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You Decide: Will the Trade Deals Benefit North Carolina?

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You Decide: Will the Trade Deals Benefit North Carolina?

For the past two years, the US has been locked in international trade disputes – frequently called trade wars – with several countries. There’s now been a thaw in some of these disputes with the recent conclusion of new trade deals with Canada, Mexico and China. The question for North Carolina is, will these deals help our state economy?

Trade between countries results in each nation specializing in economic activities it does best, most efficiently and at lowest cost. For the US, this has meant a loss of many manufacturing companies that could now take advantage of significantly lower labor costs in China and Mexico. At the same time, industries like information technology, research, finance and health care expanded in the US to utilize the country’s highly educated workforce.

We can clearly see the results of these shifts in North Carolina. Big urban areas with universities and a college educated workforce have prospered, while many rural and small town areas that previously were home to textile and furniture factories have fallen behind.

It is changes like these that prompted a re-examination of NAFTA as well as our trade with China. Although all trade negotiations are challenging, the new NAFTA – called the USMCA (US, Mexico, Canada Agreement) – has now been completed.

Since the creation of NAFTA, North Carolina exports to Canada and Mexico have soared to more than 12 billion. Estimates indicate almost 400,000 jobs are directly or indirectly supported by these sales. The new USMCA could expand this impact in several important ways. Dairy farmers will have greater access to the Canadian market, and the state’s hog, poultry and fabric producers should see their exports increase.

The potential biggest impact could be on North Carolina’s auto industry. Auto industry, you say. We don’t manufacture vehicles in North Carolina! That’s correct, but we do have a large auto parts sector. The USMCA will now require a larger percentage of auto parts assembled into vehicles in North America to be made in North America. This should create more work and jobs for North Carolina’s auto parts factories.

And speaking of auto assembly plants, the USMCA should increase North Carolina’s odds of finally landing one.

The US-China trade deal should also help North Carolina. Over the next two years China has promised to purchase 52 billion more in agricultural products from US farmers than occurred . This should be a big boost to our state’s hog and bean farmers. China has also agreed to buy 32 billion more in manufactured products from the US in the same two-year period.

These trade agreements will not return the North Carolina economy to what it once was, and alone they won’t end the economic gaps existing between urban and rural regions of our state. Yet in the 21st century economy, agreement seems to be the deals will be a net plus.

Dr. Mike Walden

A William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University

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