The United States-Mexico-Canada Agreement Impact on New Jersey Manufacturers

The United States-Mexico-Canada Agreement (“USMCA”) was signed November of 2018, and includes significant updates that modernize the North American Free Trade Agreement (“NAFTA”) originally signed in 1994. The effects of the USMCA impact all facets of the New Jersey economy and produce significant benefits for small- and medium-sized businesses (“SME”) and their labor forces. The USMCA also includes provisions specific to SMEs designed to promote trade and investment by eliminating conditional barriers of conducting business while providing stronger and more effective intellectual property protection. The USMCA consists of 34 provisions or chapters and 14 side letters that address various key trade issues, such as Rules of Origin, Market Access, Intellectual Property, Small and Medium Sized Businesses, Agriculture, Digital Trade, and Labor.

NJ Manufactured Exports

From the New Jersey Manufacturing facts site, here is an overview of the manufacturing industry numbers in that state.

2017

• Total goods approximated at $49.3 billion, accounting for 8.33  percent of total state output
• Employed 5.95 percent of the state’s labor force

2018

• Total goods approximated at $30.98 billion, 1/3 sold to Canada and Mexico, the Country’s largest trading partners

Over the Past Decade Exports Included

• Chemicals, food and beverage, other nonferrous metals, petroleum products, plastics, pharmaceuticals, fabricated metal products, computer equipment, paper products and other manufactured commodities
• Over the last decade exports of chemicals, food, and beverage products to Canada and Mexico increased 30 percent
• Small- and medium-sized businesses comprising approximately 83 – 85 percent of the state’s exports
• More than 15,000 New Jersey manufacturing jobs dependent on exports to Canada and Mexico

Although 2018 was a record year with optimism at an all-time high, as reported in the National Association of Manufacturers (“NAM”) Outlook Survey, escalating tariffs and uncertainty from Washington has raised concerns over slowing global economic growth. A sound trade policy is critical to the future growth and success of New Jersey manufacturers. Despite the uncertainty from Washington, the New Jersey manufacturing sector continues to expand with most business leaders remaining mostly upbeat as noted in the NAM Second Quarter 2019 Outlook Survey.

Additionally, the NAM reports, that tax reform has also contributed to additional hiring and increased wages, noting that 4 out of 5 respondents were either “somewhat or very positive about their company’s outlook.”

Further, the NAM Manufacturing Outlook Index for the Second Quarter 2019, measured 53.2 and has exceeded 50 for the previous 11 quarters, which is indicative of the overall optimism in the global market. The NAM noted that “smaller manufacturers were more optimistic about their company’s outlook,” and four out of five respondents indicated that ratification of the USMCA was important to their company.

In our opinion, although New Jersey has benefited under NAFTA, the USMCA agreement promises to provide more opportunities for growth and expansion. The failure of congress to pass legislation to ratify the provisions of the USMCA could have devastating consequences to New Jersey manufacturers resulting in the loss of revenues and jobs to competitors.

Resources:

1. Office of the United States Trade Representative
   1. United States-Mexico-Canada Agreement (signed November 2018)
   2. USMCA State Fact Sheets – New Jersey
   3. USMCA Issue Specific Facts Sheets – Small and Medium Sized Businesses
2. National Association of Manufacturers:
   1. USMCA State Data Sheets
   2. 2019 New Jersey Manufacturing Facts
   3. Manufacturers Outlook Survey Second Quarter 2019
   4. Manufacturing Employment by State
   5. Manufacturing’s Share of Gross State Product

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07/08/2019