Mexican textile businesses fear tough times with Trump

From avocado orchards to border factories, Mexican exporters who have prospered under two decades of NAFTA face the prospect of an abrupt end to the boom if U.S. President-elect Donald Trump carries out his threats to ditch the free trade pact.

Trump says the North American Free Trade Agreement favors Mexico at the expense of U.S. workers and has vowed to either rewrite or withdraw from the deal, as well as build a giant border wall and possibly slap steep tariffs on imports.

The WYNY leather factory whose clients are Zara and Hugo Boss - WYNY

Since the treaty took effect in 1994, Mexican exports to the United States have jumped six-fold to some $320 billion a year, transforming a once-closed economy into a hub for investment and a workshop for some of the world's biggest companies.

So business leaders there were stunned as Trump romped to victory on Tuesday night, upsetting the widespread expectation in Mexico that his candidacy would fade.

“(We) couldn’t believe what was unfolding before our eyes,” said Marcello Hinojosa, president of the Canacintra industrial chamber in Tijuana, the border city whose economy is based on a mix of U.S. tourism and assembly plants.

"Our main partner where we export is the United States. So if we take that away we’re going to have a lot of unemployment, we’re going to have a really big trade deficit," said Hinojosa, who runs a company that collects factory waste.

Further south, on the outskirts of the city of Leon, Rosendo Castillo, business director of leather exporter WYNY, whose customers include global retailers like Hugo Boss and Inditex's Zara unit, fretted about a potential blow to sales that are six times higher than when NAFTA began.

"It would really jeopardize the business" if the deal were rescinded, Castillo said, adding that WYNY, whose sales reached $120 million last year, was "not very successful" before NAFTA.

Trump has threatened to impose tariffs of up to 35 percent on Mexican-made goods and said he would scrap NAFTA if he cannot renegotiate what he calls the "worst deal ever."

GREEN GOLD

NAFTA brought mixed results for Mexican agriculture, with the sector suffering a net loss of 1.9 million jobs between 1991 to 2007 in the face of competition from U.S. agribusiness, according to a 2014 study from the Center for Economic and Policy Research.

But there have been clear winners too, such as avocado farmers who since 2007 have been able to sell their fashionable fruit north of the border, triggering a "green gold" rush that some say has stemmed migration and crime in some of Mexico's most troubled regions.

Mexico exported more than 1.7 billion pounds (771,000 tonnes) of the fruit to the United States in 2015, more than six times the amount a decade earlier, according to the Hass Avocado Board.

The United States has overtaken Mexico as the world's top avocado consumer, said Ramon Paz, spokesman for an avocado growers group in Michoacan state.

Paz said his members were so worried about protectionism under Trump that they had hired lobbyists in Washington.

"We would have to redirect out production to other places," if NAFTA was scuttled, said Paz. "In particular Europe, Canada, Japan and China."

He said growers were also worried about Trump's position on the Trans-Pacific Partnership, a 12-country trade deal from which the president-elect has vowed to withdraw.

"That is generally bad news," said Paz, adding that TPP, which Mexico has also signed, would open up the possibility of exporting to new markets like Australia.

Even farmers who might see some benefits from a protectionist turn in U.S. policy are spooked by Trump's threat to scrap the treaty.

If Trump started a trade war that slowed such imports, it would probably boost local demand for domestic potatoes, which have battled to compete with processed imports from the United States and Canada, said Bosco de la Vega, a partner in Agro Groppo, a potato producer in the northern state of Sinaloa.

But the repercussions for the rest of the economy would be far more serious, he added.

The competitiveness of the entire continent depends on avoiding moves that hurt producers and consumers alike, said Jaime Serra, who as trade minister in the early 1990s led Mexico's NAFTA negotiations.

"The prevailing rhetoric in the United States is completely myopic," said Serra. "It's not that we're on one side of the table and the others are on the opposite side: we're both on the same side of the table now."

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