Major U.S. railroads warn Trump against derailing NAFTA

LOMBARD, Ill. (Reuters) - Major U.S. railroads on Wednesday warned President Donald Trump of the potential financial and political consequences of scrapping the North American Free Trade Agreement and urged U.S., Mexican, and Canadian officials to find ways to modernize the accord.

A Union Pacific rail car is parked at a Burlington National Santa Fe (BNSF) train yard in Seattle, Washington, U.S., February 10, 2017. REUTERS/Chris Helgren

Trump has threatened to withdraw from the agreement, which is heavily utilized by U.S. and Canadian railroads hauling freight such as cars, beer, and grain across the three countries.

Some 35 percent of annual U.S. rail industry revenue is directly linked to international trade, according to the Association of American Railroads lobby group.

Kansas City Southern KSU.N Chief Executive Officer Pat Ottensmeyer told Reuters at a rail shippers' conference that scrapping NAFTA would put supply chains, jobs and consumers at risk and could come back to haunt Trump politically.

Cross-border rail trade between the United States and Mexico is dominated by Kansas City Southern. More than a quarter of its revenue comes from U.S.-Mexico shipments, and grain from American farms forms an important portion of cross-border carloads.

Ottensmeyer said many farmers who supported Trump in the 2016 election support NAFTA and are becoming critical of Trump’s threats to scrap the accord.

“You won’t talk to a single farmer who is against NAFTA,” Ottensmeyer said. “They did not vote for Donald Trump because of NAFTA, they decided to set that aside. I think (Trump) is beginning to understand that, the more time he spends in rural America.”

“Be careful what you do here,” he said.

Washington has taken a hard line in talks, saying that concessions are the only way for Canada and Mexico to keep the deal. Talks appear to be stalled heading into the penultimate round of negotiations scheduled to begin next week in Montreal.

"It's certainly out of date; it's old, so fix the things that need to be fixed but to wholesale walk away from it doesn't make a lot of sense to us," Union Pacific Corp UNP.N Chief Marketing Officer Beth Whited told Reuters.

No. 1 U.S. railroad Union Pacific serves all the main U.S.-Mexico rail gateways.

For example, Union Pacific hauls "a ton of Corona" beer and bottles and recycled glass to and from a Constellation Brands Inc STZ.N brewery in Mexico and made "a huge investment in Texas to support that, creating American jobs."

“NAFTA is a job creator,” Whited said. “Union Pacific jobs are American jobs.”

No. 3 railroad Norfolk Southern Corp NSC.N declined to comment.

Reporting by Eric M. Johnson; Editing by James Dalgleish