Trump’s Call to Renegotiate or Kill NAFTA Reverberates Through Texas

“No state has benefited from the adoption of NAFTA more than Texas.”

By Aaron SchrankJanuary 13, 2017 10:10 am, , ,

From Texas Public Radio:

A new pickup truck comes off the line nearly once a minute at Toyota’s San Antonio factory.

The Japanese automaker set up in Texas more than a decade ago to be closer to truck-buyers—and to take advantage of cross-border trade.

“The fact that it’s close to the NAFTA corridor,” says Toyota Motor Manufacturing Texas spokesman Mario Lozoya “ I’m not saying that’s the only reason why it’s here, but it’s a factor.”

The North American Free Trade Agreement was signed in San Antonio 25 years ago, creating the largest free trade zone in the world linking Canada, the U.S. and Mexico. President-Elect Donald Trump has promised to renegotiate or scrap NAFTA, in an effort to bring back U.S. jobs. But the controversial trade agreement has increased economic activity in Texas.

Toyota’s San Antonio factory produced its first truck in 2006, and produced 230,000 Tacomas and Tundras last year. Toyota says the plant employs 3,300 people, and another 4,000 work for parts suppliers on site. The company depends on a global supply chain that includes Mexican auto parts manufacturers in Mexico.

“Seventy-three percent of the volume of the Tundra, for example, is made right here on-site,” says Lozoya. “It’s actually more American than most vehicles on the road. However, some parts do come from Mexico. So logistics through the border are very important. Any legislation that affects that will definitely affect this facility and its workforce.”

Donald Trump threatened Toyota on Twitter this month with a ‘border tax,’ falsely claiming the automaker was building a new plant in Baja, Mexico. The company did recently break ground on a Corolla factory in Central Mexico, but its Baja plant has been operating for years, sharing production of the Tacoma with San Antonio. Lozoya says Toyota recently announced it would be upping production in Baja to meet demand for pickup trucks. 

“We’ve already been building trucks there for years, and we’re just going to build a little bit more,” says Lozoya. “So, I’m guessing that that was the confusion.”

Toyota responded to Trump’s tweet with a statement claiming the company’s plans in Mexico wouldn’t cost jobs in the U.S.

Trump worries NAFTA hurts the American worker, but that’s not universally true.

“No state has benefited from the adoption of NAFTA more than Texas,” says Ron Kirk, former U.S. Trade Representative and Dallas mayor.

The Federal Reserve Bank of Dallas says Texas exports to Mexico and Canada grew by 13 percent per year since NAFTA started.

“We do about $3 billion every day of the year in commerce between those three countries,” says Kirk. “The overwhelming majority of that trade flows through the state of Texas, all up and down I-35.”

Most NAFTA impact studies show the agreement hasn’t caused huge job losses or economic gains across the country, but had modest positive impact on U.S. GDP, especially in South Texas. Still, Trump calls NAFTA the “worst trade deal ever,” but Kirk says NAFTA increases competition and saves consumers money.

“One of the real tragedies of our recent presidential debate: trade became such a whipping boy, and NAFTA is such an easy target,” Kirk says.

Trump’s tough talk on trade played well on the campaign trail, especially in the Rust Belt, it’s still anyone’s guess which trade policy changes Trump will actually make.

“Trying to undo NAFTA with the stroke of a pen is probably going to be impossible both politically and from an implementation standpoint, but also probably not a good idea economically for either country,” says Thomas Tunstall, research director at UTSA’s Center for Economic Development.

Tunstall says NAFTA does have its problems. Some would like to see updated protections for the environment, labor and intellectual property.

“President-Elect Trump campaigned on his ability as a dealmaker and negotiator,” says Tunstall. “Maybe this will be an opportunity to find out if he’s as good as he says he is.”

San Antonio’s Toyota plant is running at full capacity, producing pickup trucks jointly, with Mexico. Spokeswoman Melissa Sparks points out a giant mechanical claw.

“So, this is actually the biggest robot we have in the plant,” says Sparks. “We call it Godzilla.”

Godzilla lifts and rotates entire truck frames as automated dollies carry truck beds from point A to point B. Robots like this have revolutionized manufacturing everywhere, but they’ve also replaced some workers.

Like automation, NAFTA has permanently changed how and where products are made. Donald Trump and NAFTA critics say it’s hurt American workers, but many Texas business leaders say it’s not that simple.

“Jobs have indeed left, but jobs have also come here,” says San Antonio Chamber of Commerce President Richard Perez. “New jobs, different jobs, a different kind of job. At the end of the day, NAFTA has allowed for the city of San Antonio to really lay a very real claim to being an international trade city.”

Perez hopes that cross-border cooperation continues. Texas has more jobs tied to trade with Mexico than any other state. A Trump trade war could put them in jeopardy.