Trump talk sounds alarm on Mexican trade

Trump talk sounds alarm on Mexican trade

By Lynn Brezosky, San Antonio Express-News January 18, 2017

Standing beside a busy avenue in Mexico City last spring, Agustín Barrios Gómez, a former Mexican congressman who is founder of the Mexican Council on Foreign Relations and head of the Mexican Image Foundation, took on Donald Trump’s adversarial talk about U.S.-Mexico relations with a television spot dubbed “The truth about us.”

He cited key statistics, several put out by the U.S. Chamber of Commerce and often used by defenders of the North American Free Trade Agreement: Fourteen million U.S. jobs depend directly on NAFTA trade. Of every dollar worth of Mexican imports to the U.S., 40 cents represents U.S. content. Immigration from Mexico is decreasing, with 1 million fewer Mexicans living in the U.S. since 2013.

 The Mexican economy meanwhile has grown to the 11th largest in the world by purchasing power, he said, about two-thirds the size of Russia’s.

“That’s not a friend you want to lose,” Barrios Gómez said. “We make stuff together, which means that we help America stay competitive. … Come home, have a Corona, and let’s prosper together.”

But as the world readies for Trump’s swearing-in Friday, Barrios Gómez’s tone has gotten more dire. Any hope that Trump’s talk would soften after visits with Mexican President Enrique Peña Nieto and prominent Mexican billionaire Carlos Slim evaporated last week at Trump’s news conference, when the president-elect spoke of fast-tracking a southern border wall.

Closer to home, U.S. mayors of border cities fear a new Rust Belt emerging amid a post-NAFTA administration. And farmers and ranchers who cheered on Trump’s talk of a lighter regulatory environment hope that unraveling NAFTA doesn’t ruin trade with one of their biggest customers.

Many also favor passage of the Trans-Pacific Partnership, a 12-nation pact that could have brought even more customers for U.S. agricultural products but is considered dead with the Trump victory.

“Let’s be clear,” Barrios Gómez said in an interview. “Donald Trump rode to the White House on basically a platform of war with Mexico in one way or another. Right now, that’s what we’re facing.”

The Mexican peso has plummeted since the election, and a steep hike in gasoline prices attributed to energy reform has erupted in violent protesting. News that air conditioning company Carrier would keep jobs planned for Mexico in Indiana, that Ford has backtracked on plans for a $1.6 billion plant in Mexico, and General Motors, Toyota, and others manufacturing in Mexico could be hit by a “big border tax” has Mexico’s manufacturing sector cowed.

If trade arguments don’t work, security implications might, Barrios Gómez said.

“How hard is it to understand the United States has basically half of humanity that is willing to do itself harm in exchange for hurting the United States and the fact that it is blessed with two neighbors that have up until now been stable and cooperative?” he said.

Eduardo Bravo, a San Antonio magazine publisher who is past chairman of the binational Association of Mexican Entrepreneurs, said a trade disruption would cause at least short-term pain for Mexico and the U.S. cities that conduct a lot of Mexican trade. But he said Mexico had developed a sophisticated labor force that could look to other markets.

“Obviously San Antonio and the border states, they are going to be hurt because it’s a global market,” Bravo said. “If the commerce with the United States becomes difficult, other countries like China, European countries, they are going to see Mexico. Because Mexico, they have engineers, they have technology, they have the qualified people. I know the biggest market is the United States, but the United States is not the whole world. We have a globalized economy.”

He doubted the Trump administration, including cabinet nominees Rex Tillerson as secretary of state and Rick Perry as energy secretary, would be able to turn its back on opportunities in deregulated Mexican oil.

“He has great people, business people, in the Cabinet,” he said. “Maybe they hurt for the manufacturing, but remember when NAFTA was negotiated, we didn’t have the oil in NAFTA. But now, with the open oil industry in Mexico, it’s going to be for Texas and Mexico a big opportunity.”

Laredo Mayor Pete Saenz hosted Trump for a two-and-a-half-hour stop at the border in July, but said he now wonders if it was for naught.

“He saw the (World Trade) bridge, we gave him all the data, the metrics, and he was very impressed. And then this issue with the wall, we discussed that, too,” he said.

“I told him, Look, it’s a river. It’s got creeks emptying into it. Are you going to dam those creeks? And then livestock use it. River, water, wildlife, we’ll have the environmentalists. It’s private property. You’ll be in court for years. It’s not practical. So anyway, he just listened and then at the press conference he said, ‘Well maybe some areas, some parts of the border may not be conducive.’ But then the next week I heard him say it’s going to be wall across the entire border, real deep and real high and real thick.”

Displaced jobs

There are plenty of statistics on how NAFTA has failed U.S. workers. According to a report by Washington, D.C.-based Public Citizen, NAFTA in its first decade contributed to a trade deficit with Mexico and Canada that translated to a net loss of 1 million U.S. jobs.

