BUS497 CSUN The Impact of Canceling the NAFTA

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Description

Predicting the impact of cancelling the North American Free Trade Agreement (NAFTA)

on overall Business Strategy in the California agriculture industry
Key Themes
- Briefly discuss the development, purpose, and formalization of Business Strategy.
-Discuss the role of any relevant public policy and/or government legislation, and the
possible impact on the evolution of Business Strategy, in California agriculture
-Discuss how the end of NAFTA might change the ways that Agri-business Strategy is
developed and implemented in California, over the next 5 to 10 years
- Make specific business policy recommendations for the agriculture industry, over the next
5 to 10 years

IMPORTANT: The overall page length for your memos is a minimum of three (3) and a
maximum of four (4) single-spaced pages.

Sections:

1-Overview

2-Details

3-Conclusion and Recommendations

Instructions:

-Font size 12, single spaced, 5 references minimum

-Clear introductory sentence in first paragraph (e.g., “This memo is about /
concerns / will discuss . . . ” etc.)

“Details” section: all important supporting evidence is documented with
references (author or organization, and year) in the body of the memo
- “Details” section: good use of sub-headings to help ideas “jump out” at reader
- “Details” section: good use of white space (one line) between paragraphs
- “Conclusion and Recommendations” section: your recommendations for action
(or “next steps”) are clear and easy to read
-“Bibliography” / “References Cited”: use either APA or MLA format (note, I
might actually read this section first, in some cases!)


