Some recent announcements from the White House have highlighted a possibility that President Trump may try to remove the long-standing North American Free Trade Agreement (NAFTA). But, is such an event likely? And, what would the impact be?
Marlin Steel CEO Drew Greenblatt recently made an appearance on FOX News alongside former Michigan Governor and Ambassador to Canada James Blanchard to talk about what would happen if the President of the U.S. were to get rid of NAFTA.
Is a Total NAFTA Repeal Likely?
In the interview, Blanchard was generally optimistic, noting that the agreement may be old, but free trade is critical to the economies of both Canada and the USA, so he didn’t think that “much will happen other than maybe update it [NAFTA] to have more standardized goods and services to allow a better free flow of labor… the real target is Mexico and how you do that.”
So, it doesn't seem likely that a total repeal will happen, but it is likely that the current trade agreement will be strongly reassessed.
What Would the Impact Be?
As noted during the broadcast, “every 24 hours, 400,000 people and $1.5 billion in goods are transferred across the U.S./Canada border… and three-quarters of all Canadian exports head straight into the U.S.”
Because of the sheer size and importance of the USA’s trade with Canada, the dissolution of NAFTA might not have a large immediate effect on overall trade. However, that being said, such a massive sea change in policy is sure to play havoc with trade between individual companies as requirements and taxes change.
Trade won’t stop, but the waters will get rougher if NAFTA is killed entirely without another agreement in place to ensure a level playing field between companies in the U.S., Canada, and Mexico.
What Can Be Done?
Rather than completely eliminating NAFTA, we can revise and refine it to better promote trade in the modern world economy. NAFTA, as a document, is more than 20 years old—the iPhone hadn’t been invented yet and the internet was still in its infancy!
Now, we have massive online companies like Amazon that sell millions of dollars in goods without having a permanent brick and mortar store. The old agreement is out of date and needs some tweaking.
In particular, the taxes and tariffs on any goods moving from America to Canada/Mexico and vice versa need to be the same. As Drew says in the interview “we want to make sure a Canadian basket maker has the same tax going into America as we have going into them… We’ll do super things if we have a level playing field.”
It’s important for American manufacturing and other business sectors going forward to make sure that our politicians know what we need to make our economy succeed and to grow jobs for Americans—which is why Marlin Steel is part of organizations such as the National Association of Manufacturers (NAM) and the National Alliance for Jobs and Innovation (NAJI).
Building things is a manufacturer’s business—whether it’s a custom stainless steel basket or the future of the country.