Economic Development and Government

NAFTA loss threatens economy

NAFTA is responsible for $6 billion toward the West Michigan economy.

March 2, 2018
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A Canadian official is warning of “serious repercussions” if the United States pulls out of the North American Free Trade Agreement.

Canadian Consul General Douglas George addressed more than 150 area business leaders regarding NAFTA during a closed meeting last week.

He said NAFTA has benefitted all three countries involved, and there would be serious repercussions if the U.S. pulled out of the agreement, as President Donald Trump has suggested. 

George said the agreement has allowed over $1 trillion in trade between the U.S., Mexico and Canada, and all three economies would suffer if NAFTA disappeared. 

Birgit Klohs, president and CEO of The Right Place, the Grand Rapids-based economic development organization that hosted the event, said it would negatively impact Michigan’s farmers, food processing companies, auto suppliers and furniture makers.

Michigan exports are worth $24 billion — $6 billion from West Michigan — and account for 50,000 jobs, she said.

“That’s a lot of money, and if it goes away or is in any way jeopardized, I think you would see job losses that would put us in a recession,” Klohs said.

In reference to companies that some would say were encouraged through NAFTA to send jobs south of the border — such as Electrolux, which laid off 2,700 workers in 2005 when it moved operations to Mexico from a plant in Greenville — Klohs said, looking at the “bigger picture for West Michigan,” the “overall benefit in terms of jobs has far outweighed” cases like that.

If NAFTA were to disappear, Klohs said she would expect more of those border-crossing scenarios.

Though Michigan will be hit the hardest if NAFTA ends, Klohs said her colleagues in other states are worried as well, particularly those that export produce to Mexico. If tariffs are put in place, Mexico can purchase those goods elsewhere.

Klohs mentioned a company that imports a type of steel only made in Germany. Recently, tariffs were applied to steel, and the company owner already has lost customers and is laying off employees, she said.

Trump said on March 1 that the United States will institute tariffs on steel and aluminum this week.

George said he does not think the agreement is unfair, as Trump has said, but he does think the 24-year-old agreement is outdated.

In updating the agreement, he said, in general, it should include reduction of trade barriers; modern technologies; an effective dispute settlement system; and a review every five years that does not threaten the agreement’s existence.

There will be tradeoffs, George said, but all sides need to flexible and forward-looking to create the best possible scenario for all involved.

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