TMF Group today published new research that weighs sentiments around the impact that the proposed United States-Mexico-Canada Agreement (USMCA) will have on cross-border trade in North America.
The data reflects an overall tone of optimism amongst North American business leaders, including a majority belief that a signed deal will have an immediate and positive economic impact in each respective market. The study also sheds light onto likely trade blocs, growth industries and regulatory market factors that could hinder or promote economic growth for each of the North American economies.
The survey, which was commissioned by TMF Group and conducted by Wakefield Research in August 2019, sampled 1,500 business leaders, defined as full time employees with purchasing authority. The total sample size was comprised of 500 respondents from the United States, Canada and Mexico, respectively.
Notable statistical results include:
- 68% of respondents believe the USMCA trade deal will be ratified by all three nations. Mexico was the most optimistic (88%) with slightly lower confidence from Canadian (60%) and American (56%) participants.
- Respondents from Mexico overwhelming (70%) believe the deal would have a positive economic impact within two years of implementation, compared to responses from the U.S. (55%) and Canada (45%).
- More than half of the total respondents believe that more foreign companies will invest in, or trade more, with each respective market, if the USMCA agreement is swiftly implemented.
Mark Weil, TMF Group’s chief executive officer, said: “Continental North America is currently one of the biggest and most successful free trade areas in the world, so ratification of the treaty has huge ramifications for the three national economies and for the wider globe.
“Our data reinforces the expectation that the USMCA will be ratified, and shows a slim majority expect businesses to benefit from it. For firms who want to take advantage of this, the key is not to sit and passively watch the political process unfold – even with a deal, firms wishing to export or invest will face complexities when dealing with Mexican and Canadian markets. So, it is wise to begin contingency planning now for both scenarios: ratification and failure.”
Notable regional results include1:
- U.S respondents ranked countries or trade blocs where American companies are most likely to trade over the next five years as: Mexico (47%), Canada (41%), United Kingdom2 (33%), Japan (30%), European Union (30%) and China (29%).
- Over the same time period, respondents from Mexico believe Mexican companies are most likely to trade with: China (64%), U.S. (63%), Canada (61%), European Union (41%), Japan (41%) and Brazil (22%).
- Canadian respondents similarly ranked likely trade partners as: U.S. (48%), Mexico (48%), European Union (42%), China (37%), United Kingdom (33%) and Japan (26%).
From a wider viewpoint, there is broad agreement between all three countries on the factors holding back cross-border investment. 53% of American business leaders blame tariffs for inhibiting American entities from expanding internationally – a figure which jumped to 59% among Mexican respondents. Canadians are more worried about the complexities caused by dealing with taxes, with 47% citing it as the biggest barrier.
Other notable barriers to trade include:
- 38% of Canadian respondents think that complex local regulations prevent US and Mexican businesses from expanding into Canada.
- 47% of Canadian respondents say transportation costs discourage them from expanding internationally.
- 23% of US respondents say cultural differences deter them from expanding internationally.
- 30% of Mexican respondents are concerned that complex local HR rules and regulations stop US and Canadian businesses from expanding in Mexico.
- 36% of Mexican respondents think a lack of foreign market data is holding back their cross- border expansion.
Raimundo Diaz, TMF Group’s regional director for the Americas, said: “Trade agreements are never a zero-sum game, there are a few industries like the Canadian dairy or 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 amongst a variety of industries in each country.”
This content was previously posted on the TMF Group’s website.