With the North American Free Trade Agreement in limbo after renegotiation talks hit an impasse last week, Louisiana finds itself among states that stand to lose the most from disruption to the trade deal.
Louisiana’s economy is the third most dependant on international trade—which makes up 34.6% of gross domestic product—behind Michigan and Kentucky, according to a report from the American Enterprise Institute. The study used data from the Census Bureau and the Bureau of Economic Analysis to determine how important trade is to each state.
The top six states that most depend on international trade also voted for President Donald Trump—despite facing the biggest risk under his anti-free trade agenda, according to U.S. News & World Report.
Trump has set out to rework or dismantle trade deals he views as unfair to the U.S. The president has even threatened to pull out of NAFTA, which he has called “one of the worst deals ever,” although economists warn of repercussions if the U.S. drops out of the 23-year-old agreement with Canada and Mexico.
In Louisiana, officials say free trade deals like NAFTA have historically benefitted the state economy and any disruption would have a significant impact, especially at the ports and in two of the state’s biggest industries: energy and agriculture.
“Mexico is our No. 2 trading partner overall, so there are concerns around that,” says Louisiana Economic Development Secretary Don Pierson. “The impacts of a NAFTA repeal would hit agriculture most significantly. The ports would be heavily impacted as well.”
Although the U.S. has a trade deficit with Mexico and Canada, Louisiana has a surplus. The state ships $1.2 billion more to Canada and $4.4 billion more to Mexico than it imports from those countries, Pierson says.
Overall, Louisiana exported $5.7 billion to Mexico in 2016. Agriculture accounted for $1.1 billion of those exports, says Louisiana Department of Agriculture and Forestry Commissioner Mike Strain. Corn, soybeans and rice are among the top commodities shipped to Mexico.
“For Louisiana, when you look at trade with Mexico, it is a critical relationship,” Strain says. “These trade negotiations are so very, very important.”
The U.S. began renegotiating NAFTA this summer to resolve its trade deficit with Canada and Mexico, but the fourth round of renegotiations came to an end last week without resolution. The talks will resume in November and are expected to continue into 2018.
Neither Strain nor Pierson believe NAFTA will be repealed, despite the president’s threats to do so. But parts of the deal will probably be reworked, they say, which could be a good thing.
NAFTA is not perfect and has presented some challenges for the U.S., Pierson says, such as trade-related losses when manufacturing companies move to Mexico and the dumping of subsidized products, like Canadian lumber or Mexican sugar, into the U.S. market.
“There are some issues that must be resolved. Free trade must be fair trade,” Strain says. “We will come to resolution. It takes time.”
—Annie Ourso Landry