By Pat Ottensmeyer, President & CEO of Kansas City Southern
As I write this article, the new United States, Mexico and Canada Agreement (USMCA) still sits in the “on-deck circle” waiting on the moment when its implementing legislation is introduced to Congress for formal approval.
It is believed that the agreement is stalled due to some final changes being sought by certain members of the U.S. House of Representatives around pharmaceutical, environ- mental and labor enforcement concerns.
These issues simply should not impede the approval of such a landmark trade agreement, which has been negotiated with a bipartisan approach, and is far too economically important to American business and agricultural interests not to pass.
The economic benefits of the USMCA, and its predecessor NAFTA, are well understood. More than 12 million American jobs depend on trade with Mexico and Canada, which are now also the top two export destinations of small- and medium-sized American businesses. It is estimated that more than 120,000 American small businesses sell their goods and services to Mexico and Canada. There are many more statistics that I could cite but the point of them all is that trade with our two largest partners in commerce—and closest neighbors—is far too important to the American economy and prosperity of our communities to delay approval of USMCA any further.
We have passed so many key milestones to get to this point. In April, the International Trade Commission (ITC) released its economic impact analysis which estimates that USMCA would raise real U.S GDP by $68.2 billion and add 176,000 jobs to American payrolls. In May, Mexico passed landmark labor reforms to bring the country into compliance with USMCA’s upgraded labor provisions. Also in May, the U.S. lifted tariffs on steel and aluminum imports from Mexico and Canada, which, up to that point, had stalled progress in all three legislatures. On June 19, the Mexican Senate ratified the agreement making Mexico the first of the agreement countries to do so.
Over the summer, Nancy Pelosi, speaker of the U.S. House of Representatives, assigned Democratic leaders in the House to four working groups to engage with Ambassador
Robert Lighthizer, U.S. Trade Representative, and other administration officials to resolve differences and bridge gaps on certain issues, including those that I mentioned previously. Finally, in July, Ways and Means Subcommittee on Trade chairman Earl Blumenauer led a bipartisan congressional delegation to Mexico.
In addition to all of the bipartisan groundwork that has been done on the U.S. side, think about this: Prime Minister Justin Trudeau’s Liberal Party of Canada, Republican U.S. President Donald Trump’s administration, and a unique collaboration between Mexico’s outgoing PRI (Institutional Revolutionary Party) leadership and incoming Mexico President Andrés Manuel López-Obrador’s MORENA (National Regeneration Movement) administration reached an agreement that all sides can hold out as a model for cooperation and collaboration that benefits their citizens. If that doesn’t indicate this agreement’s bipartisan appeal, I don’t know what does!
At Kansas City Southern, agriculture is one of our most important industry segments. And grain primarily yellow corn grown in the upper Midwest is our single largest export commodity to Mexico. Prior to the passage of NAFTA, very little grain moved to Mexico on our railroad. Today, we move about 45-50 “unit trains” (dedicated trains, each consisting of 100 or more rail cars) per month, from states including Missouri, Kansas, Iowa, Nebraska, and Illinois, deep into Mexico.
Looking ahead, we see significant new opportunities for growth in trade between the U.S. and Mexico, that, in certain cases, includes increasing exports from the U.S. to Mexico in commodities that are much needed and desired in Mexico.
The first of these areas would be refined petroleum products moving from the U.S Gulf Coast refineries into Mexico, made possible by constitutional reforms passed in Mexico in 2013, which, over time, open Mexico’s energy markets to private and foreign investment.
The second of these opportunities is also energy-related and involves the shipment of plastics and resins from U.S. refineries into Mexico for use in products ranging from water bottles to electronics and auto parts. Substantial investment is being made in both of these areas including investment that Kansas City Southern is making to build terminals and add track capacity to facilitate the movement of these products from the U.S. into Mexico. The investment and growth in these segments will benefit both countries, creating jobs and economic growth on both sides of the border. Approval of the new USMCA is essential to provide clarity and structure to support investment and growth in these commodities.
All of these considerations should point to a trade agreement that literally sells itself and, clearly should be approved, but we cannot let our guard down until the USMCA is approved. There are several venues and initiatives underway which have elevated the collective voice of business and agricultural interests on this important topic:
• The USMCA Coalition, composed of more than 450 companies and associations of every size, sector and region across the U.S., including KCS, is working to secure congressional approval of the agreement. This Coalition has had over a thousand meetings on Capitol Hill to discuss and promote USMCA, and coordinates grassroots events around the country;
• In July, the U.S. Chamber of Commerce and more than 600 business and agricultural associations and local chambers sent a letter to Congress urging members to support USMCA—a staggering level of support for a trade agreement;
• At Kansas City Southern, we are trying to do our part as well. We have written to and communicated with members of Congress about the agreement’s importance to our economy. In early September, KCS partnered with Congressman Emanuel Cleaver (D-MO) and Missouri Governor Mike Parson to lead a grain elevator inspection tour on our historic Southern Belle passenger train. The purpose of this inspection tour was to reinforce the importance of USMCA passage to Missouri farmers, ag-business interests and communities; and
• During September, we continued to press members to bring the USMCA implementing law to Congress for a vote.
As I mentioned at the very beginning, the USMCA is still awaiting formal introduction in Congress; therefore, we still need all interested parties to speak up and make sure your voices are heard to provide that final nudge to Congressional leaders to move forward with approval of USMCA without delay.
Patrick J. Ottensmeyer is president & CEO of Kansas City Southern.
Patrick J. Ottensmeyer has served as president & CEO of Kansas City Southern since July 1, 2016. Kansas City Southern, a transportation holding company with railroad investments in the U.S., Mexico and Panama. Previously, he was vice president of finance and treasurer for Santa Fe Pacific Corp and Burlington Northern Santa Fe Corp. He is chairman of the U.S. Chamber of Commerce’s U.S.-Mexico Economic Council and recently served as chairman of the strategic trade initiatives working group of the U.S.-Mexico CEO Dialogue. He also serves on the boards of the Association of American Railroads, Truman Library Institute and Kansas City Metropolitan Crime Commission, and is a member of The Civic Council of Greater Kansas City.
