Trade deal could boost Buffalo Niagara auto plants, dairy farms

WASHINGTON – President Trump spells his new trade deal with Canada and Mexico “USMCA” – but for Western New York’s auto workers, farmers and business people, it spells relief.

For those people and countless others nationwide, the U.S.-Mexico-Canada Agreement that Trump and his rival Democrats agreed upon this week will end three years of anxious uncertainty.

No longer will they have to worry that the trade relationships that they have depended upon for a quarter century may be destroyed by the free trade critic in the White House. Instead, they foresee a period when America’s trade with its nearest neighbors might actually grow.

“We look forward to seeing the agreement ratified in all three countries, and getting back to business in North American trade,” said Craig W. Turner, president of World Trade Center Buffalo Niagara.

From a Western New York standpoint, the deal between Trump and House Democrats differs little from the replacement for the North American Free Trade Agreement Trump unveiled more than a year ago.

The new deal, like last year’s, solidifies the cross-border relationships that the U.S. auto industry, including local plants, have forged over the decades.

It opens up the Canadian dairy market ever so slightly for American farmers.

And for businesses of every type, the new trade deal appears to end the trade skirmishes that Trump has launched with Canada and Mexico in recent years, thereby giving companies reason to think about growing their businesses internationally.

What’s changed is a series of tough new labor and environmental provisions that organized labor, and the Democratic Party, demanded.

And the result is a rarity: a trade deal backed by the nation’s largest labor group.

The agreement still faces some skeptics – including Rep. Brian Higgins, a Buffalo Democrat.

But many people echo the thoughts of Rep. Tom Reed, a Corning Republican.

“There’s a tremendous amount of positive news associated with this Canada/Mexico deal,” Reed said.

A boost for autos

Experts say the trade deal should benefit the region’s auto plants – if not consumers.

The biggest change will require that 75% of an auto’s content must be made in the U.S., Canada or Mexico in order for it to be sheltered from tariffs. That’s up from 62.5% under NAFTA.

In addition, the new trade deal mandates that 40% of those North American autos be made by workers earning at least $16 an hour.

“Manufacturers are going to look at that and say, ‘Listen, you know, when I factor in logistics costs if I imported from Canada or from Mexico, I’ll just make it here in the U.S.,’ ” former Ford CEO Mark Fields told the FOX Business Network on Thursday.

That would be great news for metro Buffalo, which is home to a Ford stamping plant, a General Motors Powertrain plant and a host of auto parts manufacturers. That adds up to 12,229 jobs in the Buffalo area, according to the Auto Alliance, an industry group.

Then again, Buffalo-area car buyers may not be so happy with USMCA’s changes. The U.S. International Trade Commission says the deal will boost prices, ranging from 0.37% for pickups to 1.61% for compact cars.

But that’s nothing compared to the huge price increases that could have occurred if Trump had abandoned NAFTA completely.

“The auto industry and many others have built integrated supply chains among these three countries, and to automatically end that would dramatically increase costs and wreak all sorts of havoc in those industries,” said George Palumbo, an economics professor at Canisius College who studies the local economy.

Fairness for farmers

Upstate New York’s huge but shrinking dairy industry has encountered all sorts of havoc in recent years, but USMCA brings local dairy farmers reason for optimism.

That’s because it creates a small crack in the Canadian dairy cartel. Canada agreed to eliminate its special pricing scheme for ultra-filtered milk and powdered milk products that are primarily used to make cheese and yogurt – and that should give U.S. dairy farmers a new foothold in the Canadian market.

“Make no mistake about it: for the U.S. dairy industry – farmers, processors and suppliers – the USMCA deal is a major win that levels the playing field with our largest trading partners,” said Michael Dykes, president and CEO of the International Dairy Foods Association.

That’s important locally because New York ranks fourth in the nation in dairy production, and because Wyoming County is home to more dairy cows than any other county in the state.

The trade agreement doesn’t provide the same sort of boost for other sectors of New York’s farm economy. But at least it frees farmers from the worry that two of their biggest overseas markets might become less welcoming to American farm products.

“I think the biggest thing is the certainty it provides to our farmers,” said Lauren Williams, senior associate director of national affairs at the New York Farm Bureau.

Labor and the environment

Perhaps the biggest surprise regarding the deal came when Richard Trumka, president of the AFL-CIO, endorsed it.

“For the first time, there truly will be enforceable labor standards – including a process that allows for the inspections of factories and facilities that are not living up to their obligations,” Trumka said.

That’s long been a complaint about NAFTA: that it allowed American companies to move factories to Mexico, where they could pay substandard wages in substandard working conditions.

The new deal will force Mexico to modernize its labor laws to make it easier for workers to join unions. That, in turn, could discourage American companies from crossing the border in pursuit of cheap labor.

On top of that, the deal will force Mexico to boost its environmental standards.

Democrats insisted on such provisions, which is why USMCA seemed to languish for more than a year while Democrats negotiated with the Trump administration to change the deal.

Doing so made the trade agreement stronger, said Joelle Leclaire, an associate professor of economics and finance at SUNY Buffalo State.

“I think that the additional labor protections are a really good thing,” she said.

Skepticism and hope

Not everyone has fallen in love with the trade deal.

Higgins, the Buffalo congressman, said he needs to take a closer look before deciding whether to support the measure. He’s concerned it might continue to give special treatment to factories in Mexico, which allowed American companies like Buffalo’s Trico to flee in pursuit of lower-wage workers.

“If you have labor and environmental standards, they should apply universally,” Higgins said.

Meanwhile, the International Association of Machinists and Aerospace Workers – in contrast to the AFL-CIO – is urging House members to oppose the deal.

“While it contains some improvements, the outsourcing of U.S. jobs to Mexico will continue at an alarming rate under USMCA,” the union’s president, Robert J. Martinez, said.

Nevertheless, the deal is expected to pass the House next week and the Senate sometime early next year. After all, it has the support of the nation’s most powerful Democrat – House Speaker Nancy Pelosi – as well as the most powerful Republican, Trump.

Turner, of the World Trade Center Buffalo Niagara, said that’s good news.

“Our goal is to get it done – just for the optics of doing business across the border in our region,” he said.

Source:  The Buffalo News

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