For multinational corporations, the North American Free Trade Agreement cut labor costs and streamlined supply chains. For Mexican corn farmers and Michigan factory workers, NAFTA helped to end their way of life. For consumers, it has meant lower prices for everything from avocados to automobiles.
In Laredo, where unending streams of 18-wheelers roll through the busiest U.S. inland port every day, the NAFTA question isn’t a complicated one.
“If NAFTA would be rejected or withdrawn, Texas would be the most negatively impacted state, and the city of Laredo would be the most impacted city,” U.S. Rep. Henry Cuellar, D-Laredo, said. “You’re talking about a lot of business. … Once Mr. Trump and his advisers really start looking at this, they will see that Mexico is a friend and not a threat.”
The landmark 1994 trade deal, which was negotiated by President George H.W. Bush and shepherded through Congress by President Bill Clinton, created the largest free trade zone in the world by eliminating most tariffs among the U.S., Mexico and Canada and by making it easier for corporations to do business across the continent.
President-elect Donald Trump has promised to change or withdraw from NAFTA, calling it the “worst trade deal in history” and saying it contributed to the decline in U.S. manufacturing.
Although the deal’s impact on the overall U.S. economy is a matter of debate, Texas benefits disproportionately from trade with Mexico and has never depended on manufacturing jobs to the extent that Rust Belt states did.
In 2015, $381 billion worth of trade between the U.S. and Mexico passed through Texas, accounting for 65 percent of the total trade between the two countries, according to the Census Bureau.
About 4.9 million American jobs depend on trade with Mexico, including 382,000 in Texas, according to the Wilson Center, a Washington, D.C., think tank chartered by Congress that studies global affairs.
Not all of those jobs would go away if Trump follows through on threats to withdraw from NAFTA, but many would.
In the short term, if the U.S. restarts tariffs on goods from south of the border, Mexico likely would retaliate, sparking a trade war that could raise prices for U.S. consumers and hurt U.S. manufacturing exports in the process. Mexico is the second-biggest importer of U.S. goods, behind Canada.
In the long term, the higher cost of assembling products in Mexico would lead U.S. companies to make fewer products there. Trump hopes they would open more plants in the United States, but they could also go to countries where labor is even cheaper than in Mexico.
McAllen Mayor Jim Darling questioned whether it was worth disrupting international trade in an attempt to bring back manufacturing jobs at a time when automation and robotics are eliminating many of those jobs.
“They’re built to have less people employed. I think we really need to have a discourse on how is technology going to change the workforce that we have,” said Darling, whose city is just across the border from Reynosa, a major Mexican manufacturing hub. “I think (NAFTA) needs to be tweaked, but I think it needs to be in place.”
Traditionally, promoting free trade has been a GOP priority and stemming it has been a rallying cry for unions and the Democrats who labor typically supports. But Trump’s unique candidacy, along with Clinton’s role in NAFTA and President Barack Obama’s push for the Trans-Pacific Partnership, has scrambled alliances.
Johnny Pruitte, president of the union local for workers at the General Motors plant in Arlington, said he hopes Trump succeeds in re-establishing tariffs on Mexican products.
“There was some bad feelings over Bill Clinton signing the NAFTA agreement because we as labor thought that that was a slap in the face and would take jobs out of the country, which inevitably it would,” said Pruitte, who leads the 7,000-member United Auto Workers’ Local 276. “I hope the new incoming president is going to be able to keep his campaign promises, and hopefully he will be able to adjust it so that he can bring more jobs back to the states.”
Texas likely would suffer more than other states if NAFTA were canceled because it depends on international trade and because a destabilized Mexican economy would have an adverse impact north of the Rio Grande, experts said.
“Any type of conversation of doing away with trade agreements would be detrimental to any border state,” said Luisa del Rosal, executive director of Southern Methodist University’s Texas-Mexico Center. “It would send Texas into a recession.”
In 2015, Texas companies exported $92 billion in goods to Mexico and imported $84 billion in goods from Mexico, according to the Census Bureau. The Lone Star State’s biggest export, by far, is fossil fuels, including natural gas carried by pipeline across the Rio Grande.
