Logistics and SCM NAFTA May 2011

Views:
 
     
 

Presentation Description

Macro and micro conditions for Logistics and SCM in the NAFTA region by Maria Rey, LALC, CELSC, Georgia Tech

Comments

Presentation Transcript

A Trilateral Perspective of NAFTA:

A Trilateral Perspective of NAFTA With the collaboration of Alejandro Nieto (SMU – Dallas, TX) Maria Rey (EMIL 2002) EMIL Class 2011 May 18, 2011

Agenda :

Agenda Introduction NAFTA Overview The First Decade of NAFTA NAFTA Next Stage: SPP The NAFTA Superhighway: Myth or Reality Impact of NAFTA on SCM – 5 Examples Analysis

Economic Globalization:

Integration of national economies into international economies through Trade Direct foreign investment Short-term capital flows International flow of workers Economic Globalization

Levels of Economic Integration:

Levels of Economic Integration *If the policies are not just harmonized by separate governments, but have a unified government with binding commitments on all members, then you reach political integration and have “full economic integration”. Source: The North American Free Trade Agreement by Katy Haas

NAFTA Overview:

NAFTA Overview

NAFTA - Overview:

1990- June, Mexican President Carlos Salinas de Gortari and US President George H.W. Bush announced the creation of a free trade area between The United States and Mexico . 1991. Formal negotiations began and Canada joined the project . 1994, January . North American Free Trade Agreement began . Major additions. the North American Agreement for Economic Cooperation (NAAEC) the North American Agreement for Labor Cooperation (NAALC). Recently, the Security and Prosperity Partnership of North America, designed to foster cooperation on issues of national security. NAFTA - Overview

North American Free Trade Agreement -NAFTA:

North American Free Trade Agreement -NAFTA NAFTA is one of the most powerful and wide-reaching treaties in the world. NAFTA represented in 1994 a $6 trillion economy with a population of 360 million. Ten years later, the NAFTA area grew to a $12.5 trillion economy with a population of 430 million

What is NAFTA?:

What is NAFTA? Effective as of January 1, 1994 A trade agreement between CANADA, MEXICO, and the UNITED STATES which provides for the elimination of tariffs on North American goods shipped among the three countries. Source: The North American Free Trade Agreement by Katy Haas

Background of NAFTA:

Background of NAFTA An Introduction Zedillo Clinton Salinas Marcos Source: The North American Free Trade Agreement by Katy Haas

Carlos Salinas de Gortari (1993):

Carlos Salinas de Gortari (1993) "For the first time ever, Mexico has a deadline for becoming more efficient. There is no more mañana ."

President Clinton's Remarks on the signing of NAFTA:

President Clinton's Remarks on the signing of NAFTA http://youtube.com/watch?v=b3ooMrgXido&feature=related

Slide 13:

UNITED STATES : Would solidify an expanding trade relationship, which would spur job creation at home and help to continue the revolutionary shift throughout Latin America away from state controlled markets toward freer markets. MEXICO : Lower inflation and foreign debt; create more well-paying jobs for Mexicans, thus producing less incentive for Mexicans to work illegally in the U.S.; Mexico would become a richer market for American exporters. Expectations and Goals Source: The North American Free Trade Agreement by Katy Haas

Top U.S.:

Top U.S. 1. Aircraft 2. Electronic Computing Equipment 3. Motor Vehicle Parts 4. Motor Vehicles 5. Semiconductors 6. Aircraft/Space/Missile Parts 7. Chemicals 8. Plastics 9. Airplane Engines/Parts 10. Refined Petroleum Products 1. Motor Vehicles 2. Oil/Natural Gas 3. Motor Vehicle Parts 4. Semiconductors 5. Electronic Parts and Imports Exports Source: The North American Free Trade Agreement by Katy Haas

NAFTA Pros :

NAFTA Pros Goods/Services at lower cost Most underdeveloped countries gain the most (i.e. standards of trade increased) Tariffs reduced Jobs created Mexico’s economy is growing again Source: The North American Free Trade Agreement by Katy Haas

