The potential renegotiating of the U.S. and Mexico trade agreement is not likely to bring back apparel and textile-production jobs, according to analysts and economists.
However, it could benefit North Carolina consumers and farmers, as well as create more foreign-trade uncertainty, particularly if Canada is not included in a revamped multilateral agreement to replace the much-criticized North American Free Trade Agreement.
Established to eliminate costly trade barriers between the countries, NAFTA has come to symbolize the pros and cons, and successes and pains, of international trade.
Supporters say NAFTA delivered on its promise of providing cheaper imported goods to U.S. consumers, but critics maintain it has cost millions of U.S. and Mexican workers their jobs, particularly in manufacturing.
President Trump said Monday his administration has reached an “understanding” with Mexico on revamping the agreement that went into effect in January 1994.
“Canada has been on the sidelines until Mexico and the U.S. came to an agreement,” said Michael Walden, an economics professor at N.C. State University. “I expect Canada to re-enter negotiations, and I expect a deal between the three countries by year’s end.”
Walden said that if NAFTA folded, North Carolina would lose about $450 million annually in trade value.
“Big winners in North Carolina from a deal will be agriculture and food products — mainly in meat,” Walden said. “Our state vehicle-parts industry will also be a winner — we make the parts, and then ship them to Mexico for assembly.”
NAFTA works chiefly by exporting primarily raw U.S. materials and components to Mexican assembly plants, where products are made less expensively, and then shipped back for U.S. consumption.
The strategy was an acknowledgement that wages in labor-intensive U.S. manufacturing jobs were becoming noncompetitive with Far East companies. Some Triad manufacturers, such as Burlington Industries Inc. and Guilford Mills Inc., eventually opened their own plants in Mexico, with mixed results.
Though the loss of jobs from Triad and N.C companies pursuing lower labor costs in China — and later in other Asian countries — has been severe, economists have said NAFTA tends to resonate more with North Carolinians.
“Don’t think the textile and apparel industries and their hundreds of thousands of jobs are coming back,” Walden said. “They aren’t, and are likely lost forever.
“Asian countries are now the big producers of clothing.
Mitch Kokai, policy analyst with Libertarian think-tank John Locke Foundation, said long-term impacts for particular industries “are hard to gauge at this point.”
“To the extent the new agreement lowers trade barriers, the biggest winners will be consumers — both those in America and those in Mexico.
“The losers will be those companies or industries that benefited from trade barriers that are going away,” Kokai said.
The National Retail Federation said that while “coming to terms with Mexico is an encouraging sign, threatening to pull out of the existing agreement is not.”
“NAFTA supports millions of U.S. jobs and provides hardworking American families access to more products at lower prices.
“To preserve these benefits and protect complex, sophisticated and efficient supply chains, the administration must bring Canada, an essential trading partner, back to the bargaining table and deliver a trilateral deal.”
Earlier this year, an AT Kearney study prepared for the federation and other retail associations found that without NAFTA, American retailers and consumers would face up to $16 billion a year in higher costs.
Tony Plath, a retired finance professor at UNC Charlotte, said the Mexican trade agreement "is quite consistent with Trump's continuing efforts to reform and restructure American's global trade agreements — like our withdrawal from the Trans-Pacific Partnership and current negotiations with China — around the world to be more fair to American interests.
"Love him or hate him, Trump is being totally consistent in holding frank and internationally unpopular discussions with our international trading partners about negotiating trade terms that bring greater value to American consumers and businesses."
Zagros Madjd-Sadjadi, an economics professor at Winston-Salem State University, said going the bilateral trade route “complicates matters for Canada-Mexico trade unless a separate side agreement is made.”
Madjd-Sadjadi said the timing of Trump’s announcement “is definitely meant as a deflection” away from other issues facing the president.
“The negotiations may be finished with a completed agreement, but it does not come into force until ratified by the Senate,” Madjd-Sadjadi said.
He said renegotiated bilateral trade agreements “can do little” to bring back manufacturing jobs since “U.S. manufacturing woes are both structural and non-competitive in nature. The non-competitiveness is really not with Canada or Mexico, but rather with other countries.”
“The beauty of having NAFTA was the consistency we saw for all three countries. This made the entire NAFTA bloc one economic zone.
“By going forward with bilateralism rather than multilateralism, we could increase not only uncertainty, which is bad for all businesses, but also inconsistency in rules, which is often even worse,” Madjd-Sadjadi said.