Trade is woven into the fabric of the world economy. Access to reduced tariffs and increased market access have traditionally been a centerpiece of US free trade strategy. Generally, a mix of both bilateral and multilateral Free Trade Agreements (FTAs), with valued trading partners, have been used to execute that strategy.
The trade landscape has changed in the US. President Trump has repeatedly asserted that his Administration intends to abandon the multilateral paradigm and focus on bilateral agreements with key partners, working under the assumption that greater concessions can be gained from one-on-one negotiations. To that end, the United States has withdrawn from the Trans-Pacific Partnership (which will be signed by remaining members on March 8 in Chile). Threats to abandon the NAFTA appear to be tempered as NAFTA negotiations continue, but nothing is yet certain. At the same time, the US has moved forward with re-negotiating the US-Korea FTA, and starting the framework for negotiating individual free trade agreements with India and Japan. Possible new free trade agreements with Vietnam, the Philippines, and a post-Brexit UK are in an even more preliminary phase.
In this time of uncertainty, we wondered how our customers felt about the shift in FTA focus. Was this something that would really impact their businesses? Or simply another annoyance in the day-to-day?
During BDP’s Regulatory Compliance Seminar in Houston last week, we polled the audience members who represented US importers and exporters for their perspectives. (Some audience members were both.) While there were some retail and food production clients in the audience, the vast majority represented the chemical and oil/gas industries. And, at any given time, roughly half of the attendees participated in the poll for a specific question.
Nonetheless, we are able to extrapolate a few things:
73% felt that the NAFTA was antiquated and should be updated, while 10% felt the NAFTA did not need to be changed at all.
67% felt that withdrawing from the TTP was the wrong thing to do and the US will be left behind, 13% thought withdrawal was positive, and 20% were not sure.
The audience did not have strong feelings about the US Korean FTA. 36% wanted it left as is and 36% didn’t know. 21% wanted KORUS to be updated and 7% thought it should be canceled altogether.
We also posed to the audience which FTA would be the most beneficial for their organization (India, UK, Vietnam, Japan, Philippines). 49% of the audience said that all five were equally important. Opinions were more divided over benefits of Free Trade Agreements. 56% believed that they kept US manufacturing costs down, while 26% did not. 18% did not know. In dealing with current US trade positions, 43% were maintaining the status quo, and 30% of the audience was actively seeking to give input to the US government. 27% were actively investigating sourcing choices in their supply chain to avoid certain countries they felt might be problematic going forward.
With the growing pace of global trade, FTAs will continue to boost old and new emerging economies.
Our Houston event confirms that FTAs remain in the forefront of the trading community’s concerns. We will continue to share FTA information, both factual and anecdotal information from our customers, as the Administration’s strategy forges ahead.