Election 2016

How Would A US Withdrawal From NAFTA Affect Houston?

This week, NPR and member stations are looking at how the presidential candidates define America’s role in the world. It’s a project called “A Nation Engaged.” This morning, we’re looking at Houston’s role in U.S. trade with Mexico and Canada.

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Donald Trump met with Mexican President Enrique Peña Nieto in Mexico City on Wednesday. One of the main topics of the meeting was the North American Free Trade Agreement, better known as NAFTA. Trump says if he's elected, he'll demand Mexico and Canada renegotiate NAFTA in America's favor. If they refuse, he'll pull the U.S. out of the trade agreement.

When Trump calls NAFTA "a disaster," he often points to Carrier Corporation. The American company is one of the world's top manufacturers of heating, ventilation, and air conditioning (HVAC) systems. In February, a Carrier spokesman read out this announcement on the floor of the company's plant in Indianapolis:

Houston Public Media's Coverage of Election 2016

Houston Public Media's Coverage of Election 2016

"...The best way to stay competitive and protect the business for the long term is to move production from our facility in Indianapolis to Monterrey, Mexico."

Those workers are crying out because all 1,400 of them will soon lose their jobs. That's the dark side of global trade.

Here's the bright side. Daikin is a Japanese company that also makes HVAC systems. Four years ago, it bought Houston's Goodman Manufacturing. Goodman builds air conditioning equipment at plants like this one west of the Heights.

Goodman plant - AC-heat pumps line
Factory worker assembles heat pump at Goodman Manufacturing Cooling Facility.

Daikin is building a new home for Goodman, and the rest of its U.S. operations, northwest of Houston. Company spokesman Rex Anderson says Daikin is investing $417 million in the new campus, and that means jobs.

"The consolidation of the new facility will result in roughly 5,000-plus jobs," Anderson says. "Now, some of those will be transferring from Houston and from Tennessee in the operations we have today, and many will be new employees."

Daikin Texas Technology Park
Artist’s rendering of Daikin Texas Technology Park, now under construction in Waller, Texas.

The campus will import some components from Mexico, but all design, engineering, and final assembly will stay in Texas. It's an example of how NAFTA can work for a region, instead of against it.

"NAFTA's probably had a larger effect on Houston than any other North American city," says Peter Rodriguez, dean of the Jones Graduate School of Business at Rice University. "There are two decades plus of investments in facilities, corporate headquarters and other relationships that would not have been here but for NAFTA."

Click here for more stories on NPR's "A Nation Engaged" series

Last year, Greater Houston exported $2.5 billion more in goods and services to Mexico than it imported. Its positive trade balance with Canada came to $4 billion.

Horacio Licon is vice president of international investment and trade at the Greater Houston Partnership. He sees a bleak future for the region's economy if the U.S. were to leave NAFTA.

"The port would see less movement, and as you know, the Port of Houston supports something like 1.2 million jobs in Texas. You know, less movement would mean less jobs," Licon says.

Still, there are some local businesses getting the short end of the stick with NAFTA.

Prime Eco Group is based in Wharton, 60 miles southwest of Houston. The company makes fluids for use in fracking and oil drilling. Prime Eco is already suffering from the downturn in crude oil prices. CEO Fernando Guzman says Mexico is his top export market. And even with NAFTA, he has to pay a value added tax that drives up the price of his products more than 30 percent. "The barriers that we have found in Mexico, entering in Mexico, are a little bit tougher," he says.

Guzman doesn't want NAFTA to end, but he does want it revised. That's why he's supporting Trump.

"He's going to look at it as a businessman, and he's going to look at what is the benefit of the United States, really, in all these things," Guzman said.

As for Trump's threat to pull the U.S. entirely out of NAFTA, Guzman isn't too worried.

"I don't think he can do that," Guzman says. "It's easy to say, but he has to go through the Congress."

But does he? Most experts agree the president does have the power to pull the U.S. out of NAFTA.

But maybe there's one part of the Houston economy that would benefit if the U.S. withdrew from the trade agreement: law firms. They might start suing the federal government on behalf of all the Houston companies that would lose business.

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Andrew Schneider

Andrew Schneider

Politics and Government Reporter

Andrew heads Houston Public Media's coverage of national, state, and local elections. He also reports on major policy issues before the Texas Legislature and county and city governments across Greater Houston. Before taking up his current post, Andrew spent five years as Houston Public Media's business reporter, covering the oil...

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