How NAFTA Changes May Affect Houston Economy

The top reasons that many people considered ending NAFTA.

October 25, 2017
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President Clinton first signed the North American Free Trade Agreement on December 8, 1993. While the impact of the law are still debated to this day, many experts feel that it had a net positive impact on the economy. At the same, it may have hurt blue-collar workers.

How NAFTA Affected the United States Economy

Robert Scott, chief economist at the Economic Policy Institute, a left-leaning think tank in Washington, D.C, states that the law seems to have hurt manufacturing jobs in the United States.

““Jobs making cars, electronics, apparel and other goods moved to Mexico, and job losses piled up in the United States, especially in the Midwest where those products used to be made,” says Scott. “By 2010, trade deficits with Mexico had eliminated 682,900 U.S. jobs, mostly (60.8 %) in manufacturing.”

This is one of the top reasons that many people considered ending NAFTA. President Trump built inroads with many blue-collar workers that felt ignored by previous Republican candidates by pledging to end these free trade deals. This is one of the only issues that he shared with Democratic president hopeful Bernie Sanders. Both candidates managed to pull surprising upsets in Michigan in their respective campaigns against Hillary Clinton, largely due to their hostility towards free trade policies such as NAFTA.

What Does a New NAFTA Contract Mean for Houston?

While changing NAFTA terms will affect every city in the United States, Houston is one of the biggest stakeholders in the discussion. This due to both the city’s proximity to Mexico and the products and services that it produces, which may have a large demand in Mexico.

Earlier this year, President Trump has pledged to negotiate new NAFTA contracts. Many experts around the country are debating the impact the new changes will have on their communities. Houston business experts and economists are no exception. The Houston Chronicle has cited a number of experts that argue it could have great opportunities for the city.

The growing demand for blue collar jobs will spur the Houston economy, which may affect every company. Even a company that offers a title loan in Houston may see a rise in demand, due to the higher employment rate and wide range of businesses in the city.

The biggest advantage new NAFTA contracts would have is creating a new market for natural gas. If the new deal is struck, Mexico may purchase 70% of its natural gas from the United States. Since Houston is a major center for natural gas production, this would be a huge economic boom for the city.

The Mexican government currently has a monopoly on natural fuel. This leaves people with very few other heating alternatives. However, the government has started to sever its holdings on the energy market and allow the free market to begin serving them.

Houston oil companies are eager to learn that the new agreement may benefit them. The Mexican government didn’t fight to have them in the discussions, which may neuter their negotiating power in the North American oil market.

“Mexico’s oil industry was largely left out of the original agreement because at the time it was closed to foreign investment. The nation began allowing private and foreign investment under a 2013 overhaul. Lately, investors have become concerned that leftist candidate Andres Manuel Lopez Obrador, the early front-runner for next year’s presidential election, will seek to undo parts of the overhaul. Incorporating it into Nafta and making it subject to international obligations would add an extra layer of reassurance.”

Houston oil producers are likely to benefit as a result. If the demand for oil peaks in the United States, they can meet their growth projections by serving a new, untapped market in Mexico.

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