Howdy Gentleladies and Gentlemen. This will be a short and cursory reason in support of keeping NAFTA strong.
NAFTA?
The North American Free Trade Agreement (NAFTA) has been a mainstay in international trade for decades. It has largely helped shape the American continent, and has made many improvements among the Canadian, Mexican, and Unites States economies. It is also unfairly criticized by many, which includes many Democrats and left-leaning individuals. This is why I believe NAFTA is important, and why President Trump should be careful when negotiation Duty and Tariff changes to NAFTA.
Being in the logistics profession, I have a view on this issue that is different than others. For one; my livelihood depends on international trade among our continental partners of Canada and Mexico. I have also seen first hand the impact of Duty and Tariff rate changes from small inconveniences to an existential threat to my customer's solvency. Therefore, the following are two key reasons why we need to be careful when tinkering with NAFTA: Duty (also known as tariff) rates make or break imports and importers; and these rates can have a dampening effect in our respective economies and trade relations as a whole.
Impact on Importers
Because most of my experience is in international imports, I have seen the steady rise of imports, and the steady decline in exports. One quality of imports that is different than exports is the appraisal and assessment of Duty. Duty is the amount that an importer owes the United States Customs and Border Protection Agency. This is vital to maintain proper funding levels for the Division within the Department of Homeland Security.
Duty rates necessarily change occasionally as a percentage of total commercial value (how much the imported goods are worth based on United States currency) as per what the government requires, even beyond what is expressly described in law. The type and frequency of imports has the most impact on how much Duty an importer pays. Lets say 2% instead of Duty based on an import worth $10,000. You pay $200 in Duty (plus some extra blanket fees that I will not get into). Hypothetically, due to NAFTA, by 2020, Duty rate drops to 1.5% for that same commodity. You then pay $50 less.
An unnecessary increase in Duty because President Trump decides to be an asshole will cost importers $50 extra bucks. Big deal, right? Well most importers actually several times more than that. $600 to $1,000 swings are common. You make 100 imports a year, and that adds up. That can, and has, shuttered windows and closed doors just in my three years in the industry.
In addition, we must not take away preferential treatment for Canadian and Mexican imports. Currently, most imports enjoy Duty Free treatment. We take that away, suddenly we are talking about potentially thousands of extra dollars per shipment more in Duty. Importers hate that, and can even go out of business, or have to change business model because of that. Therefore, any irrational changes to NAFTA can and will directly and negatively impact United States commerce.
Impact on The Economy
Canada and Mexico are among our top trading partners. It makes sense seeing as though we share the same contiguous ground as them. Making Canadian and Mexican exports more expensive for the American importer can and will have a dampening effect on their economy as well. Economies of scale dictate that all partners will be negatively impacted if costs rise.
A customer of mine has a customer that exports from Mexico to Canada to make aerospace and rail accessories and vehicles. Even the CTA (Chicago Transit Authority) has trains made from that very same material created from my customer. Before my time with my current employer, the import tariffs were 1.5% higher than they are now for most of the commodities imported from the customers of my current employer. As to why, I have yet to find out through research. The manufacturing had to slow. Eventually, manufacturing moved to places like Belgium, China, and Vietnam; all of which had a preferential Duty rate as compared to Mexico. Production only started back up in Mexico when Duty rates were lower.
The reason I am stating the above example is because I believe that this can be an indicator for a wider economy. Countries compete with each other, with winners and losers a lot of the time. If President Trump starts mucking with Duty rates, businesses may decide to alter their entire operating structure. Is this the case with all the customers of my current employer? No. That would be asinine to suggest. It does bear some relation to the greater economy, however.
Moral of the Story
Basically, the moral of the story is: be careful what you do with Duty and Tariffs. These have very real consequences, as outlined by my experiences in the Logistisc industry in only three years. Imagine all the new knowledge I will gain after five, seven, ten years and beyond. Please President Trump. Whatever you do, PUT SOME THOUGHT INTO RENEGOTIATING NAFTA!!!
Extra Cra[
I will try to write an extended and more structurally correct version of this with scholarly research and numbers. I tried to only incorporate my own experiences so as to avoid making facts with no source. It was also written on the fly just to get my ideas out there. These are only be beliefs based on my first-hand experiences. Others may disagree.
