Washington Watch
Thursday | 09 November, 2017 | 1:32 pm

NAFTA: A Steely Outlook

By Eduardo Campirano

The Port of Brownsville is on the front lines of trade negotiations

November 2017 - Negotiations are under way to overhaul the North America Free Trade Act (NAFTA). Uniquely situated, the Port of Brownsville is the only deepwater port on the U.S.-Mexico border and ships more steel into Mexico than any other American harbor. The Port of Brownsville is embedded on the front lines of this evolving story and the companies that operate there are deeply concerned with NAFTA’s outcome.

NAFTA economics

Going into effect in January 1994, NAFTA integrated the economies of the United States, Mexico and Canada. Renegotiating the 23-year-old agreement isn’t a new idea. Unfortunately, recently drafted reforms never took effect because they were part of the abandoned Trans-Pacific Partnership. Current NAFTA talks focus on correcting trade imbalances, with the possibility of finalizing a revised agreement in early 2018.

NAFTA has dramatically reshaped the North American economic landscape. Regional trade under NAFTA quadrupled to more than $1 trillion annually over the last two decades, according to the Council on Foreign Relations, while cross-border investment similarly spiked. U.S. foreign investment into Mexico increased from $15 billion to more than $100 billion. From a policy perspective, NAFTA set the pattern for the free-trade agreements that the United States now enjoys with 20 other countries and provided the template for the incorporation of important labor and environmental expectations now commonplace in trade agreements.

Front-row seat

Borrowing the real estate mantra of “location, location, location,” the Port of Brownsville has a prime vantage point from which to see NAFTA at work.

The port is the largest land-owning public port authority in the United States, with more than 40,000 acres and 17 miles of waterfront access. It has 13 cargo docks, five liquid cargo docks, 1 million square feet of covered storage and more than 3 million square feet of open storage. Its Foreign Trade Zone is the second largest by value of exported goods in America. The port is equipped with three Class I rail connections, pipeline connectivity with United States and Mexico, direct U.S. interstate highway access and a direct heavy-haul corridor into Mexico. It is growing rapidly based on the increase in trade, with $43 billion in potential new projects on the drawing board—representing thousands of American jobs and economic development throughout the Gulf region.

Steely outlook

The Port of Brownsville moves more steel into Mexico than any U.S. seaport. Last year, more than 2.3 million tons of steel slab, plates, wire rod, hot-rolled and cold-rolled steel, beams, pig iron, ingots, chrome ore, and other forms steadily flowed from Brownsville’s docks to Mexican manufacturers. Mexico has emerged as the most dynamic economy in Latin America, overtaking Brazil as the region’s largest steel consumer.

The Port of Brownsville is the closest deepwater seaport to Monterrey, heart of the Golden Triangle of the nation’s industrial might. It is 100 miles closer, in fact, than the nearest Mexican port. Based on these advantages, primary iron and steel exports at Brownsville are projected to increase 8 percent and aluminum exports are expected to rise 11 percent over the next five years.

Brownsville also hosts significant shipbreaking and shipbuilding operations. Its shipbreaking operations are the largest by volume in the United States, which supplies high-quality scrap for both American and Mexican manufacturing.

A key tenant at the port, Keppel AmFELS, just announced a $400 million deal to build two massive 774-feet-long LNG-powered container ships to be delivered in 2020. These ships will be registered as “Jones Act” vessels, which serve only U.S. ports and must be built in the U.S., creating hundreds of jobs in the shipyard and at suppliers across the country. The average age of ships in America’s Jones Act fleet exceeds 30 years and replacements are needed, which means opportunities for makers of marine steel.

The port that works

The Port of Brownsville is the fulcrum for trade between the United States and Mexico and serves a particular role in the steel industry. It truly is “the port that works.” Operations at the Port support more than 44,000 jobs, generate $3 billion in annual economic activity, produce $2.2 billion annually in personal income and local consumption, and create $165 million in tax revenues. The importance of a NAFTA agreement that continues to foster trade cannot be overstated—for the port, our tenants, our communities, and the industries we serve on both sides of the border. n

Eduardo Campirano is port director and CEO of the Port of Brownsville, Texas.

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