NAFTA Cons:

NAFTA Cons Fuel for peso crisis (1995) Benefits Mexico more than the U.S. U.S. deficit with trading partners Loss of low-wage American jobs to Mexico Environmental problems Traffic congestion and delays along the borders Mexico’s dependency on U.S. imports Source: The North American Free Trade Agreement by Katy Haas

The First Decade of NAFTA:

The First Decade of NAFTA

Slide 18:

Source: LEDERMAN, Daniel, William F. Maloney & Luis Serven; Lessons from NAFTA for Latin America and the Caribbean Countries: A Summary of Research Findings ; The World Bank; December, 2003; p.V. “The report’s main conclusion regarding NAFTA is that the treaty has helped Mexico get closer to the levels of development of its NAFTA partners. The research suggests, for example, that Mexico’s global exports would have been about 50% lower without NAFTA, and foreign direct investment (FDI) would have been about 40% less without NAFTA. Also the amount of time required for Mexican manufacturers to adopt U.S. technological innovations was cut in half. Trade can probably take some credit for moderate declines in poverty, and has likely had positive impacts on the number and quality of jobs.” World Bank's Report

Slide 19:

Degree of Openness X+M GDP The opening of the Mexican economy has dramatically increased. Source: Banco de México; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 NAFTA’s Reasons & Objectives Openness

Slide 20:

Evolution of Mexican total & non-oil exports Since the signing of NAFTA, Mexican non-oil exports have shown significant growth. Source: Banco de México; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 Results of Negotiation Trade

Slide 21:

Foreign trade has shifted toward manufacturing and away from primary sectors. Export mix Exports (billion dollars) 1980 2004 Increase Total $18.0 $1 88 .6 10 times Manufacture $5.5 $1 58 . 9 2 9 times 1980 2004 Source: Banco de México; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 Results of Negotiation Trade

Slide 22:

Source : U.S. Census Bureau, Foreign Trade Division; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 U.S. imports from Latin America Since the signing of NAFTA, U.S. imports from Mexico have nearly doubled those from the rest of Latin America. GATT NAFTA Results of Negotiation Trade

Slide 23:

Source: US Census Bureau, Foreign Trade Division; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 . Exports to the U.S. 2004/1993 With the exception of China, Mexico leads in export growth to the US when compared to other regions and especially when compared to the rest of Latin America. Results of Negotiation Trade

Slide 24:

Mexico - U.S. trade (1990-2004) Since the beginning of NAFTA, Mexico has had a surplus with the U.S. Source: INEGI; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 Results of Negotiation Asymmetry

Slide 25:

Imports and quotas: corn Corn imports have surpassed negotiated NAFTA quotas. Source: Secretaría de Economía; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 Results of Negotiation Agriculture

Slide 26:

Source: U.S. Census Bureau, Foreign Trade Division; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 Trade balance with the U.S. Since 1995, Mexico has had a positive trade balance with the U.S. which has been significantly larger than that of the rest of Latin America with the U.S. Results of Negotiation Concentration

Slide 27:

Source: Banco de México; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 . U.S. share of Mexico’s foreign trade U.S. share of Mexico’s foreign trade in 2003 was rather similar to that of 1993. Results of Negotiation Concentration

Slide 28:

Source: Banco de México; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 . Mexico’s global trade (X+M) Mexico’s trade with other regions has shown greater growth than with North America. Region Growth rate 2004/1993 North America 213% Central America 349% South America 246% European Union 130% Other European 247% Asia 450% Africa 362% Results of Negotiation Concentration

Slide 29:

Source: Secretaría de Economía; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 Foreign Direct Investment Foreign direct investment has also had a dramatic increase as a result of NAFTA. The figure for 2001 includes Citigroup´s US $12.5 billion acquisition of Banamex. China Effect Results of Negotiation Investment

Slide 30:

