A few weeks ago, I spoke at the Economic Development Council in Brownsville, TX about the urgent need to bring manufacturing back to America.  Brownsville is an economically depressed area with 7-8% unemployment rate.  The city is working very hard to attract new manufacturers and jobs to the region by making it an attractive location for factories.

With Trump’s promises to bring manufacturing back, there is a lot of speculation regarding whether this means outsourced jobs will be coming back from Mexico and into the Rio Grande Valley region, including Brownsville. Perhaps, but at what price?

The current economy in Brownsville is dependent on the Mexico-U.S. border crossing that separates the city from Matamoros on the Mexico side. This cross-border trade provides a significant portion of jobs in Brownsville such as import brokers and their staff, truckers, warehousing and distribution services.

South of the border

On the Mexico side of the border there are huge industrial manufacturing sites in Matamoros and the industrial areas of Monterrey. In this region, Mexicans make everything from apparel to electronics and automotive parts.

Companies move to Mexico, to take advantage of low-cost labor and low-cost operating environments. Labor rates in some parts of Mexico are on par with China.

In addition, NAFTA adds to the economic appeal of manufacturing in Mexico by eliminating import tariffs between the three signatory countries: Canada, US, and Mexico.

So what might happen in Brownsville, and all along the Rio Grande Valley border areas if NAFTA is renegotiated or the U.S. withdraws from the treaty altogether, as Trump has promised? There are certainly two sides to this story. About half of the residents in the Rio Grande Valley region voted for Trump and half for Clinton, and they will readily offer their differing opinions.

Not your grandfather’s manufacturing job

No matter what the pundits on either side are predicting, and even if NAFTA is modified or scrapped altogether, it is unlikely that all of these jobs will come back to America. Returning manufacturing to anywhere in the U.S. is likely to provide opportunities to modernize and automate production, thereby reducing operating costs and enhancing productivity – ultimately requiring far fewer workers.

Much has changed in the 20 years since NAFTA came into effect. The jobs needed in advanced manufacturing factories are fewer and very different than they were when American manufacturing headed south to Mexico and west to China.

Today’s advanced manufacturing jobs require a host of new skills and technology, for which workers will have to be retrained.

Advanced factories today are full of robots, computerized machine tools, 3D printing and IoT connected machines. These things require completely different skills from those of even one generation ago.

If the NAFTA treaty ended, the U.S. would be free to increase tariff rates on imports, presumably to make manufacturing in the U.S. seem more cost competitive.  But import tariffs mask the problem and allow companies to get lazy about being cost-efficient.  Instead of focusing on productivity improvements and cost cutting, manufacturers wouldn’t have to do much to compete with higher-priced imports. Tariffs protect companies from foreign competition.  Meanwhile, we know that U.S. consumers will have to pay more for imported goods as well as American-made goods. The consumer loses either way.

Another Smoot- Hawley?

On the other hand, there are economists who say that NAFTA has caused the loss of countless jobs to the lower-cost environments in Mexico, and that these jobs will come back in a post-NAFTA trade environment. They argue that instead of doing nothing, we should take every opportunity to raise all import tariffs, eliminate trade agreements, and close our borders to immigrants and trade. This, some say, will make America competitive, even though there is no gain in productivity or cost reduction in American manufacturing.

What they may be forgetting is that we have gone down this pathway before with the Smoot-Hawley Tariff Act of 1930, which raised tariffs on about 900 products.  Historians blame Smoot-Hawley for triggering the Great Depression of the 1930s.  They point out that Smoot-Hawley caused sharp increases in consumer prices, which led to consumers buying fewer products, which in turn led to low demand, lay-offs, high unemployment and ultimately the stock market crash.

For sure, NAFTA has its problems. The import/export paperwork required to track goods moving across the borders and the associated record-keeping can be onerous. Special rules for truckers from Mexico have taken a toll on American truckers, and the effects don’t end there.

But overall, most economists think NAFTA has had a net positive effect on the U.S. economy.

I hope we have learned our lesson from American history. To revitalize American manufacturing we must focus on innovation, automation, productivity and cost efficiency. Let’s not allow history to repeat itself.

For more information on maximizing your supply chain efficiency and navigating the legal issues, check out Rosemary Coates best-selling books 42 Rules for Sourcing and Manufacturing in China and Legal Blacksmith – How to Avoid and Defend Supply Chain Disputes.

The post Eliminating NAFTA might bring back jobs, but at what cost? appeared first on Trade Ready.

Despite the huge reception given to Thomas L. Friedman’s The World is Flat, published in 2006, our thinking about trade balances and their measurement remains over 500 years old: globalization has left trade balances behind! Mercantilism ruled from 1500 to about 1750, yet the framework it generated – “imports are bad, exports are good” – to account for and explain trade balances persists today.

