New NAFTA deal has RGV cautiously optimistic

October 2, 2018

PHARR — The three North American countries that agreed on a trade pact 25 years ago to transform competitiveness in the continent, and ignite growth in the Rio Grande Valley, announced on Monday a new North American Free Trade Agreement.

The deal was welcomed by the trade community in South Texas and its representatives in Washington. New details on rules of origin and minimum wage had Valley leaders optimistic. Still, Monday’s Rose Garden announcement at the White House was only the first step in finalizing the trilateral deal, which would no longer be named NAFTA, the countries announced. The new deal would be called the “United States-Mexico-Canada Agreement.”

The three countries began renegotiating the free trade agreement in August 2017, rotating negotiating rounds between them over the last year. There have been, and will continue to be, political hurdles, such as July’s Mexican presidential election, and upcoming midterm elections in the U.S.

“Each week and each day, from a political scenario, becomes more important,” said Gerald Schwebel, executive vice president of International Bank of Commerce. Schwebel was involved in the negotiating of the original NAFTA, and has been on hand for much of the negotiations over the last year.

Schwebel added, “Full engagement is critical from the private sector. And local chambers, regional chambers, pro-trade groups, all of us cannot be comfortable because a deal was announced. The next 60 days will become critical because members of Congress get to see what’s included.”

Many elected officials said they look forward to reviewing the text of the new agreement, including U.S. Reps. Henry Cuellar, D-Laredo, and Vicente Gonzalez, D-McAllen. U.S. Sen. John Cornyn, R-TX, did, as well. Cornyn, the Senate’s second-in-command, lobbied President Trump and his top trade advisors not to pull out of the agreement, which Trump had threatened to do when he campaigned for office and upon his election.

The uncertainty on the NAFTA negations irked Cornyn at times. He said as much in Washington, and at a January speech in Weslaco.

“I’m a little concerned that the U.S. Trade Representative that is negotiating this does not appreciate the difficulty of getting this approved if they achieve a negotiated outcome,” Cornyn said in January after his Weslaco address. “Secondly, as was alluded, some of the rhetoric could inflame some of the passions in Mexico and cause them, perhaps, to be more likely to elect a president who’s not pro-America, not pro-NAFTA, and I think that would be an unforced error on our part.”

The rhetoric Cornyn referred to was Trump’s threats to pull out of the agreement and Trump’s hostility toward Mexicans on the campaign trail and, since he took office, his rhetoric toward Mexican and Central American immigrants. And that presidential candidate Cornyn cited? Andrés Manuel López Obrador, who was elected president in July.

López Obrador, who takes office before year’s end, has been much more amicable toward the U.S. and NAFTA since the election. The new agreement could offer some wins for Mexico, including higher wages for workers. One component of the agreement calls for a minimum $16 per hour wage for anyone working in a factory where vehicles are manufactured.

Along those same auto lines, under the original agreement, if 62.5 percent of a vehicle was produced in North America, it would qualify for zero tariffs. That percentage has been upped to 75 percent in the USMCA. While the wage baseline is an improvement for workers, consumers could pay.

While wages could rise, that would likely mean consumers will eventually have to pay more for cars, said Luis Bazan, director of the Pharr-Reynosa International Bridge. Bazan sees car parts cross his bridge daily, as well as scores of produce. The Pharr bridge is the largest produce port of entry in the country, and the only full-service bridge in the area.

Bazan noted that the area’s trade community is cautiously optimistic and acknowledged the potential political challenges ahead. But all the distribution facilities in the city and surrounding areas will continue operations and any planned expansions, Bazan said.


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