Cumulative FDI by country of origin and by destination sector, 1994 - 2004 NAFTA partners lead as investors in Mexico, but other economies recognize its attractive potential. On the other hand, manufacturing is the leading destination sector of FDI. Source: Secretaría de Economía; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 . Results of Negotiation Investment

Slide 31:

Source: INEGI, U.S. Department of Commerce, Bureau of Economic Analysis; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 Four period moving average of quarterly year on year growth rates. A Chow test shows significant evidence (F-statistic=13.42) of a structural change in the relationship of GDP growth rates as a result of NAFTA implementation. Mexico and US GDP growth rates Mexico’s economic cycles are increasingly linked to those of the US. Expectations Generated by NAFTA Economic Cycle

Slide 32:

Source: INEGI, Federal Reserve Board; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 A Chow test shows significant evidence (F-statistic = 6.76) of a structural change in the relationship of economic cycles as a result of NAFTA implementation. Growth rates for Mexico’s manufacturing GDP and US industrial production Mexico’s economic cycles are increasingly linked to those of the US. Expectations Generated by NAFTA Economic Cycle

Slide 33:

Source: www.oanda.com; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 Exchange rate volatility Annualized standard deviation of one-year daily fluctuations. Exchange rate volatility has converged toward levels of the major currencies. Moreover, a floating exchange rate regime has allowed the economy to adequately absorb external shocks. Expectations Generated by NAFTA Exchange Rate

Slide 34:

CPI Inflation rate Source: INEGI, Federal Reserve System, Bank of Canada ; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 Inflation has consistently decreased and is now converging toward levels comparable to those of the United States and Canada. Expectations Generated by NAFTA Inflation

Slide 35:

Short term interest rate Source: INEGI, Federal Reserve System, Bank of Canada ; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 Short term interest rates have reached historical lows, and are also converging towards US and Canadian levels. One-month Treasury Bill rates. Expectations Generated by NAFTA Interest Rates

NAFTA & Its impact on Canada: Fears :

NAFTA & Its impact on Canada: Fears NAFTA created the largest free trade area in the world, covering at the time some 360 million people and nearly C$500 billion in yearly trade and investment. Canadian businesses wanted Mexico to open up to them. Organized labor and workers feared Canadian businesses would relocate to Mexico to take advantage of lower labor costs and lower environmental standards. Canadian nationalists wanted assurances that Canadian sovereignty would be respected and that Canada could protect its culture, water resources, and standards on health, safety, labor and social programs. Some provinces however worried about NAFTA’s effects on regional industries, such as British Columbia’s softwood lumber and Ontario’s car manufacturing.

NAFTA & Its Impact on Canada: Facts :

NAFTA & Its Impact on Canada: Facts The agreement also set out rules in areas such as investment, services, intellectual property, government procurement, competition policy and temporary entry of business persons. As was the case in the CUSFTA, Canada made no commitments to liberalize trade in social services or cultural industries. To promote the effective enforcement of each country's labor and environmental laws and regulations, separate agreements were negotiated. The North American Agreement on Labor Cooperation was designed to facilitate greater co-operation between Canada, the United States and Mexico in this area. NAFTA has had some clear effects on Canada’s economy. Canadian product exports to both Mexico and the United States roughly doubled between 1994 and 2000, from C$1 billion to C$2 billion to Mexico, and from C$183 billion to C$359 billion to the United States. NAFTA has made Canada more attractive to foreign and domestic investors.