**Further instructions are included in the attachments and a sample memo

Unformatted Attachment Preview

MEMORANDUM TO: Students of BUS 497-A CSUN / Nazarian College of Business & Economics FROM: Blaine D. Pope, Ph.D. Lecturer, BUS 497-A SUBJECT: How to Write a Concise and Effective Memorandum (A memo about writing memos) DATE: 27 January 2018 OVERVIEW This paper concerns how to present ideas through the medium of a memorandum—a concise form of written business communication, designed to summarize information and highlight potential action items quickly. This means of communication can be found in a wide array of professional settings. In the body of the document you are reading here, the medium is also part of the message. Notice the structure of this document. Follow it, practice it, and you should have little problem in writing a clear and effective office memorandum over the course of your career. Memoranda can be on almost any topic but in each case the basic idea remains the same: to condense and simplify material for quick reading, and to facilitate organizational decision-making.1 Therefore, in this class, your memos should always contain suggested next steps (or action items) in the final section—“Conclusions” and/or “Recommendations.” IMPORTANT: The overall page length for your memos is a minimum of three (3) and a maximum of four (4) single-spaced pages. If you exceed the upper limit, I simply won’t read past the fourth page. DETAILS Memos should not usually be flowery or overly prosaic. When writing in memo format, it is okay (even encouraged) to use relatively dry language or wording. The idea here is to let the true power of your ideas (the underlying concepts the words should be conveying) speak for themselves. This can best be done by highlighting your ideas according to the following simple format—just like in you PowerPoint executive briefings 1 There is also an organizational historical dimension to memo writing. For further details, see the definition and origins of the Latin word, “Memorandum” in the Appendix section. Page 1 of 12 A memo about writing memos B. Pope, BUS 497-A / presentations. The same basic principles apply in each case—simplicity. Less can be more. • Basic identifying information: name and titles (and possibly the work units) of individuals involved, plus date, subject or topic at the top of the first page (see above); and page numbers typically at the bottom of the page. This is especially important for historical purposes. People who have never met you may read your memos months—or even years—later. This basic identifying information can help set some of the organizational context for those readers. • Come to the point, immediately: wording along the lines of “This is a paper on/about/concerning . . . “ should usually be your first sentence. But by all means, it must be somewhere in your first paragraph. This is not negotiable. • Use “Overview-Details-Conclusions/Recommendations” format: in much the same way that we employ executive briefings via PowerPoint, give your readers the brief overview of the issue(s), followed by the details explaining the importance of the issue(s), followed by your conclusion and/or recommended next steps. • Consider itemizing an array of solutions: it’s one thing to eloquently identify problems; but, from a supervisor’s or a chief executive’s perspective, the next thought is typically something like, “Oh, okay, so what do your recommend we do about this issue?” Supervisors also usually like choices: consider an array of three (3) options. - Option 1: a reasonable choice, but not necessarily the one you most favor. Option 2: a choice you might not advocate or actually prefer Option 3: the choice you are actually recommending; the action you are suggesting Then, having noted your own recommendation or choice, briefly explain to your reader why you are recommending it. • Consider using sub-headings, to highlight certain key ideas: again, the basic idea is ease of viewing / reading. • Quotes: typically, any quote that would take up more than two full lines of text on a regular page should be indented (see appendix). • Avoid run-on sentences like the plague: an example of a run-on sentence is a sentence that just seems to go on and on without any kind of pause or break because the writer just seems to have so much to say in that particular sentence so every idea that he or she thinks is important at that precise moment—just like a brand new beautiful pair of shoes that deep down inside you actually know are too small for your feet—must somehow come-Hell-orPage 2 of 12 A memo about writing memos B. Pope, BUS 497-A high-water be crammed in to that space. [This is a run-on sentence. Simple rule of thumb, if you have to pause to take a breath, then you probably need a period at that point; or at least a semi-colon. Break your long and rambling thoughts into two or more sentences. You reader will appreciate that.] • Use white space on the page wisely: same reason as above, ease of viewing for your readers. Just like with PowerPoint, too much text that appears crammed together on a page is not a good thing. • Appendixes: for purposes of our class, anything you cannot fit into your 4-page, single-space page limit, you can put into an appendix. Remember that this is merely supporting material that can help to bolster your argument. For purposes of this class, this optional section has no page limits. This might also be a good place to include charts, graphs, or other forms imagery, which help support your basic points, and recommendations. CONCLUSION AND RECOMMENDATIONS The “Conclusions” and/or “Recommendations” section should initially restate your introductory sentence (which states “This paper is about X,Y, Z”). But you should feel free to embellish