Looming NAFTA Talks Spark Concern, Hope in Promo Industry

President Donald Trump has often lambasted the North American Free Trade Agreement, calling it the worst in deal in American history while asserting that it has driven U.S. jobs abroad. Starting this week, Trump’s administration will have the chance to work out a revised agreement, a prospect that has drawn a range of reactions across the promotional products industry.

On Wednesday, Trump’s team will begin NAFTA renegotiations with representatives from Canada and Mexico in Washington D.C. Talks will continue throughout the year, with Mexico eager to have a new deal in place before January and its 2018 elections.

In July, the Office of the United States Trade Representative laid out U.S. objectives for the negotiations. Top goals include cutting the trade deficit with Mexico, which was $63 billion last year.

Another objective is that the U.S. be able to pursue “trade remedies” to “enforce rigorously its trade laws” – language some analysts interpret as the Trump administration being keen to impose certain types of tariffs. As it stands, products from the U.S., Canada and Mexico cross each other’s borders without tariff.

The Trump administration also reportedly wants to remove the NAFTA panel, which could make it easier to impose tariffs. And, the president’s team wants to increase labor standards in the three NAFTA nations – a move that could drive up the cost of labor in Mexico, potentially making workers there less appealing to U.S. firms.

Certainly, the prospect of new tariffs on goods from NAFTA partner countries has some in the promo industry concerned.

Harry Ein, owner of Perfection Promo, an iPROMOTEu (asi/232119) affiliate, told Counselor he worries that a U.S.-imposed tariff could drive up the cost of promotional products produced in Mexico. That could have a ripple effect, impacting suppliers in America and potentially causing distributors to lose sales as budget-conscious buyers decide to spend their marketing dollars on advertising mediums that are not promotional products. “It’s hard to say where the talks are going to go, but my concern is they could do things that limit the products we have available to us or drive up the cost of products,” says Ein.

Meanwhile, other top industry pros don’t see the NAFTA negotiations as a cause for concern. “I do not believe there will be any changes in our relationship with companies south of the border regardless of the NAFTA conversations,” Memo Kahan, president of Top 40 distributor PromoShop (asi/300446), told Counselor. “We need the Mexican workforce as much as they need us. There will be a middle ground if there are any changes.”

In fact, Kahan believes the negotiations, if executed well, could lead to gains for the American economy – a development that would ultimately benefit promotional product distributors, too. “I see this as a great opportunity for us to export much more than we currently do,” Kahan says. “Our economy’s success is based on our exports. Mexico is the gateway to Central and South America. Thus, we need to figure out ways to send more, while still bringing in merchandise.”

Other industry executives opined that it’s too early to forecast how the negotiations will go, saying substantive discussions must first occur to determine what the three negotiating partners will truly push for.