In the run-up to his inauguration, President-elect Donald Trump has attacked the auto industry on Twitter for expanding production in Mexico, threatening General Motors and other manufacturers with “a big border tax” on cars and trucks imported to the U.S.
During the campaign, he pledged to renegotiate or dump the North American Free Trade Agreement, the 23-year-old pact with Mexico and Canada that he blames for the loss of tens of thousands of manufacturing jobs, particularly in Rust Belt states like Michigan and Ohio.
But at GM’s massive assembly plant in Arlington, you’d be hard-pressed to find negative effects from NAFTA.
Inside the 62-year-old factory, things have never been busier. More than 4,000 employees work three shifts a day, six days a week, turning out about 1,200 Chevrolet Tahoes, Cadillac Escalades and other high-end sport utility vehicles each day using parts and assemblies that come from suppliers in Mexico.
Just south of the plant, land is being cleared for yet another expansion that will add new body and paint shops. Construction on the new buildings is expected to begin by mid-year. When the additions are completed in 2018, the complex will have grown by about 1.3 million square feet.
Since 2011, GM has invested nearly $2 billion in Arlington, marking the largest single plant investment in the U.S. by the Detroit automaker. Meanwhile, GM Financial, the automaker’s Fort Worth-based finance unit, has expanded as well. It recently completed a $35 million expansion at its Arlington campus, where 3,400 workers process and service loans.
It’s no coincidence that GM is investing in Texas, given its proximity to the Mexican border. Under NAFTA, the auto industry — both U.S. and foreign companies — has invested billions in Mexico to create an integrated cross-border manufacturing network, where parts, assemblies and vehicles move back and forth tariff-free, enabling U.S. companies to compete with low-cost vehicles from Asia.
“All of our economies are really just intertwined like a ball of thread at this point,” said Mike Davis, a senior lecturer at SMU’s Cox School of Business. “If you damage one aspect of that through tariffs or quotas or something that restricts trade, you’re just going to foul things up all over the place.”
That could actually mean reduced jobs in the U.S. Last week, the Center for Automotive Research, a leading industry think tank in Ann Arbor, Mich., estimated that pulling out of NAFTA or implementing a border tax could cause the loss of 31,000 U.S. auto jobs, as the industry becomes less competitive.
Business leaders and economists point to other benefits from NAFTA in North Texas, from increased freight traffic at Dallas/Fort Worth Airport to the rapid growth of warehouses at the AllianceTexas development in far north Fort Worth. The Fort Worth Chamber of Commerce plans to lobby the state’s congressional delegation to keep the trade pact in place.
“The state of Texas and North Texas have done very well from NAFTA,” said Dave Malenfant, director of the Center for Supply Chain Innovation at TCU’s Neeley School of Business. Trucks with parts and goods roll up I-35 from Mexico, he said, where they can use the free trade zone in AllianceTexas as a consolidation point for distribution.
“I would think if they do change things, it would have a negative impact on our economy up here,” he said.
According to the Federal Reserve Bank of Dallas, U.S.-Mexico trade grew by 286 percent during the first 20 years of the pact, helping Texas become the nation’s top exporting state. About 36 percent of the state’s foreign sales go to Mexico, much in the form of so-called intermediate goods, meaning parts and assemblies that move across the border to create products like cars or machinery.
Experts say it’s hard to quantify the overall effect on jobs from NAFTA. Nearly 50,000 Texas jobs have been lost because of NAFTA, with most concentrated near the border, according to a recent article written by Jesus Cañas, a business economist with the Dallas Fed. While factory jobs have declined, that is more the result of increased robotics and automation than outsourcing to Mexico, he wrote.
Blaming NAFTA for declining manufacturing jobs is “an easy scare tactic,” said Tiffany Melvin, president of North American Strategy for Competitiveness, a Dallas-based nonprofit coalition of businesses and governments in the U.S., Mexico and Canada focused on trade issues.
She said far more jobs have been created than lost from the increased trade, helping Texas become a jobs leader.
“There’s no doubt that NAFTA has been a very beneficial trade agreement for the U.S., Mexico and Canada, and certainly in North Texas and Texas,” she said.
Still, Trump’s call to change NAFTA and bring factory jobs back to the United States struck a chord with voters and has won the support of organized labor, including the United Auto Workers union.
Johnny Pruitte, president of UAW Local 276, which represents workers at GM’s Arlington plant, said he was surprised to hear the billionaire developer come out against NAFTA and now hopes he succeeds as president in changing the trade pact.
He estimated that about 40 percent of the parts and components in the SUVs made in Arlington come from outsourced plants, mainly in Mexico. “We’re not really proud of that,” he said. “We wish everything, 100 percent of our vehicles made in Arlington, could be made here in the United States.”
Pruitte came to Arlington in 2009 after the automaker closed its other big SUV plant in Janesville, Wis., and went into bankruptcy. He readily admits that being closer to the Mexican border has benefited the plant here and that lower costs have helped GM recover and expand.
Melvin said her group is not entirely opposed to making changes to NAFTA, as long as they don’t restrict trade.
“We’re not panicking,” she said. “We’re going to see how he approaches this and play what role we need to play to make sure North America is protected.”
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