it, slightly, based on the strong case you’ve hopefully presented to your readers. In many ways, you’re selling something here: you’re selling your ideas. So, feel free to be somewhat “forceful” in your conclusion section (but don’t go over the top with this idea!). You should be subtly forceful, here. Think of it as “soft power,” in your wording. The main idea of any good office memorandum should be to convey an array of ideas (even complex ideas) as simply as possible. But, when analyzing problems or challenges, it is also important to provide recommendations or solutions—even if they are only tentative. Present your readers with proposed options. This conveys to them the feeling of being the decision-makers; however, you retain the power to “guide” your decision-makers toward the recommendation(s) you would actually like to see implemented. Finally, please note: it’s not always the “best ideas” that get approved. Instead, it is those ideas which are most clearly conveyed in the minds of viewers, listeners, and readers. Ultimately—in business just like in politics—the “best ideas” end up being the ones that finally got approved and implemented. This memo writing assignment is an exercise conveying ideas clearly and effectively, so that your ideas will hopefully be the ones chosen for implementation. Follow these simple steps, and you should do well in your business writing, both in this class and elsewhere. Blaine Pope Page 3 of 12 A memo about writing memos B. Pope, BUS 497-A APPENDIX (Use the appendix to supply what you think might be supplementary-but-helpful information to support your position(s). Remember, in writing memoranda, you are in the business of selling ideas. So try to avoid unnecessary material, even here!) Page 4 of 12 A memo about writing memos B. Pope, BUS 497-A Please follow these general guidelines, using APA (American Psychological Association) format, when citing references. APA is a common format across a wide range of academic fields. It is not the only format, however. In general, when citing references, just try to remember the who-what-when-where format. Who published the material (author’s name)? What is the name of the material (the title of the book, article, book chapter, or URL)? When was it published? Where was it published (the name of the publisher, or web site, if relevant)? Image source: https://www.slideshare.net/sherfel/apa-citation-28207081 Page 5 of 12 A memo about writing memos B. Pope, BUS 497-A Memorandum Defined mem·o·ran·dum (from Latin) noun: memorandum; plural noun (Latin): memoranda; plural noun (English) : memorandums definition: a note or record made for future use. "the two countries signed a memorandum of understanding on economic cooperation" synonyms: message, communication, note, email, letter, missive, directive; more a written message, especially in business or diplomacy. "he told them of his decision in a memorandum" synonyms: message, communication, note, email, letter, missive, directive Law: a document recording the terms of a contract or other legal details. Origin late Middle English: originally from Latin, literally ‘something to be brought to mind,’ gerundive of memorare . The original use was as an adjective, placed at the head of a note of something to be remembered or of a record made for future reference. Adapted from: https://www.google.com/webhp?sourceid=chromeinstant&ion=1&espv=2&ie=UTF-8#q=memorandum Page 6 of 12 A memo about writing memos B. Pope, BUS 497-A How MBA students should not approach business writing! Source: http://navycaptain-therealnavy.blogspot.com/2012_12_01_archive.html Page 7 of 12 A memo about writing memos B. Pope, BUS 497-A Proper use of Quotations Proper use of quotations is also very important. Again, bear in mind the underlying concept or principle: ease of viewing and/or reading. With that in mind, it is important to know when / how to offset quotes from other writers from your own writing. Brief quotes: For an example of a brief quote, I will actually quote myself, from page 2 of this memo, above: “typically, any quote that would take up more than two full lines of text on a regular page should be indented.” Since this quoted sentence was less than two full lines of regular text, there is no need to indent it. It appears in italics simply to highlight it, for your ease of viewing here. Don’t use italics if it’s not really necessary, however. Longer quotes (more than 2 lines of text): Longer quotes: indent two (2) tab spaces. The following extended quote comes from my own 2007 Ph.D. dissertation. I am discussing the theory behind something called “world-systems analysis” (which I shortened to “WSA,” in this section), put forward by the American sociologist, Immanuel Wallerstein. I was required to use the formatting style of the American Psychological Association (APA); a virtual industry standard in many (but not all) of the social sciences. Beginning of Excerpt In this section on the approach to WSA, it is important to define our terms before proceeding further. According to Wallerstein (2000), WSA entails the following: The argument of world-systems analysis is straightforward. The three presumed arenas of collective human action—the economic, the political, and the social or socio-cultural—are not autonomous arenas of social action. They do not have separate “logics.” More importantly, the intermeshing of constraints, options, decisions, norms, and “rationalities” is such that no useful research model can isolate “factors” according to the categories of economic, political, and social. . . . We are arguing that there is a single “set of rules” or a single “set of constraints” within which these various structures operate. (p. 134) One of Andre Gunder Frank’s points of disagreement with Wallerstein came