How Important Are Economic Ties Between Utah and Mexico?

SALT LAKE CITY, Utah (ABC4 News) - As the geopolitical climate between the United States and Mexico continues to grow more tense its influence can have some drastic effects on the Utah's relationship with Mexico.  

Talks of a border tax, construction of a border wall, and renegotiating NAFTA, all topics stressed by President Trump and campaigned heavily, by then Republican candidate Trump, have increased the stress between the two countries.  

According to a fact sheet, provided by the Kem C. Gardner Policy Institute during a discussion panel held at the Thomas S. Monson Center in Salt Lake City on Wednesday, Mexico is Utah's fourth largest international export partner and the second largest in imports.  

The value of Utah's commodity exports to Mexico in 2016 was $714-million ranking as the fourth export destination.  The value of Mexico's imports to Utah last year was $3.3-billion ranking first among import origins.  Meaning in 2016 Mexico's import value to the Beehive State was 4.5 times larger than the value of Utah's exports to its neighbor.  A disruption to that partnership could mean that Utah economy could suffer.  

The first thing that we don’t want to do is do anything that would tilt the scale against US companies and cost jobs here in the United States," said Derek Mlller, President and CEO of World Trade Center Utah. 

Miller led the one-hour discussion Wednesday morning to a group of about 70 in attendance on the delicate relationship that Utah and Mexico share for economic prosperity.   

"It comes down to personal relationships.  You tend to do business with people you know, people you like, people you trust, and then you tend not to fight with people you know, like and trust, and we have to be cautious of the brand that the U.S. has around the world because brand helps business," added Miller.  

Utah and Mexico share a long relationship because of their sharing of goods and services, their close proximity to one another, and dependability on labor.  Mexico is also Utah’s top destination for travel, about 29 flights to the country fly out of the Salt Lake International Airport each day.  

The top commodity traded between Utah and Mexico is transportation equipment.  But Utah also moves textiles, food, chemicals, computers, and electronics with Mexico.  Miller used the example of the assembly of a phone to paint a picture of trade.  He says products are moved across borders multiple times and with various different partners to make something as simple as a phone.  

He says something done to disrupt that partnership or trade can mean a reduction in exports, meaning loss of jobs, loss of millions in income and a reduction in our Gross Domestic Product.  

 

For example, a 35% reduction in commodity exports with Mexico could mean an estimated loss of about 2,000 jobs, close to a $100-million loss in personal income, and a reduction in our GDP by about $190-million.  Miller says businesses want and rely on certainty and predictability for success. 

According to Miller, Utah has done exceptionally well in globalization.  Utah exports alone add about $12-$13 billion to our economy and GDP.  Over the last 10 years Utah has nearly doubled its exports, making us the sixth fastest growing export state.  

 

So how does Washington affect that trade relationship?  Miller says words have meaning, and words matter.  He says, 

you can’t say things and have them float away especially in the world of international affairs and diplomacy.” 

That kind of careless, Miller says, puts Utah at a great risk because nearly 1/4 or 1.8 million Utah jobs are supported by international trade.  

The discussion today focused on how American policies have a direct impact on our economy and how our leaders can protect the economic interests of Utah.  

President Trump has said he has been looking to renegotiate NAFTA, for example.  According to Miller, Utah has benefited from that trade deal.  10 years ago, Utah made about $250-million in exports.  That number has since tripled.  

In order for Utah businesses to thrive, Miller says they need rule-based trading.  But, he does say he supports a “revamp” to NAFTA because it is over 20 years-old.  He sites an example of Dominium Value, for example, if a value for imports to the United States is $800 and someone from Mexico is shipping in something less than that there is no duty or tariff. “In Mexico the value is $50, in Canada, $20.  So, if you’re a Utah company sending something to Mexico and it’s over $50 dollars, it’s not a level playing field,” says Miller.  “Why does that matter?  It puts our Utah companies at a disadvantage.  The best protection for Utah companies, Miller says, comes though our congressional delegation. 

He also spoke about Mexican labor and the construction of President Trump’s “Great Wall” along the country’s most southern border.  Trump announced his candidacy by saying “he was going to build a wall, and not a lot of people though it was a winning idea,” said Miller.  “That announcement resonated with a lot of people in this country.  So, we have to ask ourselves why?  And it’s the one thing he stayed consistent on.  Why did it resonate?”  He concludes “to say that we had a broken immigration system is speaking highly of it, it’s completely upside down.” 

Miller asked, why do immigrants come to the U.S. illegally?  “They come for good intention, some for nefarious.  But, we have a system that puts those categories of people in the sane grouping.  Both in how they come and how they have to live when they come, meaning living in the shadows.”

He says there are two components in dealing with illegal immigration: securing a border and figuring out a humane way to deal with undocumented residents.  When the issue is addressed he says, America focuses on the second part but not the first, and until we secure the border “we’ll always be on this merry-go-round.”

President Trump has said that trade is bad, trade deals are bad, and that the United States is getting worse because of trade.  He has also said trade must be free but needs to be fair.  If Miller had the presidents ear, he says President Trump should look to the model that Utah has built to accomplish the goals he has been advocating for.  

He says more Utah companies are manufacturing here and selling to foreign companies.  More Utah companies have figured out a way to play the economic market in their favor.  Utah, he says, is a trade surplus state to the tune of $4-billion dollars every year.  

So, how could a trade war or border tax affect our economic prosperity?  Miller says when such an action is taken “it feels personal and has the greatest chance of inciting a trade war.”

For example, there has been an idea about imposing a flat 20% tariff on all goods from Mexico imported to the U.S..  Miller explains why it would harm us more than help.

“So, if you add 20% on to goods coming from Mexico into the U.S. and they’re going to U.S. stores, you know — like those avocados that we’ve talked about — I mean who pays for that?  Yea, the consumer does,” Miller adds.  

There is also a perception coming from Mexico that these sort of policy changes are racially motivated.  In the U.S., Miller says, that perception is different, the perception in the U.S. is that America has terrible trade deals and needs to negotiate ones that favor American industry.  He asks, “How do we change the perceptions in micro interactions and those who make those complex relationships happen?  Rather than build a wall.  Build a prosperous Mexico.  You tend to do business with those you know and trust and tend not to go to war with those you do business with.”

Another important part is the cultural aspect of our relationship to Mexico.  Not only does Utah have a long Mexican history — as the lands Utahns now walk on were once governed by the Mexican people — but approximately 42% of Utah’s foreign born population has cultural and ancestral ties to Mexico.  Miller says, that cultural tie can be a vital asset to continued cooperation and partnership with Utah and Mexico.


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