Before Donald Trump tries to renegotiate the North American Free Trade Agreement, a trade pact he has called one of the worst ever, he should visit the General Motors Assembly plant in Arlington.
The 62-year-old auto factory has never been busier. More than 4,300 workers fill three shifts there six days a week, turning out large sport utility vehicles including Chevy Tahoes and Suburbans, GMC Yukons, and Cadillac Escalades. Just south of the plant, ground has been cleared for a $1.4 billion expansion that will add new paint and body shops and about 600 more jobs.
GM’s revival is an American success story, made possible in part by NAFTA, which has allowed U.S. automakers to shift some parts production and manufacturing to Mexico.
That may not be very popular in states like Michigan and Ohio, which have lost auto jobs by the thousands and whose angry voters helped Trump win the White House. But in Texas, NAFTA has been a job creator, not just in the auto industry but in multiple other areas as well. “We don’t think NAFTA is broken,” says Bill Thornton, president and CEO of the Fort Worth Chamber of Commerce, which is lobbying the state’s Congressional delegation to keep the pact. “We’re a winner in this deal.”
In the auto industry, NAFTA has enabled U.S. companies to create integrated cross-border manufacturing networks to compete with lower-cost imports from Asian rivals, which have also set up shop there. Parts and assemblies flow both ways across the border, allowing companies like GM to take advantage of less-expensive, less-skilled labor to supply parts for its vehicles. And that has worked out well for Texas.
According to the Federal Reserve Bank of Dallas, U.S.-Mexico trade grew by 286 percent during the first 20 years of the pact, helping Texas become the nation’s top exporting state. About 36 percent of our foreign sales go to Mexico, much in the form of so-called intermediate goods, meaning parts and assemblies that move across the border to create products like cars or machinery. The huge investments have turned Mexico into a global auto manufacturing hub.
Now Trump wants to reverse course and try to bring manufacturing jobs back to the U.S. During the campaign, he proposed 35 percent tariffs on certain goods coming from Mexico if NAFTA isn’t revamped, which would throw a wrench into the industry mechanics.
“All of our economies are really just intertwined like a ball of thread at this point,” said Mike Davis, a senior lecturer at Southern Methodist University’s Cox School of Business. “If you damage one aspect of that through tariffs or quotas or something that restricts trade, you’re just going to foul things up all over the place.”
In Arlington, about 40 percent of the parts that go into the luxury SUVs that roll off GM’s assembly line come from outside the country, mainly Mexico, says Johnny Pruitte, president of United Auto Workers Local 276, which represents the factory workers there.
Pruitte has lived through the NAFTA experience. A 26-year veteran of GM, he saw parts start arriving from Mexican maquiladora plants in the 1990s when he worked at GM’s plant in Janesville, Wis.. He moved to Arlington in 2009 as that plant was being closed and watched outsourcing expand as GM went through bankruptcy. The Arlington plant, in close proximity to the Mexican border, has flourished. Still, Pruitte and other UAW leaders support Trump’s call to renegotiate NAFTA. “We wish everything, 100 percent of our vehicles made in Arlington, could be made here in the United States.”
So do I, but I doubt we can put the genie back in the bottle on globalization. While other countries have gained jobs at our expense, U.S. consumers have benefited. The non-partisan National Foundation for American Policy projects that Trump’s proposed tariffs on goods from Mexico, China, and Japan would cost the typical U.S. household $11,000 over five years.
Ross Perot famously said NAFTA would cause a giant sucking sound as jobs moved to Mexico. Yes, jobs have been sucked south, but Texas has been on the winning end.
Steve Kaskovich is the Deputy Managing Editor of Business for the Fort Worth Star-Telegram.