Mr. Pete Garcia, Executive Director of the U.S.-Mexico Chamber of Commerce, Houston chapter, met with me at the BBVA on Post Oak. Coming on the heels of the discussion about our withdrawal from NAFTA and renegotiations of the agreement and the controversies surrounding immigration, I was anxious to get his insight and opinions on U.S. trade relations with Mexico, more specifically, Texas trade relations with Mexico.
Garcia: I was with Continental Airlines for 30 years. For the last 10 years of my service there, I was like the president of Latin America. My job was to open up a hub for flights to Latin America.
Garcia: That was my job. I retired from there.
Garcia: Oh, I moved around a lot with the airline. Houston to Florida, that was how I got to know Sanibel Island. I moved to San Diego with the airline. Then I moved to Mexico City. From Mexico City, I moved back to Houston.
Garcia: My first job was selling international. My first marketing job with Continental was marketing the Pacific. Continental used to be really big in Micronesia, Guam, New Zealand, and more. Then we decided to grow Latin America. We grew Mexico from 17 flights from Houston a day to 32 flights a day from Houston. Then we added Central America and the Caribbean.
Garcia: You know I started my own consulting company, really to help Latin countries build their businesses here in the United States and vice-versa. But it seemed that most of the business was from Mexico, so I focused on Mexico. Continental was the official airline of the Chamber of Commerce for several years. I created that relationship.
Garcia: Before, yes. All the people in The Woodlands started seeing all these wealthy Mexicans buying houses. Why weren’t they bringing their businesses as well? So I asked them to talk with the U.S.-Mexico Chamber of Commerce about a chapter here. They had chapters in New York, Chicago and Los Angeles. They said yes and asked who is going to run it? I volunteered to do it for two years for FREE! After two years, they said that they should be paying, compensating me. I said okay, and here I am seven years later. I still consult. That is how I make my money.
Garcia: Well, during my tenure with Mexico, there were only two airlines that flew into Mexico: Aeromexico and Continental. Now there are seven airlines that fly into Mexico. There are about 100 flights a day. So it made Texas the number one market for Mexico and number one trade partner for Houston. The amount of business done between Texas and Mexico is about $175 billion a year! That is from $690 billion for the entire United States. The topic right now is NAFTA, how to get NAFTA approved. The current administration threatened to pull out. It is a 25 year-old agreement, and it has worked very well economically, particularly in the automotive industry. Twenty-five years ago, the United States’ automotive industry was in trouble. Their labor costs were too high. The Japanese, the Europeans, and the Koreans were invading the industry.
Garcia: The purpose of the Chamber of Commerce is to develop business to Mexico and from Mexico. There are 10 chapters in the United States; New York, Chicago, Miami, San Francisco; and we have eight chapters in Mexico. We have been around for 40 years, in Houston for about seven. We started with two ambassadors, from that evolved creating NAFTA, which is now being deemed the worst trade agreement ever in history for the U.S. We, as well as the U.S. Chamber of Commerce and most businessmen, disagree.
Garcia: Look at what trade has done. It is the biggest trade block anywhere in the World. Twenty-five years ago, everything has changed. The globalization of business has given America an opportunity to grow worldwide. Now we are looking at China as a competitor. They have grown quite well. The trade imbalance with China is huge. The way I look at NAFTA, the way it was originally drawn up, the three North American countries were to co-manufacture goods and sell them to the world and try to compete with China, Japan, and Europe.
Garcia: Some creativity and high quality should be done here. Which is why we have these high payrolls.Some of the labor costs we can get done in Canada, is that going to move jobs around? It could É but look at what automation has done. Some jobs are being done by computers and robots.
Garcia: We are kind of the landing spot. Our membership has international attorneys, international accountants, CPAs and representatives from a variety of industries. Mexico is the number one country for patients seeking medical care, so we have a couple of hospitals as members. We are a logistic hub with the airports, the Port of Houston, and rail travel. Actually, Kansas Railroad runs the Mexican rail service. Highway 69 — the NAFTA highway — runs from Laredo, through Houston, to Canada. We are the port for the entire middle of the U.S. The Ports of Mexico are not very large, so we are the Port for Mexico even though we are not in Mexico. Goods are brought into Houston by air, trucks, or rail and shipped to Mexico. Texas manufactures and exports 17% of everything the United States exports anywhere. That is more than the next four states combined. Texas is the largest manufacturer and exporter of the 50 states. Most people do not know that. It is part of my job to make sure that they learn the value of trade. That is why we are supporting the initiative with the Global Trade Conference.
What a Chamber of Commerce is supposed to do is to help companies 1) build their business, and 2) help them to build relationships. Like we said, Mexico is Texas’ number one trade partner, Canada is number two. That is why we had the Canadian Consul at our Board Meeting presenting Canada’s view of NAFTA.
Garcia: One thing they do not like is being left out of the conversation. The administration decided to negotiate with Mexico first. They are on a fast track to try to get it done 1) before the mid-term elections, and 2) before the new leftist president comes into play. Even if they get it approved, they need 90 days before the mid-term. That means that they have only a few weeks to meet those deadlines. Like any negotiations, someone has to give a little.
Some people think 100% of the cars are made in Mexico. That’s not true. According to NAFTA, the current agreement, 60% of any car manufactured in Mexico must have original parts manufactured in the United States. The U.S. wants that 60% raised to a whopping 85%. That would increase the price of vehicles, because the labor costs would go up. Another point they want to make is to have the agreement expire in five years and be renegotiated. Imagine if you suggested to a business that they build in Mexico if you can only guarantee five years, no company is going to do it. In the original agreement there is a clause that allows for arbitration if there is a problem with one point in the agreement.
As a Chamber of Commerce and the U.S. Chamber of Commerce, we feel that trade agreements are beneficial for companies.
I think the economic power Houston has created is finally being identified. We are finally saying that one of the reasons Houston has done so well is because of our diversity. What brought the diversity here was the oil industry. Everybody in the World needs oil. The diversity generates creativity and opportunity. I applaud Val for creating this Global Conference. We are proud to be a part of it.
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