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Marietta ice cream plant wary of Trump talk on NAFTA, import tax

High Road Ice Cream & Sorbet depends on ingredients from around the world


Keith Schroeder, founder of High Road Ice Cream & Sorbet, surveys the storage room of his Marietta plant and ticks off countries that supply ingredients: Mexico, Japan, Thailand, Canada, Tanzania, Ivory Coast and Madagascar, to name just a few.

“This is like the U.N. in here!” he exclaims. “This is neat.”

That smiling embrace of global trade is now tempered by uncertainty, for Schroeder and many other Georgia business owners or executives.

They are waiting to see how President Donald Trump’s tough trade talk plays out, and what that will mean for the state’s manufacturers and the 387,000 jobs they support.

It was only a few years ago that Schroeder, an Atlanta chef-turned entrepreneur, and two employees were operating out of a former Church’s Chicken research and development facility in Chamblee.

Today, High Road employs 40 people at its new plant in Cobb County and is on track to bring in $10 million in revenue this year. Its products can be found in many upscale area restaurants and at Whole Foods. Schroeder has also signed deals with Delta, Publix and the Atlanta Braves.

President Trump’s victory has been credited, at least in part, to his promise to renegotiate or pull out of trade deals like the North American Free Trade Agreement, which he says hurt American workers by making it easier to ship jobs abroad.

In his first week in office he vowed to renegotiate NAFTA and withdraw from the agreement if Mexico and Canada don’t cooperate. Trump also briefly floated the idea of a 20 percent tax on imports from Mexico after President Enrique Pena Nieto canceled a planned visit to Washington.

Skeptics say new barriers or tariffs could backfire by upsetting supply chains and raising costs for businesses and consumers.

READ MORE: This Atlanta’s recovery means new jobs? Now if you’re middle class

Schroeder, who imports nearly everything but the milk for his ice cream, found Trump’s rhetoric on trade and immigration alarming.

“Can you imagine a tariff on sugar from Mexico?” he said. “I think if anything, the dialogue should have teetered toward a more collaborative and inclusive relationship with our trade partners, both North and South.”

Canadian protections for dairy, which was carved out of NAFTA, prevents High Road from marketing its ice cream to our northern neighbor. Schroeder said he would prefer to see trade between the three countries open wider, not tighten.

Reshaping global trade

NAFTA was signed by President Bill Clinton in 1993, removing trade barriers for most products between Canada, Mexico and the United States. Since then, manufacturing jobs in the U.S. have declined, although production is higher than ever. The economies of all three countries have evolved as supply chains became more entwined.

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Any changes the U.S. might seek to make to NAFTA would have to be approved by Canada and Mexico.

“Remaking global trade is going to have real implications for local economies,” said Joseph Parilla, a fellow in the Metropolitan Policy Program at the Brookings Institution. “It’s important to say that we don’t know how those disruptions will play out.”

Parilla thinks the benefits of NAFTA have outweighed the damage. But while the advantages were spread widely – mainly through lower prices for products – the pain was concentrated, both geographically and by industry.

In Georgia, low-skilled textile manufacturing was decimated, while other sectors, including agriculture, benefited greatly from the agreement, according to economists who spoke to The Atlanta Journal-Constitution.

Manufacturing now accounts for 8.8 percent of the state’s workforce, down 170,000 jobs since the 1998 peak, according to the most recent numbers available from the Bureau of Labor Statistics. Food and beverage make up a significant portion of Georgia exports.

“Generally speaking, the NAFTA agreement is working very well for American manufacturers, and perhaps all we might need is fine tuning,” said Roy Bowen, president of the Georgia Association of Manufacturers. “We’d like to see a dampening down of the rhetoric up there. Maybe a few less tweets.”

Early reports of Trump’s tax plan indicated it was unclear whether he would abandon the proposed tax on imports.

