Companies will be operating under the current NAFTA provisions until 2020 to give businesses time to adjust to the USMCA. Garza noted that “there is much speculation about where the exact details of the agreement will land, given that the proposed updates will be implemented over several years, not immediately.”
From his businesses' standpoint, M. Holland’s Morgan is relieved that the USMCA does not impact the plastics (resin) industry, which is a huge exporter to Mexico. “It’s a relief not to be facing tariffs on exports south of the border,” Morgan stated. “The Chinese tariffs have altered the whole movement of plastics in that part of the world so this ability to export tariff free to Mexico is important.”
Morgan cited one other potential negative about the USMCA. “NAFTA has a dispute mechanism, so if there is a dispute, the party can use chapter 11 regulations to get the dispute resolved quickly without having to go to a foreign court,” he explained. “That [rule] has been emasculated and it might discourage investment. If a company feels that they are being dealt with unfairly or illegally, it could go to a NAFTA arbitration system. The USMCA says you have to go to that country’s court system and deal with a foreign court. I personally don’t feel that will be a major detriment to investments but it’s viewed as a give-away by major companies.”
Not surprisingly, all three companies I interviewed brought up the issue of China, which has become somewhat of an unknown given the trade spats between presidents Xi and Trump. Sholtis called this “the next big trade issue to be resolved.” He sees the USMCA resulting in more businesses considering North American regional sourcing.
Morgan noted that he’s already seeing molds for part production returning to the U.S. and Mexico. “The U.S. is highly competitive today from a manufacturing standpoint; it’s a bit of a renaissance driven by low-cost energy. China’s wages have gone up, they have some fiscal issues and quite a bit of debt.”
Evco’s Garza commented: “It will be very interesting to see how these changes impact China, especially given the increase in tariffs to the U.S. This points to many more opportunities for Mexico, the United States and Canada, especially in the automotive sector.”
It would appear from these interviews that most plastics industry businesses are feeling fairly positive about the USMCA. “We believe the plastics industry will see positive gains as a result of the updated trade deal and it will bring a lot of exciting new opportunities to each of the three countries in many industrial sectors,” said Garza.
Morgan stated: “Business loves stability and digesting all this self-made drama will take a bit of doing, but at the end of the day, it appears that all’s well that ends well.”
Image courtesy Jegas Ra/Adobe Stock.