The ongoing debate over whether to renew or cashier the North American Free Trade Agreement (NAFTA) – an issue exacerbated in some ways by tariffs on steel and aluminum imposed by the Trump administration – often obscures the fact that trucking has a lot of stake in terms of whether this pact survives or not.
Bob Costello, chief economist for the American Trucking Associations (ATA) and the trade group’s representative at the NAFTA negotiations, noted recently that his largely positive outlook for the industry is “threatened” if the U.S. withdraws from the agreement, which is something the Trump administration has threatened to do, but which he thinks could be a “negotiating” tactic.
“I’m slightly optimistic that this [a pull out] is being floated as a negotiating tactic,” he explained. “With the Mexican presidential election in July and our mid-term [Congressional] elections in November, the odds of making a deal by this point are long.”
If Trump were to truly initiate a NAFTA pull out, that would occur in late March/early April and would activate a six-month clock for dissolution of the trade deal. But Costello does not see that scenario developing quite yet. “It might be a ploy to get a deal done within that six months, but that would be a really big gamble. And suffice to say this is a really big deal for trucking: cross-border truck-traffic generates $6.5 billion a year for U.S. truckers. [That trade] is critical to the trucking industry.”
Yet despite the uncertainty swirling around what many are calling “protectionist trade policies,” business leaders as a whole in the U.S., Canada and Mexico are maintaining a “positive outlook” for NAFTA, according to a newly released report compiled by HSBC Commercial Banking dubbed HSBC Navigator: Now, next and how for business.
Even though more than 60% of business leaders across North America polled as part of this report believe governments are increasingly taking a “protectionist” stance of raising trade barriers to defend domestic businesses, nearly half of them (U.S. 49%; Canada 52%; Mexico 53%) expect the impact of NAFTA to be “positive” over the next two years.
“In spite of the threat of new trade barriers, we expect growth in cross-border business to continue, especially among our North American neighbors. We’re seeing a lot of optimism from U.S. clients right now stemming from factors like deregulation, lower taxes, a somewhat weaker U.S. dollar, climbing energy prices and a rise in global economic development,” noted Wyatt Crowell, head of commercial banking for HSBC USA, in a statement.
HSBC surveyed 6,000 international firms around the world for its report and found that more than three in four (77%) are optimistic about their international prospects, notwithstanding the worldwide concern among almost two-thirds of global businesses (61%) that governments are becoming protective of their domestic economies.
According to the survey, less than one in ten (9%) U.S. businesses expect NAFTA to inhibit growth – a smaller share of firms with negative views of NAFTA than in Mexico (16%) and Canada (13%).
In fact, the survey found that North American firms were more positive about NAFTA than agreements with trading partners farther from home. For example, a smaller share of Mexican firms (43%) expected a positive impact from the Pacific Alliance – a trade block comprising Mexico, Peru, Colombia and Chile – than from NAFTA (53%). Similarly, Canadian firms saw less growth opportunity from CETA (43%) and CPTPP (39%) than from NAFTA (52%).
“NAFTA has significantly benefitted Canada, Mexico and the U.S.,” added Linda Seymour, head of commercial banking for HSBC Bank Canada. “It has facilitated increased trade, improved customer choice, allowed for the provision of more services and has fostered growth and greater co-operation among government policy makers and businesses in all three countries.”
Firms in all three countries remain upbeat about doing more business abroad, with Mexico leading the way with 87% of firms surveyed expecting increased trade volume over the next 12 months, compared to 77% of U.S. firms and 70% of Canadian firms.
“NAFTA has become a $1.2 trillion corridor for continental trade and investment, and represents a good opportunity to business in the three countries to grow and expand, noted Juan Marotta, head of commercial banking for HSBC Latin America and Mexico. “HSBC has a major presence in each NAFTA country, making us ideally placed to connect businesses to opportunities across North America, as well as around the world.”
In all three North American countries, surveyed businesses rank NAFTA partners as their top two most important target markets for expansion.
- U.S. firms identify Canada (20%), Mexico (19%) and Japan (11%) as their primary markets for expansion;
- Mexican firms are focused on expansion in the U.S. (39%), Canada (27%) and Argentina (10%);
- Canadian firms see opportunity in the U.S. (36%), Mexico (18%) and China (14%)
Other key survey findings from businesses in the U.S. include:
- In light of an overall “upbeat” trade outlook, just over half (52%) of the U.S. businesses surveyed expect to need more trade finance over the next 12 months. A similar proportion (49%) think their access to trade finance will improve.
- As the world’s leader in service exports, the U.S. accounts for an estimated 15% of total international services trade, with business-to-business services dominating the sector.
- Over a third (35%) of respondents think technology use stimulates growth in services trade. After entering new markets—the number one strategy for increasing service trade, cited by a third of respondents—e-commerce is the second most popular approach.
- More than three-quarters (77%) of U.S. firms said easier access to data creates a more level playing field in international business, while about two-thirds (68%) believe data regulation would impede cross-border service delivery.
Just some information truckers should keep in mind as NAFTA negotiations push forward.