NAFTA Without Canada Would Be Trouble For Texas Exports

Over $22 billion worth of Texas exports are at stake if the U.S. can’t strike a trade deal with Canada.

By Alexa HartAugust 31, 2018 1:02 pm| ,

After months of stalled negotiations, it looks like the U.S. and Mexico are close to an agreement on new terms for the North American Free Trade Agreement, or NAFTA. But Canada is conspicuously on the sidelines in this deal, and that comes at a time when relations between President Donald Trump and Canadian Prime Minister Justin Trudeau are strained.

Now Canada is scrambling to work out an agreement with Washington, but the clock is ticking because Trump wants it all done before December, when Mexico’s new president, Andrés Manuel López Obrador, takes office.

Trudeau says he hopes to strike a deal by Friday, but parts of the current agreement with Mexico, especially on issues like intellectual property, aren’t acceptable to Canada. Negotiators worked late into the night Thursday, but if it ends up failing, it’s not just Canada that could suffer the consequence but elsewhere in the U.S. – including Texas.

Doug McCullough, director of the Canada-Texas Chamber of Commerce and director of the the Lone Star Policy Institute, says if Canada can’t strike a deal with the U.S., it could harm Texas.

“Texas is the nation’s largest exporter….Texas exports $22.8 billion annually to Canada, so I think it would have a real impact on Texas companies,” McCullough says.

McCullough says if the U.S. imposes tariffs on Canada, Canada would likely retaliate and that would reduce demand for Texas products. McCullough says it would be better for the Texas economy if trade was completely open on both sides.

“Once one side starts imposing tariffs, the other side’s likely to do it, and so we’re gonna get into a bit of a trade war,” McCullough says. “It reduces the goodwill between companies and consumers on each side of the border.”

While Canada is negotiating to protect two of its main exports to the U.S. – automotive products and dairy – McCullough says Texas’ exports are far more diverse, and range from petroleum products to agricultural goods and information technology. So, if a deal isn’t made, the state loses its ability to send those goods up north.

“It’s actually a pretty broad-base array of exports from Texas,” McCullough says. “As an international trade hub…it would definitely affect Texas more than, say, Alabama.”

McCullough says state and local officials in Texas support keeping Canada in NAFTA, but more could be done by Congress. Congress has the ability to take back some of the power given to Trump when it comes to trade negotiation. McCullough says he’s disappointed Texas senators haven’t made such an effort.

“Texas senators have not actually spoken up and tried to pass laws that would rein in the president’s powers…to impose national security tariffs in a situation like this,” McCullough says.

Written by Caroline Covington.