Slide 38:

Key Events that Impacted NAFTA 9/11

Slide 39:

Key Events that Impacted NAFTA Lack of Structural Reforms

Slide 40:

Key Events that Impacted NAFTA Raising Crime

Slide 41:

Share in the US import market China has surpassed Mexico on its US import market share. Source: U.S. Census Bureau, Foreign Trade Division; presented by Jaime Serra @ SMU, Dallas, TX, January 2006 Key Events that Impacted NAFTA “Enter the Dragon”

NAFTA Next Stage: SPP:

www.spp.gov NAFTA Next Stage: SPP

The SPP- What Is It?:

The SPP- What Is It? The Goal: ensure North America- Best and safest place to live, work and do business By maintaining North American advantage in era of global sourcing Builds on the NAFTA, P4P, and border initiatives to: Better protect citizens from man-made and natural threats Promote safe and efficient movement of people and goods The SPP consists of an economic and a security component Based on the principle that common prosperity depends on mutual security Expands economic opportunities by reducing barriers and making businesses more competitive in the global marketplace

What SPP is Not::

What SPP is Not: The SPP is not a NAFTA renegotiation exercise The SPP is not an immigration initiative nor forum for dispute resolution The SPP is not a new treaty or trade agreement

Who Does What?:

Who Does What? SPP is an inter-agency initiative On the U.S. side: The White House/NSC Security- DHS Prosperity- Commerce Department Coordination- State Department

Security Component Working Groups:

Security Component Working Groups Secure North America from External Threats Traveler and Cargo Security, and Bio-protection Prevent and Respond to Threats within North America Aviation and maritime security, law enforcement, intelligence cooperation, and protection, prevention and response Further Streamline the Secure Movement of Low-Risk Traffic across our Shared Borders Develop and implement strategies to combat threats, such as terrorism, organized crime, migrant smuggling and trafficking

Economic (‘Prosperity’) Component Working Groups:

Economic (‘Prosperity’) Component Working Groups Manufactured Goods (DOC) Lower production costs for North American manufacturers by eliminating unnecessary regulatory barriers, ensuring compatibility of regulations and by eliminating redundant testing requirements Provide consumers with cheaper, safer, and more diversified and innovative products The Other Nine: E-Commerce and ICT (DOC) Energy (DOE) Movement of Goods (USTR) Transportation (DOT) Food and Agriculture (USDA) Business Facilitation (DOS) Financial Services (Treas) Environment (DOS) Health (HHS)

NA Competitiveness Council (NACC):

NA Competitiveness Council (NACC) Provides recommendations on North American competitiveness that could be addressed through the SPP Help governments focus their efforts by applying a cost-benefit analysis to “prioritize the priorities”

NA Competitiveness Council (NACC):

NA Competitiveness Council (NACC) Membership- 10 private sector representatives from each country; 30 delegates total U.S. Secretariat- Council of the Americas and U.S. Chamber of Commerce Canadian Secretariat: Canadian Council of Chief Executives Organization varies in each country

NACC Report:

NACC Report Enhancing Competitiveness in Canada, Mexico and the United States Put forward more than 50 recommendations to strengthen North American competitiveness in global markets while improving safety and security Report is divided into three priority areas: Border-crossing facilitation Standards and regulatory cooperation Energy supply and distribution

2007 The Montebello Report:

2007 The Montebello Report “Montebello” Five Priorities: Enhancing the Global Competitiveness of North America Safe Food and Products Sustainable Energy and the Environment Smart and Secure Borders Emergency Management and Preparedness

Vicente Fox hopes for NA Union:

Vicente Fox hopes for NA Union http://www.youtube.com/watch?v=vyq4gzvAeRc&feature=related

The NAFTA Super Highway:

www.spp.gov The NAFTA Super Highway

What is this?:

What is this? The NASCO Superhighway encompasses Interstate Highways 35, 29 and 94 , and the significant connectors to those highways in the United States, Canada and Mexico.  The Corridor directly impacts the continental trade flow of North America. Membership includes public and private sector entities along the Corridor in Canada, the United States and Mexico. From the largest border crossing in North America (The Ambassador Bridge in Detroit, Michigan and Windsor, Canada), to the second largest border crossing of Laredo, Texas and Nuevo Laredo, Mexico, and to Manitoba, Canada, the impressive, tri-national NASCO membership truly reflects the international scope of the Corridor and the regions it impacts.