Workers without college degrees, some 63 percent of the U.S. workforce, lost an estimated 12.2 percent of their wages, even after accounting for the benefits of goods made less expensive by manufacturers’ lower labor costs.

The pact has by no means been a blanket bonanza for Mexico, either, Public Citizen said, with imports of subsidized U.S. corn destroying the livelihoods of more than 1 million Mexican farmers and more than half the population still falling below the poverty line as of 2014.

 “Many outcomes are exactly the opposite of what was promised,” the report said.

According to a recent report by the Federal Reserve Bank of Dallas, Texas was second only to North Carolina in the number of jobs lost in the wake of the pact, with El Paso alone seeing 18,500 trade displaced workers between 1994 and 2014. Many of the jobs were at “cut and sew” plants such as Levi’s, Haggar, and Fruit of the Loom.

But in part by evolving into production-sharing hubs and trading goods destined for assembly or other production back in the U.S., border cities came out ahead.

“Granted, I know the Rust Belt is having a hard time, but believe me, if NAFTA’s gone, we’ll mirror that,” Saenz, the Laredo mayor, said. “The unemployment rate in Laredo is about 5.1 percent. Toward the (Rio Grande) Valley, it’s more like 8 or 9. It would easily double that.”

The international bridge upriver in Del Rio is the city’s largest revenue source, Mayor Robert Garza said, contributing about $6 million annually to the general fund. Most of that is truck traffic coming from the more than 50 maquiladoras, or foreign-owned factories, across the Rio Grande in Ciudad Acuña.

The commerce is so lucrative that Del Rio has been studying the idea of a second bridge that would take advantage of a new super highway cutting through Mexico from the Pacific port of Mazatlán to allow Asian and South American shippers an alternative to ports in California.

“We’re in direct route on the ports-to-plains (corridor) that goes up to Denver and Canada, so and for us locally it would be a super boost economically,” Garza said.

Factories in Acuña tend to have management offices and managers living in Del Rio. What’s good for the border is good for San Antonio, Garza added, because prosperity there means more trips east on U.S. Highway 90 to San Antonio’s malls, medical complexes, and automobile dealerships.

“We all come to San Antonio,” he said.

Impact on agriculture

NAFTA also has given a major boost to farm and ranch profits. Fearing the loss of an open market, sixteen powerful agricultural lobbying groups signed a Jan. 6 letter urging Trump and Vice President-elect Mike Pence to tread carefully on trade.

“The importance of trade to America’s farmers and ranchers cannot be overstated,” read the letter from groups including the American Farm Bureau Federation and the National Farmers Union.

The letter noted that more than 20 percent of U.S. farm output is exported, including more than 70 percent of cotton and tree nuts, 60 percent of soybeans, and 50 percent or rice and wheat. China, Canada, and Mexico rank as the top three buyers.

“When NAFTA began, the United States was exporting about $5 billion in agricultural products to Mexico, and today we’re exporting over $20 billion,” said Ryan LeGrand, Mexico director for the U.S. Grains Council. “Unfortunately, agriculture takes a back seat to manufacturing and other issues like that.”

If NAFTA were completely scrapped, “Mexico would start to look to South American nations for the grains, and that’s obviously something we don’t want,” LeGrand said.

Sorghum has become one of Texas’ most important exports, with 85 percent of the world’s sorghum seed coming out of the Texas Panhandle. China came to supersede Mexico as the top buyer of U.S. sorghum, which upped Mexico’s consumption of U.S. corn even more.

For Dale Artho, a sorghum farmer in Wildorado, Texas, the evolving market is a case study of why the Trans-Pacific Partnership merits more consideration.

“We’re 4 percent of the world’s population,” he said of the U.S. “That means 96 percent of the market is outside of the United States.”

And with Mexico and Canada among the signatories, the TPP fixes glitches that manifested with NAFTA, he said.

“The Trans-Pacific Partnership was probably the most up-to-date trading mechanism that’s ever been developed,” he said.

Richard Thorpe, a Winters, Texas, rancher who serves as president of the Texas and Southwestern Cattle Raisers Association, said the beef industry backed NAFTA from the beginning and under it saw beef exports just to Mexico jump from less than $300 million a year to a peak in 2008 of $1.4 billion. Beef exports to Mexico in 2015 year were valued at $1.1 billion.

Twelve percent of U.S. beef goes to exports, he said, accounting for an added $275 for each animal raised.

Like other agricultural producers, cattle raisers fear Trump’s promise to deport undocumented immigrants will worsen an already tight labor market. The Department of Labor estimates 53 percent of U.S. farm workers are undocumented, and those in the industry say the percentage is much higher.