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.”
Stuart Varney: What would happen to the US-Canada friendship if President Trump tears up NAFTA? Let me give you a number here: every year $544 billion in trade occurs between the two countries. And you know what that works out to every 24 hours? 400,000 people and $1.5 billion in goods transferring across the 4,000-mile border daily. It is far more critical, though, for Canada as 3/4 of all Canadian exports head straight to the US.
Let us bring in former Ambassador to Canada James Blanchard, also former Michigan Governor, and we're thrilled to have you here, along with a guy named Drew Greenblatt. He's the CEO of Marlin Steel, a Baltimore steel and wire company that does a big chunk of his business with Canada and Mexico.
Ambassador, to you first: what does it look like to you? Did Prime Minister Trudeau save any part of NAFTA, or is he already simply ready to strike a fresh deal with the US?
James Blanchard: Well, I think NAFTA can be tweaked. I was there when we signed it, when we finished it. You know, it started in January 1994. So you can modernize uh NAFTA or relations with Canada very easily. So I don't see any major change. I mean, it's—first of all, it’d be self-defeating for us to do that.
I mean, and by the way, the busiest trade corridor between our two countries is Detroit-Windsor, and we do more trade with Canada than we do all the European Union added up, and it supports—I don't know—maybe about 7 million jobs in the US. So not much I think will happen other than maybe update it to have more standardized goods and services, allow better free flow of labor, a lot of different things—e-commerce things like that. So I—I think everything will be fine. I think the meeting went quite well today actually, and the real target is Mexico and how you do that. And remember, Mexico is important to us; they're not just an ally on a border, but they're important to our economy as well.
Stuart Varney: Well, to the Canadians though, um, they sell more to us. But let's not—let's not ignore the fact that we're a stock channel, we're a market channel, and people are watching right now and they own stock in companies here based in the US that get a ton of revenue from Canada and from dealing with Canada—everything from Ford to Costco, Home Depot, Valero Energy, ConocoPhillips—huge amounts of business dealings there. Um, so—so do we—do we simply accept that we are going to have really good relations with Canada, Ambassador, and that it’s—nothing better change in that regard when it comes to border taxes and border tariffs?
James Blanchard: Yeah, I—I—I think you're right. I think good relations will continue. I really do. I don't—I don't see a problem with tweaking NAFTA and modernizing it. I mean, we have a totally integrated automotive industry, totally integrated energy industry. We can't live without that any more than they can. Okay? And there's a lot more there: financial services, agriculture, uh, infrastructure. It's—it's a partnership that works, and nobody in their right mind, frankly, would try to alter it in any significant way.
Stuart Varney: Let me bring in Drew Greenblatt. You're with Marlin Steel, you're the president, you're the CEO of—uh, you—you make steel and wire. How much business do you do with Canada?
Drew Greenblatt: About 20–25% of our business every year is with NAFTA—Mexico and Canada. Probably about 10–15% is with Canada alone. Canada is hugely important for Marlin and other factories throughout the nation.
Stuart Varney: Where do you stand on the president's belief that NAFTA must go?
Drew Greenblatt: I—I think the president is right that we need to refine and tweak NAFTA. It's a—a—a document that was created over 20 years ago. A lot's changed. The iPhone was not invented yet; uh, the internet was in its infancy at this point. Uh, so it could be uh revised, refined. There's a lot of important things we can add and improve. You know, it's—trade with Canada, trade with Mexico is really important for America.
Stuart Varney: Let me just interrupt you because we're—we're showing video of your operations. A lot of American flags here, but you're not just jingoistic. You are willing to sell to countries that will absolutely buy from you. So is there anything that you fear or panic about? If—look, everything at one stage is—is appropriate, at another might be inappropriate. NAFTA’s an old deal. You've got to—as—as we're using the word of the day—tweak it. But which part of it do you need to see tweaked and which part of it do you need to stay the same so that you keep selling your goods across the borders?
Drew Greenblatt: That's—that's a great question. You know, Marlin exports to 39 countries. However, like you said, Canada is really important for us. Things we need to make sure is that when we ship a car to Canada or they ship a car back to us, the—the taxes are the same each way. Same thing with supplies—uh, parts and supplies. We ship baskets into Canada for their factories, so we want to make sure a Canadian basket maker has the same tax coming into America as we have going into them.
We need a level playing field. If we get a level playing field, I'm content because the American manufacturing community will rise to the occasion. We'll do super things if we have a level playing field. That's all we need. And if President Trump can get that accomplished, he'd be a huge success with the Canadian trade and Mexican trade.
Stuart Varney: I want to thank both of you very much. Uh, Drew, good luck to you, and Ambassador James Blanchard, it's a pleasure to have you both.
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.
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