Who is NASCO?:

Who is NASCO? NASCO is a tri-national, non-profit, trade and transportation coalition working to make international and domestic trade more efficient and secure along the existing network of transportation systems (including highways, rail, inland ports and deep-water ports) running north-south through the central U.S., Canada and Mexico. A non-profit incorporated group, NASCO was initially founded in 1994 as the I-35 Corridor Coalition and incorporated as NASCO in 1996. It is overseen by a Board of Directors representing its dues-paying members from the public and private sector. From almost immediately after the Jan. 1, 1994 entry into effect of the North American Free Trade Agreement (NAFTA), NASCO has sought and backed Corridor-related initiatives to enhance border security, cargo safety and operational efficiency of existing transportation infrastructure.

Who does form the Coalition?:

Who does form the Coalition?

The NASCO Super Highway:

The NASCO Super Highway http://edition.cnn.com/video/#/video/us/2006/06/22/tucker.nafta.superhighway.cnn?iref=videosearch

Example: The Dallas Logistics Hub:

Example: The Dallas Logistics Hub www.dallaslogisticshub.com

NAFTA Superhighway: Myth or Reality?:

NAFTA Superhighway: Myth or Reality? http://edition.cnn.com/video/#/video/bestoftv/2008/05/28/ldt.tucker.nafta.superhighway.cnn?iref=videosearch

Impact of NAFTA on SCM – 5 Examples – :

Impact of NAFTA on SCM – 5 Examples –

More US Companies Relocating to Mexico:

More US Companies Relocating to Mexico

More Mexican Companies using the US as platform for global growth :

More Mexican Companies using the US as platform for global growth

Explosive Growth of State of the Art Distribution Facilities:

Explosive Growth of State of the Art Distribution Facilities

Increasing Demand of Best of Breed SCM Technology:

Increasing Demand of Best of Breed SCM Technology

One Stop SCM Solutions: PLEXO:

One Stop SCM Solutions: PLEXO www.plexohub.com

Conclusions :

Conclusions

1. NAFTA has been successful on increasing and facilitating Free Trade:

1. NAFTA has been successful on increasing and facilitating Free Trade www.plexohub.com Almost no tariffs on U.S. industrial exports to Mexico. More than 90% of U.S. Goods enter duty-free. By 2008, 100% will enter duty-free. Institution of Dispute Resolution Process. U.S.-Mexico bilateral trade increased 232%: from $88 billion in 1993 to $292 billion in 2005.

2. North America is still far away from moving to a Economic Union status:

2. North America is still far away from moving to a Economic Union status

3. The Economic Integration is a reality at the local and regional levels:

3. The Economic Integration is a reality at the local and regional levels www.plexohub.com

4. The Regional and local integration is opening great SCM opportunities:

4. The Regional and local integration is opening great SCM opportunities www.plexohub.com

5. NAFTA has been good, but not enough…the deepening still uncertain:

5. NAFTA has been good, but not enough…the deepening still uncertain http://www.youtube.com/watch?v=_LtbLEKHsi0

Strategic Ideas that Successfully Address NAFTA’s Opportunities and Weaknesses:

Strategic Ideas that Successfully Address NAFTA’s Opportunities and Weaknesses Discussing the Business Vantage Point

SC Strategists Role: Sense-Making & Sense-Giving:

SC Strategists Role: Sense-Making & Sense-Giving News, Ideas, Decisions, Facts, Opinions, Theories… Sense-Making Sense-Giving SC Strategist

The REAL Fear!:

The REAL Fear! Clearly not about cheap labor. It is about integration of the North American marketplace. It is about moving up the value-added chain. It is about maintaining and increasing competitiveness and productivity. Mexico, like the U.S., fears losing its manufacturing sector to other countries. Over the last 5 years: China’s exports to the U.S. grew 300%. Mexico’s exports to the U.S. grew 30%.

