This article was originally published in Global Trade Magazine on April 22, 2018
Businesses across Canada and the United States that currently make use of the North American Free Trade Agreement (NAFTA) are fairly passive about the outcome of the ongoing NAFTA negotiations and have not yet developed contingency plans to prepare for a potential US withdrawal from NAFTA.
According to “Preparedness for a Post-NAFTA World,” a study conducted by customs broker and trade services firm Livingston International, only a small contingent of small and medium-sized businesses that currently use NAFTA – four percent and six percent respectively – have contingency plans in place in the event of a NAFTA withdrawal compared to only one in five large businesses (18 per cent).
The study also revealed a fairly passive attitude toward the ongoing NAFTA negotiations amongst Canadian and US companies that use NAFTA and the potential impact to their business. The lion’s share of those businesses (46 percent) say that while they are concerned the NAFTA negotiations may not be successful, they have only a general sense of the impact on their business and have not yet started contingency planning. An additional 29 percent say they haven’t considered whether or not the negotiations will be successful or unsuccessful or how an unsuccessful negotiation could affect their business.
“While we remain hopeful negotiations will be successful, we encourage businesses not to wait until a US notification of withdrawal is issued to begin considering the impact to their business,” said Daniel McHugh, Chief Executive Officer, Livingston International, emphasizing the notification period is only six months long. “There are multiple potential outcomes to the NAFTA negotiations and businesses should be considering how each one might impact everything from their trade processes and landed costs, to their risk exposure, cash flow, profitability and market competitiveness.”