to be—in addition to privileging Europe (as Eurocentrism)—privileging human-to-human structures (as “humanocentrism”) to the exclusion of nonhuman/ecological structures which also influence those same human structures in a dynamic fashion. End of Excerpt Page 8 of 12 A memo about writing memos B. Pope, BUS 497-A Working (& Communicating) in Teams: Are you a “Thinker” or a “Doer?” Part of being an effective manager involves an element of introspection. Know thyself. Do you tend to be more of a “Thought Leader” or a “Do Leader?” One is not better than the other. Each requires an element of the other (thought versus action), in order to bring about success. Balance is the key. Thought without action soon rings hallow or pointless. Action without thought can prove to be costly—even outright dangerous. Ideally, organizations need diverse teams of people working on projects. In that diversity, hopefully, there will be a balance of “thinkers” and “doers.” Each group, in its own way, can serve as a kind of check-and-balance, with regard to the behavior of the other. Thinkers should not let the doers run away with things just because “We have to get something done!” By the same token, doers must remind the thinkers that, eventually, they must get something done. Where do you see yourself in the scheme of things, between thinkers and doers? Consider how this may (or may not) be reflected in your writing, speaking, and learning style. How does it reflect how you interact with colleagues? If you tend toward the “thinker” or “Thought Leader” side, for example, you might want to consider aligning with some “doers” or “Do Leaders,” to assist you in implementing your great ideas. If you tend toward the “doer” or “Do Leader” side, you might want to include people you know to have solid thinking, and who can sometimes ask tough questions of the group— before things go too far in the wrong direction. As you refine and complete your group papers in this class, consider your own personal style. Again, no one way is necessarily better than the other. It’s really an issue of what seems most appropriate (what seems to be the “best fit”) for a given assignment, task, or project.2 Look at the graphic image on the next page; then ask yourself where you believe you fit in, among the characteristics described there. 2 There are numerous, formal ways of objectively assessing your own personal style. One of these ways is the Myers–Briggs Type Indicator, or MBTI. It is designed to measure psychological preferences. It does this by assessing how people perceive themselves, their environment, arrive at individual decisions, and under what conditions they can work and perform best in groups. Page 9 of 12 A memo about writing memos B. Pope, BUS 497-A Page 10 of 12 A memo about writing memos B. Pope, BUS 497-A Develop Your Unique Communication Style: Play to your strengths, but Be Aware of Your Weaknesses Not all sound thinkers are good writers; and not all good writers are eloquent speakers. Consider where you fit in, among these three domains of communication. What are your strengths? Where could you improve? Know thyself. Ancient Rome: Caesar Augustus Below: a depiction of Caesar Augustus (reigned 27 BC to 14 AD) speaking before the Roman Senate. As the “chief executive” of the Roman Empire, his eloquent words could move armies, set domestic social welfare policy, as well as hopefully “appease the gods.” Most of important of all, he had to appease the Roman masses who had the power to determine if he either remained in power as Emperor, or met an early death. He would do this through a combination of thought, word, and deed. Image Source: HBO Rome. Page 11 of 12 A memo about writing memos B. Pope, BUS 497-A Ancient Rome: Caesar Claudius Below: a depiction of Caesar Claudius (reigned 41 to 54 AD), at his desk, writing his memoir. He had been a precocious youth, with two distinct physical handicaps. Despite his having both a stutter and a limp (and his family initially thinking his congenital condition was some form of mental retardation), Claudius went on to become a brilliant and effective emperor of Rome. Although he sometimes struggled with his own speech (particularly when under stress), he was an excellent writer and strategic thinker. He was also known to be a first rate historian. Moreover, he used his vast knowledge of Roman politics and the imperial palace to surround himself with a highly competent staff—people capable of implementing his many brilliant ideas. Image source: The BBC’s “Masterpiece Theater” series, I, Claudius. Page 12 of 12 A memo about writing memos B. Pope, BUS 497-A MEMORANDUM TO: Blaine D. Pope, Ph.D. Professor, BUS 497 - A FROM: (Student Name Here) Student, BUS 497 – A SUBJECT: The Impact of Cancelling the North American Free Trade Agreement (NAFTA) and The California Agriculture Industry DATE: 21 July 2018 OVERVIEW The purpose of this memorandum is to present business strategies to help improve the North American Free Trade Agreement (NAFTA) and prevent the cancellation of the agreement. These strategies will focus on the California agriculture industry in relation to the NAFTA agreement, and try to balance the pros and the cons. The strategies will also give recommendation to help solve the disagreement that the government of the three countries have had for the past months. DETAILS Agriculture trade plays a central role in NAFTA. The agricultural industry is important in all three countries concerning the agreement: The United States, Mexico, and Canada. The Trump administration wants to lower the trade deficit between Mexico and the United States (Amadeo, 2018). According to statistics, the United States imports more products from Mexico and Canada in comparison to its exports to the two countries (Appendix