The result is that this outdated and erroneous framework threatens the global operations of U.S. multinational corporations, and therefore, the:

• $23 million jobs they create in America;
• $341 billion worth of investments in America; and
• 25% or $3 trillion of America’s GDP they create.

How the “imports kill jobs” myth serves politicians

Politicians want to attain public office and stay in power as long as they can. For that, they need votes. If unemployment among the constituents rises, the incumbents’ votes are threatened. In such a situation, the easy reaction of both politicians and their voters is to blame so-called outside forces for fewer jobs.

Of course, there could be several real reasons for the rise in joblessness. These range from bad education policies that do not create employable (i.e. qualified) workers in sufficient numbers, to burdensome taxation, to lack of policy perseverance and poor corporate strategy. One way to avoid the inconvenient truth and deflect the criticism is to put the blame on “unfair” imports for killing domestic jobs.

What would be the result of carrying the logic of “killer imports” to its absurd conclusion? All imports to the U.S. would have to be banned.

This would also affect U.S. multinational corporations that have proliferated abroad and import their foreign-made products back into the U.S. market.

However, unlikely as such a prospect might be in the real globalized world, let us visualize the effects of a hypothetical ban on imports by the U.S. For starters, most of those imports would have to be substituted by local production, the cost of which would be much higher. This would raise the inflation and in turn, interest rates.

Higher interest rates result in reduced investment. The growth of manufacturing slows; fewer new jobs are created and more jobs are lost. A rise in the cost of capital sinks the housing market as well as adversely affecting stocks, bonds and debt markets, which would be focused on diminishing returns on investment.

The bottom line is – imports create jobs

In fact, imports allow U.S. companies to make more of what they are good at, thus creating jobs in America: supply creates demand. That is why, when imports rise, so does employment. We have developed “The Economic Clock” for many of the world’s economies. Whenever the “economic time” is good in America, there is an excess demand for goods. So, of course imports rise, as does the number of jobs.

How, then, can some U.S. politicians claim that imports kill jobs when the facts support exactly the opposite view?

Another question worth asking is: When America employs fewer people in manufacturing, how can the trade surplus rise if fewer people are manufacturing goods? The share of America’s manufacturing employment in total employment shrank by two thirds – from 28% in 1960 to 8% in 2016.

As fewer Americans are employed on the manufacturing assembly lines, more goods are imported, and that allows American companies to make more of what they are good at – and in this age, these are services. Over the past several decades there has been a persistent rise in the well-paying service-sector jobs for Americans; in the 1960s one in two Americans worked in the service sector; by now two in three hold service jobs. In the corresponding period, the country’s net balance in services trade has turned into a surplus.

According to the office of the U.S. Trade Representative, the services economy generates the largest services trade in the world, with exports of $606 billion dollars in 2011 and a trade surplus of $179 billion. In Canada, commercial services have now run a surplus for 13 years, all the way back to 2003 and throughout the Great Recession, according to Global Affairs Canada.

To sum up, the idea that imports kill jobs is fallacious for a number of reasons. The fact is that, thanks to the growth in the services sector, the U.S. export surplus in services has risen significantly.

Protectionism defeats everyone

While the immediate aim of this content is to reach decision-makers particularly in Washington and China, the broader objective is to move the thinking away from national or nation-state trade balances and towards multinational trade balances. This needs to be done to avert protectionism based on wrong-headed mercantilism.

Protectionism defeats everyone and the resulting animosity leads to unemployment, followed by social unrest and even wars.

It is always easier to blame the foreigner than to work on one’s own backyard. Most of all, this content is meant to stir some debate in order to solve the problem of protecting American workers from offshoring and, as Prof. Alan Blinder stated in one of his essays: “My main purpose is to get as many smart people as possible thinking creatively about the problem.”

The post Imports do not kill jobs – protectionism does appeared first on Trade Ready.

I come from a long lineage of autoworkers. Approximately half of my family works for one of the Big Three automotive manufacturers in Canada (GM, Ford and Chrysler).

As a result, I have long heard about how free trade agreements are detrimental to manufacturing workers and how beneficial the Auto Pact (signed by Canada and the U.S. in 1965) was for everyone.

Whenever my dad would mention the Auto Pact, I would roll my eyes and claim union brainwashing on his part. My response was always something along the lines of, “Well, the WTO deemed it illegal so obviously it wasn’t that great!” In 2001 they ruled that the pact unfairly hindered efforts by European and Asian automakers to sell their vehicles in Canada.

The Canadian Big Three labour contract negotiations began again this past September. Once again, talks about the Auto Pact began making its way into social media posts from autoworkers fed up with the race to the bottom.

I had never stopped to look at the Auto Pact or trade agreements from the viewpoint of someone that wasn’t involved in the trade industry. It would be very difficult to have almost two decades of international trade experience, as I do, without being pro-trade.

It was time to take a more detailed look into the Auto Pact and see why this was so favourable to autoworkers. I also wanted to try to understand why they view trade agreements as the downfall to their livelihood and how this can be changed.

