Supply Chain

The Parable of the Wizard and NAFTA

“Say hi to Wizard Bernie while you’re down there,” he yelled at the falling figure.
Gregory HusisianMarch 20, 2017

There once was a very powerful wizard who, quite late in his life, cast the Spell of the MAGA, which allowed him to become the ruler of a great kingdom. But though he ruled all he could see, he was not happy, because he was certain the kingdom to his south was causing great hurt to his land.

“This southern kingdom is surely a thorn in my side,” he would muse, while praying to the great and powerful Goddess Twitter. “While its maids may be fair, and the powerful tequila potion has certainly been a boon to the many business spells I have cast over the years, I cannot shake the feeling that my predecessor wizards were hoodwinked in their negotiation of this Pact of NAFTA.”

Not wanting to act precipitously, the wizard called in a rich artisan with vast estates stretching across both kingdoms. “Tell me,” he asked the artisan, “has this Pact of NAFTA not caused great economic harm to my subjects?”

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The artisan thought for a moment. “I say no,” he said at last. “While in some cases there have been livelihood losses, the Pact of NAFTA has allowed our artisans to create a supply chain that stretches from the farthest points of the north to the warm climes of the south.”

That supply chain “allows them to compete with the kingdom to the east, which sends us its wares in never-ending quantities, and which is creating its own versions of the Pact of NAFTA with many kingdoms to the south. I think it actually has made us more competitive,” he concluded.

The wizard was quite vexed with this response and threw the artisan down the deepest well. “Say hi to Wizard Bernie while you’re down there,” he yelled at the falling figure.

The wizard then brought in a famous NAFTA scholar. “Is it not true,” he queried the scholar, “that each time the four seasons pass, this Pact of NAFTA leads to the loss of billions of gold coins from our treasury?”

The scholar rubbed his beard in a thoughtful fashion. “The deficit in trade indeed amounts to 60 billion gold coins a year,” the scholar conceded.

“Yet we cannot forget that the southern kingdom is our second-largest trading partner, that it buys 34% of our exports, that maybe 6 million of our people have jobs that depend on this trade, and that 40% of the value of the goods they send us actually first was created by our own artisans,” he added.

“Sixty billion gold coins is not much compared to the $1.2 trillion in annual trade with the southern kingdom. And while some workers may have lost jobs due to trade with the southern kingdom,” he concluded, “the real job losses are caused by our own clever artisans, which each year produce more and more machines to replace their workers, which would happen even if there were no Pact of NAFTA.”

The wizard was enraged by this response and immediately ordered the scholar thrown into the closest dungeon, although truth be told this wasn’t so bad because the wizard had insisted that all his dungeons be redone with plenty of gold and granite and that all prisoners be served well-done steaks.

Still wishing to hear all counsel, the wizard called in his last adviser, the countess of his treasury. “Is it not true,” the wizard said, “that our land would be better off if we cast a spell to eliminate this Pact of NAFTA?”

“Oh my, no,” the countess nervously said. “Before the Pact of NAFTA, the southern kingdom had tariffs that far exceeded ours, and this situation could return without the Pact. The goods from the southern kingdom help keep our prices low, helping your subjects everywhere.”

The countess continued. “And the southern kingdom now cooperates with us on so many things, like the fight against the trafficking in illegal potions and in helping stop the flow of untraceable gold coins, because the Pact has made us good friends. And if the southern kingdom can no longer send us its goods, then what of its workers? Will they not come to our own fair land to seek their fortunes?”

After concluding with these remarks, the countess closed her eyes, fearing she would enjoy the fate of the artisan and the scholar. Yet when she opened her eyes she saw, to her wonder, that the wizard actually had taken her words to heart.

“So if what you say is true,” the wizard slowly said, “then what is needed is not NAFTA elimination, but NAFTA … reform. And not less trade with the southern kingdom, but perhaps … more, but on updated terms?”

And with that epiphany, the wizard flew into a bustle. He announced to the Goddess Twitter that instead of eliminating the Pact of NAFTA, he would instead seek its reform. He ordered that the artisan be retrieved from the well, and received his ideas for leaving in place the central idea of low tariffs, but premised on more realistic country-of-origin rules that provided for increased domestic content and strengthened provisions to prevent other kingdoms from taking advantage of NAFTA free trade rules.

He wrote down ideas about how enhanced de minimis valuation levels were needed to allow more goods to flow between the countries without the casting of the Spell of Red Tape.

The wizard brought the scholar back from the dungeon to hear his counsel that a new Pact of NAFTA should address non-tariff barriers that arbitrarily restricted exports, include enhanced protections of intellectual property, and impose more stringent environmental rules on the southern kingdom.

And he listened to the countess, who developed ways to counteract a particularly vexing way in which the southern kingdom’s adjustment for its tax of the VAT made it more difficult for the wizard’s artisans to sell to the southern kingdom.

And eventually it came to pass that there was a new and updated Pact of NAFTA – one modernized to deal with things never contemplated in the old Pact, such as new ways of electronically sharing data and electronic spells, enhancing cooperation to combat evil wizards who sought to steal secret data using electronic spells, and new forms of electronic trade between the two kingdoms.

And the wizard was so happy with the result that he even bought a new MAGA wizard hat made in the southern kingdom.

And with that the wizard ended his preoccupation with the southern kingdom. And while he was perhaps not happy, he was … content. And that was good enough for all the people of the land.

Gregory Husisian is a partner and litigation attorney at Foley & Lardner.