New Mexico Border Towns Fear Trump's Disdain for Nafta Will Stall Trade Growth
A truck driver pauses at one of the few intersections in the border area of Santa Teresa, New Mexico, as he tries to navigate a narrow turn while transporting a giant wind turbine blade.
The 116-foot piece of equipment was manufactured in Ciudad Juárez, Mexico, by an Arizona company, then sent by rail through El Paso on the Union Pacific line and is now probably headed to California, Oregon or the Canadian province British Columbia, areas with fast-growing wind-power industries.
Just down the road, another truck driver positions his rig under a giant off-loader that can transfer a shipping container from a train onto a truck in a minute at Union Pacific Railroad’s new $400 million intermodal facility. The lot might one day grow to 11 miles across as more cargo ends up in this Southern New Mexico community.
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The cargo here typically originates in places like Vietnam, China and other Asian countries. It makes its way by ship to Los Angeles or Long Beach, California. It’s then taken by train to Santa Teresa and will be stored here until needed by a customer for the production of cars, electronics or airplanes.
The connections to and from Santa Teresa — a Dona Aña County community with a population less than 4,500 that lies just a few miles from Interstate 10 — are quickly becoming links to the rest of the world, a superhighway of rail and truck routes built on a policy of free trade.
No other state has seen more of an increase in international trade than New Mexico, said Jim Peach, a professor of economics at New Mexico State University who is an expert on the North American Free Trade Agreement, which took effect Jan. 1, 1994. But as President-elect Donald Trump prepares to take office this month, his repeated criticism of the pact — calling it maybe “the worst trade deal” the U.S. ever signed — worries people here that changes slowing that growth could be on the way.
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“We’re here because of Nafta,” said Alex Sierra, operations manager of Acme Mills, which relocated to Santa Teresa from Michigan to take advantage of the growth along the border. His plant is the largest producer of a material known as scrim, a light cotton used in upholstery, especially automobile seats made in the Mexican plants near the border.
In simple terms, Nafta allows goods made in Canada, the United States and Mexico that have a majority of their materials from these countries move across borders without additional charges, known as tariffs.
The actual Nafta document is 2,000 pages, but the core treaty that “all tariffs be eliminated” is just a few pages with signatures. The remaining pages are definitions and exceptions, as well as enforcement procedures. Peach’s favorite discussion concerns label restrictions for “Kentucky Bourbon” “Canadian Whiskey” and tequila.
“At the time, I was one of the few people in the world who had actually read it,” Peach said of Nafta.
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But nothing is simple about trade agreements. Trump has in part blamed free and easy trade with Mexico and China for the decline of manufacturing jobs in America. His campaign promised to stop new trade deals and reopen negotiations for some elements of Nafta.
The most obvious way to do that would be to restore tariffs and force those who make or sell goods across a border to pay a certain fee for access to that market.
Legally and politically opting out of Nafta would be very difficult, Peach said. “I don’t think the United Sates has ever gotten out of a trade deal before. A lot of people in Congress, Republicans, are ideologically in support of free trade, regardless of what the president has to say.”
But, he added, the uncertainty itself is bound to have an impact on businesses’ decisions. The United States has unilaterally opted out of treaties in the past, he said, referring to agreements with Native American tribes, “and that could probably be done in this case, as well.”
But for Peach, the biggest change that resulted from Nafta was that it opened up the state of New Mexico to the rest of the world — and any changes would stall some of that progress.
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Backers of an open border are ready for the debate and say any new tariffs will cost American jobs, especially in New Mexico, said Jerry Pacheco, chief executive of the Border Industrial Association, a trade group for 155 businesses that import and export along the border in Santa Teresa and El Paso, Texas.
The rail connections coming from the West Coast into Santa Teresa connect to Dallas; Memphis, Tennessee; and then on to St. Louis and Chicago. The international border crossing at Santa Teresa is the gateway for manufactured raw materials and supplies from U.S. factories heading into the maquiladora plants in the Mexican state of Chihuahua and for the storage of finished products coming back.
“Slap a 35% tariff on this border and watch what’s going to happen to these American jobs,” Pacheco said.
Santa Teresa was really just a residential retirement community 13 miles west of El Paso before Nafta. But as the border point at El Paso became increasingly congested, the Santa Teresa Port of Entry was opened in 1993 with support from former New Mexico Gov. Bruce King and former U.S. Sen. Pete Domenici.
At the time, the state had two sleepy, little-used crossings with Mexico, one in Columbus and the other at Antelope Wells.
Still, Pacheco said, the creation of the Santa Teresa port was unusual at the time because most crossings were being established in population centers to transport cars and people across the border in El Paso; Nogales, Arizona; and San Diego.
