by Paula Aven Gladych
May 5, 2017
President Donald Trump’s policies regarding international trade have many trade proponents in Colorado up in arms.
One of his first acts as president was to sign an executive order withdrawing the United States from the Trans-Pacific Partnership Agreement, a trade deal among the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
Gil Cisneros, chairman and CEO of the Denver-based Chamber of the Americas, said that this decision was one of his organization’s biggest disappointments. He felt the deal would be a boon for a lot of companies and now those opportunities will go to other countries instead of the United States.
The future of the North American Free Trade Agreement — which includes Canada, Mexico and the United States — also is uncertain, with the president saying April 27 that he would seek to renegotiate the agreement, rather than withdraw outright.
The Chamber of the Americas has an office in Mexico City, where it works to develop partnerships with small and medium-sized businesses. In the last year alone, the Chamber signed on more than 130 new members in the Mexico City area.
“They all present opportunities for us to begin to work with them. I don’t know what Mr. Trump is ultimately going to do. One of the things he has done is get Mexican business people beginning to look at other markets, which could be a big loss for us. We’ve always been one of the best trade partners for Mexico and our trade partners.”
Cisneros believes that if Trump walks away from NAFTA, it “could be very disastrous. I don’t blame the Mexican government for looking at other markets. I hope Mr. Trump takes advice from other countries to walk gingerly when it comes to NAFTA.”
Unlike the United States, Mexico has stayed with the TPP, which will “increase their opportunities to do more trade and lose potential clients for us in this area of the world. It is very simple logic in terms of we’re one world and we can’t exist solely by ourselves, and becoming isolationists again could really harm our country,” Cisneros said.
“Colorado exports to other countries bring in $8 billion in goods and $13 billion in services every year,” said Karen Gerwitz, president of World Trade Center Denver. That equates to 700,000 Colorado jobs supported by international trade, or about one in five Colorado jobs. In addition to that, 83,000 Coloradans go to work every morning for foreign-owned companies.
She points out that 85 percent of the state’s agricultural exports and 44 percent of its manufactured exports go to the 11 TPP countries, “which is huge. So the idea of pulling out of that agreement so early in the administration, it would have been nice to at least see some effort to understand what are the things they hated so much about it, because that free-trade agreement would have eliminated 11,000 tariffs.”
Gerwitz said that most people believe that all of Colorado’s international trade comes from big companies, but 88 percent of it comes from small businesses.
Colorado-based Crazy Mountain Brewery does business in 27 states and seven countries, including China, Sweden, Korea and the United Kingdom. The company has been trying to break into other international markets for a few years.
“With the changing political landscape, deals we have lined up in Chile and Mexico have fallen through,” said Kevin Selvy, CEO of Crazy Mountain Brewery, which has locations in Edwards and Denver.
The deal the brewery had lined up in Chile fell apart when it became clear that the United States was not going to participate in the TPP because that changed the economics of the deal they were putting together. The uncertainty around NAFTA helped sink a deal with Mexico.
“Those were both deals we spent years putting together. We were bummed to not see them come together for us,” Selvy said.
“With America moving towards an isolationist-type view of operating, well, that has not boded well for the way consumers around the world view American-made consumer goods, and that effect has happened alarmingly fast, in my opinion,” Selvy added. “I think it is too early to tell if it is a knee-jerk reaction people are having or if it is going to be around for a long time. I would say that craft beer is more isolated from politics than most consumer goods but unfortunately we have been feeling the impacts of the changing scenery in America already. Like I said, it caught us by surprise how quickly it has happened.”
Mexico is still in its infancy when it comes to craft beer, but because it is a new product, there is enormous price sensitivity. When steep tariffs are added on top of shipping and other fees to get the beer across the border, it prices itself out of the market, he said.
“If all of a sudden America changes its policies and that triggers Mexico to do the same and tariffs come into place, it’s not going to limit our ability to get product into Mexico. It will eliminate our ability to get product into Mexico,” Selvy said. That will have a “trickle-down effect on our economy and their economy.”
Exports make up 20 percent of Crazy Mountain Brewery’s business and are its fastest-growing revenue stream.
George Deriso, assistant director, innovation and entrepreneurship for the Research & Innovation Office at the University of Colorado Boulder, is worried about changes to the H1-B visa program that brings in immigrants from other countries to take on certain jobs, particularly in the technology industry.
Deriso deals with global entrepreneurs in residence at CU-Boulder. Those are people the university recruits globally who “have deep entrepreneurial experience on a global scale, and we look for a particular type of talent to help bring perspective to our students, faculty, our staff and researchers,” he said. Those individuals mentor others, speak in classrooms, coach faculty and researchers and connect the university’s networks with their networks.
“It has been an amazingly beneficial program for the short time it has existed,” he said. And that program is one of the ones that could be potentially threatened because of the visa changes. The Trump Administration placed a moratorium on the H1-B premium processing option that cuts visa approval times down from months to weeks.
CU-Boulder is “quite likely” the largest employer of H1-B immigrants in the state of Colorado, Deriso said. “Anything that affects our ability to acquire H1-B visas, even innocuous things like the temporary moratorium on premium processing, can have an economic impact.”
That restriction could also restrict the university’s ability to attract additional research dollars, he added.
“Take that to a national scale, and it is enormously devastating to our ability to lead the world as a country of innovators because we know through an enormous corpus of research that diversity in collaborative teams leads to much bigger breakthroughs and much more effectiveness. We don’t want to lose that at all,” Deriso said.
Gerwitz is concerned that the new visa requirements will have a negative impact on technology and science organizations, that they will have a difficult time filling those roles here.
“The reason they are going to other countries is to tap into new expertise or skillsets they are not finding here. I also think the agricultural sector will be hurt from this as well. It is a major concern,” Gerwitz said. She believes that it would be better policy to find ways to bring this outside talent into the United States and find a way to keep them here and integrate them into our economy so they can continue to add value to it.
International trade doesn’t just refer to products but services and knowledge as well. “All those benefit our state, new money coming to the economy, new jobs created,” Gerwitz said.
She said renegotiating NAFTA may not be a bad thing because it was signed into law before cell phones and the Internet.
“What bothers or concerns us as a trade association that is pro trade is the whole concept that trade is a zero-sum game, which is what we’re hearing come out of his policies right now,” she said. “I feel like he’s taking an approach to negotiating agreements like he would a business deal.”
She points out that if the United States is importing more from Mexico than it is exporting, that the U.S. is boosting their economy. It is also “empowering them to be more powerful consumers to purchase other goods from us. To look at just trade imbalances is not the whole picture. A more-empowered Mexico means they can invest in the U.S., buy our products, become a more stable country, a neighboring country to be partners with. There’s a lot more to it than sheer numbers of who imports more from whom.”
The Trans-Pacific Partnership “ would have been a huge impact for both manufactured goods and agriculture,” Gerwitz said.
One of the major benefits of a trading block like the TPP is that the United States could make sure those countries’ labor standards were on par with others, including electrical and environmental standards.