MORGANTOWN – The devil might be in the details of a Trump administration-renegotiated North American Free Trade Agreement (NAFTA) that could end up hurting West Virginia even if it benefits the rest of the nation, a West Virginia University law professor said during a recent interview.
"West Virginia needs jobs, and NAFTA isn’t the problem," WVU Law Professor Alison Peck said during a The West Virginia Record email interview. "If we focus on fighting NAFTA we will lose our opportunity to demand that the federal government provide real support for business innovation here in West Virginia that will move our industries forward."
The state also needs rural broadband and cellular, inexpensive access to capital, state-of-the-art technical schools, and tax breaks for business incubation, Peck said.
"We also need much better job retraining and other benefits while those new businesses grow. The federal government can help by supporting those programs, but it won’t if we focus on the wrong things. We could win the battle but lose the war," she said.
West Virginia College of Law Professor Alison Peck
As the Trump administration approaches renegotiating NAFTA, Peck said West Virginia and Kentucky could lose yet again.
"West Virginia and Kentucky have lost 38,000 coal jobs since 1983," she said. "Those jobs didn’t move to Mexico or Canada. Some of those jobs disappeared because technology changes like mountaintop mining allowed companies to mine with machines instead of workers. Other jobs were eliminated because alternatives like natural gas, renewables, energy efficiency, and low-sulfur coal from Wyoming became cheaper than Appalachian coal. If you want to bring coal jobs back to West Virginia, you’d be better off taxing Wyoming products than Mexican products, and obviously no one is suggesting that."
President Donald Trump announced in May his administration's intent to renegotiate the North American Free Trade Agreement (NAFTA), a treaty between the U.S., Canada and Mexico in force since 1994. That announcement, part of a Trump campaign promise, also triggered a 90-day consult with Congress and the nation's industrial representatives as a preamble to formal negotiations.
Trump's promises about renegotiating NAFTA, as well as the Trans-Pacific Partnership, was popular among voters but is making the nation's businesses nervous, according to reports. The situation is significantly more nuanced for West Virginia, Peck said.
"As I’ve written on International Trade Law Profs Blog, it would be extremely difficult for the U.S. to withdraw from NAFTA because it would devastate grain farmers, and therefore farm mortgage lenders," Peck said.
"West Virginia farmers aren’t directly affected by NAFTA because most West Virginia farmers don’t produce major export crops like feed corn. West Virginia farmers, like other West Virginians, have been affected by NAFTA primarily in two ways: their off-farm employment and the cost of the things they buy. So their interests are very similar to the interests of other West Virginians."
The difficulty - and therefore the nuance - with focusing reform efforts on trade is that trade costs jobs but it also creates jobs, Peck said.
"It’s hard to tell some West Virginians they are going to lose their jobs in order to bring jobs back for other West Virginians," she said.
After all, in 2016 West Virginia had about 23,300 jobs that depended on trade with Mexico and the state exported approximately $41 million in coal to Mexico last year, Peck said.
"We don’t want to lose those jobs and we don’t want Mexico to start placing high tariffs on West Virginia products in retaliation for the U.S. tariffs on Mexican products," Peck said.
"In addition, neighboring states are more dependent on NAFTA trade than West Virginia and would lose out if Mexico started placing tariffs on U.S. products. Ohio has 178,000 jobs that depend on trade with Mexico. In Pennsylvania, it’s 200,000. It’s not a good economic or political strategy for West Virginia businesses to bet against Ohio and Pennsylvania businesses."
Proposed NAFTA reforms outlined in the Trump Administration's letter to Congress are not sweeping and wouldn’t do much to reallocate production, Peck said.
"Renegotiating NAFTA might even make things worse for West Virginia businesses," she said.
Peck referred to comments made by U.S. Secretary of State Rex Tillerson about renegotiating the rules of origin provisions of NAFTA and said those provisions ensure goods contain a certain percentage of component parts produced in NAFTA countries for finished products to receive the NAFTA relief from tariffs.
"But those rules of origin are already stricter than most free trade agreement," Peck said.
"Making them even stricter will only add layers of complex regulation. For small and medium-sized businesses in West Virginia, we should be trying to eliminate regulatory complexity, not add to it."
West Virginia needs is long-term job growth that takes into account jobs lost in the future to automation and increased competition from innovative new products, Peck said.
"I have not seen any proposals on NAFTA that will accomplish that, and some might even hurt," said. "We urgently need federal government support to create a strong business environment in West Virginia during this time of fast technological change. Focusing on NAFTA only lets the federal government off the hook and hurts West Virginia workers and entrepreneurs."