… and fear is everywhere…:

… and fear is everywhere…

Today’s Approach:

Today’s Approach Specific Impact of NAFTA on YOUR Particular SCS Make Sense of NAFTA’s Pitfalls & Opportunities Give Sense of Their Impact on Different Supply Chain Strategies No Impact Marginal Impact Significant Impact Key to Survival

Opportunities to Seize & Pitfalls to Avoid :

Opportunities to Seize & Pitfalls to Avoid Your Top 10 List of…

My Top 11 List…:

My Top 11 List… Seen As Opportunities … Seen as Pitfalls… China China NAFTA Energy Markets Cross Border Congestion Integrated Highways Uncertain Political Support Mexican Consumer Market Currency Instability Mexican Ports U.S. Ports NAFTA Contract Manufacturing Mexican Human Talent Productivity Health Care Providing Violence and Security Retailing Drugs, Arms, Gangs Gateway to the Hemisphere Red Tape (in all member countries!) Vacation & Retirement Properties Product Safety & Quality Learning Across Borders Environmental Issues

Tri-lateral Collaboration for 21st Century :

79 Tri-lateral Collaboration for 21 st Century Global economics is the wave of the 21 st Century With its entry to WTO, China is ready for global expansion. Three driving forces: Culture, Management and Technology should be closely examined for this global collaboration. Tri-lateral Collaboration among China / US / Mexico business can generate significant impact in Pan Pacific trade practices. Chinese investments in the US can provide direct access to the North American investment and consumer markets via NAFTA

Share of world income :

Share of world income 1980 2000 U.S. 21% 22% P. R. CHINA 4% 12% MEXICO 2% 2% 80 Source: IMF

Redistribution of Income brings Opportunity:

Redistribution of Income brings Opportunity China’s share of World Income is increasing dramatically Cash available = Opportunity for Global Investments US share of World Income has slowed down Welcomes Global Investments and Trade for growth Mexico’s share of World Income remains flat Needs Trade and Investments for growth Preparietary Information Omega International Group, Inc. 81

Chinese Investment Opportunities in NAFTA and Benefits::

Proprietary Information Omega International Group, Inc. Chinese Investment Opportunities in NAFTA and Benefits : Direct Facilities ownership in US Foreign Trade Zone Business alliances with US owned companies for import/export under NAFTA Business partnerships with US owned companies for import/export under NAFTA Light Manufacturing in US Foreign Trade Zone for import/export under NAFTA Product distribution from US Foreign Trade Zone under NAFTA Direct access to the Maquiladora Program Local and federal tax advantages Access to technology and markets Joint development of products and services Import/Export tax advantages Import/Export tariff advantages Teaming with Mexican cross boarder manufacturing Opportunities Benefits

… if you’re a journalist or a politician, these issues matter by themselves, but what do they mean to you?:

… if you’re a journalist or a politician, these issues matter by themselves, but what do they mean to you? If you are designing your supply network strategy, what sense do they make to you? How are you addressing them in the context of your day-to-day operations?

Issue #1 NAFTA is a reality:

Issue #1 NAFTA is a reality 16.9% increase in surface trade 18.1 percent in trucking movements between U.S. and Canada 7.1% higher value of goods than in 2007 13.3% growth in surface transportation between Mexico and U.S.

Mexican carriers allowed to transport into US...:

Mexican carriers allowed to transport into US... Mexican Truckers: Keeping a low profile! Shhhhhhhh... (Picture taken outside of a Dallas DC) Ooops … that was so LAST year!

Issue #2 Border Congestion:

Issue #2 Border Congestion Canada/US Border Crossing Between Washington and British Columbia

Issue: Border Congestion:

Issue: Border Congestion Coordinating long-term infrastructure plans Reduce congestion and bottlenecks at major border crossings Deeper cooperation on the use of technology, like advanced screening equipment Strength trusted traveller and shipper programs New customs procedures and enforcement policies From Mexico to the U.S.

