Page 21 - OCEAN BLUE - SUMMER 2017

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R enegotiating NAFTA: It’s Complicated
The North American Free Trade Agreement is over 20 years old.
It’s probably not a bad idea to renegotiate an agreement that was
signed before the Internet really took off. Both sides stand to
gain something, and both sides stand to lose. It is important to remember that
Mexico is the third-largest goods trading partner, and the fourth largest supplier
of oil to the United States. A number of U.S. corporate giants would suffer under
a tariff, including Walmart, Best Buy, Ford and GM. Some five million American
jobs depend on trade with Mexico. As Carlos Slim commented in a recent Forbes
article, “I would be more worried if I were an American.”

“40% of a Mexican import is American made.”
Modern Supply Chain Economics
American-made cars often carry Mexican-made parts, and vice versa. In fact,
40% of a Mexican import is American made. The idea that Mexican advantages
built into NAFTA have caused a trade deficit and American jobs is erroneous.
Trade agreements don’t create deficits; the flow of capital does. Only American
consumers will decide whether they will pay more for avocados, Coronas and
car parts. Ironically, it is thanks to NAFTA that American manufacturers can
compete successfully around the world by creating links along their supply
chains in Mexico.
The Bottom Line
Donald Trump may never be considered “presidential” nor is he likely to
behave in ways deemed “politically correct,” but the one thing he will always be
is a businessman. Love him, or hate him, he is a deal maker and consummate
negotiator. Where there is room to negotiate, there is always opportunity for
both sides to make gains. This is the beauty of business and a reason we can all
remain optimistic about the future.
While much remains to be seen, it appears that Trump will be good for business
and that America stands to prosper under his administration. This too is good
for Mexico. The ties between both of these great countries are strong and deep.
It’s going to take more than a few reckless Tweets to change the hearts and minds
of the millions of Mexican and American people who know better.

Dieter Esch
Chairman

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