By Nick Carey
DETROIT (Reuters) - The list of priorities U.S. Trade Representative Robert Lighthizer released this week for the renegotiation of NAFTA with Mexico and Canada is reasonable and in line with what the Trump administration has promised to focus on, the head of America's largest railroad said on Thursday.
"It was a very reasonable document," Union Pacific Corp (N:UNP) Chief Executive Lance Fritz said in an interview about a list of priorities released this week by Lighthizer. "From our perspective, he (Lighthizer) hit all of the elements that we’ve heard from the administration and they make sense."
Republican U.S. President Donald Trump has threatened to exit the North American Free Trade Agreement if it is not renegotiated in favour of the United States. Talks with Mexico and Canada on revisions to the treaty, which came into effect in 1994, are due to start in mid-August.
The top priority for the talks listed by Lighthizer's office was shrinking the U.S. trade deficit with Canada and Mexico.
Union Pacific's Fritz said that Lighthizer's focus on intellectual property, labour laws and dispute resolution mechanisms all make sense.
"What makes most sense to us is elements (of Lighthizer's priorities) focusing on the streamlining of freight across the border," he added.
About 40 percent of Union Pacific's freight volume is based on international trade and about 12 percent is based on cross-border trade with Mexico.
Fritz said that Mexico should continue to be a "good driver" for Union Pacific's growth.
The CEO spoke to Reuters after Union Pacific posted a better-than-expected second-quarter profit that was lifted in part by a 25-percent jump in coal revenue.
Major U.S. railroads have seen a resurgence in coal volumes this year, following two years of precipitous declines as many utilities switched to burning cheaper natural gas and as unseasonable weather resulted in large stockpiles of unburned coal. Union Pacific said on Thursday that coal volumes in the third quarter should be relatively flat versus the same period in 2016.
"We expect coal to be a bit more stable moving forward and that's dependent on natural gas pricing and to some degree weather," Fritz said. "The large inventory overhang has largely been consumed and that's the good news."