Will redrawing NAFTA disrupt Mexican-U.S. ties?

Executive Summary

President Trump’s bid to renegotiate the North American Free Trade Agreement (NAFTA) may have a pronounced impact on the strong economic relationship between Mexico and the United States that has developed in the 23 years since the accord took effect. During this time, U.S. trade with Mexico has increased more than 500 percent as tariffs and other restrictions disappeared. The relationship is especially close in cities along the U.S.-Mexican border, such as El Paso, Texas and Ciudad Juarez just across the Rio Grande. These binational links are so strong that many experts say they can survive a redrawing of the trade agreement.

Among the key takeaways:

  • While U.S. exports to Mexico have more than tripled under NAFTA, the U.S. trade balance with that country has swung from a $1.6 billion surplus to a $63.2 billion deficit.

  • A substantial wage gap persists; the average wage in the United States is more than three times greater than in Mexico.

  • Trump has moved from threatening to withdraw from NAFTA to calling for a renegotiation of the accord, which encompasses Canada as well as the United States and Mexico.

Resources for Further Study

Bibliography

Books

Boskin, Michael J., “NAFTA at 20,” Hoover Institution Press, 2014. A Stanford economist brings together presentations from policymakers who helped develop the North American Free Trade Agreement (NAFTA) and academics who have studied it.

Articles

Domm, Patti, “Trump is mad about ‘made in Mexico’ cars – but this is even bigger,” CNBC, Jan 3, 2017, http://tinyurl.com/gp2d6gp. A journalist examines how President Trump’s proposed border tax would influence the automobile industry.

Kahn, Carrie, “How NAFTA Helped The Mexican Billionaires’ Club,” NPR, Dec. 13, 2013, http://tinyurl.com/k9jnj4m. A journalist looks at how Mexican billionaires increase their fortunes by participating in industries excluded from NAFTA.

Reports and Studies

“2016 Top Markets Report, Automotive Parts, Country Case Study,” U.S. Department of Commerce, 2016, http://tinyurl.com/nyw33ej. This report goes into comprehensive detail on how the United States and Mexico work together in the automobile industry.

De la Calle, Luis, and Luis Rubio, “Mexico: A Middle Class Society Poor No More, Developed Not Yet,” Woodrow Wilson International Center for Scholars, 2012, http://tinyurl.com/knqveuf. Two Mexican economists look at how the middle class in their country has fared throughout history and has grown in the last 15 years.

Villarreal, M. Angeles, “Mexico’s Free Trade Agreements,” Congressional Research Service, 2012, http://tinyurl.com/kr4qrym. An international trade and finance analyst provides an in-depth look at the history of Mexico’s economy and trade decisions.

Villarreal, M. Angeles, and Ian F. Fergusson, “The North American Free Trade Agreement,” Congressional Research Service, 2017, http://tinyurl.com/khqb46b. Two international trade specialists examine the trajectory of NAFTA and its impact on various sectors as well as on the three participating countries’ economies.

Weisbrot, Mark, Stephan Lefebvre and Joseph Sammut, “Did NAFTA Help Mexico? An Assessment After 20 Years,” Center for Economic and Policy Research, 2014, http://tinyurl.com/jcbaqa5. Researchers look at how NAFTA has affected Mexico’s economy, in particular its unemployment and poverty levels, over the last 20 years.

The Next Step

Effects on Businesses

Crow, Kirsten, “In Texas, companies await word on Trump’s border wall,” USA Today, May 19, 2017, http://tinyurl.com/l9s4otc. Contractors in Texas, which has the largest section of the U.S.-Mexico border, are vying to construct President Trump’s proposed border wall. About 20 companies from across the country will advance to the second round to present their prototype plans.

Murphy, Katy, “California bill would blacklist contractors involved in U.S.-Mexico border wall project,” The Mercury News, April 25, 2017, http://tinyurl.com/lm9lsag. Two proposed measures in the California Legislature would prevent contractors who want to participate in building a border wall from doing business in the state or receiving state pension investments.

Sherman, Christopher, “Complex world of border trade: Cattle go north, meat south,” ABC News, The Associated Press, May 22, 2017, http://tinyurl.com/me7w2b7. Business owners and workers in U.S. and Mexican border cities are experiencing store closings and other changes in their interconnected economies that some attribute to fear of the Trump administration.

Immigration Crackdown

Chardy, Alfonso, “Border guards accused of illegally turning away foreigners seeking asylum,” Miami Herald, May 21, 2017, http://tinyurl.com/k54n9t5. Humans Rights First, a human rights organization, alleges in a report that U.S. immigration authorities are blocking asylum seekers from entering the country, in violation of U.S. law and international agreements.

Hesson, Ted, and Seung Min Kim, “Trump’s immigration crackdown is well underway,” Politico, April 28, 2017, http://tinyurl.com/l8u2dmv. Immigration enforcement numbers in the early months of the Trump administration show a shift from prioritizing undocumented immigrants with criminal records to arresting undocumented immigrants regardless of whether they have criminal records.

Partlow, Joshua, “The ‘Trump effect’ has slowed illegal U.S. border crossings. But for how long?” The Washington Post, May 22, 2017, http://tinyurl.com/l7zl6wm. The number of migrants apprehended at the U.S.-Mexico border decreased by about 40 percent in the first four months of the year. But part of the decline is attributed to Central American migrants sneaking across the border rather than turning themselves in and requesting asylum at the border.

Organizations

Center for International Policy Americas Program
2000 M St., N.W., Suite 720, Washington, DC 20036
1-202-232-3440
011-52-555-324-1201 (Mexico City office)
www.ciponline.org/programs/americas-program
Research center that focuses on public policy and socioeconomics in Mexico.

The Hub for Human Innovation
500 W. Overland Ave., Suite 230, El Paso, TX 79901
1-915-321-3125
http://hubep.org/
Incubator for tech businesses in the El Paso-Ciudad Juarez region.

International Trade Administration
U.S. Department of Commerce, 1401 Constitution Ave., N.W., Washington, DC 20230
www.export.gov
1-800-549-0595 ext.2
Resource for information on foreign industries that participate in the U.S. market.

SAI
Edificio Plaza Reforma, Prolongación Paseo de la Reforma 600-101B, Col. Santa Fe Peña Blanca, C.P. 01210, México D.F.
011-52-55-5985-6618
www.sai.com.mx
Economic research group of former Mexican politicians who worked to develop NAFTA.

Woodrow Wilson International Center for Scholars Mexico Institute
1300 Pennsylvania Ave., N.W., Washington, DC 20004
1-202-691-4000
https://www.wilsoncenter.org/about-21
Research group that examines U.S.-Mexico public policy.

DOI: 10.1177/237455680316.n3