Meat of the Matter: The Great Trade Debate
It’s no exaggeration to note that too many people are uninformed about the scope of the issues confronting 21st century America. Among those issues, foreign trade ranks right behind national security as one of the most misunderstood, yet wildly debated, controversies impacting contemporary politics.
As the source of the largest contingent of immigrants — legal and otherwise — Mexico is understandably the focal point of concerns about cultural changes, job losses and the rising cost of public services. Our neighbor with whom we share a 2,000-mile border is often denigrated as the poster child for the negative impact of globalization.
On the campaign trial, President Trump argued that the North American Free Trade Act (NAFTA) needs to be renegotiated or scrapped entirely. More than once he called NAFTA “a catastrophic trade deal for the United States.”
As he recently stated about health care, however, the issue of trade is complicated.
Much more complicated than labeling it “great” or “horrible.” Problem is, few of us bother to dig into the details.
For example: How many people, in their rush to demonize Mexican immigrants and deride the relationship between the two countries, realize that Mexico is our second largest export market and our third largest trading partner?
Or more to the point, solid evidence shows that, “Trade with Mexico, though not without its challenges, provides concrete benefits, strengthening the competitiveness of American firms … generating savings for the average American family [and creating] nearly 5 million U.S. jobs.”
That quote is from a major study recently released by the Wilson Center’s Mexico Institute titled, “Growing Together: Economic Ties between the United States and Mexico.”
The report makes three key points rarely raised in conjunction with policy discussions (rants?) about U.S.-Mexico relations:
1. The U.S. and Mexico no longer simply sell finished products to one another, the report documented. Instead, a regional system of manufacturing supply chains “crisscross the U.S.-Mexico border. This allows the two countries to effectively combine their individual comparative advantages into an ultra-competitive regional system.”
2. The scale of cross-border trade is significant. In 2011 (the most recent data), Mexican industries consumed $140 billion in U.S. goods, and U.S. industries consumed $111 billion worth of Mexican inputs.
3. Foreign trade — including off-shoring — is but a minor contributor to the undeniably significant loss of assembly-line and general manufacturing jobs in the U.S., down 29% just since 2000. The real cause is what economic analysts term a “structural shift” to high-tech, information-based and service industry jobs. Manufacturing job losses, in truth, are largely driven by productivity improvements and automation that allow more goods to be produced by fewer workers. In 2015, researchers from Ball State University determined that 87% of manufacturing job losses from 2000 to 2010 were caused by productivity increases; only 13% were linked to trade.
The animal agriculture industry, in particular, has seen definitive benefits from the rules that freed up trade among the U.S., Mexico and Canada.
Cross-border benefits
A recent ABC News online report profiled Gildardo Lopez Hinojosa, a Mexican national who sells cattle to Texas feeders and other buyers.
“Three days a week he loads four to six trailers with his young cows and sends them across the bridge connecting to Pharr, Texas,” the story detailed. “Once cleared by USDA veterinarians, buyers from Texas, Arizona or even up toward the Canadian border pick up their cows.”
Lopez then imports beef and chicken from U.S. processors to supply his Mexican butcher shops and fried chicken restaurants, which employ more than 400 people. As the ABC News story explained, he gets the best price for his calves in the United States, and it’s cheaper for him to import chicken from American suppliers than ship Mexican-produced chicken from elsewhere in the country.
“It’s a lie to say that NAFTA didn’t work,” Rafael Garduno Rivera, an economist at the Center for Economic Research and Teaching in Aguascalientes, was quoted in the story. “It worked and worked very well and for both sides in various areas. Like everything, there were losers and winners.”
That last sentence is the key to parsing the often-conflicting analyses about trade issues: All trade creates some winners, and some losers.
American blue-collar workers have lost jobs as low-skill manufacturing operations relocated to “maquiladoras,” as Mexican assembly plants are known. These plants produce electronics, car parts, appliances and household goods.
But again, it’s not as simple as jobs taken from Americans and given to Mexicans. The raw materials and components needed to build an automobile, to take the most obvious example, “might cross borders a dozen times before a car comes off the assembly line in Michigan,” the story explained.
Meanwhile, U.S. retailers that do business along the southern border depend on Mexican shoppers, many of whom work in those maquiladoras, to support their operations.
U.S. agriculture has clearly been one of the winners in global trade, yet it’s not accurate to say the growth of meat, dairy and other commodity exports to Mexico justifies all aspects of the cross-border commerce that NAFTA has helped promote.
Imports of cheaper U.S. commodities, such as the beef and chicken Gildardo Lopez imports, have hurt Mexico’s domestic farm economy and in fact are responsible for a large percentage of the undocumented immigrants who have entered the U.S. in recent decades. That flood of people, though it has largely reached equilibrium with an improving Mexican economy and tighter border controls, creates pressures and problems in many U.S cities.
Winners and losers.
No matter what aspect of foreign trade is under discussion, in the end it’s complicated.
Editor’s Note: The opinions in this commentary are those of Dan Murphy, a veteran journalist and commentator.
