Trade Expert: Tariffs De-Globalizing US Economy

Posted by Kristen Rupert on Nov 9, 2018 8:43:12 AM

The Trump Administration is stretching the rules and norms of international trade in a manner that will ultimately de-globalize the United States economy and undermine the nation’s prosperity, a Harvard professor and former presidential trade adviser said yesterday.

LawrenceRobert Lawrence, the Albert Williams Professor of Trade and Investment at Harvard’s Kennedy School, told 150 people at the 2018 AIM Global Trade Symposium that the imposition of tariffs by the United States and retaliatory tariffs by China and other nations will actually harm domestic manufacturing since many of the inputs for US producers come from overseas.

“We’re raising costs for American production. It’s a counterproductive strategy,” said Lawrence, who was a member of President Clinton’s Council of Economic Advisers and an adviser to the Congressional Budget Office.

Two prominent Massachusetts employers confirmed that the deepening trade war is causing them to shift manufacturing, in some cases from the United States to overseas locations.

Lisa Hill, Vice President of Global Trade Strategies at Ocean Spray in Lakeville, said the company is moving some of its processing operations to recently acquired facilities in Chile and Canada to avoid retaliatory tariffs from China, the European Union, Mexico and Canada.

“We are literally on everybody’s list,” Hill said as part of a panel discussion on trade.

She told the audience that Ocean Spray has dealt with trade wars in the past but “what we are dealing with today is unprecedented.”

A similar story is unfolding at Sensata Technologies of Attleboro, which maintains operations and business centers in 12 countries around the world. Vineet Nargolwala, Senior Vice President for Performance Sensing, said that 20 percent of the high-tech sensors the company makes in China come to the United States and are thus subject to new tariffs.

The company is responding by moving international production to other sites in Southeast Asia while reserving more of its China operations to make products for the Chinese market.

“It’s definitely a new landscape we are operating in,” Nargolwala said.

Lisa Wieland, Port Director for Massport, said the peak import shipping season for Boston accelerated this year as companies tried to get product into the United States ahead of the tariffs. Massport itself, which is in the middle of an $850 million infrastructure modernization project, had to spent significant time to ensure that three massive ship-to-shore cranes made exclusively by a company in China were not included in the tariff schedule.

The comments on trade policy came as AIM and its International Business Council honored four Massachusetts companies for excellence in international trade. The recipients of the 2018 Global Trade Awards were Universal Plastics of Holyoke, John Hancock of Boston, Bennett & Company of Newburyport and nuTonomy/APTIV of Boston.

Lawrence maintained that the Trump Administration used an overly broad definition of national security to impose tariffs on imported steel and aluminum and a similarly broad interpretation of provisions that permit tariffs when foreign governments impose unreasonable burdens on US commerce.

The result, he said, has been that the United States has ceded world trade leadership to China.

“It leaves us with a severely damaged global trading system,” he said.

Topics: International Trade, AIM International Business Council, AIM Global Trade Symposium

Autonomous Driving Systems Developer Earns Global Innovation Award

Posted by Kristen Rupert on Oct 23, 2018 8:30:00 AM

A Boston company developing groundbreaking autonomous driving software and systems has been named the winner of the 2018 AIM Global Innovation Award.

nuTonomynuTonomy, an Aptiv company, will be honored at the 23nd annual AIM Global Trade Symposium on November 8 in Waltham.  Previously announced Global Trade honorees will include Bennett and Company, Universal Plastics, and John Hancock, all companies that have demonstrated excellence in international business.  

“The global marketplace is an innovative one,” said Richard Lord, President and CEO of AIM. “We are pleased that as part of our recognition of Massachusetts companies exhibiting best practices in advancing global business we have the opportunity to highlight the work of nuTonomy, a company that is truly re-imagining one of the most time-tested pieces of technology – the automobile.”

Founded out of MIT in 2013 by Karl Iagnemma and Emilio Frazzoli, nuTonomy was the first company to test autonomous vehicles on public roads - in Singapore in 2016 and Boston in 2017.  In November 2017 the company was acquired by global automotive technology company Aptiv.

nuTonomy reached a milestone six months ago when the company made its autonomous vehicles available to the general public in Las Vegas via the Lyft ride-hailing app.

Aptiv and Nutonomy together employ 150 people in Boston’s Seaport district. 

