MEXICAN BUSINESSES WARN ABOUT CHINA

CIUDAD JUAREZ, Mexico - In the 1990s, Julio Chiu's textile manufacturing business here employed hundreds of people and shipped thousands of pairs of jeans across the United States.

The business, split between Juarez and El Paso on the other side of the border, grew for half a decade under the North American Free Trade Agreement, which lowered barriers to trade between Mexico, the United States and Canada. But when China entered the World Trade Organization in 2001 - allowing multinational manufacturers to take advantage of China's cheap labor by moving operations there - Chiu was forced to get out of the textile business.

"I realized I was going to have a tough time competing with China," said Chiu, founder and chief executive of another manufacturing company, the El Paso-based medical device maker Seisa. "I decided I would concentrate on the medical device industry, and I've been able to compete."

Juarez manufacturers like Chiu say the Trump administration's rhetoric blaming NAFTA for the decimation of U.S. manufacturing is aimed at the wrong target, and U.S. withdrawal from the pact - as Trump has threatened - would open the door to rivals such as China, Russia and Brazil eager to sell goods and services in one of the largest markets in the world. Mexico is party to more free trade agreements than any other country and has plenty of trading partners interested in doing more business in Mexico, manufacturers in Juarez said.

Mexico already is negotiating with the European Union to update a trade deal to lower barriers to agricultural products, one of the leading U.S. exports to Mexico. Mexico has also recently struck trade deals to import corn from Brazil and wheat from Argentina.

"Mexico has options," said K. Alan Russell, chief executive of El Paso contract manufacturer Tecma. "The United States will be the loser."

The U.S. Trade Representative's office did not respond to requests for comment.

Uneasy over Trump stand

The United States, Canada and Mexico began renegotiating the 24-year-old NAFTA treaty last year amid Trump's arguments that the benefits of NAFTA flowed mostly to Mexico and Canada while the United States lost millions of jobs. As the talks have dragged on, businesses along the border and across Texas have become increasingly concerned that Trump will pull the country out of the agreement.

Another round of talks are scheduled for later this month.

Despite the Trump administration's protectionist views, much of the world continues to seek trade deals to open markets and build new trading partnerships, analysts said. For example, even after the Trump administration withdrew the United States last year from the Trans-Pacific Partnership, an international free trade agreement between 11 countries that make up almost a fifth of the world economy, Mexico has remained in the pact alongside Canada, Japan, Vietnam, New Zealand, Chile, Australia, Malaysia and Singapore.

The Trans-Pacific Partnership was promoted in part by the Obama administration as a check on China's growing influence in Asia and beyond as China tries to fulfill its vision of leading a new world order. In recent years, Chinese manufacturers that make everything from electronics to car parts and textiles have set stakes in Mexico, seeking proximity to the U.S. border, said Marcos Delgado, executive vice president at the Borderplex Alliance in El Paso, an economic development group.

Between 2011 and 2016, Chinese exports to Mexico climbed by more than 30 percent to nearly $70 billion and its share of foreign exports to country increased from 15 percent to 18 percent, according to the World Bank. During that period, U.S. exports rose about 3 percent to $180 billion while its share fell from 50 percent to 47 percent.

Mexico's recent trade deals, including its pact to import Brazilian corn, are aimed straight at the Trump administration, which knows such agreements will hurt American farmers in Midwestern corn-producing states, said Edward Alden, a senior fellow at the Council on Foreign Relations in Washington.

"Mexico has been making efforts to find new suppliers and the message to Washington is clear, that leaving NAFTA isn't going to be cost-free," Alden said. "This is a very uncertain time in U.S.-Mexico trading arrangements."

Chinese companies have invested in operations in Mexico as labor and other costs rise in China and the economy shifts to one more focused on services and higher-value products. A year ago, for example, a Chinese company moved into Juarez close to the border to make artificial Christmas trees and inflatable swimming pools.

The year before, Hisense Co., a Chinese electronics manufacturer, decided to expand its investment in its Mexican factory making televisions it sells into the United States.

Other big draws for Chinese companies include Mexico's efforts to open its monolithic energy industry to international investment and develop its transportation capabilities, as well as its 40-plus free trade agreements that provide access to markets around the world, including the United States.

"The Chinese and the Russians see an opening along our frontier," said John Barela, CEO of the Borderplex Alliance. "This could be a stormy time for our bilateral relationships. Mexico is already looking at diversifying its imports away from the United States and toward other countries."

China influence grows

After 2001, when China entered the World Trade Organization, the lure of cheaper labor and global competition drove manufacturers that depend on large workforces to build plants in China - and that shift hurt manufacturers on both sides of the U.S.-Mexico border, said Cecilia Levine, chief executive of El Paso manufacturing company MFI International, which makes bedding and other home furnishings.

The company Levine has run for decades helping manufacturers start making products in Mexico has lost many of its clients to China over the years.

"I'm constantly having to reinvent myself and look for ways I can be competitive," Levine said. "Every time I'd get another client, we'd work with them, we would grow them, but the minute that company had enough numbers they'd go to China. They had no option. They had to compete."

Chiu's manufacturing company, Seisa, now runs a 200,000 square-foot medical device manufacturing plant that employs 2,000 workers in Juarez. The medical device industry, with its complex intellectual property laws, has proved to have a higher barrier to entry than textile manufacturing, making Chiu feel far safer than when he was making jeans. He recalled the scores of plant closings and loss of tens of thousands of jobs in Juarez as textile companies shifted production to China.

"The notion we took jobs from the United States is wrong," Chiu said. "NAFTA has allowed U.S. corporations to remain competitive in a globalized world."