The numbers are impressive. The North American Free Trade Agreement has had a profound impact on the economies of the United States, Mexico and Canada, the three nations party to the agreement implemented in 1994.
NAFTA has been a driving force behind increases in Texas exports, which reached $247 billion by 2015, the best in the country and followed by California with $163 billion, according to statistics compiled by Jesus Canas, a business economist with the Federal Reserve Bank of Dallas. Canas has also reported that about 75 percent of U.S.-Mexico land trade, some $343 billion in 2015, crosses via a Texas port of entry.
To give some perspective about trade growth under NAFTA, Canas also reported that Texas exports to Mexico grew 236 percent from 1994 to 2015. For the rest of the United States, exports headed south of the border grew by 116 percent.
Federal Reserve Bank statistics also document a significant drop in border-city unemployment rates under NAFTA. Running up to the implementation of the trade agreement, McAllen unemployment hit highs of more than 18 percent and more than 13 percent in Brownsville. Today, those numbers are in the six percent range.
“The border has become a part of a global phenomenon known as production sharing, in which companies – predominately based in the U.S. – located some operations in Mexico, thus achieving lower costs in the overall production process,” Canas wrote in Federal Reserve Bank report.
“It’s not debatable that NAFTA has had an impact on the economy,” said Michael Blum, partner and managing broker for NAI Rio Grande Valley. Blum has studied NAFTA since it was originally being negotiated.
Blum said the economic impact has been positive along the border in Mexico as well. Looking at a Google map, he pointed out a large industrial park in Reynosa that was farmland pre-NAFTA. Now there are multiple plants, including a 340,000-square-foot Black and Decker facility. To make a point about the benefit to Mexican workers, he noted that as the industrial park developed, many of the plants’ parking lots were almost empty. “The workers came by bus. Now, after 20 years they can afford to buy a car.”
NAFTA critics have long complained that the agreement hit Midwest industrial states hard as companies closed plants and moved operations south of the border. Blum doesn’t lay the blame for those changes on NAFTA as much as corporations looking for cheap labor. In fact, he thinks NAFTA may have ultimately put a positive spin on those moves.
“Those jobs would have gone someplace,” he said. “Thank God they stayed in North America and didn’t go offshore. Without NAFTA, many of those jobs might have gone to someplace like China.”
NAFTA has its supporters and detractors, and there seems to be little doubt that there will be changes. Donald Trump, during his presidential campaign, complained loudly about NAFTA and said the United States needed to pull out of it, or at least negotiate a better deal.
Negotiations are under way but few seem to know what direction they are taking. “I don’t know what they are talking about,” Blum said. “There’s not enough public conversation.”
While the Federal Reserve Bank of Dallas has concluded that NAFTA has strengthened bilateral economic integration and made Texas exports more competitive due to manufacturing partnerships with Mexico, one report cautions: Uncertainty continues to be the operative word.
Much of that uncertainly is wrapped up in Mexican politics. Voters there will choose a new president in July and the front-runner may not bode well for U.S.-Mexico relations. Andres Manuel Lopez Obrador, a far-left populist who placed second in the previous two presidential elections, is leading in the polls. He is running on a platform of breaking up corporate monopolies and stopping Trump from building a border wall.
“The big mystery is who is going to be the president of Mexico,” Blum said. Lopez Obrador reminds him of the radical former Venezuelan dictator Hugo Chavez. “He makes Trump look like a wonderful person.”