While it’s no secret that Mexico is Arizona’s largest foreign trade partner, current political rhetoric at the national level sends the message that trade with Mexico is disadvantageous and results in a loss of American jobs.
In a meeting with CEOs of major American manufacturers, President Trump recently referred to our trade relationship with Mexico as “unbelievably bad.” The real data, however, paint a very different picture for Arizona.
The University of Arizona’s Economic and Business Research Center just released the latest Arizona-Mexico Trade Indicators. In 2016, Arizona had a net trade surplus of $870 million with Mexico. If we look only at trade in manufactured goods, the numbers become even more compelling. In 2016, Arizona had a net trade surplus with Mexico of $1.3 billion for the manufacturing sector.
This is exciting news for Arizona’s businesses and workers. Our relationship with Mexico directly supports over 100,000 jobs in Arizona. Mexico accounted for about 40 percent of all Arizona exports to foreign markets in 2015, according to the U.S. Department of Commerce’s International Trade Administration.
Many of these exports are high-value, manufactured goods such as electronics and machinery. These trade-related jobs pay around 18 percent more than other types of jobs.
A $1.3 billion surplus is a big deal. But it is at risk as the Trump administration blames international trade for manufacturing job losses. These claims ring hollow in Arizona where we are clearly benefiting from robust trade with Mexico. So how do we prevent misguided protectionist policies from stymieing our growth?
1. First, change the narrative. Media outlets on both the political right and the left have published stories blaming trade for destroying good paying manufacturing jobs. This has led to a push for restrictionist trade policies that would reduce economic output and cost American jobs. We need to start telling the positive side of the story and providing examples of the numerous companies that have created new jobs by exporting to Mexico.
2. Build relationships between governmental and business leaders on both sides of the border. Fortunately, many of Arizona’s leaders get this. Gov. Doug Ducey, Tucson Mayor Jonathan Rothschild, Sens. John McCain and Jeff Flake, and many business leaders have established strong ties with their counterparts in Mexico. We should continue to build on these relationships at all levels of government.
Resist the border adjustment tax (BAT). The proposed tax on Mexican imports would have a chilling effect on Arizona’s trade relationship. It would invite retaliatory action and ultimately shrink the size of the market available to Arizona manufacturers.
3. Modernize NAFTA. The 23-year-old trilateral trade deal has done wonders for Arizona’s export industries. Any serious effort to renegotiate the treaty should focus on addressing new trade issues that have emerged since the widespread adoption of internet-based and mobile technologies.
4. Invest in infrastructure to support commerce. Infrastructure investment was one of President Trump’s major campaign promises, and one of the few that enjoys bipartisan support. Improvements to Arizona’s Key Commerce Corridors — Interstates 10, 8, 19, 40 and the forthcoming Interstate 11 — as well as upgrades to our border ports of entry could expedite the safe movement of commerce.
Arizona’s strategic location and historic ties with Mexico position us well for strong export-led growth in 2017 and beyond.
Turning inward toward protectionist policies that reduce market access and drive up costs throughout the supply chain would hurt Arizona’s manufacturing industry and have a negative impact on jobs.