LAREDO, Texas – Dennis E. Nixon, CEO of IBC Bank, has staked out his company’s position on the North American Free Trade Agreement.
Nixon, who is also chairman of the board of IBC, said modernization of the trilateral accord between the United States, Canada and Mexico is crucial. IBC Bank has submitted testimony about NAFTA to U.S. Trade Representative Robert Lighthizer.
“The trilateral agreement is a fundamental economic tool that we must have in place and must work well. It has worked well, for the past 23-plus years,” Nixon told the Rio Grande Guardian. “From the people that I have been meeting with on this issue over the past few months, the key points are: do no harm, modernize the document, and get it done quickly so we can get about our business of growing the economy.”
Renegotiation of NAFTA has been triggered by the United States and is likely to start in August. The document was major campaign issue during last year’s presidential election, with Donald Trump saying it was the worst international agreement the United States had ever signed. His administration has since softened its position.
Nixon, along with Gerry Schwebel, head of IBC’s international banking group, and IBC Bank Senior Vice President Eddie Aldrete, was recently in Washington, D.C., for meetings about NAFTA.
“We have been involved in the NAFTA world from the beginning. We were involved in the original agreement and had a lot to do with working on both sides of the border here in our part of the world to fashion that agreement. We believe it was done well,” Nixon said.
“However, the passage of time has created changes in society that the agreement never anticipated. One of those was technology. There is a whole world of technology that did not exist 23 years ago when NAFTA was put in place. The digital world, the electronic world, all the things now that go on across borders, electronically, was not addressed, such as protection of intellectual property rights.”
Nixon listed other reasons NAFTA needs to be modernized.
“Another area that was left vacant is oil and gas and energy development. Mexico has reformed their policies towards energy. Privatization is part of their energy program and so there is now a wonderful opportunity under NAFTA to create a whole area dealing with our North American energy plan. Canada, the United States and Mexico has a huge opportunity to expand and develop and become the leader in energy. That is a wonderful opportunity, not only to promote from a strategic perspective, a defense perspective, a security perspective, it is also a wonderful opportunity for the growth of our export business around the world, and send oil and gas around the world,” Nixon said.
Another area that could be added to the NAFTA renegotiations, Nixon believes, is efficiencies at land ports of entry.
“We are interested in improving cross border efficiency. We think the document can help there. We would like to see more emphasis on the place of entry, to improve the infrastructure development, both on the U.S. and the Mexican sides of the border. This has to be enhanced. We think a focus on revenues and how we deal with border activities and obviously border security may have some bearing in this document, as to what we will trilaterally do to improve world security, North American security, from all threats. We now know there is a worldwide threat from ISIS and other terrorist groups. Things like that can also be improved in the NAFTA agreement,” Nixon argued.
Rules of Origin is likely to be discussed during the NAFTA renegotiations, Nixon pointed out. Rules of Origin govern how much of a product can be produced locally and how much with imported raw materials.
“There has been talk about creating some additional protections on rules of origin in the agreement. We will have to be careful there but that is also something that can be addressed properly, if we also make sure those rules allow for the most competitive product to be produced, for a quality product to be produced. Sometimes the rule of origin can prohibit quality because you have to use some sort of inferior component. And with competition, we want to be able to compete. We want North American trade agreements to make us the most competitive trading bloc in the world. We want to ensure that competition is preserved,” Nixon said.
Asked if the Trump Administration’s stance on NAFTA is different to the one candidate Trump campaigned on, Nixon said:
“We just came back from a U.S. Chamber of Commerce’s CEO Dialogue meeting. Mexican and U.S. leaders are invited to meet, twice a year. This one was focused on NAFTA. Commerce Secretary Ross came to that meeting as well as Secretary Guajardo of Mexico. Both were pretty uniform in their speaking. They said they want to modernize the agreement, they want to do it quickly, and they want to do no harm. So, the group was very pleased with that message. It sounds to me as though we are going down the right track.”
ldefonso Guajardo Villarreal is Mexico’s secretary of the economy. Wilbur Ross is U.S. secretary for commerce.
Nixon said Schwebel has since had a follow-up meeting with Secretary Ross.
