Killing NAFTA will hurt consumers
Donald Trump’s dislike for the North American Free Trade Agreement and his yen to tax imports represent threats to Arizona’s economic future. Some prominent Arizonans know why. Glenn Hamer, head of the Arizona Chamber of Commerce, sent an email blast saying “Arizona and Sonora are developing a MegaRegion concept to drive regional economic development.” He included suggestions for refining NAFTA.
It’s in Arizona’s best interest. The ongoing effort to enhance trade with Mexico has been furthered by Gov. Doug Ducey, the Arizona Legislature and the mayors of Phoenix and Tucson.
There are 100,000 jobs in Arizona directly connected to trade with Mexico, according to the chamber.
A report released this month from the University of Arizona’s Eller College of Management says exports of automotive parts from Arizona to Mexico increased from $153.3 million in 2008 to $571.9 million in 2015.
It was partly the result of the expansion of the Ford Motor Co. plant in Sonora. It’s how things work these days. “The US-Canada-Mexico trading relationship is now highly integrated with parts and supplies zipping across the border multiple times,” Hamer says.
The three-country trading zone represents the “largest trading bloc in the world, and it’s made up of freedom-loving democracies with similar values. That’s something to be celebrated and strengthened,” he says.
A tariff on imports, such as Trump has proposed, would cost jobs because it would raise the price of goods manufactured by the NAFTA partners.
In a speech to Congress, Republican Sen. Jeff Flake said even a modified version of the tariff, called a border import tax, would raise costs to American consumers and U.S. companies by disrupting the global supply chains.
About 50 percent of what our country imports is used in production or manufacturing, he says.
Imports are not the enemy. Neither are trade deals, like NAFTA, which keep down the cost of finished goods.
Trade deals among like-minded neighbors, such as the U.S., Mexico and Canada, help entire regions thrive. Restricting trade hurts.
To put it in global terms: “It would be an economic and national-security disaster to weaken this area, and in effect strengthen China, which does not share our values on trade and is certainly not an ally,” Hamer says.
Concrete examples of the benefits of NAFTA for Arizona include decisions last year by Caterpillar Inc. and Lucid Motors to establish major operations in Arizona. Both companies use NAFTA.
Caterpillar will bring an estimated $600 million economic benefit to southern Arizona. Lucid is expected to bring 2,000 jobs to the Casa Grande area.
Hamer points to another benefit that comes as a result of Mexico opening up its energy markets to U.S. companies: UNS Energy, which owns Tucson Electric Power and Unisource Energy Services, is working to connect the electric grid in southern Arizona with electric facilities in northwestern Mexico.
This could make North America less reliant on places like Venezuela and the Middle East for power, he said.
Creating barriers to trade and trash talking our southern neighbor won’t help facilitate deals like these.
Is NAFTA perfect? No. After 23 years, the agreement can use some finetuning.
Hamer has a businessman’s suggestions on how to do that. They include enhancing protections for intellectual property and reducing customs regulations and red tape, as well as creating physical and e-commerce improvements worthy of the 21st century.
These refinements would allow the Trump administration to put its stamp on NAFTA without weakening its economic muscle.
Flake put it simply: “When we increase barriers to trade, nobody wins.”
Gutting NAFTA or imposing tariffs would hurt consumers and cost jobs.