READ MORE: Trump’s tax plan could face a budget deficit challenge

A sweet opportunity

When it comes to ice cream, exports from Georgia have quadrupled since 2010, according to the U.S. Census Bureau. More than one-third of the roughly $16 million in state ice cream exports went to Mexico last year.

“There’s a sizable market to be tapped in the ice cream sector, there’s no doubt about that,” said Usha Nair-Reichert, an economist at Georgia Tech.

She questioned pulling out of NAFTA, especially given the economic interdependence of the three countries. She also pointed out that if disagreements with Mexico cause the Peso to fall, Mexican exports become more competitive. Comments by the president since his election have been linked to fluctuations in that country’s currency.

“With all of this uncertainty, not only is it hard for domestic investors, but it’s also going to be hard for foreign firms to currently invest in the U.S.,” she said. “It’s not very clear what the landscape is going to be.”

Nair-Reichert said it is more likely NAFTA will be amended, rather than abandoned.

Charles Hankla, an economist at Georgia State University, said NAFTA has benefited the U.S. economy while acknowledging the hurt it caused to workers in specific sectors. Still, he didn’t think the pain explained the depth of opposition to trade deals that played out in the election.

“My sense is that trade deals have kind of come to embody a sense of insecurity, especially on the part of individuals in jobs that are not interconnected with globalization,” he said. “It kind of becomes an easier target, politically, to mobilize people around.”

Pay more, charge more

For some American companies that go head-to-head with imports – and for their workers – taller trade barriers or higher taxes could be a welcome way to make up for cheaper labor in Mexico. But for High Road, Mexico is less a competitor than a supplier and a potential market.

Back at the High Road plant, Grayson Shurett, a budding entrepreneur in his own right, loads scoops for Delta’s international first class customers. Shurett and his partner, Tony Abdelmalek, recent University of Georgia graduates, caught Schroeder’s eye during a business competition where Schroeder was a judge. They both took jobs at the plant to learn the industry as they build their own company selling falafel made from Abdelmalek’s grandmother’s recipe.

“It was a really good experience to learn how hectic it can get and how rewarding it can be at the same time,” says Shurett, clad in a hair net and shouting over the whir of machinery. Every few minutes, disinfectant foam spews in guttural bursts onto the floor.

As for Schroeder, he’s confident luxury products like his ice cream, which comes in flavors like Aztec Chocolate and Bourbon Burnt Sugar, will continue to sell even if tariffs or other trade barriers forced him to boost the price.

“I don’t know that there’s anything we can do” to prepare, he says. “We pay more, right? We pay more and then we charge more.”

Georgia shipments to NAFTA partners, 2016

Exports to Canada: $5.88 billion, up 110 percent in 20 years

Exports to Mexico: $3.58 billion, up 544 percent in 20 years

Imports from Canada: $3.99 billion, down 9.1 percent in eight years

Imports from Mexico: $6.47 billion, up 66.7 percent in eight years

Source: Georgia Department of Economic Development

Georgia exports

Total, 2015: $50.6 billion

Rank among states: 12

Exports as share of economy: 10.2 percent

Rank among states: 28

Top industries supported by exports:

Source: Brookings Institution

 

Where the ice cream comes from

Some of the ingredients, and their source, in High Road Ice Cream & Sorbet

Packaging: Canada

Maple syrup: Canada

Sugar: Mexico

Flavors (e.g. lime, vanilla, chocolate, chiles): Mexico

Milk: United States

Cinnamon: Vietnam

Matcha: Japan

Chocolates: Belgium

Coconut: Thailand

Chocolate: Peru, Venezuela, Madagascar, Ecuador, Tanzania

Raspberry puree: Italy

Source: High Road Ice Cream & Sorbet

Georgia exports of ice cream

(by value in millions)

2010 – $3.9

2011 – $10.1

2012 – $23.9

2013 – $11.3

2014 – $11.9

2015 – $14.3

2016 – $16.0

Source: Census Bureau

*This article was originally published February 13, 2017


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