A). Also, The United States exports more services in comparison to the services imported from Mexico and Canada (Appendix B). Even though services exported are higher than services imported, after the numbers are compared in the different industries, there is a trade deficit. The Agreement The government leaders of the three countries are scheduled to negotiate in the near future and make changes in the NAFTA agreement due to changes in the different industries. The Trump Administration has threatened to withdraw from the NAFTA agreement and implement higher tariffs on imports from Mexico and Canada to reduce the trade deficit. The agricultural trade barriers that were eliminated with the NAFTA agreement may be imposed again. The food and agricultural groups of the United States are concerned because it will affect the agricultural industry. Thousands of agricultural jobs depend on cross-border agreements. Farmers can potentially lose their jobs if the NAFTA leaders decide to undo the agreement. Food and Agriculture Groups According to Politico, a web magazine, Agriculture Organizations presented a signed letter to Commerce Secretary Wilbur Ross. Based on their numbers, the food and agriculture groups see the NAFTA agreement as a good agreement for their industry (Nestle, 2017). Page 1 of 7 • Poultry: In 2016, U.S. poultry exports were 7.95 billion pounds, over 16 percent of total production. Canada was the second-largest market for the chicken industry and in the top five for turkey. Almost 70 percent of U.S. exports of turkey go to Mexico. • High-fructose corn syrup: U.S. exports to Mexico would decrease by $500 million per year. • Fruits and veggies: Canada and Mexico account for 18 percent of U.S. fresh fruit exports and 60 percent of U.S. fresh vegetable exports. Since 1993, fruit and vegetable exports from the U.S. to Mexico and Canada have more than tripled, totaling $7.2 billion. • Beef: In 2016, U.S. beef exports to Mexico and Canada exceeded $1.7 billion and accounted for 27 percent of total U.S. beef exports. • Dairy: Over $1 billion a year in U.S. dairy products are shipped to Mexico. California California’s number one export destination is Canada. California accounts for more than a million jobs that depends on the NAFTA agreement with Canada. Canada argues that the NAFTA agreement make the three countries more competitive around the world. As was part of the message Minister Lawrence MacAulay spoke at a luncheon co-hosted by the California Chamber of Commerce, where he stated “if the agreement grows, the countries’ economies will follow” (Stirling, 2018). As a border state and a major agricultural producer, California has a big stake in NAFTA. Under the North American Free Trade Agreement, dairy exports to Mexico are up 885 percent (to $1.2 billion in 2016) (Vilsack, 2017). If the NAFTA agreement is broken, Mexico can start looking for other dairy or corn industries in South American countries like Argentina. Once the negotiations of agriculture trade start with other countries, the United States can lose profits, jobs, and may risk losing the market indefinitely. California’s economy rests on continued access to the Canadian and Mexican markets (Hamberger, 2018). CalChamber did an assessment and supports the NAFTA agreement because the agreement is beneficial for the business community. The NAFTA agreement facilitates trade and helps provide employment for Californians as well as the rest of the United States (CalChambers, 2018). The NAFTA agreement is controversial in the United States because it presents a great number of PROS but also presenta great number of CONS. The United States has to weigh both sides and do what is best for the country’s economy and the millions of Americans that are affected by the agreement. Some of the aspects that are affected by the agreement are listed as PROS and CONS as follows: (Amadeo, 2018) NAFTA PROS • • • • The trades between the three countries increased Created millions of jobs in the United States The average wages in the United States increased The price of oil cost less in the United States Page 2 of 7 • • • The price of food cost less in the United States The finance service and health care exports increased in the United States There is more competitive bidding on government contracts NAFTA CONS • • • • • • Thousands of manufacturer jobs were lost in the United States Factories in the United States kept lower wages Jobless Mexicans cross the border illegally United States Unions lose power and Mexican workers were abused Canada abused Mexican fields and Mexico’s environment deteriorated Mexican Farmers went out of business due to food’s lower costs NAFTA advantages are somehow overshadowed by some of the disadvantages and vice versa. Some industries were more affected than others. The manufacturing industry lost thousands of jobs. but overall, accounting for all industries, more jobs were created. The increase in trade gave the three countries more power as a group than as individual countries. This put them in a more competitive position with the rest of the world. With most businesses going international, it is better for countries to keep working on trade agreements and keep moving forward to help the economy of their country. Economy From 1993 to 2015, the U.S.'s real per-capita gross domestic product (GDP) grew 39.3% to $51,638 (2010 USD). Canada's per-capita GDP grew 40.3% to $50,001, and Mexico's grew 24.1% to $9,511 (Floyd). Reviewing these numbers, Mexico’s Gross Domestic Product has grown slower than the other members in the agreement despite the improved trade agreement (Appendix C). Environment The members of the agreement were not too environmentally concerned at the beginning of the agreement. Canada was found liable several times