Border Crossing Bottlenecks US-7, Mexico-1:

Border Crossing Bottlenecks US-7, Mexico-1

Tectrol, Inc The need for a new network design:

Tectrol , Inc The need for a new network design Analysis to include two transportation modes: truck and rail Production and distribution facilities to be assigned simultaneously Variability in lead-times and transit times included Design and Optimization Challenges: Sourcing BOM Constrains Inventory Costs

Network optimization model that includes delays and uncertainty in lead-times:

Network optimization model that includes delays and uncertainty in lead-times

Issue > Intra-NAFTA: Border Issues:

Issue > Intra-NAFTA: Border Issues Thickening Borders More transactions vs offshore imports Impacts producers and customers Impedes JIT systems Several areas of Concern: Physical Infrastructure / Capacity Security vs. Trade – Risk Based? Multiple programs -- coordination lacking Customs Administration – Manpower, Technology, Permits, Fees Regulatory Barriers (e.g. truck load limits) 92

Global Steel Production Trends:

93 Global Steel Production Trends NAFTA below global growth trends Imports grew 5 percentage points over past 5 years

Canadian Steel Industry:

Canadian Steel Industry 94 Key economic indicators (2006) Employment 30,000+ Sales $ 12.6 billion Production 15.4 million tonnes International Trade (2006) Exports $ 5.9 billion Net Imports 3.8 million tonnes Canada in global “Top 20” Domestic and export markets Automotive, industrial, energy, infrastructure, construction Strong supply chain linkages (goods & services) A “strategic industry” (SPP

Indirect Steel Trade:

95 Indirect Steel Trade Source : World Trade Atlas, AISI calculations NAFTA Indirect Steel Trade with non-NAFTA Countries -10.9 -12.3 -14.1 -11.9 -12.7 -13.9 -15.3 -1.5 -1.5 -1.9 -2.1 -2.4 -2.9 -3.4 -1.8 -2.2 -2.4 -2.4 -3.5 -4.1 -4.6 -25 -20 -15 -10 -5 0 2000 2001 2002 2003 2004 2005 2006 Millions of Net Steel Tons Equivalent United States Canada Mexico

The Steel Industry from a Canadian Perspective: Manufacturing Challenges:

The Steel Industry from a Canadian Perspective: Manufacturing Challenges 96 Source: Canadian Manufacturers and Exporters

The Canadian Steel Industry Response:

The Canadian Steel Industry Response Competitive environment for steel producers continues to transform Changing ownership and production patterns Direct and indirect competitive pressures, especially from Asia; subsidies a factor Cost pressures on inputs and transportation (including $C effects) Regulatory impacts Economic conditions/uncertainties Logistics implications: Close attention to structural changes in markets and within producers (customers) Producers and customers seek innovative and lower-cost logistics solutions Joint interest in effective infrastructure 97

Issue # 3 Environmental Concerns:

Issue # 3 Environmental Concerns Mexico City produces 5,100 tons of organic waste daily. 600 tons come from the city's sprawling Central de Abasto, or central marketplace. Close to 80 percent of the CEDA's waste goes to the landfill. Before the closure, only a small fraction of the organic waste generated at the market -- between 30 and 40 tons -- was reused as compost at the West Dump.

Issue # 4 Fairness in Trade:

Preliminary figures Source: Banco de Mexico and INA Issue # 4 Fairness in Trade Contrary to popular belief, Mexico is more a buyer than a seller in the automotive industry!

Issue # 5 Network Design:

Issue # 5 Network Design Will NAFTA superhighways affect location of strategic distribution centers? Artist Rendition

QUEBECOR Willingness to face realities!:

QUEBECOR Willingness to face realities! Quebecor World Logistics (QWL) ships over 9 billion pieces of mail and 4.2 billion pounds per year. Through the QWL National Consolidation Network, customers achieve deep postal penetration, lower delivery costs, reduced inventories, improved transit times and reliable, on-time delivery. All freight moves through their 7 regional consolidation centers (Chicago, IL; Memphis, TN; Atlanta, GA; Edison, NJ; Los Angeles, CA; San Francisco, CA and Portland, OR), where QWL consolidates volume from all Quebecor World and third-party customers

