Texas Business Leaders Tell Congress NAFTA Should be Strengthened, Not Scrapped

“Texas will be a loser if the United States elects to pull out of NAFTA” TAB CEO Moseley said; TXOGA, auto manufacturers, local chambers and others line up with Cornyn in push to “modernize” the pact while Trump talks about canceling it

SAN ANTONIO – Facing uncertainty brought on by President Donald Trump’s talk of scrapping the North American Free Trade Agreement, Texas business leaders on Monday asked Sen. John Cornyn to do everything in his power as the number two member of the Senate to keep the three-nation pact strong while making updates to the 24-year-old deal.

Cornyn said his message to the White House has been consistent: “First, do no harm.” It’s a difficult balance to strike, though, given the fact that President Trump has repeatedly called NAFTA the “worst trade deal ever made” in his appeals to Rust Belt voters who put him over the top in the Electoral College. As recently as August, Trump said it may be time to “terminate” it.

The world is now in a digital economy and the energy sector has changed dynamically over the last couple decades, leading Cornyn and others to argue NAFTA needs “modernization,” not cancellation.

During a field hearing chaired by Texas’ senior senator, groups like the Alliance of Automobile Manufacturers, the Border Trade Alliance, the San Antonio Chamber of Commerce, the Texas Association of Business, the Texas Farm Bureau, and the Texas Oil and Gas Association all sought to diplomatically make clear they agree with Cornyn and disagree with the administration. To do away with the agreement would cause economic harm to this state and the rest of the nation, they argued one after another.

But Steven P. Vaughn, general counsel for the Office of the US Trade Representative, said the administration is mainly concerned about trade deficits.

“Markets aren’t working the way they should. I think that’s one of the reasons the administration’s talking about trade deficits,” Vaughn said. He argued, for instance, that intellectual property is not being protected under various trade agreements including NAFTA.

Vaughn said the deal needs to be “rebalanced” in a way that leads to “more market-based competition.” Vaughn also said the administration would like to see a sunset provision in the agreement so that it doesn’t linger in a form that is out of date for years, as it is now. To that, Cornyn responded that any of the three signatories can already demand a re-negotiation of the deal, making a sunset provision seem unnecessary.

Can Trump unilaterally throw NAFTA in the trash?

“I think it’s a complex picture, but most certainly if he did, there certainly would be litigation,” Sen. Cornyn said. “In the past, it’s always been considered a collaborative effort,” he told reporters covering the hearing at the Marriott Plaza Hotel where NAFTA was signed on this day 24 years ago.

“I just think trade gets a bad rap,” Cornyn said. “NAFTA is not a dirty word. I think we ought to tell the story, because I think the story is a very positive one in terms of benefits to consumers, in terms of jobs creation, in terms of markets available to produce and manufacturing,” Cornyn said.

The senator heard a lot of about it during the Senate Finance Subcommittee on International Trade, Customs, and Global Competitiveness hearing at the Marriott.

Farm Bureau President Russell Boening, for example, said agriculture contributes $135 billion to the Texas economy and many of the crops are shipped to Mexico. Since the inception of the trade agreement with Canada and Mexico, Texas ag exports have quadrupled from $8.9 billion more than two decades ago to more than $38 billion today.

“It’s important that we not only keep this market strong, but that we work to expand it,” Boening said.

Jeff Moseley, TAB’s CEO, testified that more than 1 million Texas jobs are reliant on trade and, according to various estimates, roughly 190,000 of those are directly attributable to NAFTA.

“Those gains have been balanced in populations across the state as all 11 metro areas in Texas have seen increased exports to Canada and Mexico since NAFTA was signed including many areas with export rate increases of 100 to 200 percent or more,” Moseley said. He pointed to the Toyota manufacturing plant here in South Texas as a “key example of a NAFTA win,” employing thousands and creating positive ripple effects in the region’s economy.

Cutting right to the chase, Moseley said, “Texas will be a loser if the United States elects to pull out of NAFTA.”

Sen. Cornyn highlighted Moseley’s statement that Texas has an $11 billion trade surplus with Mexico. Cornyn also noted that even during the Great Recession, Texas’ economy continued to perform better than many other states for a variety of reasons including robust trade with our neighbors across the Rio Grande.

Texas Oil and Gas Association President Todd Staples said, “The U.S. benefits from providing energy resources to our neighbors in the form of profits, job growth and the stimulation of our own economic activity like manufacturing and construction.”

“According to the American Petroleum Institute, as early as 2020 the United States will have the ability to meet its liquid fuel needs, completely, through domestic energy production and trade with our North American partners,” Staples said. “Our agreement with Mexico and Canada has been fundamental to our economy, keeping our fuel prices fair, and our petroleum and natural gas products both competitive, and favorable.”

“Ultimately, NAFTA has served as the very foundation that has allowed the oil and natural gas industry to see the growth and prosperity it has today, and this has resulted in countless jobs for Texans and Americans, jobs right here at home,” Staples said. “Now, it is imperative that we conserve the polices that have allowed this industry to provide for our nation’s energy needs.”

“NAFTA’s not a nice to have. It’s a must have,” said Paola Avila, Chair of the Border Trade Alliance and the San Diego Regional Chamber of Commerce's vice president of international business affairs. Exports from Texas have grown from $47 billion to $230 billion annually thanks to NAFTA, Avila said. She argued, among other things, that updating the agreement is an opportunity to improve the inspection process for goods shipped between the three partner nations.

As to the administration’s concerns about trade deficits, Sen. Cornyn told reporters after the hearing that “the last thing you’d want to do is hurt Texas exports. It would make the deficit worse, not better.”

“To focus strictly on deficits, to the exclusion of everything else, to me, it’s too narrow,” Cornyn said. “I think we ought to be looking at the entire package.”

Kimberly Reeves contributed to this report.

Originally published in the Quorum Report. Copyright November 20, 2017, Harvey Kronberg, www.quorumreport.com, All rights are reserved. Reprinted with permission.

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