NAFTA Withdrawal to Affect US

March 3, 2017

By Alexandra Mendoza

A small fence separates densely populated Tijuana, Mexico, right, from the United States in the Border Patrol’s San Diego Sector. Construction is underway to extend a secondary fence over the top of this hill and eventually to the Pacific Ocean.

The effects of a potential renegotiation of the North American Free Trade Agreement (NAFTA) took center stage at a conference held this week by the Center for U.S.-Mexican Studies at UCSD.

President Donald Trump has indicated that he intends to revoke the 1994 Agreement, stating that he feels it has been harmful for the U.S. manufacturing economy. While it is true that this industry has seen a decline in number of people employed over the past 20 years, most of that decline can be attributed to automation and technological progress, according to analysts.

During the conference, entitled Conversations on the Future of the North American Economic Partnership, economists and agency representatives from both sides of the border agreed that weakening NAFTA would impact industries that depend on trade relations with Mexico. As an example, one of the American companies at the conference has facilities in both countries, employing 25,000 people in the U.S. and about 1,300 in Mexico. The competitive advantage the trade agreement provides has allowed business such as this one to create more jobs; it is estimated that for every job created in Mexico, 250 additional jobs are created in the U.S.

In 2014, American companies in Mexico sold $292 billion in goods and services, and employed 1.5 million Mexican workers, a significant increase versus 1990, when $32 billion in sales and 550,000 jobs were generated.

Should the United States choose to withdraw from NAFTA, the brunt of the impact would be borne by consumers who would have to pay more for goods and services, as well as by the thousands of workers whose jobs depend on this trade, shared UCSD Professor Gordon Hanson.

“Workers would also be affected. Those working at maquiladoras, twin manufacturing plants along the border, would face a shrinking job demand,” he stated in closing his presentation. “Something similar would happen on the U.S. side; workers at companies that depend on Mexico as a trade partner would end up with fewer business prospects, lower sales, hiring, and wages”.

David Shirk, Director of the Justice in Mexico Program at the University of San Diego said that in the worst-case scenario, the opportunity for the three NAFTA countries – the U.S., Canada, and Mexico – to continue being the top integrated economic region in the world could be lost.

“We have built this over 20 years, and if we decide to destroy it in the next 4 years, I personally think it would mark the beginning of the end of the United States as the world’s top economic power,” said Dr. Shirk.

In San Diego, it is estimated that cross-border trade creates over $90 billion in annual profits for the binational region.
For Mexican Senator Antonio Rios Piter, the conditions are not set for a renegotiation that would benefit both parties.

“As with any negotiation, there has to be a win-win,” stressed the legislator during the San Diego conference. “I am one of those who has said that it would be better for the United States to just say ‘we’re withdrawing from the Agreement’ and for us to be protected by the World Trade Organization, than to play along with someone who has continuously shown not only a horrendous hostility, but also wants to undo things for the benefit of only one of the parties to an agreement that has evidently been positive for both sides.”

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