What’s been described as “the worst trade deal in the history of the world” will not be scrapped after all but instead, renegotiated. The 1994 North American Free Trade Agreement (NAFTA) has had its share of champions and critics through the years. The US Chamber of Commerce cites such statistics as exports from the US to Canada and Mexico up 280%, while imports from the two countries have risen 313% since 1994. Other statistics highlight the fact that 14 million US jobs are directly dependent on the US’ two largest trade partners, Canada and Mexico.
Alternatively, MSNBC television host Ed Schultz noted in 2015 that trade deals have cost the US 50,000 manufacturing factories. Keep in mind however, as PunditFact checked this statistic and found it to be only half-true. The Great Recession and changes in technology also played roles in the loss of US manufacturing factories.
Be that as it may, NAFTA evokes strong emotions particularly within the US automotive industry. Many facilities located in what has been described as the “rust belt” left US cities in favor of Mexico or Canada resulting in US workers struggling to find comparable work. However, NAFTA has resulted in supply chains that are entwined among the three countries connecting manufacturer, final assembly location, supplier, logistics/transportation provider, warehouse(s) and customer.
Logistics and transportation providers have played a leading role in this connectivity by developing unique networks and introducing cross-border services. The results of a renegotiated agreement will definitely impact the logistics market – transportation, warehousing, customs and more. Those logistics/transportation providers that offer consulting services will likely benefit the most as shippers look for expertise in determining how potential changes will impact them.
In April, the US president was quoted as saying, “It is my privilege to bring NAFTA up-to-date through renegotiation. I believe that the end result will make all three countries stronger and better.” With that, US negotiation objectives were recently published with plans to begin talks in August.
Among the objectives are:
- Update and strengthen the rules of origin
- Elimination of ‘unfair’ subsidies
- End “market-distorting practices’ by state-owned enterprises
- Reduce US trade deficits
A particular interesting objective is that of automating import, export and transit processes and the call for electronic payment of duties, taxes, fees and charges. This, if agreed by the three countries, could speed up border crossings and shippers’ overall NAFTA supply chain.
So it seems campaign promises of an overall 30% import tariff may be mute with exceptions of recent US import tariffs of 30% on Canadian lumber. Businesses are hopeful that NAFTA will remain not only in tack but beneficial for all three countries. Stay tune.