Mexican demand for natural gas is expected to grow over the next few years, a major opportunity for the state’s oil and gas sector. The Texas Railroad Commission predicted last year that the state’s natural gas exports to Mexico will increase from 2.1 billion cubic feet per day in 2015 to 3.4 billion cubic feet per day in 2020.
Aside from making it cheaper to sell products from one NAFTA country to another, the agreement has facilitated international means of manufacturing. Auto companies, for instance, can ship parts, oftentimes originating in the U.S., back and forth between the U.S. and Mexico several times for various stages of production before a car is finally assembled, usually in Mexico.
The companies fine-tune the continent-wide supply chains to save money at every step of the way. The end result is less expensive products, made possible in large part by substituting American blue-collar workers with low-paid labor in maquiladoras, the Mexican government’s term for foreign-owned plants that assemble products made for export back to the company’s home country. In 2015, there were more than 1,600 maquiladoras operating in three Mexican states bordering Texas.
Maquiladoras have been criticized for subjecting workers, especially women, to abusive work conditions. And although Mexican leaders say the plants have helped create an emerging middle class in the country, their ability to lift workers out of poverty has been questioned.
Mexico is keeping mum on potential changes to the trade agreement until Trump takes office in January. Paulo Carreño King, Mexico’s undersecretary for North America, said his country is open to discussing new deals to accompany NAFTA rather than ones that would change it.
“Not only are we buying and selling from each other, but we’re creating things together. We have built and developed supply chains between the two countries in which we are creating products to sell abroad,” he told the American-Statesman. “NAFTA has been very successful to create this megaregion to compete in the world.”
At the southern terminus of Interstate 35, Laredo is the aorta of the NAFTA economy. Despite being more than 100 miles from a major body of water and lacking a major airport, the 14,000 trucks that pass over the World Trade Bridge and through other entry points in the city every day make it the third-busiest port in the U.S., behind Los Angeles and New York City.
The local job market depends on the customs, logistics and transportation industries. Many people have family across the Rio Grande, in Nuevo Laredo, or commute between the two communities.
The region’s cross-river culture is rooted in history. Laredo was home to the Republic of the Rio Grande, a 283-day experiment that echoed the Texas Revolution and allows the area to say it is the only part of the state that has flown under seven flags.
Early in the primary campaign, as he was cementing illegal immigration as his No. 1 issue, Trump flew to Laredo for a whirlwind photo-op at the border and a meeting with local law enforcement officials.
Although Laredo isn’t the center of the current crisis over illegal immigration — in which thousands of families from Central America have been crossing into the U.S. mostly in the McAllen area — it could be at the center of a trade crisis during Trump’s presidency.
Trump plans to begin addressing NAFTA on the first day of his administration by asking the Commerce Department to study the effects of withdrawing from the deal, according to a memo from his transition team obtained by CNN. On the 200th day, Trump will consider withdrawing from NAFTA and replacing it with bilateral agreements with Mexico and Canada, the memo says.
Former President George W. Bush, who was Texas governor as NAFTA was rolling out, defended the trade agreement Tuesday, saying it has improved economies on both sides of the border.
“Trade shows a confidence in our workers and our business people, because trade really means we’re willing to compete,” Bush said in an address at Southern Methodist University.
Federico Schaffler, an economist at Texas A&M International University in Laredo, said Laredo would be devastated if NAFTA were canceled, as would Americans who would have to pay more for goods made in Mexico today.
“This is a trade city. This is an international city,” said Schaffler, director of the Texas Center for Border Economic and Enterprise Development. “Eventually, who might be negatively impacted will be the consumer.”
Born in Canada, raised in Mexico and living in the United States, Schaffler in many ways embodies NAFTA. At the moment, he has children living in Canada, Mexico and the U.S.
Schaffler said he doubts Trump will abandon NAFTA and predicts that any changes to it will be superficial, a sentiment echoed by Cuellar and others.
“Texas is a Republican state, and it exports to Mexico. Texas will take a big hit if this happens,” Schaffler said. “Texas Republicans will have their say in this.”
Additional material from Statesman staff writer James Barragán.
$381 billion: Value of U.S.-Mexico trade that passed through Texas in 2015
4.9 million: Number of U.S. jobs that depend on trade with Mexico
382,000: Number of Texas jobs that depend on trade with Mexico]]>