Two of Georgia’s top trading partners — China and Mexico — also happened to have been Donald Trump’s biggest targets on the campaign trail.
And while the new president has yet to make good on promised tariffs on Chinese imports and a full renegotiation of NAFTA, ongoing political risk surrounding these important ties is threatening job-creating foreign investment and exports in the state.
Countering this uncertainty was a common refrain at a “Trump Effect” panel discussion on the two countries hosted by the Cumming-Forsyth Chamber of Commerce April 20.
One unexpected silver lining from trade bashing has been to bring it to the forefront of the national dialogue, said Mary Waters, deputy commissioner for international trade at the Georgia Department of Economic Development.
“There has never been so much overt political discussion about trade,” said Ms. Waters, who never tires of rattling off the state’s robust export figures.
In the case of Mexico, bilateral trade with Georgia has grown a whopping 544 percent to reach $10 billion over the last two decades, an average annual growth rate of 10.2 percent. Georgia’s combined merchandise exports to China and Mexico climbed to over $6 billion in 2016 and include civilian aircraft, wood pulp, craft paper, as well as poultry and peanuts. On a weekly basis, ships leave for at least nine Chinese cities from Savannah port. Trade with China has jumped 59 percent since 2007. Even the state’s massive imports from China create employment: The Georgia Ports Authority activities help support 369,000 jobs in the state.
“Our companies understand going global is the key,” Ms. Waters said during a discussion moderated by Global Atlanta.
She has a vociferous supporter in Mexican Consul General Javier Díaz de León, who points out that Georgia’s export growth rate to Mexico is nearly four times higher than to the rest of the world.
“Mexico and Georgia are not just about peaches and tequila. We are trading high-tech manufacturing parts. Mexican imports to U.S. actually have 40 percent U.S. content. We import, value-add and export back,” he said. About 152,000 jobs in the U.S. depend on trade with Mexico, and Georgia is keen to retain its part of the pie.
Quite contrary to Trump’s claims that Mexicans have simply siphoned off American jobs, some Georgians know that these intertwined supply chains can also job engines in sectors like car production.
“NAFTA has ensured there are intricate cross-border supply chains and Georgia sits right in the middle of this web. The threat of taxing imports will leave managers with stalled projects and skewed deadlines,” Mr. Blair warned. He worries that protectionist talk will needlessly squander Georgia’s solid reputation as a safe haven for investments, especially if legislators don’t speak out against Mr. Trump.
These self-imposed headwinds come at a time when the natural economic trends would lean toward more FDI.
“We cannot highlight this enough. China has been lately upping its investment in Georgia. As costs of labor increase in China and Mexico it makes sense for them to manufacture closer to markets,” says Jim Blair, managing director of Navigator Consulting, which helps foreign companies with site selection in the U.S.
One of his new Chinese clients, Sentury Tire, is expected to invest $530 million and employ over 1,000. Mexico too is invested in Georgia with at least 90 facilities supporting 3,000 jobs.
“Unlike Europe, Mexico and China have yet to take full advantage of Georgia. We are likely to see more of them,” Mr. Blair said.
Robert Long, vice president of economic development at the Cumming-Forsyth Chamber of Commerce, says the chamber has seen interest from Chinese prospects and is concerned at the negative narrative swirling around the two countries.
“We have a world class infrastructure which makes it attractive and easy for foreigners to invest,” Mr. Long said of Forsyth County and Georgia.
But when companies see unpredictable timelines on tax reforms and the looming threat of border tariffs, they may balk at starting new cross-border operations, said Michael Whitacre, a tax consultant specializing in corporate and cross-border taxation for Frazier & Deeter.
A border adjustable tax of 20 percent on imports is a political hard sell, especially since the failure to repeal Affordable Care Act has changed the government’s revenue projections.
“We would be lucky if there is any clarity on taxes by end of the year,” says Mr. Whitacre.
If both pace and direction of trade and tax reforms is a concern for Georgian businesses, so is the new agenda on immigration.
Mr. Diaz expanded the issue to the safety and security front, turning on its head the notion that the Mexican border is a source of instability. More than 1 million people per day cross the border legally, he said. Mr. Blair noted that on a recent trip to American border regions, he observed how neighboring cities on opposite sides jointly approach economic development, pitching complementary strengths to outside investors.
“Every single U.S. intelligence agency operates with Mexicans. We have to understand that even our threats are intertwined. Keeping America safe is also our top priority,” Mr. Diaz said.