The North American Free Trade Agreement (NAFTA) was established to encourage tariff-free trade and investments between Canada, the United States and Mexico — a significant arrangement given that the combined gross domestic product of these three countries totals more than $20 trillion.
Since its inception, NAFTA has been hotly debated. Supporters point to quadrupled trade, less dependence on foreign oil and subsequent lower transportation costs, job creation and a tripling of U.S. investments in the other two countries. Detractors cite U.S. manufacturing job loss and wage suppression, and the impact of government-subsidized U.S. farm products on local farmers in Mexico. Now, the political unrest as to the future of NAFTA only adds fuel to the fire.
What the Future May Hold
If the terms of NAFTA are changed and United States-Mexico trade relations are subsequently altered or discontinued, OEMs outsourcing their electrical and mechanical assembly components to Mexico face an interrupted supply chain and all the uncertainty it entails, including:
- Production costs are subject to volatile swings in raw materials and labor
- Reliability can be jeopardized as transportation delays could impact deadlines
- Import taxes become a sizable consideration and may interfere with securing foreign manufacturing partnerships
- Lead times may need to be increased to accommodate additional bureaucratic “red tape,” thereby lengthening job duration
Made in the USA
Unpredictability has no place in your supply chain. Establishing a domestic supply chain partnership with a full-service electrical and mechanical design manufacturer that supports OEMs is more important now than ever in order to:
- Control total cost of ownership (TCO)
- Simplify on-site quality assurance inspections
- Meet order deadlines by eliminating delays caused by weather, port strikes or other geopolitical factors
- Minimize complicated and sometimes costly transportation, as third-party logistics services are projected to increase 2.1% year over year until 2020
In addition to eliminating challenges related to outsourcing electrical and mechanical assembly production, a domestic supply chain partner committed to the “Made in the USA” philosophy may be able to provide value-add services. For example, engaging with MCL early in your project’s design process gives you access to design and manufacturability expertise that can help you manage risk, control costs and maintain regulatory compliance. It’s an advantage not every supply chain partner can offer, and it may mean the difference in getting your product to market faster with greater confidence.
The fate of NAFTA remains ambiguous, but that shouldn’t deter you from being proactive in growing domestic supply chain partnerships. Explore more about the choices you have using our Outsourcing vs. Building In-house infographic. Click the button below to download your free copy.