Pacheco: In Reviewing NAFTA, Don't Ignore The Power Of International Trade

Oct 24, 2017

Commentary: I recently attended the Seventh Annual EXPO MRO show in Juarez, Mexico. This annual trade fair focuses on suppliers involved in maintenance, repair, and operations. I have been going to this show since inception, when just a few companies participated to display their products/services at trade booths. During the past seven years, I have watched this show grow steadily until last year, when the parking lot was packed and an adjacent lot had to be used for parking overflow. The Cuatro Siglos event center, where the show is held, was almost completely full of exhibitors last year.

    This year, I attended the show as usual, but with more curiosity as to whether the attendance would be down because of President Donald Trump’s threats to cancel NAFTA, and his antagonism toward Mexico during the campaign and while in office. As was the case last year when I arrived early at the show, the main parking lot was packed. I again was directed to the empty parking lot adjacent to the convention center. To my surprise and horror, this parking lot was completely packed. After going around and around, I finally when to the deep end of the lot, which had been overgrown by weeds and shrubs, and managed to park my vehicle.

   Upon entering the venue, I felt that I was at some type of party thrown by friends. People from both sides of the border, whom I know and work with, came up to give me hugs and handshakes. We found that we had to shout over the noise, which was being generated by conversations all around us and disco music being pumped out by a DJ.

   After the show’s inauguration and welcoming speeches ended, I proceeded to my booth with one of my team members and got ready for the show. After set-up, I walked around the trade fair to gauge who was participating and which prospects might be good for our objectives. My concern that the show would have decreased attendance was quickly dispelled. Every inch, and I mean every inch, of the massive convention center was occupied by participants, vendors and show managers. One organizer told me that more than 120 people were contracted to set up the show three days prior to the event.

   Walking the floor, I got lost a couple of times. All around me were both Mexican and American business people, not by the hundreds, but by the thousands. Booths represented companies from the U.S., Mexico, and all around the world. I stopped to chat with several of the exhibitors. There was a vibrancy and energy flowing through the building. When our conversations veered to the North American Free Trade (NAFTA) renegotiations and Trump’s trade stances, collective eyes started rolling. The consensus was that there was business to be made on both sides of the border and that was the focus, not what could possibly come out of ongoing negotiations. I did not meet one businessperson at the event, either American or Mexican, who said that they were holding back business operations until the air cleared on NAFTA. 

So much of trade occurs locally. Sure, there are multi-national corporations that ship and receive products without ever getting to personally know or understand their counterparts. However, much of trade requires human interaction to really get to know who you are dealing with, and to personally see and feel the products/services that are being offered. Between the U.S. and Mexico, there is such a need for the exchange of talent and products/services. We are neighbors and as the EXPO MRO experience clearly demonstrated, trade occurs naturally. 

If the worst scenario occurs and the Trump administration decides that the NAFTA renegotiations did not produce the expected results, feels backed into a corner, and decides that it has to pull the U.S. out of the agreement to save face, trade between U.S. and Mexican businesses would still occur. This was the case before NAFTA was signed into law, and it will be the case if there no longer is a NAFTA . Comparative advantages will continue to exist on both sides of the border, which necessitate that trade and interactions to occur. Neither Washington D.C., Ottawa, or Mexico City will ever completely eradicate these.

Taking the U.S. out of NAFTA would certainly have one major effect: Consumers will ultimately pay the price for higher tariffs and increased inefficiencies that would certainly ensue. Canada and Mexico might decide to keep a version of NAFTA in place between them. Because all three NAFTA nations are members of the World Trade Organization, it’s most likely tariffs would be regulated by this agency. These uncertain outcomes notwithstanding, there is a buzz at the border reflecting the entrepreneurial spirit on either side that results in cross-border trade.  

Jerry Pacheco is President of the Border Industrial Association.  His columns appear in The Albuquerque Journal.