“He came away with the same feeling, that we want to modernize and improve the agreement, that it is based on fair trade. That is the whole message everybody is preaching. I think as long as we stick to the no harm principle, that we get it done expeditiously, and that we modernize it, I think everybody wins. Everybody is committed to a trilateral agreement. There was some talk about trying to do some trilateral agreement. That has pretty well been discarded. So, we are back on track to modernize it and improve it quickly, and do no harm. That message is very encouraging,” Nixon said.
Asked about the critics of NAFTA, many of whom live in the Rust Belt states that have lost manufacturing jobs, Nixon said:
“Those of us that have been in this game for a long time now understand that there has been a changing dynamic going on for a long time. I think the lack of proper education and information is at the bottom of a lot of that and I think, unfortunately, that gets highlighted in the political races. The full story is not told in a political race. As more and more information is developed… the last number I saw there were 29 or 30 states where either Mexico or Canada were first or second as trading partners of those states. I can tell you for certain that the “rust belt” states are part of that 29.”
Nixon said it is critical that more information needs to be disseminated about NAFTA. He said groups like the U.S. Chamber of Commerce and the Wilson Center are helping.
“There is an underlining education component here that has to be put in place. For instance, I was talking to Senator Moran the other day from Kansas and he wants to hold a town hall meeting in Kansas and explain to the Kansas voter how valuable NAFTA is to Kansas. Those kinds of meetings are going to be held all over the country. The chambers of commerce have access to the data. They have published information on NAFTA for many years. It is out there, if you do any kind of basic research at all,” Nixon said.
Jerry Moran is a U.S. Senator for Kansas.
“There is the Wilson Center or the U.S. Chamber, there are vast amounts of information to support the argument of how well NAFTA has done,” Nixon said. “You cannot overcome the fact that the three countries now are producing $1.3 trillion worth of trade between the parties on an annual basis. It is one of the largest trading blocs in the world. It is hard to diminish that and when you look at 14 or 15 million jobs in America tied directly to NAFTA, and if you look at one in five jobs in Texas is tied to NAFTA, it is really hard to make an argument that is negative to the general workforce as a whole.”
That said, Nixon acknowledged that some businesses have been “dislocated” because of free trade.
“One of the things we have argued is that there needs to be more educational and training support in the new agreement to continue to help displaced workers. We recognize that if you are out of a job, no matter what the reason, that hurts and you need to have some way to transition to a new job type. So, we can’t preserve the horse and buggy. But, we can certainly take a horse and buggy worker and provide him a new opportunity to do something different. That is probably an area where NAFTA did not focus enough on that in the original document. There were training programs and funding programs in the original agreement but they were short-changed a bit in that area. So, that needs to be re-emphasized in the new agreement,” Nixon said.
Nixon was asked if he agreed with the argument that Mexico has been incredibly mature in its deliberations on NAFTA in that it has stayed calm during the insults that were hurled its way during the presidential campaign and that since then it has embraced the notion of modernization.
“I agree 100 percent. There was some original nativism. We have a wonderful relationship with many business organizations and with the people of Mexico. In fact, of the 25 CEOs that were at the CEO Dialogue, they were all very positive. They are business people, they understand trade, they understand logistics and transportation and all the things needed to get products and services across the border. The attitude is let’s make this a better mousetrap, so to speak. They are very thoughtful about the process,” Nixon said.
Nixon said he is also pleased with the support Governor Abbott is displaying towards NAFTA.
“We brought 14 or 15 executives to Austin, they reached out to us and wanted to see if we could get a meeting with the Governor. We did that and with the help of Secretary of State Pablos we facilitated that meeting about a month ago. The Governor gave them positive feedback in support of NAFTA. We are just creating that process of being engaged, working together and we just don’t want bad things to happen to good people,” Nixon said.
“As long as we are in that mindset, I think we will do well with the document. There are some political things that are concerning. Mexico is going to go through a presidential election next year and obviously the left-wing parties in Mexico are nationalistic and anti-America in many ways and so we want to be very careful that we get this thing done very quickly and not create a situation there that would get out of control.”
