NAFTA Talks Spark Concern in Promo Industry

The latest talks to rework the North American Free Trade Agreement entered Tuesday stalemated in gridlock, with negotiators from Mexico and Canada digging in against proposals from the United States that they say are unfair and economically untenable.

Meanwhile, some promotional product industry leaders have kept a nervous eye on the talks, which have played out over the last five days in Mexico City in what is the fifth round in recent negotiations aimed at revamping the trade agreement between North America’s three biggest economies.

In the promo niche, distributors and suppliers in both the U.S. and Canada told Counselor they are concerned a renegotiated NAFTA could result in trade tariffs and/or other new restrictions that could inhibit commerce across national borders, thereby ramping up pricing and hurting sales.

“From my personal perspective, I believe anything that restricts free trade is ultimately bad for the economy long-term,” Henrik Johansson, CEO of Top 40 distributor Boundless (asi/143717), told Counselor. Emphasizing that he was speaking personally and not articulating an official company position, Johansson continued: “What’s bad for the economy is bad for our industry. There may be winners in the short-term, like local manufacturers, but long-term we’ll all lose.”

North of the border, Canadian promo leaders worry about detrimental impact from a newly negotiated NAFTA. Mark Graham, CEO of distributorship Rightsleeve (asi/308922) and chief platform officer of industry business management solution commonsku, told Counselor that if NAFTA talks ultimately result in new barriers to trade between the U.S. and Canada, then Canadian distributors will be negatively impacted on both sides of the deal. They’ll face higher tariffs to export to the U.S. and higher tariffs to import products into Canada, said Graham, adding that Canada will likely offset a tariff increase imposed by the U.S. with an increase of its own.

“You can argue that higher tariffs protect local businesses, but we live in a global economy these days and the promotional industry is reliant on a free flow of products from all over the continent, and the world,” said Graham. “I don't believe a supplier with a unique product needs to be protected by trade tariffs.”

While there are concerns, some leaders in the promo space said that it’s currently difficult to say how things will ultimately play out given all the uncertainty about where the talks are headed, adding that they maintain hope for possible trade improvements. “Renegotiation talks can be unsettling since from a promotional products perspective we are going from a known agreement to something that isn’t known,” Taraynn Lloyd, marketing director at Top 40 supplier Edwards Garment Co. (asi/51752), told Counselor. “Renegotiation may improve our business climate, but it’s too soon to respond in a way that is meaningful” to whether or not that will actually happen. 

Established in 1994, NAFTA is a trilateral trade agreement between Canada, Mexico and the U.S. During his campaign for office and early presidency, President Donald Trump criticized the deal as unfavorable to the U.S. and pledged to renegotiate it.

The talks that have occurred over the last few days are the fifth round in a negotiation process that is slated to conclude in March, though analysts say that end-date could be unrealistic given the stalemate and division. As Bloomberg reported, the fifth round of talks had produced no substantial breakthrough on big issues headed into the final day and had largely avoided the most divisive U.S. proposals, including those related to dispute panels, government procurement, a sunset clause and dairy.

While there was hope some advancements would be made by end-of-day Tuesday, Mexican and Canadian negotiators were also expected to make a significant pushback against another of the major dividing proposals – this one related to automotive content, Reuters reportedThe U.S. has proposed to raise the minimum threshold for NAFTA autos to 85% from 62.5%, while demanding that half the content is from the United States. “Mexican and Canadian officials say they want the United States to explain how the auto plan could prosper in view of the skepticism, and have repeatedly indicated they have no intention of responding to the scheme with a counterproposal,” Reuters reported.

President Trump has threatened to withdraw from NAFTA if it cannot be reworked in the U.S.’s favor.