of polluting the environment in the United States and Mexico due to different industries that Canada owns on their soil (Duncan and Garver). With international industries opening all over the world, the environment is being affected, especially in industrialized countries. NAFTA is in part responsible for this. CONCLUSIONS AND RECOMMENDATIONS The North American Free Trade Agreement (NAFTA) helped The United States, Mexico, and Canada to improve their economy. There are some pros and cons that surged with the agreement. After balancing the two sides, it is imperative that the agreement go to a revision and new clauses need to be implemented. Since the agreement was put in place, the different industries have been accustomed to practicing business with the advantages of the NAFTA agreement. It is not to the United States’ benefit to withdraw from the North American Free Trade Agreement (NAFTA). Withdrawal from the agreement may bring some unskilled jobs back to the United States, but it would be at the cost of other jobs that have higher pay. The jobs that were created due to the agreement improved the overall economy in the country. Page 3 of 7 The stoppage of the agreement will damage the economic, social, and political relationships with the neighboring countries. If Mexico’s economy starts deteriorating, more Mexican citizens will try to cross the border for the necessity of a better work opportunity in the United States. Also, the oil prices will increase in the United States with Mexico losing their number one oil client. The three countries have to analyze the agreement and decide what is best for the economy of the members. Some of the recommendations for the stakeholders of the agreement are laid out as follow: • To reduce the trade deficit between the countries, a trade ceiling in each industry has to be implemented The trade ceiling has to be implemented to prevent the abuse of the agreement from any of the parties. If an industry is exporting a vast amount of goods, it needs to buy credits from other industries to balance the overall trade among the members. • Every industry needs to review the rules and regulations and do the necessary changes that benefits all parties The agreement needs to have changes by industry. What works for one industry may not be able to be implemented by another industry. • Impose sanctions and tariff fees for any disciplinary action that is not respected by any of the members. The members have to respect rules and regulations and have a plan in place to do the necessary adjustments to meet the requirements of the agreement. Sanctions must be placed for members that are not in compliance with the agreement • Appoint a committee to oversee the most relevant transactions per industry A committee should be formed per industry to oversee that the agreement is beneficial for all members and is good for their economy. This will allow for necessary changes in the rules if something is not working within the industry’s trades. • Implement new provisions as well as the rules and regulations for new industries Implementing new rules and regulations constantly will help regulate any new industries trying to take advantage of NAFTA. • To practice social responsibility by trying to place more regulations for the protection of the environment. Environment and climate provision regulations will help members try to create a better planet for our future generations or at least to conserve the planet as it is. NAFTA removed tariffs and helps determine taxes and duties between the members on their products and services traded. NAFTA opened doors between Mexico, Canada, and the United States. It is time to review the agreement, implement changes and take care of the jobs in California. All NAFTA members need to be accountable for the part that each of them plays in the agreement and follow all rules and regulation. Page 4 of 7 APPENDIX Appendix A Source: https://goo.gl/images/xfTVmM Source: https://goo.gl/images/WfYtwf Page 5 of 7 Appendix B Appendix C Source: https://goo.gl/images/yyPZW1 Page 6 of 7 References Amadeo, K. (2018, July 07). What happens if Trump dumps NAFTA. Retrieved from https://www.thebalance.com/donald-trump-nafta-4111368 Amadeo, K. (2018, June 11). Why NAFTA's six advantages outweigh its six disadvantages. Retrieved from https://www.thebalance.com/nafta-pros-and-cons-3970481 CalChamber. (2018, May 15). North America Free Trade Agreement (NAFTA) urges congressional action on NAFTA agreement. Retrieved from http://advocacy.calchamber.com/international/trade/nafta/ Duncan, L. & Garver, G. (2017, September 28). Opinion, energy, politics. Retrieved from https://www.nationalobserver.com/2017/09/28/opinion/nafta-and-environment-timecome-clean Floy, David (2018, January 30). NAFTA's winners And losers. Investopedia. Retrieved from https://www.investopedia.com/articles/economics/08/north-american-free-tradeagreement.asp Hamberger, E. R. (2018, May 29). Messing with NAFTA endangers California exports. Retrieved from https://www.sacbee.com/opinion/op-ed/soapbox/article211928559.html Nestle, M. (2017, November 1). It’s NAFTA again: An update. Food Politics. Retrieved from https://www.foodpolitics.com/2017/11/its-nafta-time-again-an-update/ Stirling, S. T. (2018, February 23). Canada Day: What changes in NAFTA mean for agriculture in California. Retrieved from http://advocacy.calchamber.com/2018/02/23/canada-daywhat-changes-in-nafta-mean-for-agriculture-in-california/ Vilsack, T. (2017, November 09). Got milk? Ending NAFTA could sour California’s booming dairy industry. The Sacramento Bee. Retrieved from https://www.sacbee.com/opinion/california-forum/article183232361.html Page 7 of 7
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Running Head: EFFECTS OF CANCELLING THE NAFTA

