What The New North American Trade Deal Means For Hawaii

Dec 11, 2019

The United States, Mexico, and Canada have finalized the details of a new free trade agreement. Hawaii stands to see modest benefits.

The US-Mexico-Canada Agreement, or USMCA, is billed as the 21st century update to the North American Free Trade Agreement. NAFTA, which was signed during the Clinton Administration, was written before industries like e-commerce fully developed.

The 25-year-old NAFTA, which President Trump called “the worst trade deal ever made,” streamlined trade by reducing or eliminating tariffs and creating universal product standards between the three signatories. Canada and Mexico are the second and third largest trading partners, respectively, of the United States.

Companies in Hawaii and other U.S. states benefit by getting duty-free access to Canadian and Mexican markets. Under the existing NAFTA deal, Hawaii exports $20 million worth of goods to Canada and Mexico each year, mostly in the form of agricultural products and manufactured goods.

Hawaii’s $17 billion tourism industry also benefits, albeit indirectly. Tori Emerson Barnes with the U.S. Industry Association says NAFTA deepened the economic ties between the three North American countries. That in turn leads to more travel for business, but also for leisure.

Barnes says the opposite is also true. When trade ties fray, international travel suffers. She cites a nationwide decline in Chinese visitors coming to the U.S. since a trade dispute between the two countries began.

So while the USMCA doesn’t directly impact the visitor industry the way it does manufacturing and agriculture, Barnes says Travel Industry Association still predicts nationwide benefits for the tourism sector.

“We think the resolution of this deal could add as much as $1.7 billion in economic output in the U.S. economy and create as many as 15,000 jobs in the travel industry,” she said.

More than half a million Canadians visited Hawaii in 2018, spending $1.10 billion.

Farmers around the country have long supported free trade with Mexico and Canada, which account for 25 percent of agriculture exports. Most farmers have been supportive of the USMCA, with the exception of some cattle ranchers, who unsuccessfully pushed for new county of origin labeling requirements for beef products.

In a written statement, the Hawaii Cattleman's Council said it supports USMCA, which preserves American ranchers' duty-free access to Canadian and Mexican markets, which the group stated is worth $1.8 billion annually.

Nichole Galase, Managing Director of the Cattleman's Council, told HPR that mandatory origin labels previously cost the beef industry more than $100 million to implement, without generating any additional profits for producers.

The USMCA appears to have the support it needs in Congress. Democratic leaders in the House of Representatives signed on to the latest version after the country’s largest union, the AFL-CIO, signaled it favored the revised agreement.

Democrats, whose control the House, had been pushing for changes to the original deal covering labor standards, environmental regulations, and protections for pharmaceutical manufacturers.