions to cross-border business

Some of the key stumbling blocks on North American trade — now mostly resolved — didn’t affect Arizona as much as some other states. But local business officials are reacting with relief now that Canada has agreed to join a trade deal previously worked out by the United States and Mexico.

The tentative three-way deal reduces uncertainty for many Arizona businesses and retains existing relationships with the two foreign nations that buy the highest amount of Arizona exports.

Two previous studies pegged Arizona as the ninth-most vulnerable state to any permanent cross-border trade disruptions.

“For nearly 25 years, the North American Free Trade Agreement has

ensured North America’s place as the world’s most economically competitive region,” Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry, said in a statement.

“A new trilateral agreement means North America will maintain that distinction in the years to come.”

The proposed new deal needs approval from all three nations and wouldn’t take effect until 2020. It would be called the United States-Mexico-Canada Agreement and would replace NAFTA, the North American Free Trade Agreement.

Mexico is the largest foreign buyer of Arizona-made products, accounting for 36 percent of the state’s exports, with Canada second at 10 percent.Continuing good relations with both nations was a high concern for Arizona business interests.

Some industries that had been key stumbling blocks in negotiations with Canada — auto manufacturing, steel and dairy — aren’t especially prominent here.

The three nations agreed to require higher North American parts content in vehicles if manufacturers hoped to ship cars and trucks across borders without paying tariffs. Another provision would require more auto production by workers earning at least $16 an hour, with greatest impact in Mexico.

Canadians have complained about higher steel tariffs imposed by the Trump administration, though those levies will remain as negotiations continue.

Among other provisions, the tentative trade agreement strengthens intellectual-property rights and affirms a streamlined dispute resolution process.

Canada had been resisting opening its market to U.S. dairy products but partly relented. Although dairy products aren’t among Arizona’s top 15 exports to Canada, increased Canadian access still matters to the state’s farmers.

“It’s all about supply and demand on an international scale,” said Stefanie Smallhouse, president of the Arizona Farm Bureau

American dairies in the upper Midwest have more to gain from the Canadian concession, “but all of this has a trickle-down impact on Arizona dairy,” Smallhouse said. “Without Mexico and Canada, our dairy supplies are out of whack and Arizona dairy farmers feel the pain.”

Smallhouse said she is pleased with the deal, noting that Arizona agricultural exports to Canada and Mexico amount to 12 percent of total farm cash receipts, or about $500 million annually.

Vegetables are the top Arizona item exported to Canada, followed by aircraft and engines/turbines. Produce also is a big trade commodity with Mexico.

The new agreement “gives all of us much more confidence to go forward” by removing uncertainty, especially in terms of long-term business investments,” said Jaime Chamberlain of J-C Distributing, a company in Nogales, Arizona, that ships fruits and vegetables.

“It’s also a win-win situation for consumers in all three North American countries,” he said.

Arizona’s nearly $23 billion tourism industry also depends heavily on foreign visitors, and the agreement should ease uncertainty in this sector, too. Mexicans represent the largest pool of international tourists — nearly two-thirds of the total. Canadians are next.

Two studies released late last year, one from BMO Capital Markets and the other from the U.S. Chamber of Commerce, both ranked Arizona as ninth-most vulnerable among the states if NAFTA unraveled and wasn’t replaced by a similar trade agreement.

Glenn Williamson, CEO of the Canada Arizona Business Council, said the tentative agreement is important, adding that he hopes the deal will “stop this bickering between very long-standing friends who have gone to war together.”