Wednesday, November 16, 2016

Donald Trump’s Nafta Plan Would Confront Globalized Auto Industry
Analysis by Franco Agoglia
Original article published: Updated Nov. 10, 2016 7:51 p.m. ET

In light of now President-Elect Trump’s proclamation that he will dismantle NAFTA and renegotiate trade policies with Canada and Mexico, the question has been raised as to what the auto industry will do in response? The auto-industry has evolved throughout the years to become a truly international enterprise. Materials come from across the world to be assembled somewhere else then travel again to be assembled into something else then on and on. Every nut and bolt that makes up an automobile travels all around the world to such an extent that would make anyone jealous of the stamps it must have on its passport.

          Politically President-Elect Trump’s motive is to bring back jobs to the United States, however the economical and logistical repercussions of such actions will certainly harm the US auto-industry. The so-called “Auto Alley” which runs from the Great Lakes to the Gulf of Mexico has scattered across it many suppliers and assembly plants. This alley has been formed as the transition of assembly plants chased down cheaper labor in Mexico. With major manufacturers split between the rust belt and Mexico many suppliers have been stretched along the middle with the effort of being closer to their customers.

          If trade barriers imposed by a Trump administration result in a competitive disadvantage to the now established automotive plants in Mexico the immediate and short-term outlooks would not be so good. Because of the nature of the equipment, training and logistics involved with moving back to the United States would be drastic no immediate change will be felt other than I hike of cost to manufacturers and consequently consumers will arise. However, it is possible that this will yield a benefit in the long-run for manufacturers, when or if those plants and suppliers present in the Auto Alley become more focused again. The result of said centralization of the industry will allow manufacturers and suppliers to be closer, which consequently will allow quicker response up and down the supply chain and also benefit of unified industry know how similar to that observed in Silicon Valley for the tech-industry.

Regardless of what happens in the near future with the US trade policy one thing is evident. The globalization of industry throughout has deeply intertwined countries with one another. Any small or significant change in political or governmental policy in regard to international trade has profound impact on any industry. However no matter the effect brought upon by policy, corporations will adapt and carry on business as usual. The real question is how will us consumer fell it?  

1 comment:

  1. It is true that US consumers will be the group that suffers the most from higher prices due to higher cost of manufacturing. I don't think we live in an era where a country can nationalize and still prosper. Like Franco said, everything is connected to each other globally and it's a force that cannot be reckoned with. In international economics we learned that countries need to specialize in a product where they have a competitive advantage. It's not advantageous for a country to produce everything. I feel that if the US isolates itself, the world will learn to operate without us and it will prosper. Plus politically, countries will strengthen their alliances from creating trade policies and the US will end up being like the black sheep. This is what happened with Cuba and now they are opening up to foreign trade because isolating themselves and creating the wrong alliances has caused their country to suffer. I think the new presidency needs to really think about how to handle foreign trade policies and the repercussions for each decision.