Trump Saves NAFTA for Now, U.S. Borderland Cheers

U.S. business developers operating near El Paso, Texas and southern New Mexico said they were relieved to hear President Trump agreed this week to renegotiate the North American Free Trade Agreement (NAFTA) with the leaders of Mexico and Canada, rather than scrapping it, as originally planned.

Just two days shy of the end of his first 100 days in office, Trump said on Thursday that he was days away from terminating the deal, but changed his mind after the heads of both countries called and asked him to renegotiate.

Trump made a campaign promise to repeal NAFTA if it could not be renegotiated. He again said this week that Canada and Mexico benefit disproportionately from the deal.

“NAFTA’s been a horrible deal for the United States. It’s been very good for Canada, it’s been really good for Mexico, but it’s been horrible for the United States,” Trump said about the 23-year-old trade agreement with the two border countries.

But some business leaders from Texas and New Mexico credit NAFTA as a top economic driver of their local economies. In fact, Jerry Pacheco, president of the New Mexico Border Industrial Association, described NAFTA as the "end all be all."

Jack Brown, a sales manager based in Santa Teresa, New Mexico for Tucson, Arizona-based manufacturer Glaz-Tech industries, said he’s seen NAFTA greatly improve the local area’s economy.

“As it improves the economy in the border area, it improves my business,” said Brown. "It’s created so many jobs and so much opportunity on the border, the robust economy is what’s beneficial to my business.”

Glaz-Tech isn’t involved in importing and exporting, but Brown says a new home construction boom resulting from the heavy trade – and resulting job opportunities -- near the border has fueled the company’s expansion.

“The area is growing faster than the infrastructure needs can keep up with it,” said Brown.

He attributes that growth to NAFTA, and said there is more room for businesses to come in. He said the thought of the U.S. backing out of NAFTA spooks him.

"It really scares me a lot," said Brown. "It would make it difficult to have any business to do because we are so interdependent with Mexico right now."

Pacheco agreed.

"We don’t live in a black and white world. If you make a move here you have to understand you’re affecting the whole industrial sector. And you’re affecting American jobs and you’re affecting American and foreign investment," said Pacheco.

NAFTA has also helped increase household incomes, created jobs and expanded infrastructure in the southwest borderland, according to University of Texas at El Paso economics professor Dr. Tom Fullerton.

When NAFTA was enacted in January of 1994, the unemployment rate in El Paso, Texas was 12.1%, according to government data. By the year 2000, the unemployment rate was 6.7% and has continued to drop. El Paso averaged 4.9% unemployment in 2016, the lowest since 1975. In March, the most recent number available, the unemployment rate was 5.3%.

"If this is what international trade treaties do, then give me some more international trade treaties," said Fullerton.

NAFTA has also had a visible impact on infrastructure in El Paso and the surrounding area. Highway 136/178 which runs from El Paso into New Mexico was described as a “glorified cow trail” before NAFTA. Now it's a four-lane highway that leads to a sprawling industrial park in Santa Teresa; where companies like Georgia-Pacific, Southwest Steel Coil, Northwire and Interceramic have massive offices (tens of thousands of square feet).

Before NAFTA, Santa Teresa was home to four major companies, today there are almost 60. Down the street from those offices is the Santa Teresa Commercial Port of Entry into Mexico.

"That’s a consequence of all of the business opportunities that are created by international commerce with Mexico," said Fullerton.

In New Mexico, trade with Mexico has increased 3000 percent since 1999, according to Pacheco. He said at a time when New Mexico’s main economic drivers of petroleum, government and tourism are weak, trade can offset the drop.

"Trade with Mexico is our best hope of diversifying New Mexico’s economy," said Pacheco. "If we don’t find a way to diversify our economy, New Mexico [which] hasn’t been doing so well economically, is going to be in even more trouble in the future."

Fullerton and Pacheco agreed if they were the ones deciding how to renegotiate NAFTA, they would expand it or deepen the agreement. They said they hoped Trump would keep the energy sector front of mind during any renegotiations.

They also said strengthening the rules of origin regulations for manufacturing would be beneficial, as they said some overseas companies are currently taking advantage of loopholes allowing them to import parts used to manufacture goods.

As an example, under NAFTA traded goods are supposed to be made in North America. But while the goods are made in North America, some of the parts used to build them can be imported from other countries. They believe stronger regulations to prevent that would improve NAFTA.

They also had their separate ideas. Fullerton thought the deal should be expanded to better include the e-commerce that occurs between all three countries. Pacheco thinks visas for workers going back and forth between the three countries should be improved.

“It’s too complicated to have an agreement in which products flow easily, but then you restrict that labor,” said Pacheco.

But overall, the reviews for NAFTA in the borderland are positive.

“It may not be a perfect document, but I think it’s undeniable that Canada and Mexico are good neighbors, good allies and excellent trading partners,” said Fullerton.