Academic journal article Policy Review

Miracle on I-35

Academic journal article Policy Review

Miracle on I-35

Article excerpt

Think free trade is hollowing out the economy? Take a look at Kansas City, just one of the nationAEs newest export powerhouses.

Free trade and the international agreements that promote it have been very good for Americans. In 1997, U.S. unemployment dipped below 5 percent--its lowest level in decades. Riding a wave of export growth, American manufacturers hired 1.4 million additional industrial workers between 1992 and 1996. In its first three years, the North American Free Trade Agreement (NAFTA) slashed tariffs on U.S. goods entering Mexico by 7.1 percent, and on Mexican goods entering the United States by 1.4 percent. In spite of the peso devaluation that made U.S. exports there more expensive, sales to Mexico have grown by 37 percent. Total trade between the two nations increased by 61 percent, or nearly $50 billion. AmericaAEs combined commerce with Canada and Mexico, its NAFTA partners, rose in that time by $127 billion annually.

This windfall from trade would be impressive even if it were confined only to dusty border towns and coastal cities. But the real news is that there is a tremendous river of international commerce rushing right through AmericaAEs heartland. In Kansas City, a metroplex of 1.7 million people that straddles the Kansas--Missouri border, unemployment dipped to 3.2 percent in July 1997. This has made NAFTA believers of residents of the region.

"NAFTAAEs early results surpassed our most optimistic expectations," says Doug Luciani, an economic-development expert with the Greater Kansas City Chamber of Commerce. Indeed, export figures from the two-state area dwarfed national trends. Missouri sends transportation equipment, chemical products, industrial machinery, and electronics to Mexico. In NAFTAAEs first three years, its Mexican exports rose from $540 million in 1993 to $1.09 billion in 1996--a 102 percent increase. Kansas sells livestock, grains, and cars in the Mexican market; it increased exports from $187 million to $643 million in three years, an incredible 244 percent rise.

Many of these goods are shipped through Kansas City, an "intermodal" hub of air, barge, truck, and rail cargo. Total merchandise exports from the Kansas City metropolitan area rose from $2.23 billion in 1993 to $3.99 billion in 1996--a $1.8 billion increase in two years.

Recovery in the Heartland

"When I talk to people about Kansas City," says Agnes Otto, the ChamberAEs export-assistance representative, "I tell them about our new industries--our international engineering and telecommunications. But I also tell them about our transportation and agriculture. What amazes me is that the things that made us strong in the beginning are precisely whatAEs bringing us back."

One leading trader is Farmland Industries, the largest farmer-owned cooperative in North America. Headquartered in Kansas City, it serves 500,000 farmer--ranchers and 13,000 livestock producers. It conducts business in all 50 states and in 70 foreign countries. For its farmer members, Farmland processes and markets grain; for its livestock producers, it slaughters, processes, and markets pork and beef.

"The future economic well-being of American agriculture," says Farmland research analyst Bill Trickey, "is closely tied to our competitiveness in an expanding global market." He notes that U.S. farm producers now earn 25 percent of their gross earnings from exports, and that this will likely increase to 35 percent by 2003.

Trade agreements have been at the heart of this surge in foreign commerce, says Trickey. "In the past six years, our international sales have grown from less than $200 million to over $4.1 billion. In Mexico alone, we have seen our trade, since the passage of NAFTA, grow from less than $50 million in 1992 to $450 million in 1996. We believe that U.S. policy must also be dedicated to the expansion of global markets."

During the NAFTA debate of 1993, Ross Perot decried the "sucking sound" of American automotive jobs hurtling south of the border, lost to cheap Mexican labor. …

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