Asked about IBC’s letter on NAFTA, Nixon said he included a border security document. “We give our solutions, such as cleaning up the river and improving access as a security zone. Most of the property along the border in Texas is private. We have a perfectly good river, so there are perfectly good solutions to it, instead of building walls,” he said.
Another message Nixon would like to send to the White House and Congress concerns immigration.
“We have to have immigration reform. That is probably the biggest elephant in the room that Congress has failed to deal with. We need to understand that and all the demographic problems we face in the world today that are driving workforce issues and labor issues and worker problems. We cannot find workers to work in the agricultural sector. We have real problems with all the dirty jobs in America. They are going vacant. I have got almost 400 unfilled positions in my company. We can’t deal with this transition of the baby boomers out of the workforce, now that that millennial population is the largest part of the workforce. There are many challenges here going forward in the next 15 or 20 years,” Nixon said.
“Unfortunately, we are well behind the curve at the federal level in dealing with many of these issues and every day that passes… immigration is right up there and we are not dealing with it. The federal government is basically bankrupt on these big issues. They need to get going and get these matters resolved because this train has left the station and if we do not get these issues resolved we are going to have a much harder time solving problems in the future. This is not a process of kicking the can down the road. In my opinion, we need to get them resolved and protect our future and economic prosperity.”
Here is IBC Bank’s letter to U.S. Trade Representative Robert Lighthizer:
June 12, 2017
The Honorable Robert Lighthizer
United States Trade Representative
600 17th Street, NW
Washington, DC 20508
Dear Ambassador Lighthizer:
International Bank of Commerce (IBC) appreciates the opportunity to offer comments on the subject of the modernization of the North America Free Trade Agreement (NAFTA) that appeared in the Federal Register on May 23, 2017, under docket number USTR-2017-0006.
IBC was founded in 1966, it is headquartered on the U.S./Mexico border in Laredo, Texas. Laredo is the second largest port in America only behind LA/Long Beach. IBC is one of the largest banks based in Texas, we are the 83rd largest U.S. bank and the largest headquartered on the Texas/Mexico border. Our motto is “We Do More”; and in this spirit, IBC is immersed in international matters, in particular as they relate to trade that daily moves between the U.S. and Mexico.
Since Ronald Reagan, every American President has met with his Mexican counterpart shortly after winning the White House. In fact, on a couple of occasions, meetings have occurred even before taking office: in 1988, George H.W. Bush met Carlos Salinas de Gortari in Houston before being sworn in as President. Most recently, then candidate Donald Trump met with President Enrique Peña Nieto in Mexico.
I mention these meetings because the “Mexico Conversation” is out of control, and what is of concern to all residents along the U.S. and Mexico border is that Washington, D.C. has forgotten and is retreating from a decades-old, well-established and very successful U.S. policy – that a politically and economically stable Mexico is indispensable to and in the best interest of the United States.
In response to the rhetoric, a Border Summit was held in Laredo, Texas on January 27, 2017 to develop a consensus on improving the North American partnership. It was attended by over 60 political, business and civic leaders from throughout Texas, in particular the Texas/Mexico border region. We met to underscore the deep bonds, shared history and common principles that hold the North American partnership together. The group focused on three topics: NAFTA, immigration and border security. All three are fundamental in sustaining our partnership.
These are the Border Summit’s highlights:
Do no harm. NAFTA is over 23 years old and should be updated, but this should be viewed as an opportunity to optimize North America’s competitiveness. We should not put in jeopardy one of the most successful trade agreements created. The relationship between the U.S., Mexico and Canada is vital to a globally competitive and successful North America. Disrupting $1.3 trillion in annual trade between our countries would put jobs at risk and throw supply chains and business interdependences into chaos.
NAFTA should better facilitate and provide clear rules of trade to insure that small to medium sized businesses have the opportunity to participate. Rules that are straight-forward and simplified will allow all businesses the opportunity to participate.
Modernize NAFTA to keep pace. Technology alone would be a good reason because it updates several other components of the agreement. With advances in smart phones, high speed internet and E-Commerce to name but three, it is time to modernize NAFTA to keep pace with changes which affect supply chain logistics, traditional and renewable energy markets, intellectual property, a mobile workforce and security.
