Union Pacific CEO Lance Fritz calls for modernizing, not withdrawing from, NAFTA

Withdrawing from the North American Free Trade Agreement would be “disastrous” for the U.S. economy as well as for workers, Union Pacific CEO Lance Fritz said at a National Press Club Headliners luncheon on Thursday.

Instead, he said, the Trump administration should be looking at ways to “modernize” the trade agreement.

Fritz applauded the administration for its tax reform measures as well as its “sensible approach” to regulations, but said withdrawing from NAFTA "threatens to undo that progress.”

About 40% of Union Pacific’s shipments either originate or terminate outside the United States, which serves as a daily reminder, Fritz said, of the benefits of international trade and what is at stake in NAFTA’s survival.

Fritz called on the administration to stop seeking a sunsetting provision that would automatically terminate NAFTA after five years unless all three countries agreed to continue. That provision would cause significant uncertainty for business planning and investment, he said. Instead, he called for a provision under which any of the three countries could choose to negotiate specific issues after a reasonable period.

The administration’s proposal to scrap NAFTA’s dispute-settlement process, which allows investors of one NAFTA country to bring claims directly against another government before an international arbitration panel, would raise questions about America’s commitment to due process, he said. Instead, he said, the dispute settlement process needs to be “mended, not ended.”

Fritz also spoke out against tariffs imposed by the president and called on the administration to work with U.S. allies “constructively” rather than “starting trade wars.” He cited several studies that showed that imposing tariffs will hurt workers’ jobs. One study he cited showed that for every job in the U.S. steel and aluminum industries protected by the tariffs, 16 jobs in related sectors would be lost. Another study showed that 134,000 jobs are threatened by the first new round of tariffs on China and that could be amplified if tariffs escalate. He also cited a third study that found that 760,000 jobs could be lost through the current tariffs and those being considered for autos and auto parts.

Providing meaningful work and decent wages for workers whose jobs are threatened by technological change, rather than trade agreements, is one of the biggest challenges for the U.S., Fritz said. Of the 5.6 million manufacturing jobs lost in the United States from 2000 to 2010, about 88% were due to productivity gains while only 12% were attributed to trade.

He said that technological change is “unstoppable” and the United States needs to spend more on training workers for jobs of the future.

“We must protect the rights of U.S. workers and companies to compete on a level playing field by reducing unfair competition from state-owned enterprises,” Fritz added.