OP-ED: USMCA: Trade Modernization Benefits Kentucky and North America
hroughout the very complex trade negotiations to replace NAFTA via a trade deal known as the United States-Mexico-Canada Agreement on Trade or USMCA, President Trump, Secretary Ross and the Trump Administration have been the subject of no small amount of criticism. As Governor of Kentucky and as a businessman with decades of experience across a wide array of industries, I have intentionally not joined in that criticism. In fact, I applaud the President and his Administration for working through a complicated deal that involves many more players than just the three mentioned in the title, has many moving parts and takes into consideration regions well beyond North America.
I am acutely aware of the temporary economic pain caused by tariffs. The Commonwealth of Kentucky produces crops and products known the world over, including Corvettes, Camrys, Lincoln Navigators, GE washers, dryers and refrigerators, Ford Super Duty pickups, Escapes, Expeditions, soybeans, beef, bourbon and more. In addition to final assembly plants, the state is home to thousands of automotive suppliers and general manufacturing companies, which send parts and products across the U.S. and North America. As a manufacturing-heavy state, Kentucky’s private-sector employment, tax base and overall economic well-being relies to a great degree on products made from aluminum and steel. I am highly sensitive to Kentucky’s exposure resulting from the potentially harmful effects of tariffs. At the same time, I recognize the need for a more level playing field globally, and welcome job-creating domestic policies.
This is why I strongly support Trump Administration efforts to modernize NAFTA, which is now more than 25 years old. I am grateful for a good relationship with the President, and I have had the opportunity to speak to both him and Secretary Ross many times about these issues. Kentuckians and Americans should take comfort in knowing that they are approaching this issue with great seriousness. They have worked tirelessly to modernize and streamline the trade between our nations and ensure that a deal is hammered out that will ultimately be more equitable for all parties.
It is incumbent upon the leaders and citizens of the U.S., Canada and Mexico to recognize that we are all part of an inextricably integrated supply chain. Using automobiles as an example, there is no longer such a thing as a strictly American-made car, a Canadian-made car or a Mexican-made car. The aforementioned Toyota Camry, manufactured in Kentucky at the largest Toyota plant in the world, is the closest thing to an “American-made” car in existence today, with about 75% of its components made in the United States. Yet the car can only be completely assembled and ready for sale with the other 25% of its components.
We must recognize and appreciate that the nations of the North American continent are joined “at the hip” when it comes to manufacturing. We need one another. Canada is Kentucky’s largest trading partner. Twenty-five percent of our exports go to Canada, a nation that will remain our largest trading partner for the foreseeable future. There are 37 Canadian companies in Kentucky that directly employ 8,000 Kentuckians. At the same time, there are 11 Mexican companies employing 3,900 Kentuckians. These are strong and mutually beneficial relationships. And a ratified USMCA will be a win for all of us.
I don’t know of a single governor that doesn’t want this deal to be ratified immediately. The Trump administration has effectively used the tactical tool of tariffs to bring other economies to the negotiating table. This is a means to an end. That end is clearly in sight. No one wants the tariffs to remain for the long term. At the same time, we should not ignore the history of these types of negotiations. They are cyclical in that there must be give and take, wins and losses by different sides in the negotiations over time.
The President is correct: the United States, because of policies that were put in place during recent decades, has not gotten the same degree of trade equity that we have given.
In order to rectify that, there will be some short term pain. People must be patient Negotiations with this many interested parties and with this level of complexity take time.
Ultimately, when the dust settles, I am confident that we will have a deal that is a significant improvement over NAFTA, that will benefit all interested parties in my home state of Kentucky and that will be a win for the entire Western Hemisphere. The USMCA is that deal, and the sooner each of our nations ratify it, the better it will be for all of us.