NovaLink and NAFTA

Position on NAFTA

In fairness to our customers, current and future, we would like to take the opportunity to state our position on NAFTA and what our plans are for the future regarding this important trade treaty.

NovaLink, like other businesses that depend on manufacturing in Mexico, has been following the negotiations of the NAFTA treaty closely. The media has been bombarding Internet news sites and social media with various pro and con viewpoints from numerous sources as to the status of the treaty and what will happen if it is cancelled.

The Negotiations for NAFTA Will Continue for the Foreseeable Future

Contrary to information coming from some media outlets, there will be no “quick fix” on NAFTA; the negotiation has just started, and will probably go on well into next year before any sort of framework is decided. According to CNBC, “Officials from the U.S., Canada and Mexico said: “…significant conceptual gaps will change the negotiating time frame. The countries will schedule more negotiating rounds “through the first quarter of 2018” after new proposals “created challenges,” the officials announced.”

The Canadian Center for International Governance Innovation notes that it takes the United States on average one and a half years to negotiate a free trade agreement, as a review of 20 such deals by the Peterson Institute for International Economics found.

For their part, the Mexican Government has stated it would like to see the treaty completed before their presidential elections in July of 2018.

With all these facts in consideration, negotiations could take at least 8 months, if all goes smoothly, to get an agreement of the treaty completed.  This does not take into account having the treaty ratified by the American, Canadian and Mexican governments, which could take another 3 -4 months.  

Prudent planning is the course of action to be taken at this time. We at NovaLink are closely monitoring the process through various governmental and manufacturing associations. Indicators at this point are that NAFTA will be modified and updated, but, will continue forward. As we have seen, nothing is final until it is committed to ratification through the congressional process. We are however moving forward. NAFTA and Mexico have been an integral part of the success of US manufacturing and retail companies; not to mention the tens of thousands of support companies. Those that have been a part of NAFTA know the benefits and the indisputable facts surrounding the manufacturing industry for the past decades since NAFTA’s introduction.

Many US Industries Want NAFTA to Stay

Many US industries, such as electronics, farming and most importantly the US automobile industry, have benefitted greatly from the treaty and their position on NAFTA is to have it remain in place. 

According to Reuters, the technology industry, along with the auto industry and electronics manufacturers, are lobbying hard for NAFTA: “The (electronics) industry now has almost as many lobby groups representing its views on NAFTA as the transport sector, which includes automakers. That sector had 52 lobbying groups discussing the trade pact with government officials between April and June. Agriculture still dominates the NAFTA lobbying effort with 86 arrangements with lobbying groups.   While the auto and farm lobbies are seeking to preserve cross-border supply chains and to retain access to markets in Mexico and Canada, the tech sector wants a revamped NAFTA to help it grow future business.”

The automotive industry is even more blunt: American Automakers say NAFTA has seen benefits for the U.S. economy and is open to “modernizing” NAFTA, but wants to block some proposals that they feel would hurt supply chains essential to helping them complete production on new cars.

According to the Detroit Free Press: “The auto industry also argues that Mexico provides the industry with an essential location for low-cost production and says NAFTA has ensured that North America, as a region, is competitive with other leading automotive regions across the world.”

“Last year, the U.S. imported $12.5 billion worth of engines and transmissions from Mexico and $5.2 billion from Canada, according to the Center for Automotive Research. Only about one third of U.S. engines and engine-parts imports come from outside the region. – Bloomberg News”

The President’s position on NAFTA Changes Frequently

President Trump’s position on NAFTA changes frequently; some days he has intentions to walk away from the treaty, other days he is eager to negotiate some new terms. Though we do not doubt his commitment to negotiate fair treaties for the US, we believe that the experts in industry and government see the true benefits of the NAFTA in the actual data. We are supporting the process on many fronts to make sure those that want to can learn from our experience and see the actual data from the small to medium size companies that make up the majority of companies standing to be affected by a withdrawal.

This is a frequent tactic used by President Trump as a way to get leverage in negotiations for the terms he wants; preparing to walk away as a threat to get people to come back; to date, Trump has made about 35 claims to “tear up” NAFTA, only to go back (sometimes on the same day) to claim he is happy how negotiations are being conducted and that the US is confident to have a treaty done soon.

According to Salon, in April of this year, President Trump tweeted about going back to negotiations on NAFTA because Canada and Mexico had “begged” him to come back, however, this was far from the case.  

“It turns out the reason that Trump was eager to backtrack on his promise to get out of NAFTA was not that other countries wanted his help — it’s that his base would be hardest hit: As news of the president’s plan reached Ottawa and Mexico City in the middle of the week and rattled the markets and Congress, Commerce Secretary Wilbur Ross, Agriculture Secretary Sonny Perdue and others huddled in meetings with Trump, urging him not to sign a document triggering a U.S. withdrawal from NAFTA.
Perdue even brought along a prop to the Oval Office: A map of the United States that illustrated the areas that would be hardest hit, particularly from agriculture and manufacturing losses, and highlighting that many of those states and counties were “Trump country” communities that had voted for the president in November.”

NovaLink is Committed to the Continued Success of its Customers

At NovaLink we realize the continued success of our clients depends in large part on the NAFTA being re-ratified and remaining in place. Our position on NAFTA feels that as competition in the labor market deepens, Mexico provides low-cost manufacturing allowing US companies to keep higher level, salaried, and technical positions rather than losing these jobs overseas. NAFTA makes all this possible.  The loss of revenue and jobs would be a colossal mistake for numerous American industries not to mention the United States economy as a whole. Thankfully and as a fail safe, Mexico also has other trade agreements with the US that NovaLink has utilized over the years prior to NAFTA being introduced. Though not as broad as NAFTA, we are in a position to implement, where applicable, these other programs.

Should you wish to discuss in more detail your program, feel free to reach out to the professionals at NovaLink.