Economics & Trade Policy

TribFest: U.S. – Mexico NAFTA Renegotiations Cause Worry Along the Border

Photo: Jonathan McIntosh (CC)

At a Texas Tribune Festival panel on “Trump and Mexico”, fear and uncertainty underlined conversations for future policy agendas and proposals for U.S.-Mexico relations.

Panelist and U.S. Representative, Henry Cuellar, said border communities receive about $1.3 million in revenue resulting from the constant influx of visitors and partnerships from Mexico. However, communities are seeing less revenue and visitors from the U.S. due to aggressive rhetoric via the Trump Administration.

Indeed, NAFTA has brought $1.15 trillion in trade revenue and 5 million new jobs to the U.S. since the agreement was enacted over twenty years ago. As as a result, the U.S. has enjoyed an increase of 0.5% growth in gross domestic product (GDP) every year since 1994.

Border officials have vocalized concerns that NAFTA renegotiation talks can bring about major shifts in business and trade practices. Veronica Escobar, panelist and El Paso County judge, said the renewal talks could have a larger domino effect, especially for cities such as El Paso which have local economies heavily tied to binational trade. Out of the $12.24 billion retail trade in El Paso, $980 million come from Mexico. The fear of deportation and stop and searches prevent people from contributing to the economy, putting the economy at risk for sudden drop in consumption.

Furthermore, Trump’s renegotiation proposals have also called for an end to the maquiladora sector. These factories in Mexico assemble imported parts at lower cost for labor so that final products re-cross the border as exports and are responsible for 65 percent of all Mexican exports. They are often cited by officials as a large source of employment and wealth in Mexico and the industry has since expanded under of the free-trade agreement.

The maquila industry has received a lot of backlash from the Trump administration given the movement of manufacturing companies south of the border. Value added tax (VAT) incentives have pushed US companies into Mexico, allowing companies to capitalize on lower taxes and minimal regulation. As a result, the U.S. manufacturing industry has suffered a loss of about 800,000 jobs due to the growth of the maquila sector.

Ross Perot,1992 presidential candidate, nicknamed this outflux of jobs to Mexico as a “giant sucking sound”, during the initial implementation of the trade agreement. Opposing candidates George H.W. Bush and Bill Clinton both hailed the final agreement as in fact an open door for jobs in the US. The trade eliminated trade tariffs on exports and encouraged transboundary manufacturing projects.

In support, the former Mexican ambassador, Antonio Garza, emphasized this importance of transnational cooperation, and askedU.S. and Mexican officials to ensure a NAFTA renewal would improve both economic stability and independence across their shared border. Panelists at “Trump and Mexico” panel called for private industry officials to practice thoroughness and precision in conversations for NAFTA renegotiation.  Francisco Cabeza de la Vaca, governor of Tamaulipas, Mexico, Francisco Cabeza de la Vaca, also emphasized the importance of binational dialogue and discouraged limiting the conversation to only the points brought by Trump. He suggested going through the free trade agreement in fullness to ensure maximum understanding and cooperation from both sides.

The only panelist who found hope in President Trump was Sid Miller, Texas Agriculture Commissioner, who stated that Trump was a “deal-maker…who genuinely cares for the American people”.

As the negotiations continue, hopefully President Trump acts true to this characterization in not only setting up the American people for success, but in also navigating through international conversations and maintaining cordiality with our neighbors.

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