GHY's Chief Executive Officer - Rick Riess - provides insight into the trade implications that are potentially on the horizon if the North American Free Trade Agreement (NAFTA) ceases to exist and what actions businesses can take today to be ready for a future without a NAFTA agreement.
Today I want to talk to you about our series, "Managing Trade in a Disruptive World."
Today's topic is a discussion about NAFTA, and in order to talk about NAFTA we have to look at what has happened over the last 70 years in globalization and the trade that has taken place, and the freer trade that has taken place for the course of the last 70 years.
There's a quantum shift going on right now where the U.S., who was a champion of that, is now looking at renegotiation of a NAFTA trade agreement and a trade block that is really about bilateral trade negotiation and improving their position. So what are the issues that we're going to face with no NAFTA in play? Well, the first thing is, for all businesses, significant business uncertainty. We're going to see a significant change in both tariffs in the supply chain, in the potential for trade actions, and all of the rules now have changed and shifted. The problem for businesses, they hate uncertainty. So, what do you need to do as a business to plan for that outcome when NAFTA is unraveled?
What are the actions that you as a business should undertake today in planning for the future without a NAFTA agreement?
Well, essentially you're going to be facing a Canada and a Mexico that's going to have an exchange rate that's going to be quite different from today. Businesses are going to be facing significant costs associated with foreign exchange differentials, new duty rates, and also the regional value issues of Buy America. All of those tangible and intangible costs have to be put in to your business planning and risk management objectives. In this scenario, there are certain specifics around the trade and renegotiation that are going to impact your business, the costs associated with it, and we as your partner can help you do that.
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