What was the Auto Pact, and how did it impact trade today?

The Auto Pact guaranteed duty-free imports and exports of vehicles produced by the Big Three manufacturers across the Canada-U.S. border, so long as specific criteria were met.

For every import of a certain class of vehicle into Canada, a vehicle of the same class had to be manufactured in Canada to maintain the same production ratios as before the Pact. The ratio was 1:1 for passenger vehicles, 0.75:1 for trucks, and 0.55:1 for buses.

The vehicles also required a minimum amount of Canadian Value Added (CVA) in its local production to count as being made in Canada. These amounts were 60% for passenger vehicles, 50% for trucks and 40% for buses.

This agreement worked well for all involved. The Big Three companies could import and export their products across the Canada-U.S. border duty free, and the auto assemblers knew that for each vehicle that was imported, they would be manufacturing a vehicle of their own for export.

No matter what you think of it, free trade is on the rise

I began to examine job losses and gains in both Canada and the United States since the implementation of NAFTA. NAFTA superseded the Auto Pact, which was already on its way to being deemed illegal by the WTO.

There have been approximately 540,000 manufacturing jobs lost in Canada and 682,900 lost in the United States since NAFTA went into force. Although there have been significant gains in employment, most of the high paying jobs that were once available in manufacturing during the height of the Auto Pact have been replaced by precarious service industry jobs with much lower rates of pay. It does not take an international trade consultant to tell you that many of these once high paying manufacturing jobs have gone.

Many people have blamed the loss of these jobs on free trade agreements like NAFTA. This is because a significant portion of the jobs have been moved to countries with which Canada has a free trade agreement, such as Mexico.

Canada currently has trade agreements with 15 countries, and is concluding negotiations or awaiting ratification with the European Union (CETA), the TPP and Ukraine. The Canadian government is currently in negotiations with another seven countries for trade agreements, and an additional seven countries have begun exploratory discussions with Canada.

Despite the many arguments made against these agreements by workers and others, it would appear that the Canadian government is aiming to be a part of as many trade agreements as possible.

Who benefits from free trade most, and is it worth it?

From a business standpoint, I encourage trade agreements and believe they are beneficial to our economy. After all, it is how I make a living. But at what point does the cost of trade agreements for some outweigh the benefits for others?

There are many new facets to trade agreements that go much further than the simple elimination of trade barriers between countries. In my opinion, however, that is all that a trade agreement should encompass: the eventual elimination of barriers to trade.

Unfortunately, what we have seen more and more in these agreements is that, as Martin Khor, Executive Director of the South Centre describes it, “trade measures have become a vehicle for big corporations and social organizations in promoting their interests.”

Governments are giving corporations and lobbyists too much stock in consultation of trade agreements, while those working in manufacturing in North America often do not have the same consultation opportunities and are largely ignored. Lines seemed to have blurred between government and big business, which is one of the first things that needs to be changed.

A simple solution to end the “race to the bottom”

After the regional value content requirements in the Auto Pact, other trade agreements like NAFTA and the TPP have included similar language. However, the required regional value content requirement amounts are getting further and further from responsible trade tactics that benefit both consumers and manufacturers.

All of this has brought to mind a simple solution to the issues that stem from trade agreements and the “race to the bottom” for workers. Those who oppose trade agreements argue that inequalities between countries abound in these agreements, such as companies exploiting cheaper labour, less stringent standards and laws, and the loss of good manufacturing jobs.

My solution seems rather simple when stated but I believe it would be beneficial to all countries involved in trade agreements; start a Global Manufacturing Pact. It would be very similar to the Auto Pact, but allow manufacturers from all around the world to benefit.

This would hold companies who outsource and offshore responsible for keeping manufacturing jobs local. It would also prevent less developed nations to be taken advantage of by developed nations, and eliminate the race to the bottom as there would be no direct competition between the same workers in different countries.

While corporations have benefited greatly from free trade in recent decades, the Auto Pact illustrates that there are ways to enable freer trade while also building a more fair and equitable system for those without corporate lobbyists or shareholder requirements. It is time to make sure that free trade benefits everyone, whether they are a consumer, a corporate professional or even a manufacturing worker.

The post It’s time for a new global manufacturing pact appeared first on Trade Ready.

Today a raging debate is playing out across many stages. Is trade, particularly free trade, beneficial to the nations involved or is foreign direct investment (FDI) stealing away jobs and hurting countries’ economies?

There is no dearth of strong opinions on the matter, as evidenced by the many vocal protests of trade deals in progress and the continuing protectionist discourse during the U.S. presidential election. However, is any argument on the matter speaking from the right statistics? And what are the right statistics to give us a full picture of the economic and social impacts of trade?

Export Development Canada (EDC) decided to embark on a mission to get a more accurate picture of what foreign investment is really doing to Canada’s economy and employment levels.

