Three years after President Trump took office ready to make good on a campaign promise to significantly overhaul a trade deal with Mexico and Canada, a new North America agreement is close to completion. And so far, it’s getting a positive reception from local business leaders following a long period of uncertainty for the county economy.
“I think it’s going to help boost our economy locally,” said Guillermo Valencia, co-owner of Valencia International customs brokerage and former director of the Greater Nogales-Santa Cruz County Port Authority.
Valencia was among the local leaders who had expressed concern since Trump’s 2016 election that the president’s promises to rewrite trade deals could have major repercussions for commerce in the county.
Speaking earlier this week, he said that progress on the new deal could help push forward local investments that had been held up by lingering uncertainty.
“There’s projects on the U.S. side that people hadn’t made the decision to invest in it because they weren’t sure if there was going to be a USMCA signed,” he said, in reference to the United States-Mexico-Canada Agreement that’s poised to replace NAFTA.
Ultimately, stakeholders say, the nearly done USMCA doesn’t entail big policy changes that would affect the U.S.-Mexico trade that dominates the local economy. For their part, produce importers are applauding the pact for leaving out a provision that could have hurt their industry.
‘Business as usual’
On Dec. 19, the U.S. House of Representatives passed a version of the agreement, making minor changes to a previous iteration of the pact. It’s expected to pass the Senate in coming weeks and has already been ratified by Mexico, meaning that approval by Canada – also expected this year – will pave the way for implementation.
The USMCA will replace the 1994 NAFTA agreement, which phased out tariffs on nearly all products traded between the three countries and fueled cross-border trade through border communities like Ambos Nogales.
Approximately $14.5 billion of commodities entered the United States from Mexico at Nogales ports in 2018, according to U.S. Census data. That included $2.9 billion in fresh produce and $4.3 billion in electronic and equipment manufacturing products, according to data compiled by the University of Arizona Eller School of Management.
For Nogales-area businesses, the new deal means they can continue bringing goods – like fresh Mexican fruits and vegetables and products manufactured in Nogales, Sonora maquiladoras – across the border without paying import taxes.
The agreement is “crucial to further grow employment opportunities” in the area, said Olivia Ainza-Kramer, president of the Nogales-Santa Cruz County Chamber of Commerce, in an emailed statement.
On the other side of the border, Richard Rubin, owner of the shelter firm Javid LLC and a member of the board of the Nogales, Sonora Maquila Association, said the updated deal is basically a nothing-burger for local manufacturers.
“As far as the 110 maquilas in Nogales (Sonora), it’s going to have pretty much zero effect,” he said. “It’ll be business as usual.”
He said that new protections for labor unions included in the USMCA wouldn’t make a big difference in the area, asserting that there is already “plenty of union activity” in Sonora.
“Most of the plants in Nogales are non-union anyway,” he added. “Companies on the border are paying better and have better benefits than where the unions are.”
No seasonality provision
Nogales, Ariz. produce businesses are cheering one thing that was left out of the trade bill the House passed in December.
“When we talk about what’s good or bad about the agreement, it’s also about what’s not in there,” said Lance Jungmeyer, president of the Fresh Produce Association of the Americas, whose members include local produce importers.
His comment was a reference to a “seasonality provision” supported by Florida and Georgia lawmakers, but ultimately kept out of the House bill after others, including U.S. Sens. Martha McSally and Kyrsten Sinema and U.S. Rep. Raul Grijalva, all of Arizona, opposed the idea.
A seasonality provision, sought by produce growers in the two southeastern states, could have opened the door to seasonal tariffs on fruits and vegetables imported from Mexico.
The USMCA also adds rules that could make it easier to call for inspections at workplaces suspected of violating labor regulations.
Labor practices at Mexican produce farms that ship fruits and vegetables to the United States have long been the subject of scrutiny, but Jungmeyer downplayed any effect the new rules would have on FPAA members, saying they were targeted at “bad actors.”
Automobile manufacturers are also the subject of specific new regulations in the deal, meaning that the Ford assembly plant in Hermosillo, Sonora, which ships a steady supply of new vehicles to the U.S. market via the freight trains that pass through Nogales, could be impacted. Ford did not respond to an email seeking comment by the NI’s press deadline on Thursday.
The USMCA bill, which passed the house by a vote of 385-41, represented a rare show of bipartisan cooperation in Congress.
But for Nogales businesses, long left wondering what might replace NAFTA – a deal that Trump once called “one of the worst trade deals ever made” – the main takeaway of the House vote is that the basic provisions of NAFTA are here to stay.
“The new agreement, USMCA, you know it has a new name,” said Rubin, the Javid LLC owner. “But it really has no change.”