Arkansas-based companies exported nearly $6 billion of goods last year, the majority of which went to Mexico and Canada.
“There is one country that is the most significant trading partner. That is Mexico. Mexico is the single largest trading partner – not just in food – but also for the service industries and light manufacturing,” said Angela Marshall-Hofmann, former trade counsel for the U.S. Senate Finance Committee, president of World Strategies in Bentonville, and member of the Board of Advisors for the Arkansas World Trade Center.
Melvin Torres, director of Latin American trade at the Arkansas WTC, told Talk Business & Politics the state’s exports to Mexico are growing 3.5 times faster than export sales to any other country.
“Those stats are about five days old and in just that amount of time we see Murphy Oil win a bid to deep sea drill off the coast of Mexico and Wal-Mart plans to invest $1.3 billion into its Mexican business unit Walmex over the next three years. We know from these two big announcements trade with Arkansas will go a good bit higher,” Torres said.
With negative comments before and during the general election by President-elect Donald Trump about the North American Trade Agreement (NAFTA), Hofmann and Torres hope to educate the public about how NAFTA directly impacts the state’s economy. He said since the signing of NAFTA, Arkansas’ exports to Mexico have increased 700%.
“There are significant industries that we manage with Mexico,” Torres said. “For example, certain aircraft parts for companies are manufactured by Mexico for Arkansas companies. Arkansas companies use these parts in their manufactured products, then turn around and sell a more complete product to Mexico. This is a good example of what our symbiotic trade relationships look like.”
He said Mexican companies employ about 3,000 workers across the state and Arkansas companies also have significant activities in Mexico. Mexico accounted for 14.2% of Arkansas exports last year. Right at 41,600 jobs in Arkansas depend on trade with Mexico, according to the WTC.
“Outside their U.S. operations, Arkansas corporate giant Wal-Mart has its largest global retail presence and sales in Mexico,” Torres said. “There are over 2,300 stores that sell quality American products to Mexican consumers.”
Torres, who recently returned from a trade expo in Mexico, said the mindset of the Mexican people and businesses is one of fear and uncertainty with respect to the president-elect. Torres said he hopes the NAFTA won’t be tossed out because he sees Mexico as the most important trading partner on the planet for Arkansas.
“While Canada is also a strong partner, Mexico continues to grow its business more quickly. Together Canada and Mexico make up a lion’s share of the trade exports from Arkansas. International trade supports nearly 50,000 jobs in Arkansas and remains important to a number of industries from aerospace, manufacturing equipment, poultry and rice,” Torres said.
CHINA AND THE TRANS-PACIFIC PARTNERSHIP
Much attention is given to China because many believe the growing nation is on track to pass the U.S. in terms of gross domestic product by 2030, according to Beth Keck, member of the Arkansas WTC Board of Advisors. Keck is practitioner-in-residence for China Studies at Johns Hopkins University. Keck said the Asian Pacific is the most dynamic economic region in the world.
“A little-known fact about TPP is that it is an agreement that unlocks huge potential for growth in services,” said Marshall-Hofmann, “These include e-commerce, a rapidly growing opportunity for small-business to access global customers.”
Not only did President-elect Trump oppose TPP, but Democratic presidential candidate Hillary Clinton also opposed the deal, saying “there were too many loopholes” and it needed to be re-negotiated before she could support it. Trump said the deal does not ensure fair trade.
“Why are we striking trade agreements with countries we already have agreements with? Why is there no effort to make sure we have fair trade instead of ‘free’ trade that isn’t free to Americans?” Trump said in a statement a little more than a month prior to the election/ “Why do we not have accompanying legislation that will punish countries that manipulate their currencies to seek unfair advantage in trade arrangements? Why has the Congress not addressed prohibitive corporate tax rates and trade agreements that continue to drain dollars and jobs from America’s shores?”
President Barack Obama has made the deal one of his priorities to pass in his final days in office.
Keck said China is already moving to try and negotiate the Regional Comprehensive Economic Partnership (RCEP) which is a rival of the Trans-Pacific Partnership (TPP). Torres said if the U.S. is unable to get the Trans-Pacific Partnership done, Arkansas and the rest of the states that aim to trade with Japan, South Korea and much of Latin America will be hindered.
“China will no doubt get these countries to sign on to their agreement, which leaves out the United States,” Torres said. “There is a lot of misunderstanding about TPP and our organization and other trade groups are working to better explain why TPP is needed.”
Companies in Arkansas, such as Tyson Foods and Wal-Mart are focusing on Chinese markets and are devoting significant efforts to expanding their business ventures into the region. Arkansas companies export roughly $3 billion in goods to TPP countries, about 75% of that comes from small to medium-sized businesses.
“In terms of trade, trade with Asia is an important income generator for Arkansas,” Keck said. “For the state to remain competitive, we need to have engagement.”
Torres said without TPP, China will undoubtedly overtake the U.S. in terms of highest GDP. He said TPP could slow down the process, and maybe even derail it overtime.
“Arkansas is clearly a net beneficiary from global trade,” Marshall-Hofmann said. “From its exports to its companies investing and growing around the world, with these deep business relationships, our companies are very well-positioned to be wise counselors as trade policy is shaped in the new Congress.”