Hansen: Renegotiating NAFTA is a Risk for Texans
Patricia I. Hansen, the J. Waddy Bullion Professor in Law and the Director of the dual degree program in Law and Latin American Studies, has written a thought-provoking op-ed on the subject of the North American Free Trade agreement. Prof. Hansen, on expert on international trade with a special interest in the economics of trade and investment in Latin America, has long been a “go to” resource for questions about NAFTA and analysis of its impact on the economies of Texas and Mexico. She was moved to share her concerns about tinkering with the nearly-25-year-old trade deal in light of strong words from the new presidential administration about wanting to either renegotiate key elements of the agreement or dismantle it altogether. Prof. Hansen’s op-ed, “Texas has much to lose with NAFTA renegotiation,” appeared in Dallas News, the online edition of the Dallas Morning News, on Feb. 18. We reprint it here in full, with permission:
Texas has much to lose with NAFTA renegotiation
by Patricia Hansen, DMN Contributor
President Donald Trump wants to “kick-start” the process to renegotiate the North American Free Trade Agreement, which he has called the “worst deal ever.” Should Texans be concerned?
The answer is unequivocally yes.
Texas consumers have a huge stake in NAFTA, which currently lowers the price we pay for many goods. One-third of goods imported from Mexico by the U.S. are imported by Texas — more than any other state.
The president has proposed new taxes on imports from Mexico. But these taxes would not be paid by Mexico. They would be paid by Texas consumers. They would also exact a heavy price from Texas companies and the Texans who work for them.
Many of these exports are parts, accessories and components made in Texas by Texas workers. These are exported to Mexico in order to be assembled and returned to the U.S. as part of final products such as automobiles, flat-screen TVs and other consumer electronic products. If we import fewer final products from Mexico, we will also reduce sales of the parts used to make those products and cut jobs for people who make those parts.
New import taxes could also increase illegal immigration from Mexico along the border. During the past 10 years, increased economic prosperity has led to a significant decline in illegal immigration from Mexico. A tax on imports from Mexico could reverse that trend. Even if a wall is built along the border, economic hardship would give more Mexicans reasons to climb it.
Arguments used to support import taxes should also raise grave concerns for Texans. Although new businesses might step in to make the products we currently import from Mexico, this would not necessarily create new jobs for workers in Texas or anywhere else in the country. Businesses in China will be happy to step into Mexico’s place instead.
It is true that the value of U.S. imports from Mexico currently exceeds the value of exports to Mexico by $60 billion. But our trade deficit with Mexico is not the real problem. Imports from Mexico are full of parts and components made in the U.S. And we are currently running a $366 billion trade deficit with China. If trade deficits are the problem, why focus on Mexico?
Trump supporters argue that import taxes can be an important negotiating tool. But they are also an extraordinarily dangerous tool — especially for Texas. The threats have already provoked a backlash in Mexico, which can retaliate with its own threats. Mexico could negotiate new agreements with President Xi Jinping of China instead, or it could threaten to reduce its cooperation with U.S. authorities on border issues such as drug trade and immigration. These threats would have their greatest impact on Texas.
What U.S. negotiating goal will justify wielding such a risky tool? Trump has yet to give us any clear indication. Mexico’s president has announced he will take 90 days to consult with business leaders in his country prior to negotiations. Trump has expressed impatience and a desire to “speed things up.”
In fact, the U.S. could pursue many productive goals in negotiations with Mexico — including increased cooperation in energy, environmental and labor policy, to name a few. No state has a bigger stake in any of these issues than Texas.
Texas business, workers, local governments and community leaders should all demand to be part of the negotiating process. Import taxes eliminated by NAFTA must not be brought back. Provisions in NAFTA aimed at improving border cooperation and environmental and labor protection need to be upgraded, not dialed back. Opportunities for energy cooperation need to be adequately explored. We have far too much at stake to leave negotiations to the president alone.