Business Leaders Wax Optimistic on North America Trade Deal

A majority of leaders from all three participating countries believe the agreement will be ratified and will produce positive business results.
David McCannOctober 1, 2019
Business Leaders Wax Optimistic on North America Trade Deal

Will the new United States-Mexico-Canada Agreement, which was agreed to by the leaders of the participating countries last November, ultimately be ratified by the legislatures of all three participating countries? And if so, what will result from it?

People who are interested in those questions prominently include North American business leaders who have purchasing authority. In a study commissioned by TMF Group, a provider of business administration support services, 1,500 such leaders — 500 from each country — were asked for their views on the trade agreement.

The results of the study, which was performed by Wakefield Research, conveyed an overall tone of optimism. Two-thirds (68%) of participants believed that the USMCA will be ratified by all three nations. Mexican participants were the most optimistic (88%), followed by those in Canada (60%) and the United States (56%).

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Respondents from Mexico also overwhelmingly expected the deal to have a positive economic impact within two years of implementation, with 70% of them saying so. Again, those from the United States (55%) and Canada (45%) were less optimistic.

And more than half of respondents said they believed that more foreign companies will invest in, or trade more, with each respective market if the USMCA is swiftly implemented.

“For [companies that] want to take advantage of this, the key is not to sit and passively watch the political process unfold,” said Mark Weil, TMF Group’s chief executive. “Even with a deal, firms wishing to export or invest will face complexities. So, it is wise to begin contingency planning now for both scenarios: ratification and failure.”

There was broad agreement by all three countries on factors that have held back cross-border investment. More than half (53%) of American survey participants blamed tariffs for inhibiting American entities from expanding internationally. That figure jumped to 59% among Mexican respondents.

Canadians were more worried about tax-related complexities, with 47% citing it as the biggest barrier.

When asked which top factors were preventing international business expansion, all three countries cited international trade tariffs as the top factor, followed by complexities around taxes, the cost of transporting goods, and compliance issues with local rules and regulations.

“Trade agreements are never a zero-sum game,” said Raimundo Diaz, TMF Group’s regional director for the Americas. “There are a few industries, like the Canadian dairy and pharmaceutical industries, who feel they are getting the short end of the stick. But like with any trade agreement there will be wins and losses among a variety of industries in each country.”

U.S. participants expected the manufacturing sector would experience the most international growth for U.S. companies, in terms of trade with other countries, in the next five years. That was followed by oil and gas, automotive, and agriculture.