In July 2015, EDC began a first-of-its-kind web-based survey of 546 Canadian companies with foreign affiliates across a wide variety of sectors. The survey asked a combination of searching questions to find out the truth about foreign affiliates’ employment, operation, wages, and competitiveness.

The findings from the survey painted a much more hopeful picture of what happens at home when Canadian companies invest abroad.

20^th century-style statistics don’t reflect today’s trade realities

“Contrary to popular belief, Canada’s international trade is remarkably diversified,” the whitepaper summary of the report begins.

Canadian companies, both large and small, have made sizeable foreign footprints and begun to tap into emerging market consumption growth and expanding South-South trade networks.

Production networks were once limited to one single country to another. In the last few decades, developments in information technology, complex global value chains, and trade and investment deals have changed the way we trade across borders. Now, production networks look much more like a web, with inputs from several different places before a final product lands in the country where it will be sold.

As Stephen Poloz said, “National economies today no longer fit inside the lines on the map. Companies are simply ignoring those geographical boundaries. This materially affects how we should look at trade and how we should interpret trade statistics.”

Measuring trade in gross terms, rather than examining the value-add inputs from countries along the supply chain, fails to tell us the whole story of where commodities actually came from and where they went. In essence, it’s giving the entire value and origin of the export to the last country that input any component before landing in its final destination.

As Pascal Lamy, former head of the WTO puts it:

Using this logic, iPhones are Chinese.

Foreign affiliate sales have changed the game for Canadian trade

The increase in foreign investment in Canada began seeing major growth in 2003 and has positively impacted the country’s trade diversification and revenue generation. The report states:

“Foreign affiliate sales grew by 61 per cent between 1999 (earliest available data) and 2013. That is nearly double the speed of Canada’s merchandise goods export growth, which came in at 33 per cent, and 1.6 times the pace of total exports (including services), which came in at 38 per cent.”

Investment through foreign affiliates overtook merchandise exports as Canada’s top revenue generator in 2006, and topped exports by almost $40 billion in 2013. This growth has a lot to do with Canadian affiliate sales in emerging markets, which nearly tripled in between 1999 and 2012.

The growth in foreign affiliate sales is largely due to an upswing in trade in services. When the financial crisis hit in 2008, foreign affiliate commodity export sales began to suffer after enjoying a period of prosperity in the previous five years.

During that same period, however, foreign affiliate service exports were steadily increasing. By 2013, they were generating revenue equal to the commodities.

To look at the impact of foreign affiliates another way, Canadian companies exporting services directly earned $160 billion less than Canadian companies with international platforms. Foreign affiliates earned 2.7 times more revenue than their domestic counterparts.

“Offshoring costing Canadian jobs” debunked?

Canadian direct investment, often referred to as offshoring, has a bad reputation for eliminating jobs at home and is commonly misconstrued with outsourcing. Where outsourcing is the practice of hiring a foreign company to produce a product or service, offshoring is when a business expands and sets up shop in a foreign country, while still remaining a branch of a Canadian-owned company.

In the past few years, a measurable downturn in Canadian manufacturing jobs has lent credence to the suspicion that increased FDI has a negative impact on employment at home.

In order to put the blame on offshoring efforts, there should be a correlating increase in manufacturing jobs with those Canadian companies abroad. However, the numbers paint a different picture. Manufacturing employment shrunk by 25% between 2005 and 2010, but since then has remained stable.

There are many economic factors that impact employment rates, but when employee registers are examined in Canadian companies overseas, it’s evident that their workforces also decreased beginning in 2005.

The trends mirror each other, and EDC argues that this makes it highly unlikely that foreign affiliates have been absorbing Canadian jobs.

Foreign investment flows both ways

Manufacturing jobs are facing an observable downward trend worldwide in developed, high-income nations. But it’s not all bad news. Foreign investment flowing into Canada has been a good thing for the country’s manufacturing sector and the data is only now starting to tell us how good.

In 2013, the latest time period we have data from, around 1.9 million Canadians – that’s one third of the total manufacturing workforce – were employed by foreign companies. It’s also notable that according to the latest data, foreign affiliates within Canada have hired 272,000 more people than Canadian affiliates abroad.

To really determine whether outbound investment has a negative or positive impact on the home country’s economy, the key is to look at the rationale behind the investment.

For example, when a company chooses to invest in offshoring in order to cut labour costs, the impact on the home economy is unsurprisingly negative. But, when a company invests abroad in order to grow, and access new markets and global value chains, the results are often positive for both the country of investment and the home country.

As the report so eloquently explains:

Direct investment abroad serves as a beachhead for market access, thus stimulating domestically produced exports and high value-added head office activities.

Want to read EDC’s detailed findings? Click here to read the full report and whitepaper.

The post Canadian companies are driving growth at home through foreign investment appeared first on Trade Ready.

3D Printing is a manufacturing process used to create a three-dimensional object by producing successive layers of material under computer control from a digital 3D model.

