TPP a Bad Deal for Texas and Mexico

Fair trade advocates have released a new report which finds the proposed Trans-Pacific Partnership (TPP) trade agreement threatens the Texas-Mexico border economy.

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According to the report, the TPP would erode preferences for Mexican-made goods imported into the United States under the North American Free Trade Agreement (NAFTA), displacing industry located in Mexico with less-expensive Asian-made goods and threatening Texan businesses built around servicing U.S.-Mexico trade.

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“Trade is good, but that doesn’t mean every trade agreement is a smart deal,” said Bob Cash, director of the Texas Fair Trade Coalition, “NAFTA devastated the Texas industrial sector and moved thousands of good-paying jobs to Mexico. Since the implementation of NAFTA in the mid-1990s, much of Texas’ economy has transitioned from being a hub of production into a center for customs brokerage, logistics, distribution, transportation, accounting and other services that support production operations in Mexico. As the report shows, these Texan jobs, as well as Mexican maquiladora jobs, are both threatened by the TPP.  The TPP would erode existing preferences for Mexican industries, threatening both Mexican businesses and the Texan businesses set up to service them.”

The report “The TPP & the Border Economy” discusses three specific Mexican industries that would be undermined by the TPP:

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• Electronics: One of Mexico’s other largest goods export categories to the United States is computer and electronic products. This sector is threatened by TPP incentives for multinational firms to relocate electronics production to countries such as Malaysia and Vietnam, with their closer proximity to low-cost electronic inputs from China and often more-competitive labor costs.

• Apparel: The TPP would likewise eliminate much of the advantage Mexican and Central American nations’ apparel industries have in accessing the U.S. market.  Vietnam, for instance, is the second cheapest apparel production venue in the world, while Mexico is only the twenty-first.  Tariffs are a significant reason why U.S. brands source in Mexico and Central America, rather than less-expensive countries like Vietnam.  The TPP’s tariffs reductions would make North American production operations much less competitive.

• Automobiles and Auto Parts:  Before NAFTA, there were only a handful of carmakers in Mexico. Today, Mexico is the fourth nation in the world for auto exports, behind Germany, South Korea and Japan. Under the TPP, tariffs on Japanese cars imported to the United States will be eliminated and the pact’s weak “rules of origin” allow for considerably more parts to be sourced from China and elsewhere. These cheaper auto parts could pose a threat to Texas based businesses that supply the Toyota plant in San Antonio.