The Dallas Morning News
Texas needs vocal NAFTA backers
In one of his first acts in Washington, President Donald Trump pulled the United States out of the TransPacific Partnership, a controversial trade deal involving a dozen countries.
Undoing the North American Free Trade Agreement with Mexico and Canada would be much tougher, even if Trump wants to go there.
That’s no accident. Before NAFTA took effect 23 years ago, Mexico was angling for more than easy access to U.S. consumers, which is usually the primary goal for a developing country.
Mexico wanted an accord that would also benefit the U.S. and Canada and strengthen economic ties among all three countries. Such multi-sided trade deals are more stable and durable, and that’s helpful when there’s a change in popular opinion — or elected leaders.
NAFTA has created impressive growth in trade and jobs, especially for Texas. But it’s also spawned large networks of suppliers and manufacturers whose goods often criss-cross the border before final assembly.
“The North American trade agreement has evolved,” Geronimo Gutierrez Fernandez, Mexico’s new ambassador to the U.S., told reporters from The Dallas Morning News last week. “It’s about joint production. It’s about the supply chains that go throughout Mexico and the United States. And that is not often known.”
While many focus on which country is exporting more to the other, he believes there’s a more important point: “It’s how are we producing together?” Gutierrez said.
The short answer: a lot. About 40 percent of the content in Mexican imports comes from U.S. companies. In 2014, $136 billion in U.S. goods were used in Mexican products, according to a study by the Mexico Institute at the Wilson Center in Washington.
U.S. companies consumed nearly as much in Mexican inputs — “direct evidence of joint production on a massive scale,” the report said.
For example, a car’s plastic dashboard might originate with oil in Mexico, go through a Louisiana refinery and be produced by an injection molder in the Midwest. The dashboard might go to a parts company near the border and to final assembly in Bajío, Mexico.
While most of the finished cars will be sold in the U.S., many go to other points around the world. Major components in the vehicles will cross the Mexican, U.S. and Canadian borders up to eight times.
“With such deep integration, there is no longer any such thing as an American car, a Canadian car, or a Mexican car,” the report said. “There are only North American cars, incorporating parts and materials from across the continent.”
Disrupting these supply chains would make U.S. companies less competitive and drive up prices for American consumers. Some political and diplomatic leaders have begun to defend the trade deal, and Gutierrez said it’s important for business executives to be more vocal, too.
“This is, in a sense, our first post-NAFTA strong disagreement,” the ambassador said.
No state stands to lose as much as Texas if the trade agreement unravels, he said, and he encouraged supporters of NAFTA and Mexico to take a stand. He cited a February opinion piece by six former U.S. ambassadors to Mexico that emphasized the value of the strategic relationship.
“That cooperation needs to be strengthened, not undermined,” the former ambassadors wrote. “Let’s keep building it.”
Almost two weeks ago, a group of senators in Washington, including Sen. John Cornyn, R-Texas, sponsored a resolution to reaffirm the U.S. partnership with Mexico and recognize shared interests.
“From diplomacy to security, immigration to trade, the United States is safer and stronger when we work together with Mexico,” said Sen. Ben Cardin, D-Md.
“Those things help,” Gutierrez said about the public comments, in part because they counter misinformation about trade, migration and public safety.
As a candidate, Trump tended to conflate NAFTA with drug cartels, deportation and the need for a big, beautiful wall. More recently, the Trump administration has appeared to soften its anti-trade stance, judging from a draft proposal on potential NAFTA changes.
The business community is gearing up to defend the trade agreement, said Chris Wallace of the Texas Association of Business. In general, the group has taken the same position as Gutierrez: Review NAFTA, improve it, update it — just don’t scrap the deal.
Defending it publicly can be a delicate proposition because Trump has criticized companies that plan to expand in Mexico. Alfredo Duarte, CEO of Taxco Produce in Dallas, believes the trade pact has been great for the U.S. and Mexico. But he wants to respect others’ views when speaking out.
“A lot of people voted for Mr. Trump,” Duarte said. “I need to find a balance so I don’t offend my good Republican customers.”
As Trump settles into the presidency, there’s hope his anti-trade sentiment will fade. Maybe he’ll learn more details about the positive effects, supporters will become more vocal and other issues may crowd it out.
“In a sense, we have been exercising strategic patience,” Gutierrez said.
The crisis in Syria, along with debates over NATO and other hot spots in the Mideast, may take the heat off Mexico, too.
“Why complicate things?” Gutierrez said. “We’re not in any way a serious security threat or challenge. On the contrary, we’re partners.”