This still-developing technology has endless applications that are still being explored in sectors such as the auto industry, health care, manufacturing, construction, robotics, education, and modern art. Many have argued that 3D Printing technology and the greater category of replicator technology is ushering in a fourth industrial revolution.

We asked our panel of supply chain experts how this new technology is already revolutionizing the way products are manufactured, moved and sourced, and what they see for the future of this fascinating industry.

Moderator: Audrey Ross (@tresAudrey), Logistics & Customs Specialist at Orchard International Inc., based out of Toronto, ON.

Panelists: 

Dr. Steve Brady (@SCMProfessor), CEO and Founder of Supply Chain Innovations Today, based out of Williamsport, PA.

Sarah Barnes, CITP|FIBP (@ICECORPlog), Director of Marketing & Strategic Sales at ICECORP Logistics, based out of Ottawa, ON.

Denise Montrose (@SmallWorldLLC), Managing Director for logistics and supply chain recruiting firm Small World Recruiting, based in Cleveland, OH.

Who is using 3D technology and printing right now?

A1 defense. Auto industry. Aviation. It’s really everywhere. #tradeelite

— Steve (@SCMProfessor) September 8, 2016

@tresAudrey @FITTNews who isn’t? My favourite is @aspectbiosys in @UBC who are printing human lung tissue. Used for drug testing #tradeelite

— Chris Begley (@BegleyChris) September 8, 2016

What industries would you want to see use 3D Printing who are not currently doing so?

A2 honestly I am not sure who isn’t. Historians are. Food is. The real question isn’t adoption in industry but speed and scope #tradeelite

— Steve (@SCMProfessor) September 8, 2016

We all think 3D technology is the best thing since sliced bread, but is there any downside to it?

Q3 environmental concerns due to energy consumption to run the printers & the dependecy on plastic & then resp of manufacturers #TradeElite

— ICECORP Logistics (@icecorplog) September 8, 2016

How is 3D Printing technology affecting operations? What processes and products are we going to shed?

A4 rapid prototyping. Localized printing could transform 3PL and shipping. Renewed “local” or reshoring. #TradeElite

— Steve (@SCMProfessor) September 8, 2016

Will this technology lead us to lose our appreciation for handcrafted goods in favour of speed and convenience?

A5 it is just another form of “handcrafted” goods, there r still ideas & design behind the products printed 3D #TradeElite #changeofmindset

— ICECORP Logistics (@icecorplog) September 8, 2016

A5 I don’t think we will ever lose our appreciation for handcrafted goods. Still appreciated in the world of mass-production #tradeelite

— Pam Hyatt (@lyricsbypam) September 8, 2016

With all this innovation and customization going on, how will intellectual property rights exist?

A6. I think as w/ all new tech, Governments & regulators are struggling to keep up! #TradeElite

— audrey ross (@tresAudrey) September 8, 2016

3D printing has been called the third industrial revolution, staggering numbers on infograph: https://t.co/Xh7GVI2zQ8 #TradeElite #3D

— ICECORP Logistics (@icecorplog) September 8, 2016

Be honest, is the profitability of 3D Printing going to change your career path or business strategy?

its going to be everywhere, forecasters think 3D printing will show revenues of 21B by 2020 #TradeElite #3Dprinting

— ICECORP Logistics (@icecorplog) September 8, 2016

A6. If Law students are looking to the future, degrees in technology #IP & #patents are going to be the ones to get! #TradeElite

— audrey ross (@tresAudrey) September 8, 2016

@SCMProfessor Good point on workforce as it one of the fastest growing segments for hiring in our industry #tradeelite

— Small World (@SmallWorldLLC) September 8, 2016

Read the rest of the chat and follow future discussions by following the #TradeElite hashtag.

Stay tuned for the next #TradeElite chat, coming up Thursday, October 13 at 2:30-3:30PM ET.

The post Is 3D Printing revolutionizing the supply chain industry? appeared first on Trade Ready.

“[NAFTA] is…a disaster.” – Donald Trump

“[NAFTA]…needs to be reassessed and adjusted.” – Hillary Clinton

These quotes illustrate how the two U.S. presidential candidates currently view NAFTA. The twenty-two year old North American Free Trade Agreement has long been controversial and blamed for lost U.S. jobs, but quantifying its impact has been difficult.

Some analysts have blamed the trade deal for 700,000 to 800,000 lost American jobs, while the U.S. Chamber of Commerce has attributed the creation of 1.7 million U.S. jobs to NAFTA.

How has NAFTA changed trade for member countries?

The passage of NAFTA established a free-trade zone in North America between Canada, Mexico, and the U.S. As part of the agreement, the three countries phased out numerous tariffs with a particular focus on those related to agriculture, textiles and automobiles.

About one-fourth of U.S. imports come from Canada and Mexico, which are the United States’ second and third largest suppliers of imported goods. In addition, about one-third of U.S. exports are destined for Canada and Mexico.