Mexican officials said they weren’t planning to pave the road to the new Santa Teresa port, and others also became skeptical of the project. “An international industrial park planned in Santa Teresa looks like a bust,” read an article in The New York Times in January 1993, with the headline: “Mexican Border’s Boom Plan is Bust.”
When the port opened, there were just four businesses in Santa Teresa. But what it had was 35 square miles of vacant land that could be developed to support manufacturing — and local leaders saw that potential.
From 1998 to 2004, some 2 million square feet of warehouse space was built, attracting firms that provide metals, materials and electronics to the Mexican manufacturing plants. Since 2007, 46 companies have invested $716 million in the area, and there are now 2,477 employees who work in Santa Teresa.
Ground broke last year on two more facilities — a massive FedEx distribution center that is due to add 200 jobs and the expansion of Las Cruces-based Valley Cold Storage and Transportation. That project is backed with a state economic development grant for a 105,000-square-foot facility that will bring 33 jobs.
FedEx ranks No. 2 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.
And that’s the other advantage for Santa Teresa: geography.
The very real evidence of this is the view at the southern tip of the United States. On one side is a manufacturing plant owned by Stanco, which provides industrial safety products, while just a quarter-mile away, in plain view, is the Chinese-owned Foxconn plant in San Jerónimo, Chihuahua, that assembles 55,000 tablet computers a day for HP Inc.
Every point of entry to the east of Santa Teresa, including the busy border crossing in El Paso, crosses the Rio Grande. That ties up traffic and can delay trucks transporting products. So, if you want to move products from the East Coast or the center of the United States into Mexico, Santa Teresa is faster and easier.
Both Mexico and the U.S. Customs Service are taking note and launching a pilot project at the Santa Teresa Port of Entry, with enforcement officers stationed inside the Foxconn plant as materials are loaded. The plant has 9,700 employees and sends 300 trucks carrying 55,000 computers a day northbound through Santa Teresa. Once inspected, the trucks will pass into the United States in a dedicated entry lane without needing another inspection, in most cases, according to Pacheco, whose group is backing the effort.
Sierra, of Acme Mills, said proximity to the border is increasingly important to manufacturers who implement “just-in-time” production methods.
Keeping and storing inventory is expensive, and truck shipments, especially to Mexico, are always problematic. Sometimes drivers don’t show up, or the shipment gets stopped, or the plant rejects the supplies and a new shipment has to be sent. Once, a driver just quit on a border bridge and abandoned his truck, Sierra said.
“It’s almost a daily occurrence, something happens. It’s bad enough already, and now you’re throwing more uncertainty into that,” Sierra said of potential changes to Nafta.
He’s also learned a lot about operations in Mexico while working for Acme. For instance, workers on-site often travel from other communities and get paid whether or not there is work. Having materials ready to go is especially important.
He also said the plants are taxed on any supplies that aren’t used, so just-in-time supplies become more economical. “They have to get it in and get it out. That’s why you see the trucks lining up on Mondays to get in and lining up on Fridays to get out,” Sierra said.
Since 2007, exports to Mexico have risen 65% from Texas, 46% from California, 75% from Arizona and 350% from New Mexico.
The largest share of these exports are for the automobile and airline industries, while 25% are electronics and 21% computer-related.
In fact, by the end of 2016, manufactured exports from Santa Teresa were expected to surpass those from Albuquerque, New Mexico, Pacheco said.
The irony is that many of the firms have come from the Midwest, the same areas Trump and others have said were losing jobs to Mexico.
The area expects to add 200 to 500 industrial jobs annually over the next several years, Pacheco said.
Some of the frustration of those backing the development is that success is difficult to measure. The state of New Mexico, like the rest of the United States, has lost manufacturing jobs, and overall employment levels across the state remain stagnant.
Pacheco said that’s because some of the numbers are lagging, and it can take several years for companies to ramp up their hiring after expansion. He also said the data from his association shows 53% of the workers in Santa Teresa live in Texas, but that will change as housing projects move forward.
The Union Pacific facility moved out of El Paso and opened in Santa Teresa on April 1, 2014, with the help of lucrative state tax credits passed by the Legislature and signed by Gov. Susana Martinez to reduce the costs of fuel for the railroad company.
Now there is a study under way to relocate the rail tracks themselves from Juárez directly to Santa Teresa instead of going through El Paso. Pacheco said Juárez supports the route change because the current line splits that city and disrupts traffic so much that trains can only operate during certain hours.
The move would cut transportation times and boost New Mexico’s international profile for trade even further.
Our biggest economic opportunity is not extractive industries, it’s not call centers, it’s not even tourism,” Pacheco said. “It is trade with Mexico.”
