KRWG

Free Trade Agreements: A Boon For Border Economies

Aug 1, 2016

The Union Pacific Intermodal Facility near the U.S. Mexico border in Santa Teresa has opened the New Mexico economy to international logistics and manufacturing.
Credit Simon Thompson

Midwestern manufacturing has suffered in recent years companies are moving out, taking jobs with them, unions have been weakened and wages have been stagnant. Some blame all these problems on free trade deals.  NAFTA, the North American Free Trade Agreement, allows U.S. companies to move to Mexico and manufacture products for the U.S. market using cheaper labor .

Past and pending deals have been linked to the decline of the middle class and US manufacturing as well as the loss of U.S. jobs. But for border communities these agreements have actually boosted the economy.

 

Donald Trump has made that narrative a major part of his campaign.

“We cannot continue to go on like this as a country, we have to keep our companies. Here if you look at the numbers, they are really discouraging everybody is leaving. We are losing millions of jobs , we are losing tens of thousands of manufacturing plants, we are losing thousands of companies.’  Trump said. 

Trump isn’t the only candidate propelled to popularity in some part for a stance against trade agreements. Bernie Sanders, who won manufacturing bellwether Michigan in the Democratic primary, has had a similar message.

“These trade agreements, among other things have contributed to the fact that we have lost almost 60,000 factories since 2001 and millions of decent paying jobs. I think enough is enough, we have got to rebuild our manufacturing base." Sanders said. 

But Border Industrial Association director Jerry Pacheco said it’s not so black and white. He said technological developments and increasing competition from South Korea and China have more to do with American companies cutting Midwestern jobs and factories than trade agreements do.

“The more automated and the more technology orientated we become the traditional smoke stack kind of industry tends to go away. That tends to go to third world countries as we advance our productivity level."
he said  

"The other thing is, is an evolution of developed nations as they become more sophisticated, most of us don’t work in manufacturing jobs any more. Most of us have desk jobs or we have desk jobs, or service jobs or what have you that tend to pay more any way.” Pacheco said. 

According to 2014 federal statistics, U.S. manufacturing jobs have been on the rise. Pacheco says what political rhetoric leaves out is when companies close factories and facilities in the Midwest, they often don’t move overseas, but to more logistically advantageous locations within the U.S.. Pacheco said if anything U.S. companies utilizing Mexican labor just across the border has allowed them to remain competitive in the U.S.

There are a list of Midwestern companies that have moved into Santa Teresa, like Northwire from Wisconsin, Stanco Metal Products from Michigan and Centipede Tool from Illinois.

“There are companies from the mid west that have chosen to move closer to the border. So you have companies out of Pittsburg, out of Dayton, out of Chicago that are no longer there and those people are unemployed and that is something that is a serious issue. A lot of those companies have come to the border to be closer to their buyers in Mexico, so they haven’t left the united states exactly." Pacheco said. 

A 2015 Congressional research report found that on a national level, the North American Free Trade Agreement did not cause the huge job losses feared by the critics or the economic gains predicted by supporters; just major adjustments in the types of jobs and investments in the U.S.

While Pacheco said these agreements keep the U.S. at the forefront of the global manufacturing market Trump is pledging to end the deals.

"That includes renegotiating NAFTA to get a much better deal for America and we will walk away if we don't get that kind of a deal.' Trump said.

But in reality even if Trump is elected, there’s little he could do to end NAFTA or stop the Trans Pacific Partnership, without Congress; which is overwhelmingly in support of both.

However Pacheco said the rhetoric still damages the U.S. relationship with trading partners.

“Can they trust the United States, that when we enter into an agreement that we stick with it? When the political winds changes we don’t automatically say 'now we are out,  you guys go off on your own?'" Pacheco said. 

The organization Economist Intelligence Unit or EIU projects Mexico will become a top 10 economy by 2050. I asked Pacheco what Santa Teresa would be like without the strong relations across the border.

“We’d have a lot of people out here shooting guns and bottles in the sand dunes, there would be nothing out here if NAFTA had not, passed we would have nothing in Santa Teresa” Pacheco said. 

In 2014, New Mexico ranked number one in the nation for the growth in exports to Mexico. The majority of that growth is attributed Santa Teresa and the $400 million dollar Union Pacific intermodal hub.