According to the U.S. Bureau of Transportation Statistics, total NAFTA trade in terms of value of goods has increased at a compounded annual growth rate of 3.75% since 2004.

By country, the Canada – U.S. relationship has the highest value of goods traded, compared to Mexican trade with either country. However, since 2004, the compounded annual growth of Canadian trade with the U.S. has increased only 2.16%.

This slow growth can be attributed to it gradually losing ground to Mexico over the years, primarily due to the growing Mexican automotive industry. As a result, Mexican trade with the U.S. has grown faster than Canada-U.S. trade, at a compounded annual growth rate of 5.91% since 2004.

Canada is America’s top customer

According to the Canadian government, Canada is the U.S.’s largest customer, purchasing US$338 billion in goods and services in 2015. Nearly nine million U.S. jobs depend on trade and investment with Canada.

In addition, Canada is the top export destination for 35 U.S. states. While Mexico grabs headlines with its auto industry, Canada also has a sizable auto industry which continues to hum along and innovate. Still, it’s a more expensive location to assemble automobiles due to union activity and higher wages, and the concern of Canadian jobs heading south is real.

Despite this, GM announced in June that it would increase its engineering and research and development team in Ontario by 700 workers over the next three to four years, focusing on electric, connected and autonomous vehicles.

Cross-border trucking industry crowding the border since NAFTA

All modes of transport have benefited in terms of volumes and finance thanks to NAFTA, but perhaps the two transport modes to see the greatest gains have been trucking and rail.

Trucking is the largest mode of transport for trade between Canada and the U.S.

For the first quarter of 2016, truck crossings were up 3.2% and in Detroit, the focal point for the automotive industry, the number of crossings increased 8%.

Despite the strong growth, it has raised concerns of growing congestion at the border between Canada and the  U.S. Detroit-Windsor is a particular area of concern as one of the busiest border crossing points between the two countries.

To alleviate the congestion, the six-lane Gordie Howe International Bridge, linking Detroit and Windsor, is expected to begin construction in 2017 with a completion date anticipated for 2020.

Meanwhile, the U.S. Federal Highway Administration has awarded $256,470 to deploy technology to provide information on wait times and give truckers advance notice of crossing conditions. The program began earlier in 2016 with a handful of trucking firms and limited border points, and the number of truck border crossings using it may continue to increase if the new pilot program is successful.

Rail continues to grow between Canada-U.S. since trade deal

U.S. and Canadian Class I railroads have also greatly benefited thanks to commodities exports, such as agriculture and petroleum. In addition, the growth of intermodal transport has spurred innovative solutions linking the two countries. For example, in 2015, Canadian National (CN) signed a memorandum of understanding with the Alabama State Port Authority and APM Terminals for the Mobile port’s intermodal gateway project.

A similar agreement was made at the New Orleans port a few months later. Described by the Journal of Commerce publication as a “third coast”, these agreements have given CN a new region in which to operate from.

The benefits for CN include the ability to take advantage of the Panama Canal widening by moving goods through the New Orleans and Mobile ports, and transporting them through Memphis, Chicago and into Canada.

Another benefit for U.S. shippers who prefer to move goods via Canadian ports is the ability to import goods via the Prince Rupert port and then transport the goods into the heartland of the U.S. without transferring to another railroad, truck or other means of transport.

Likewise, U.S.-based Class I railroad CSX opened an intermodal terminal in Montreal, which gave it access to the Eastern Canada market. Trains serving this terminal connect to its Northwest Ohio intermodal hub.

NAFTA shouldn’t be scrapped – it should be expanded

Can NAFTA really be described as a “disaster”? Hardly.

Trade between the member countries is strong and should continue to flow with little, if any disruption. Should the agreement be “reassessed” or “reexamined”?  Perhaps – in terms of opening the borders even further.

Creative logistics solutions have resulted in more efficient flows of goods, and in turn reduced time to markets for the final customer.

The post Does NAFTA still matter to Canada-U.S. trade relations? appeared first on Trade Ready.

Donald Trump, now the favoured U.S. Republican contender for the presidential nomination, has surprised critics and galvanized middlebrow support with his ‘Make America Great Again’ campaign rhetoric.

While Trump still must overcome a number of obstacles before he can muscle his way into the Oval Office, the possibility of a Trump presidency is an increasingly likely scenario.

As responsible participants in the global economy, we must all critically consider the implications of his controversial policies for economic reform.

Can the Trump plan make America great again? Let’s take a look at his three main economic proposals – tax, immigration and trade reform – to find out.

Tax Reform

As with most Republican candidates, the central pillar of the Trump economic plan is a significant series of tax cuts. Highlights of the Trump tax plan include abolishing income tax for 75 million households earning less than $50,000 per year and cutting corporate taxes from 35% down to 15% to spur economic growth.

Trump has repeatedly assured Americans that his tax plan will return America to a “dynamic economy,” and his campaign asserts that the plan is ‘one of the best and most favourable in the world’.

