Freight railroads are on board with USMCA

Last week, I once again had the pleasure, and good fortune to attend the Rail Trends conference in New York City, which was hosted by Progressive Railroading magazine and independent railroad analyst Tony Hatch. Given all that is going on in the freight railroad sector, it was great to listen to various industry stakeholders talk about the ins and outs of the sector, including positive train control, precision scheduled railroading, volumes, technology, and policy, among others.

One other theme receiving a fair amount of attention was trade, with the ongoing U.S.-China “trade war” and NAFTA, or, excuse me, the United States-Mexico-Canada Agreement (USMCA) receiving a fair amount of attention.

For the purposes of this column, the focus is on the latter, given that on Friday, November 30, President Trump heralded the signing of USMCA as a more “modern and rebalanced trade deal to replace NAFTA. USMCA was signed by President Trump, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto at last week’s G20 Summit in Argentina. Before USMCA takes effect, it needs to be ratified by each member nation’s legislatures.

A year ago at the RailTrends, there was a feeling of nervousness in regards to the fate of NAFTA at the time.

Industry stakeholders voiced their collective concerns over what may, or may not, happen. There was also possibility of the U.S. simply pulling out of the deal, which was considered a viable option at the time, and viewed as a potential big blow to the freight economy. What’s more, many stakeholders opined that the potential impact it could have had on the economy and related North American trade patterns, too, could have been severe.

Well, fast-forwarding almost exactly a year later to a new deal being signed at the time of the 2018 RailTrends, there appears to be a collective sigh relief among freight railroad industry stakeholders, regardless of the agreement’s new name.

But while the deal is done in principle, they made it clear that the deal needs to be signed in order to cross the finish line.  

“It is absolutely critical that [USMCA] gets done,” said Michael O’Malley, president of the Railway Supply Institute, at RailTrends. “Our members manufacturing networks and supply chains are in all three countries, and we cannot afford to see this get screwed up. We will be working with the US Chamber and NAM that are leading that charge.”

Union Pacific Chairman, President and CEO Lance Fritz echoed O’Malley’s sentiment.

“We love the fact that NAFTA got renegotiated,” he said. “It is an effective agreement, and it will be good for the United States, Mexico, and Canada. It needs to get ratified. It would be tremendously embarrassing for us as a country if we negotiate what appears to be a modernized good agreement that cannot get to the final threshold.”

Other speakers at RailTrends viewed the signing of USMCA as a positive sign of progress, with others observing it is largely vague at the moment.

Ed Hamberger, outgoing president and CEO of the Association of American Railroads (AAR) praised the agreement in a statement issued on November 30.

“The private freight railroad industry congratulates leaders from Canada, Mexico and the United States for signing the U.S.-Mexico-Canada Agreement (USMCA) today, an important step in preserving free trade across North America,” he said. “The seamless movement of goods between our nations – via private railroads, as well as trucks – makes our economies stronger and more competitive. The U.S. Congress should work to quickly ratify the modernized accord to provide market certainty and stimulate further investment in industry and workers.”

The future fate of NAFTA, or USMCA now, had been in question for a very long time, basically since Trump was sworn in as President. This agreement, should it become official, is one less thing for the three member countries to worry about, while also keeping the North American supply chain running smoothly down the line. Let’s hope it meets all stakeholder needs and is an efficient and effective deal for everyone involved.