Ohio waits to see how newest trade plan could affect economy

Depending on which lawmaker you talk to, the proposed U.S.- Mexico-Canada Agreement will be a balm for Ohio’s economy or a disaster that will continue bleeding the state’s manufacturing economy.

Republicans including Sen. Rob Portman, Rep. Anthony Gonzalez and Rep. Bob Gibbs are enthusiastic about it, saying it offers much-needed updates to the nearly 30-year old North American Free Trade Agreement.

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Democrats such as Sen. Sherrod Brown, Rep. Marcy Kaptur and Rep. Tim Ryan say the new deal is, like NAFTA before it, a stinker. They say the lack of enforcement for updated labor protections will hurt both U.S. and Mexican workers, and they’re outraged by a provision they say will unfairly benefit drug companies, keeping drug prices high.

In reality, economists say, the deal is not much different from what’s already in place.

The new deal, which has been signed by leaders of all three countries involved but has so far only been ratified by Mexico, closely tracks the old one with a few notable exceptions: For example, it requires automobiles to have 75 percent of their components manufactured in Mexico, the U.S. or Canada to qualify for zero tariffs — higher than the 62.5 percent under NAFTA.

ExploreRELATED: What is NAFTA?

It also requires 40 to 45 percent of automobile parts to be made by workers who earn at least $16 an hour by 2023. It opens up Canada’s dairy market to U.S. farmers.

And it includes provisions aimed at dealing with the new digital economy, such as barring duties on things such as music and e-books, and extends the period that a pharmaceutical can be protected from generic competition.

Republicans had hoped to bring the deal to the floor before Congress’ August recess. But some Democrats have balked, arguing they’re still troubled about a lack of enforcement mechanisms for labor and environmental provisions in the deal.

“What this is is NAFTA 1.6,” said Brown, adding the bill included “very minor changes” that will nonetheless result in “more cases of jobs shutting down in American and moving to Mexico.”

Brown said he offered suggestions on language that would enforce the labor provisions. “They have chosen not to move in that direction,” he said.

Kaptur, D-Toledo, said the passage of the original NAFTA was one of her greatest sources of heartbreak in a U.S. House career that began in 1983.

She said the agreement’s 1994 enactment pushed the U.S., Mexican and Canadian economies together without the appropriate protections for workers in those countries, and Mexican and U.S. workers suffered.

“We crashed our markets into one another,” she said, “And we’ve got all the casualties to show it.”

She said the original agreement led to manufacturing jobs leaving her district, contributed to the border crisis as the Mexican economy faltered and may have spurred the opioid crisis when farmers in Mexico began manufacturing drugs as Mexican farm jobs disappeared.

The new deal, she said, is largely a copy of the original.

“It basically puts workers in our region who are earning a living wage, sort of, working 10 hours a day, seven days a week … putting them in competition with $2-an-hour labor down in Mexico. Now what’s right about that?” she said.

Ryan, D-Niles, said the northeast Ohio district he represents largely overlooks the revised trade deal.

“I think people are resigned that a lot of the damage has been done but we need to do something to prevent further bleeding,” he said, adding he doesn’t think “that slightly renegotiating it will bring all these jobs back.”

Proponents, however, say Ohio can’t survive without trade.

According to the Ohio Manufacturers Association, Ohio manufacturers sold $27 billion in goods to Canada and Mexico and more than 3,800 Ohio manufacturers currently export to those two nations, which receive more than 51 percent of Ohio’s exports.

Gonzalez, R-Rocky River, said the trade agreement would add the certainty the economy needs to start investing more.

It will also, he said, help create a stronger front against China as the United States continues negotiations with that nation.

“China appears to be trying to wait the president out,” he said. “If we sign this deal, that’s going to put a lot more pressure on them to come to the table.”

Portman – a former trade attorney and U.S. Trade Representative during the George W. Bush administration — argues that it’s high time NAFTA be modernized.

“Back when NAFTA was negotiated there was no digital economy,” Portman said. “We need to have new rules with regard to the digital economy as we do in our more recent trade agreements.”

Gibbs, meanwhile, said the new deal is “a heck of a lot better than the current NAFTA.”

Jack Irvin, senior director of state and national policy for the Ohio Farm Bureau Federation, said during an era when farmers are losing market share because of a trade dispute with China and when the weather has been abysmal, the new trade deal will represent a much-needed win.

“I don’t think we could stress enough how important Canada and Mexico are to us,” he said. “No doubt about it — if U.S. agriculture is going to be successful in the long term, they have to have trade partners like Canada and Mexico.”

Ian Sheldon, the Andersons Chair in Agricultural Marketing, Trade and Policy at The Ohio State University, said economists have a nickname for the deal: “NEWFTA.” That’s because it’s essentially the same deal, he said, with a few modest changes.

Those changes will result in growth of less than 1 percent to U.S. GDP and less than 1 percent increase in employment. Some new provisions might slightly increase the price of automobiles, and any benefits to agriculture, he said, will ultimately be washed out by the Chinese trade dispute.

But all of that is better, he said, than watching NAFTA collapse in its entirety, which would cost the U.S. some $12 billion in exports.

“The way I view negotiation is we have maintained NAFTA with some new bells and whistles,” he said. “I think on balance the way I look at this is that not destroying NAFTA was the most important thing that came out of this.”