Shifting, Merger, Splitting, Acquiring, Moving, Selling, Closing, Opening…:

Shifting, Merger, Splitting, Acquiring, Moving, Selling, Closing, Opening… From Depew (Buffalo) to the world! The magic of Harry Potter

The MUSTS from Quebecor expansion into the U.S.:

The MUSTS from Quebecor expansion into the U.S. The ability to generate accurate perceptions and assumptions about the US The desire to do business in the US as it is done in the US, not just expand the concept that succeeded in the home country The availability of US managers experienced in US operations is essential to success The need for US operation to have its own specific operating goals and benchmarks, including financial goals The company’s ability to learn and adapt based on current operations.

Issue # 6 Uncertainty & Red Tape:

Issue # 6 Uncertainty & Red Tape Minimize risk by integrating vertically Different parts of the business in different countries Retail and Sourcing in Canada Sourcing and Distribution in the US Manufacturing and Sourcing in Mexico and Central America Solving the issues of lack of visibility and tracking!

The Importance of the NAFTA Certificate:

“Why does it matter? It’s all duty free anyway, right?” The Importance of the NAFTA Certificate Importers using an invalid NAFTA Certificates of Origin , will be denied NAFTA origin duty free status, and duties will be applied retroactively. Exporters are responsible for determining qualification under NAFTA , and for completing an accurate certificate. The importer of record is ultimately responsible for un-remitted duty and GST on imported goods, as well as applicable penalties. Periodic Verification Audits by Canada Customs, NAFTA Certificates are coming under greater scrutiny. AMPS (Administrative Monetary Penalty System): Introduced in 2001 as a penalty regime to be used in case of intentional, or negligent misclassification

Issue # 7 Product Quality:

Issue # 7 Product Quality

Food Industry Solution: Rely on their own standards:

Food Industry Solution: Rely on their own standards Increase cooperation and information sharing on food safety More compatible food and product safety standards Improve continual recall capabilities Strengthen respective regulatory and inspection systems

Issue # 8 Internal Markets in Mexico:

Issue # 8 Internal Markets in Mexico Private company, with estimated NOPAT of 2% (about industry average). Sales of $10B with $0.75b in Mexico with 25 stores Niche player competing with giants Cross-learning between the U.S. operation and Mexican operation… Improved mix in Mexican stores and improved merchandising for U.S. stores serving Mexican consumers

The Future of North American Integration:

The Future of North American Integration Immigration, security cooperation, and cross-border commerce in the post-September 11 environment the establishment of a permanent North American Court on Trade and Investment, to replace the current ad hoc tribunals the possibility of widening NAFTA to incorporate countries in Central America and the Caribbean systematic collaboration in dealing with criminal drug trafficking, environmental protection, energy and water management, and transportation, communications and other infrastructure development. Brookings Institute

Slide 111:

“The primary purpose of the North American Free Trade Agreement (NAFTA) was not to facilitate trade among separate sovereign societies. Rather, it was to promote an integrated continental economy and establish rules to govern it” Economic Policy Institute Briefing Paper 2006

It is not a pro-American or anti-American world…:

It is not a pro-American or anti-American world… It may be a NON American World!

Nobody has ever won betting against the U.S.:

Nobody has ever won betting against the U.S. However…

And Latin America Understands It!:

And Latin America Understands It! Cooperation, Trade, Policy Alignment

Maquiladoras Export Processing Zone:

Maquiladoras Export Processing Zone

Nafta has increased foreign direct investments in Mexico:

Nafta has increased foreign direct investments in Mexico

Maquiladoras Export Processing Zone:

Maquiladoras Export Processing Zone

And in Canada as well :

And in Canada as well

A Trilateral Perspective of NAFTA:

A Trilateral Perspective of NAFTA With the collaboration of Alejandro Nieto (SMU – Dallas, TX) Maria Rey (EMIL 2002) EMIL Class 2011 May 18, 2011

authorStream Live Help