The Impact of Canceling the North American Free Trade Agreement (NAFTA) and the
California Agriculture Industry
Name
Institutional Affiliation

1

EFFECTS OF CANCELLING THE NAFTA

2

Memorandum
TO:

Blaine D. Pope, Ph.D. Professor, BUS 497 – A

FROM:

Name

SUBJECT: The impact of canceling the North American Free Trade Agreement (NAFTA) and
The California Agriculture Industry

DATE:

February 14, 2019

Overview
This memo will discuss the issues which arise if The North American Free Trade Agreement
(NAFTA) is canceled. It will them come up with strategies which will help to prevent it from
being canceled considering the benefits it has to the people of the three countries. These
strategies will address the issues which members of this agreement have had since it was
established. It would provide the best solutions in which these countries can adopt for effective
execution of this agreement. The effects which NAFTA might have on the agri-business in
California for the next five to ten years will also be discussed.
Details
The North American Free Trade Agreement came into effect in 1994, and it created one of the
largest free trade zones in the world. It eliminated all the trade tariffs between the three countries
and currently, approximately $1.4 billion in goods cross the United States-Mexican border. It
also laid a strong foundation for economic growth and prosperity in the three member countries
which are the United States, Canada, and Mexico. Despite the numerous development and trade
which the three countries experienced, the United States president Donald Trump felt that there
was a huge trade deficit and there was the need to lower it. Critics of the NAFTA feels that many
Americans are losing jobs due to the free-flow of Mexican products (Gonzalez, 2018).
Changes of the NAFTA under the USMCA
Trump has been on the forefront trying to come up with new and better trade agreement which
would serve the interests of the Americans. Although there has been a stalemate in negotiations
with Canada, Trump has decided to come up with a pact with Mexico alone. The main reason for
the disagreement with Canada was the announcement by Trump that the United States would
impose tariffs on aluminum and steel from Canada. This move made Canada’s Prime Minister
condemning the move. Details of the expected agreement are that it will have a 16-year sunset
clause, unlike the current NAFTA. It will not remain unchanged, unlike the current pact and thus
it will be valid for 16 years. Under the expected new agreement, 75% of automobiles will be
manufactured from the United States or Mexico so that they can be exempted from tariffs. This

EFFECTS OF CANCELLING THE NAFTA

3

is an increase from the 62.5% set earlier (Kolhatkar, 2018). The agreement further states that
between 40 to 45 percent of these vehicles should be produced by workers who earn a wage of
$16 per hour. Such a move is expected to benefit the Americans due to their higher wages. The
new agreement is expected to provide more protection to intellectual properties. There will be
ten years of data protection and 75 years of copyright protection for biologic drugs (Gonzalez,
2018). The other change is the requirement for Canada to open its dairy markets to the United
States farmers to get rid of the complicated pricing scheme for class seven products. It also opens
up the wine industry in British Columbia to that one of American wine. The other expected
agreement is for Mexican trucks to meet safety standards set by the U.S. before crossing the
border. This agreement was passed in the first agreement, but the United States’ Congress
withdrew it. The new agreement also requires Mexico to allow its workers to form trade unions.
Another expected agreement is that American’s drug companies can sell their products in the
Canadian market for ten years, the time limit was eight years in the first agreement. The final
change states that companies cannot resolve with governments by using Chapter 11 (Amadeo,
2019).
Impact of the NAFTA on food and agriculture
Although many people feel the agreement has benefited the other parties, its effect in agriculture
cannot be overstated. Since it was signed, Canada and Mexico have become important markets
for U.S. grains and also oilseed products. In terms of volume and value, Mexico has become the
largest market for rice, corn, and wheat from the United States. It is also the second largest
market for sorghum and soybeans. Apart from those products, Mexico is the largest importer of
ethanol from the U.S. and NAFTA has contributed much of the increased production in the
country. It is from this benefit in which organizations like Farmers for Free Trade have been
formed in the country to determine the importance of NAFTA. The United States has
experienced a growth in the number of food products sold in Mexico and Canada. The number of
agricultural and food products supplied in these countries had grown to over $43 billion in 2016
making them one of the main trading partners with the United States. It was a four times increase
from the $11 billion which the countries exported in 1993. Almost 28% of products shipped from
the USA were destined to these countries which is a clear indication how the NAFTA has created
a positive impact in food and agricultural products from the country (CME Group, 2018).
There has been an increase in trade between the two countries since the agreement was signed
and currently, Canada and Mexico are the second and third largest markets for United States
farming products with products worth $6.5 billion. The Canadian purchase of American
agricultural products has increased by 40% while Mexico has become the largest market for
several agricultural products from the U.S. it is clear that both members have benefited in a way
through the agreement. A return to the MFN tariffs would not only cause job loss in the United
States but would also cause a drop in the gross domestic product amounting to $13 billion (CME
Group, 2018). Canada has also been a crucial importer of American agricultural products
especially in soy crushing were most of the beans are imported from the country. The two
countries also work together in the production of processed foods like pasta, cereals, and other
bakery products. The United States import oats which are used for milling from Canada. After
the agreement was signed, Mexico has become the biggest consumer...


Anonymous
Really helpful material, saved me a great deal of time.

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