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NAFTA withdrawal would raise prices, cost retail jobs, study concludes

By Mark Johnson, Senior VP of Government Affairs 

A U.S. withdrawal from the North American Free Trade Agreement would raise prices, slow the economy and reduce retail jobs, a new study has concluded.

The National Retail Federation, Retail Industry Leaders Association and The Food Marketing Institute commissioned the study out of concern the U.S. could withdraw due to dissatisfaction with some aspects of the 24-year old agreement with Mexico and Canada. The agreement largely eliminated tariffs between the three nations to promote free trade.

Among the main findings of the study:

  • Retail imports to the U.S. would be subjected to $5.3 billion in new annual tariffs that could be passed along in higher prices.
  • Retail profits would be reduced a minimum of $10.5 billion.
  • An estimated 128,000 retail jobs would go unfilled in the next three years due to lost sales.

Such national outcomes would be pronounced in Washington State. Due to our geography, technology and natural resources, Washington is among the most trade-dependent states in the nation. The state’s economy would undoubtedly be hurt and workers either would see layoffs or reduced employment opportunities as a result of the U.S. abandoning NAFTA.

The study by the consulting firm AT Kearney found that the hardest hit segments of retail would be grocery stores, stores selling apparel and footwear, electronics and appliance stores and stores selling household goods and automobile parts.

Negotiators from the partner nations have been meeting this week in talks to update and improve NAFTA. The Trump administration has taken a harder line in the talks in recent months. For example, the administration would like to see a higher percentage of cars built in the U.S. to avoid tariffs.

Retailers support improving NAFTA in the updating process. But a withdrawal from the agreement would hurt the retail industry that has been instrumental in pulling the U.S. economy out of recession the past several months. The industry also generates significant percentages of government tax revenues that support vital public services.

Since NAFTA began in 1994, trade volumes between the U.S., Canada and Mexico have tripled. In the process, access to formerly seasonal merchandise has become year-round while prices have been better held in check. The study reported that the U.S. imports $128 billion in merchandise a year from Mexico, and $54 billion from Canada.

Retailers urge U.S. negotiators to weigh the study’s findings in their deliberations and commit to improving, not abandoning, NAFTA. The talks should be aimed at strengthening the agreement so that threats to the U.S. economy can be avoided and economic growth can continue.

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