Holcomb: USMCA deal is crucial to Hoosier economy
Courier & Press
By Gov. Eric Holcomb
September 4, 2019
The North American Free Trade Agreement (NAFTA) was ratified by Congress and signed by President Bill Clinton in 1993. In the 26 years since, the need to update and amend the agreement has become clear. The United States-Mexico-Canada Agreement (USMCA) is a comprehensive, 21st century trade agreement that protects Hoosier workers and encourages free and fair trade.
Robust relationships with international trade partners are vital to the Hoosier economy. International investment in our state has increased 300% since 2017 and, while Indiana is thriving on the global stage, we recognize that two of our most important international trade relationships are with those closest to us: Canada and Mexico. This should come as little surprise, given our proximity, but what many may not know is the extent that trade with these two countries positively impacts our economy.
Canada is Indiana’s top international export market. In 2018, Canadians purchased 34% of all Hoosier exports, totaling over $13 billion in goods. 72 Canadian companies have operations in Indiana, employing over 15,600 Hoosiers. Our relationship with Canada is especially vigorous in Northwest Indiana where maritime trade through the St. Lawrence Seaway interacts with our port at Burns Harbor. Mexico is Indiana’s second highest export market, accounting for 13.8% and close to $5.5 billion in export activity in 2018. 15 Mexican companies have operations in Indiana, employing over 1,000 Hoosiers. Lt. Governor Suzanne Crouch and I have led Hoosier business delegations to Mexico and Canada respectively in order to strengthen these important relationships.
This new trade deal is an improvement on NAFTA and better serves the interests of Hoosier workers and career creators. Under the new agreement, Indiana dairy and poultry farmers will gain new access to Canadian markets, including an additional 3.6% of Canada’s dairy market. USMCA maintains the zero-tariff platform on all other agriculture products to Canada and all agriculture products to Mexico. In 2016, 41% of Hoosier agricultural exports were delivered to our NAFTA partners, a number likely to increase once USMCA is ratified.
On the automotive side, under USMCA, the portion of a car that needs to be produced in North America to avoid tariffs will increase from 62.5% to 75%. USMCA also requires at least 40% of parts from factories where the average wage is $16 an hour. Indiana is the second largest automobile manufacturing state in the country. Home to Honda, Subaru, Toyota, GM and Chrysler facilities, Indiana also supports a robust network of tier 1, 2 and 3 automotive suppliers. The new agreement will spur more investment in the American automotive supply chain and the wage protections will benefit Hoosier workers.
Indiana manufacturers rely on trade with Mexico and Canada. Over the last decade, our motor vehicle, food and beverage exports to Mexico and Canada have more than doubled. Over 2,000 manufacturing firms and 61,000 Hoosier manufacturing jobs depend on exports to these two countries.
Additionally, USMCA modernizes our trade agreement with Canada and Mexico to account for stronger protections for trade secrets, intellectual property, anticorruption and digital trade. NAFTA did not address agricultural biotechnology at all and USMCA has an entire chapter devoted to it. These issues were nascent or non-existent when NAFTA was ratified. Adding the sunset clause that NAFTA lacks safeguards all three countries by having a built-in mechanism to address evolving concerns and future issues unforeseeable today.
As Governor, I support free and fair trade that works for Hoosiers. After more than a quarter century, a reexamination of NAFTA is the prudent thing to do. The Trump administration worked diligently with Mexico and Canada to forge a new, modern trilateral agreement that will work for all three countries. The USMCA is an improvement on what worked in NAFTA and also addresses issues of economic fairness and adds provisions for issues that didn’t exist in 1993. USMCA provides certainty and stability while also expanding markets for Hoosier-made products.