What’s not to like?

Unfortunately, institutes across party lines have denounced the plan as regressive and harmful to the American people.

The left-leaning Citizens for Tax Justice have asserted that the plan will cost $12 trillion to the U.S. economy over the next decade, and the more conservative Tax Foundation has suggested that the cuts will contribute $10 trillion to the federal deficit over the same period.

Additionally, despite Trump claiming that:

there will be some people in the upper echelons who are not thrilled [with my plan],

The Tax Policy Centre asserts that Trump tax reform will only help the poorest 20% of Americans save $128, or 1% of after-tax income, while the wealthiest 1% will save $275,000, or 17.5%.

Tax cuts may be popular, but a range of institutions argue that Trump tax reform is neither beneficial to the US economy nor equitable as he claims.

Immigration Reform

Trump has proposed building a wall between the United States and Mexico and deporting some 11 million illegal immigrants already in the country.

While his critics have denounced these policies as xenophobic and racist, Trump claims that his plan is designed to improve the US economy and provide more opportunities for lower class Americans.

Trump’s campaign asserts that the “influx of foreign workers holds down salaries, keeps unemployment high, and makes it difficult for poor and working class Americans – including immigrants themselves and their children – to earn a middle class wage.”

Can immigration reform improve the U.S. economy?

Again, the answer is probably not, and for three very good reasons:

First, the jury is out on whether cheaper undocumented labour is harmful to the prospects of average Americans.

A 2003 study found that illegal immigration has decreased U.S. wages by 3%, but more recent research compiled by Berkeley economist David Card asserts that:

the impacts of immigration on native workers in the United States . . . have been very small.

Second, the Trump plan does not take into detailed account the costs of securing and maintaining a hardened Mexico border, and on March 6 the American Action Forum placed these costs at between $420 billion and $620 billion annually.

Third, the National Farm Worker Ministry estimates that 60% of all agricultural workers in the U.S. are undocumented migrants, and it is not unreasonable to assume that the deportation of this cheap labour force would place a burden on the country’s food production and consumption prices.

A final ironic and unintended economic consequence of the Trump immigration reform plan could be a “brain drain,” as educated and potentially wealthy liberals look to escape a controversial Trump presidency, namely by moving to Canada.

In the spotlight of this emigration movement is Cape Breton Island, where radio broadcaster Rob Calabrese has built a website encouraging American “refugees” to consider Cape Breton as a new home away from the sphere of Trump’s influence.

The project began as a joke, but Calabrese has since fielded inquiries from a number of potential emigrants, including a Cornell University professor.

Though tongue-in-cheek proclamations of emigration abound during times of political controversy in both Canada and the U.S., the possibility of well-educated Americans and even celebrities leaving the country due to a divisive Trump presidency could present economic consequences.

Trade Reform

The third arm of the Trump plan to make America great again is tackling trade with China, his favourite boogeyman.

Regarding China, Trump has stated that:

What they’ve done to us is the greatest single theft in the history of the world . . . they’ve taken our jobs, they’ve taken our money, they’ve taken everything.

To Trump’s credit, the U.S. trade deficit with China is higher than ever before, and studies have suggested that the U.S. has lost up to 2 million manufacturing jobs to China since 2000.

Trump plans to address these injustices with a number of strict measures, including declaring the country a currency manipulator, eliminating its export subsidies and ending Chinese violations of U.S. intellectual property.

Once again, Trump has his critics, and they denounce his plan as not only unrealistic, but downright hazardous. Michael J. Boskin asserts that “Trump’s ideas are dangerous and would reverse decades of beneficial bipartisan American leadership in trade liberalization.”

Many are concerned about the escalated possibility of a trade war between China and the U.S., an unprecedented economic conflict that could cripple the global economy. Key criticisms of the Trump position are that he assumes he can simply negotiate China into disregarding its own sovereignty.

Plus, he fails to acknowledge that the bilateral trade agreements he despises, such as the TPP, are the primary mechanisms of securing concessions and intellectual property protections.

Responsible citizens should be very concerned of Trump playing trade war chicken with China, because the future of the global economy is at stake.

Donald Trump is closer to the Oval Office than nearly anyone could have predicted.

Though his campaign is founded on the principle of making America great again, critics across the political spectrum are more than skeptical about the greatness of the economic plan Trump is proposing.

The post What if Trump wins? Implications for the U.S. and global economy appeared first on Trade Ready.

Throughout his two terms, President Obama and the Republicans in Congress have not been able to work together.

A rare exception is their current alliance to secure Congressional passage of what is known as “fast track authority” for the President to create, with eleven other countries including Canada, the Trans-Pacific Partnership (“TPP”).

This week the Senate joined the House of Representatives in voting for this fast track authority giving the Obama Administration the ability to move forward and conclude the negotiations. The support came mostly from Republicans but with some defectors on both sides of the aisle.

