As anyone who has read my previous columns knows, I am a Republican, but I am not a Donald Trump fan. But this week my particular concern is his trade policies, which could do particular damage to Idaho.
This past week, Trump at a Pennsylvania aluminum processing plant proclaimed his vision for international trade, stating in his prepared remarks: “Our politicians have aggressively pursued a policy of globalization -- moving our jobs, our wealth and our factories to Mexico and overseas.”
He pointed out that U.S. manufacturing jobs have shrunk by a third since 1997 but failed to note that U.S. manufacturing output is up more than 50% since the mid-1990s. According to U.S. economists, the U.S. job loss is primarily because of increased automation, which makes American industry more competitive but reduces overall employment.
Trump’s policy prescription is to negotiate “better deals” in the future and threaten to withdraw from existing trade agreements.
Trade is clearly a central issue in the presidential campaign this year and is certainly a key part of Trump’s pitch. Probably in response to Trump and Bernie Sanders, Clinton has also pulled back from her previous support of new trade agreements.
How dependent is Idaho on foreign trade? And, what is the potential impact of this debate on Idaho?
The answers are 1) very and 2) potentially extremely significant.
Last year Idaho exported nearly $5 billion in goods to the rest of the world. In 2014, 9.3% of Idaho’s gross domestic product was related to goods exports.
In 2013, 1,762 Idaho companies exported goods or services overseas. That includes big companies like Melaleuca in the Idaho Falls area and Micron in Boise area. But 84% of Idaho exporters are small or medium size businesses.
Roughly one in five Idaho jobs are tied to foreign trade. In 2013, the number of Idaho jobs linked to trade was an astounding 195,537.
No Idaho sector is more intertwined with foreign trade than Idaho agriculture. In 2014, Idaho’s food and agriculture product exports totaled $2.216 billion. That was more than one-fifth of all of Idaho’s agriculture production.
The Trump trade policy prescription that should be of particular concern to Idahoans is his threat to withdraw from the North American Free Trade Agreement (NAFTA). That agreement was implemented in 1994 and reduced tariffs and trade barriers between the United States, Canada and Mexico.
In 1994, for instance, the average Mexican good imported to the U.S. faced a U.S. tariff of 4.3%. But, the average tariff at the time for U.S. goods going to Mexico was 12.4%. NAFTA reset those to essentially zero. That meant Mexico had to cut its tariffs on U.S. goods being imported by nearly three times the amount that the U.S. had to do for imports from Mexico.
Like all trade agreements, there were winners and losers from NAFTA.
Idaho was one of the big winners. NAFTA created opportunities for Idaho companies to boost exports to Canada and Mexico. Since 1994, Idaho exports to those countries are up 800%.
Today, according to the International Trade Association, Idaho’s top overall export market is Canada with more than a billion dollars in sales a year. In 2014, Idaho shipped $1.4 billion in goods to Canada and provided $135 million in services.
Mexico is also critical to Idaho’s farm sector. More Idaho agricultural products are sold there than to any other country. In 2014, Mexico alone purchased 24.33% of all Idaho farm product exports. Canada was close behind with a 19.33% purchase share of all Idaho farm exports.
Many in the business community are warning that Trump’s threat to withdraw from NAFTA and other trade agreements could trigger a trade war with China, Canada, Mexico and a host of other nations.
Idaho should pay focused attention to the impact of a NAFTA repeal and/or a trade tussle with Mexico and Canada. A mere reinstatement of the previous tariffs would put Idaho companies at a substantial competitive disadvantage.
Perhaps Trump could pull off his claim to negotiate a “better deal” for NAFTA. Maybe Mexico will be won over by his charm despite his threat to make them pay for his wall and terming immigrants from Mexico “rapists”. He could hit it off with Canada’s Prime Minister Justin Trudeau (Trudeau looks like a model and Trump’s wife was a model).
But, the facts are that Idaho is uniquely vulnerable to trade policies that harm Idaho market access to Canada and Mexico. Retaliatory restrictions there would put at risk nearly half of our agricultural exports and economic activity that generates and sustains thousands of Idaho jobs.
Idaho voters will need to decide if that is a risk worth taking.