In addition to technology, modernization means: (1) amend rules of origin to eliminate tariff shift without impairing the quality of the product or its competitive pricing, (2) improve customs processing, (3) strengthen customs administration, (4) improve cross-border, inter-agency coordination and trade facilitation and (5) implement the North American Single Window proposal. This modernization will help North America remain competitive against other trade blocs, preserving U.S. jobs and discouraging the outflow of capital.
A unified approach to border infrastructure. North America requires integrated border infrastructure rather than the existing disjointed approach; and a framework for jointly developing ports, bridges and roads is needed. This is critical considering that Canada and Mexico are the top two export destinations for U.S. small and medium-size enterprises. A unified approach should focus on eliminating congestion and bottlenecks.
Funding is key, and tariffs and fees generated and collected at all three borders – Canada, Mexico and the U.S. should be sequestered and held to support border infrastructure, modernization and staffing before remitting the remaining dollars to each country’s treasury as is the current practice. Today, as an example, it is estimated that from every dollar generated at our southern land ports, only about five cents is returned to support infrastructure needs. The renegotiation process is the best time to secure a commitment from all three countries that revenues collected from tariffs and fees is dedicated to a unified approach to border infrastructure.
Efficient cross-border financial transactions. While many consider international trade to be the domain of big business, the U.S. Department of Commerce tells us that small and mediumsized businesses account for more than one-third of U.S. merchandise exports according to the U.S. Department of Commerce. Frequent, small-value banking transactions are a significant and muchneeded part of cross-border commerce; however, the harmful effect under Dodd-Frank on nationwide banking is also adversely impacting the border region. Challenges to the U.S. banking industry have resulted in fewer banking options for businesses and their customers; also, it has led to dehiscing by closing account relationships for entire industry segments and branch closures throughout the border region.
Under a modernized NAFTA, a trilateral regulatory regime should focus on addressing all the banking needs of cross-border trade, including the financial needs of small to medium-sized businesses.
Labor mobility. Update NAFTA labor and visa categories to reflect modern classifications and expand common standards for professions and mutual recognition of skills credentials. A need based immigration system will identify the number and the types of skills looked-for in the U.S. There is also a truth to admit – there are some jobs in this country that our citizens just will not fill. Any solution should be coupled with an effective trade adjustment assistance program for U.S. workers displaced by globalization, and a clear recognition that the demographic trends in the world are creating huge labor shortages. The interchange of workers must be addressed in the new agreement.
A common-sense solution to border security. A one-size-fits-all barrier approach to security on the Texas/Mexico border is not the solution. In addition to technology, it is vital to work with local terrain and topography to create an effective barrier. Texas has a number of natural barriers that can be enhanced to improve security. Along many parts of the border, the answer is cleaning up the river in cooperation with Mexico to provide a natural barrier and security zone; an economically and environmentally positive solution because it protects and preserves the border’s most important asset: the Rio Grande/Rio Bravo. See Common Sense Border Security Solutions, document attached.
Urgency. The three parties should quickly move to a new agreement in a collaborative and transparent process that will strengthen North America’s competitive advantage across the globe. Uncertainly erodes market and investment confidence.
Evidence supports that NAFTA has created jobs and has positioned industries in the United States to compete internationally. The U.S. Department of Commerce indicates that fourteen million U.S. jobs depend on trade with Canada and Mexico, and 43 of 50 U.S. states list Canada or Mexico as their 1st or 2nd largest export market.
North America has every reason to work as a region to compete successfully against other trade blocs. Trilateral collaboration protects our industries, jobs and investments, and enhance our ability to grow and prosper.
Since the Border Summit, IBC has been busy in support of and remains committed to NAFTA – this country’s most successful trade alliance.
Finally, we wish to remind you Ambassador Lighthizer that the original vision of NAFTA was to expand NAFTA to Central and South America to make the Americas the most competitive trade bloc in the world. That vision should be retained as a mandate of a modernized NAFTA.
Chairman of the Board and CEO