The other countries involved in the TPP are: Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Look who is missing from the group – China!

The Office of the U.S. Trade Representative claims that the TPP will support American exporters, including small businesses, and enforce labor rights and environmental protections.

The Obama Administration and Congressional Republicans also view the TPP as a way to counter the expanding economic and military influence of China in the Pacific region.

Can you hear the “giant sucking sound”?

Despite their loss in Congress this week, the vigorous opposition to TPP will continue when the actual treaty is finalized and presented to Congress for ratification. The opposition is led mostly by Democrats and union members, but it includes citizens of all political leanings.

In 1992, presidential candidate Ross Perot predicted that the NAFTA agreement would lead to the loss of millions of American manufacturing jobs.

He called it the “Giant Sucking Sound” – one of the most famous lines in American political history.

In my view, no one can credibly argue that NAFTA and the following trade deals with China and other countries did not lead to the loss of America’s manufacturing base and millions of blue collar factory jobs.

The evidence is there for all to see – shuttered factories in big cities and small towns all over America, persistent wage stagnation and high unemployment for workers without college or specialized vocational skills. Big box stores sell consumer goods mostly imported from China.

You don’t have to be a trained economist to see the downside of the free trade deals signed since NAFTA.

The unseen benefits of free trade agreements

Unfortunately, the upsides of free trade are not always fully recognized. Freer trade has provided American consumers with year round fruits and vegetables imported from the Southern Hemisphere.

Cheaper imported consumer goods have increased our purchasing power even as real wages for millions in the U.S. have stagnated since the 1970s.

What many people don’t see is the biggest upside of free trade – increased exports of foodstuffs, airplanes, defense articles, construction equipment and vehicles, high technology products and many services.

Unless Americans work for companies like Apple, Caterpillar, Boeing or Tyson Foods, they are not seeing all the products which leave our shores every day – only the products that come in.

International trade was much easier for all Americans to support when it only involved things like importing coffee and bananas – foodstuffs that we cannot grow here.

Would public opinion really be aroused to a fever pitch over imports of French perfume, English bone china or Canadian hydro-electric power? Of course not.

Are trade deals the real culprits for American job losses?

Protectionism and support for trade barriers arise when global corporations send manufacturing and service jobs to cheap labor countries and equivalent “good jobs” are not created to replace them.

The blue collar factory worker is left floundering when his job is sent to China and his only options are lower wage retail or attending community college to be “re-trained” for jobs that may not exist or he cannot fill.

When it was only factory workers who were displaced by free trade, service workers and other professionals were not really concerned – especially when they could buy less expensive imported goods like flat screen TVs.

But when corporate America started outsourcing programmers, radiologists, call center operators, lawyers and others, a much larger anti-free trade bloc has emerged.

Some opponents of free trade are encouraging class warfare with their rhetoric about inequality, while they fail to note that it is not only trade deals, but also advances in technology thathave displaced so many workers – like secretaries and low skilled factory workers.

The irony is that while millions of Americans are unemployed or underemployed, companies which want to manufacture high value products in the U.S. have a hard time finding workers with the math and computer skills needed to operate factory equipment.

I am fortunate to currently live in Pasco County, Florida which, as a leading participant in the Tampa Bay Advanced Manufacturing Skills Initiative, has recently established a world class, internationally recognized German/European apprenticeship program in cooperation with local companies and educational institutions.

This program will help existing manufacturers grow and will attract other companies to relocate here, especially exporters.

Don’t shut it down – lead it forward

The opponents of TPP are taking the short view. In some ways, they resemble the 19th century Luddites – the English textile workers who destroyed labor saving machinery in textile mills.

Technological progress has always displaced workers – the famous example of the automobile displacing horse drawn wagons and buggies.

Clearly, earlier trade agreements did not do enough to protect American workers from sudden dislocations and, especially when it comes to China, the agreements did not protect the environment.

The TPP promises to address these types of problems. Of course, many opponents distrust this will happen.

The way I see it – we can either have the twelve countries in the TPP, including the U.S. and Canada, lead the way in the Pacific region, or we can withdraw and let China dominate the region.

Wouldn’t the U.S.- and Canadian style’ worker protections and environmental standards and those of Australia and New Zealand be a better model than what we have seen from China to date?

Properly managed trade agreements like TPP will advance shared prosperity.

The “giant sucking sound” has already occurred, not so much from NAFTA but from our existing trade imbalance with China.

Advances in computing, communications and aviation have shrunk the globe. There is no going back. The way forward is to increase the volume and quality of our exports and increase the skills and work ethic of our citizens – not to close ourselves off from a leadership role in global trade.

Do you oppose or support the TPP deal? Do you think Canada and the U.S. can lead the way in the Pacific with worker protections and environmental standards?

The post Is the TPP deal another “Giant Sucking Sound” or a path to 21st century shared prosperity? appeared first on Trade Ready.