In a passionate plea that elicited occasional robust applause, Gov. Gary Herbert recently urged national government officials to refrain from tariffs or other restrictionist measures that the governor believes could hinder Utah companies involved in international trade.
Speaking at the 12th annual Utah Economic Summit, Herbert — without mentioning names — said he is concerned about “some of the rhetoric I hear coming out of Washington, D.C.” that is critical of international trade. Utah companies last year exported nearly $11.5 billion in goods and services and nearly one in four Utah jobs are tied somehow to international trade, he said.
“I actually don’t doubt for a minute the good intentions of our government officials who are pushing things like increased tariffs in order to protect domestic businesses from international competition,” he said. “I think that they genuinely believe that they are going to help our people. But in my considered opinion, the consequences of such protectionism could, in fact, be catastrophic.”
For example, he said, Utah companies in 2017 exported more than $850 million in value-added goods to China and Hong Kong. If the U.S. trade restrictions to China escalate, many Utah companies would be at risk. Among them are companies involved in aerospace, aluminum recycling, beef and pork, orchards, plastic manufacturing, transportation and wheat farming, he said.
Tariffs, he said, do not fix trade imbalances but instead result in “less business for everybody.” Indiscriminate tariffs on imports from Utah’s top trading partners would hurt Utah businesses, he said.
History contains proof, Herbert said. The Smoot-Hawley Tariff Act in 1930 was prompted by a desire to protect Utah sugar beets and Oregon lumber but was expanded to include more than 20,000 imported goods. “The results to our economy were terrible,” Herbert said, noting that the act invited retaliatory tariffs that cut U.S. trade by half and worsened the effects of the Great Depression. Utah’s unemployment rate in 1930 was 5.1 percent but two years later had climbed to 35.9 percent.
“That’s why in Utah, I believe we should be far more interested in building bridges in trade and economic expansion, rather than erecting walls or barriers,” Herbert said to strong applause.
Another idea being considered by the Trump administration is scrapping the North American Free Trade Agreement (NAFTA), a pact among the U.S., Mexico and Canada. Since it was passed in 1994, Utah exports to Mexico have risen more than 1,233 percent and nearly 47,000 Utah jobs depend on trade with Mexico, Herbert said. Canada is Utah’s largest trading partner, and many Utah companies rely on Canadian steel and aluminum in making their products.
NAFTA needs to be modernized, the governor acknowledged, “but doing away with NAFTA would be reactionary and, I believe, foolhardy.”
Other partnerships likewise should be updated, and officials need to ensure that rules regarding fair trade are enforced and work to support and retrain employees hurt by changes in the global marketplace, the governor said.
“But having observed first-hand the enormous benefits that come from free trade, I would urge us all as a society, instead of criticizing free trade, to consider how we can better address each of these unique challenges that come along with free trade,” Herbert said.
Much of Utah’s economic success in recent years is due to “robust and growing” international trade, he said, as Utah companies have come to realize that 70 percent of world’s purchasing power and 95 percent of the consumers are outside the U.S. Utah is now 16th among states based on exports as a percentage of GDP, and in the past decade, Utah value-added exports have grown by 75 percent.
“More Utah businesses than ever before are looking beyond our borders to boost their profitability and market share by exporting goods and services to international markets,” Herbert said.
That is likely to continue with renovations at Salt Lake City International Airport and the development of an inland port. “Utah has long been known as the ‘Crossroads of the West,’” Herbert said. “With Utah’s inland port, we will position the state as one of the modern global hubs in America, making Utah now a ‘Crossroads of the World.’”
International trade can turn potential rivals into friends and partners and bring greater stability to the world, he said.
“Free trade, based upon fair rules of exchange, means greater economic opportunity and a higher standard of living and less strife. International trade can be — and should be — a win-win for everyone,” Herbert said.
“We don’t need to hermitically seal Utah to shut off international competition. As our state’s exponential growth in exports attest, Utah businesses already know how to compete and how to win in the global marketplace. I would much rather place my bet on them and you than to gamble on tariffs and other protectionist measures,” he said.
“As well as Utah is doing, the opportunity exists for us to do even better. Keeping our goods and services open to the world is essential for such opportunity.”