Whether or not Mexico pays for a proposed border wall, Utah stands to pay economically if the wall and other President Trump policies related to Mexico become reality, a top international trade official said last week.
Derek Miller, president and chief executive officer of the World Trade Center Utah, told a crowd gathered at the University of Utah’s Kem C. Gardner Policy Institute’s “Newsmaker Breakfast” that Utah — with nearly one in four jobs supported by international trade — has “a lot at risk.”
“I think it’s important for all of us, and also for our president, to recognize that words have meaning and words matter and you can’t just say things and have them just sort of float away, especially in the world of international affairs, the world of international relations and international diplomacy,” Miller said. “It has a big impact. It certainly has the potential. … There’s a great risk to us.”
Mexico is Utah’s fourth-largest international trading partner, with about $741 million in commodity exports from Utah and $3.3 billion in Mexican exports into Utah in 2016. Research undertaken by the institute indicates that if Utah exports to Mexico were reduced by 15 percent, it would cost Utah 798 jobs, $42.7 million in personal income and $81.3 million in GDP. If trade were cut by 25 percent, it would cost Utah 1,329 jobs, $71.1 million in personal income and $135.6 million in GDP. If the reduction reached 35 percent, Utah stands to lose 1,861 jobs, $99.5 million in personal income and $189.8 million in GDP.
Among top Utah exports to Mexico are auto airbags with inflator systems, textile fabrics covered with plastics, auto body parts and accessories, food items and coal. Mexico accounts for about 6 percent of Utah’s international exports. When gold is taken out of the equation, Mexico is Utah’s second-largest trading partner, representing 10 percent of the state’s exports.
Trump has advocated a renegotiation of the North American Free Trade Agreement (NAFTA), but Miller said Utah has “definitely benefited” from NAFTA, seeing exports to Mexico rise from $250 million a decade ago to the current $741 million level. Still, he supports a “revamp” of the agreement.
“I’m certain there are parts of it that need to be updated,” Miller said. “Anything that’s 20 years old, it needs to be updated.”
Without a trade agreement in place between countries, “it’s the ‘wild West” because nations have different legal systems, Miller said. “Any company will tell you what they really need more than anything else is certainty and predictability because that’s what leads to profitability. Certainty and predictability in international trade means rule-based trade,” he said.
As for the border wall, Trump has been consistent in saying it’s needed, from the time he announced his candidacy, although “I didn’t know anyone who thought that was a winning idea,” Miller said.
Dealing with immigration issues requires securing the border and dealing with illegal immigrants already in the U.S., he said. “Whenever we do it, we always do the second part and never do the first part,” he said. Americans believe this has led to a never-ending merry-go-round in which illegal immigration has led to undocumented residents and has led to trying to solve the problem of the people here without securing the border. “Until we secure the border,” Miller said, “we’ll always be on that merry-go-round.”
Regardless of how the various issues stemming from trade with Mexico are addressed, Miller warned about a trade war. “A trade war is like a regular war: There are no winners. It’s bad for everybody all the way around,” he said.
Miller said Trump’s positions on trade moderated as he transitioned from candidate to president. No longer is Trump espousing “trade is bad” but instead that free trade must be fair trade, he said.
“What I would tell President Trump is, look to Utah as the model to accomplish what you are advocating for. If I understand what the president is advocating for, it’s more U.S. companies manufacturing more in the U.S. and selling more goods to consumers outside of the U.S.
“Look at Utah. Somehow, our companies in Utah have figured out the way to make the free market work for them, and they’ve done it in the way exactly as capitalism requires them to do, which is be very competitive, find your niche in the marketplace, drive down costs and create value. … We talk all the time in this state about Utah being the model for the country, and in this way it is particularly true. Utah is the model for accomplishing exactly what the president says he wants to accomplish, which is not taking a protectionist stance. Protectionism just says, ‘Protect me. I can’t compete. I need the protection.’ What we’ve said is, ‘We’re going to go out into the market’ and what our businesses have said is, ‘We’re going to go out and compete and we’re going to win.’”
Utah currently exports $12 billion to $13 billion annually, a figure that has doubled in the past 10 years and led Utah to become the sixth-fastest-growing export state. Miller said Utah companies are “just not afraid to get engaged internationally. There’s just not a mental barrier, not a lot of mental barriers there. I meet with small businesses all the time and they’re just so quick in their business plan to think, ‘How can I take this business international?’”
Utah also benefits from having coveted natural resources, including gold, copper, silver and coal. And advances in technology have allowed Utah businesses of all sizes to get involved in international trade, making the world metaphorically flat, Miller said.
“The world is flat,” he said, “and because of technology, it’s getting flatter every day, and the last thing that we want to do is start building artificial barriers to that naturally flat world.”