Business satisfied with NAFTA

Poll indicates hope for future

By David M. Dickson (Contact) | Wednesday, June 18, 2008

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Nearly 15 years after the North American Free Trade Agreement (NAFTA) took effect, 41 percent of U.S. manufacturers think they are more competitive today than their global rivals, according to a survey of more than 300 manufacturing executives from the United States, Canada and Mexico.

Only 13 percent surmise they are less competitive. In addition, 57 percent of U.S. manufacturers expect to become more competitive over the next five years; only 11 percent worry they will become less competitive. The survey "Made in North America" is expected to be released on Wednesday.

Many of the businessmen thought NAFTA has generated "substantial positive impact on revenue growth and business performance," said the survey, which was commissioned by Deloitte Touche Tohmatsu, an international auditing and consulting firm, and sponsored by several trade associations, including the National Association of Manufacturers (NAM).

The survey reveals that "North American executives have not abandoned North America and have a fairly strong plan for continuing to build their manufacturing businesses around operations in North America," Craig Giffi of Deloitte LLP, a principal author of the report, told The Washington Times.

Noting the survey reflects "quite a bit of optimism," Frank Vargo, the vice president for international economic affairs at NAM, said, "Most companies feel that NAFTA has been beneficial to them in terms of improving their competitiveness in North America and globally." He cited a figure in the report showing that five times as many executives (49 percent) said NAFTA had a positive impact as said it had a negative effect (10 percent).

"The optimistic evaluation of NAFTA at the elite executive level is quite different from what average Americans think," said Todd Tucker, research director at the Global Trade Watch division of Public Citizen, a liberal think tank that opposes NAFTA. Citing a recent report by the Pew Global Attitudes Project, Mr. Tucker pointed out that Americans rank last among 24 countries in their view of whether growing trade ties between countries are good for a nation. "Under NAFTA," he added, "there has been a continuation of a generation of wage stagnation."

The study divided manufacturing into components, including production, information technology, research and devel- opment (R&D), distribution and logistics, sales and marketing, customer service and financial management.

In all areas except production, considerably larger numbers of executives expected to be competitively stronger in 2012 than the number who expected to be weaker. The report suggests that the exceptional performance in non-production categories of the "entire value chain" probably explains the executives' optimism.

The production area, however, is a big concern for the North American executives, 61 percent of whom expected the production link of the manufacturing value chain to be competitively weaker in 2012 than today. The key challenges on the production front involved labor costs, the availability of skilled labor, work rules and regulation by government bureaucracies, the report says.

"If the production portion of the value chain loses its luster in North America," the report warns, "it remains to be seen whether manufacturers in the region can hold on to their lead in global innovation and continue to march up the value chain to higher value-added, and more profitable, products and services."

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