The AIM Global Trade Symposium & Awards Breakfast will take place from 7:30-10:30 am on November 8 at Waltham Woods Conference Center.  The event will feature keynote speaker Robert Z. Lawrence, Professor of International Trade & Investment at the Kennedy School of Government.

A panel discussion on “Global Business: Tariffs, Treaties and Trends” with speakers from the Port of Boston, Ocean Spray, and Brandeis International Business School, will follow.  The AIM Global Trade Symposium & Awards is sponsored by Massport, Massachusetts Manufacturing Extension Partnership (MassMEP) and The Provident Bank.

Registration for the Global Trade Symposium can be accessed online here

Topics: International Trade, Technology, AIM International Business Council

Three Employers Win AIM Global Trade Awards

Posted by Kristen Rupert on Oct 11, 2018 1:30:00 PM

Associated Industries of Massachusetts today announced the winners of its 23rd annual AIM Global Trade Awards, which recognize Massachusetts companies and public agencies of all sizes that have demonstrated excellence in international business. The 2018 honorees include Bennett & Co., Universal Plastics, and John Hancock.

international.flagssmall“From innovation in product development to supporting the profile of our commonwealth across the world, Massachusetts companies are deeply entrenched in the global marketplace,” said Richard Lord, President and CEO of AIM. “We are delighted to honor the achievements of these winners, who exhibit best practices in advancing global business. During a time when trade and international commerce are key topics of conversation, we want to foster an appreciation for the role of global business in our local economy.”

The three Global Trade Award winners will be honored during the AIM Global Trade Symposium & Awards Breakfast on Thursday, November 8 from 8-11 am at Waltham Woods Conference Center.  The event will feature keynote speaker Robert Z. Lawrence, Professor of International Trade & Investment at the Kennedy School of Government.  A panel discussion on “Global Business: Tariffs, Treaties and Trends” will follow.  The AIM Global Trade Symposium & Awards is sponsored by Massport, Massachusetts Manufacturing Extension Partnership (MassMEP) and The Provident Bank.

Ambassador’s Award: Bennett & Co., Newburyport

Founded in 1984 by CEO Jacalyn Bennett, Bennett & Co. is one of the leading designers and manufacturers for women’s intimate apparel, sleepwear and lingerie worldwide. Offices located in Newburyport are home to all of Bennett & Co.’s design, research and development efforts.  Ms. Bennett owns her manufacturing facility in Guangzhou, China, from which completed products are sent around the world on behalf of Bennett’s brand-name retail clients. Bennett & Co.’s 60,000 products and styles are produced with a minimal environmental footprint.  Jacalyn Bennett is a long-time philanthropist in her local community and beyond.

Diplomat’s Award: Universal Plastics, Holyoke, MA

Owned and operated by husband and wife team Jay and Pia Kumar, Universal Plastics has grown rapidly in the six years since the couple bought the company. Founded in 1965, Universal Plastics manufactures custom thermoformed plastic parts.  These include covers and housings for large machinery such as aircraft engines, MRI machines and dental equipment; plastic components for airplane seats; tamper-resistant signs for bus stops, and kayaks.  With 300 employees in Massachusetts, five manufacturing facilities in the U.S., and headquarters in Holyoke, Universal Plastics has created over 100 new jobs in the last 6 years, fueled by export growth.

President’s Award: John Hancock, Boston, MA

John Hancock is both a major Massachusetts employer and an ambassador for the Commonwealth globally. Owned by Canadian multinational insurance company Manulife, John Hancock offers a broad range of financial products to individuals and corporations.  Equally important, as the lead sponsor of the Boston Marathon, John Hancock plays a major role in bringing global elite athletes and the world’s attention to Massachusetts each April.  Nearly ¼ of the Marathon runners—approximately 7000—hail from close to 100 countries outside the U.S.

Topics: International Trade, AIM International Business Council

Tariffs Damage Massachusetts Companies

Posted by Kristen Rupert on Sep 10, 2018 8:30:00 AM

The thousands of member employers of Associated Industries of Massachusetts (AIM) are increasingly concerned about the negative effect of current and proposed tariffs on Massachusetts companies.

Itnl.PortParticularly alarming are tariffs on raw materials, components and finished goods coming from China. While we concur with the need to address China’s unfair trade practices, we do not believe that tariffs are the best strategy. Tariffs are already hurting our companies here in Massachusetts and additional damage is anticipated, by business owners and leaders.

AIM hears weekly from companies across industries—retail, machining, consumer goods, manufacturing, plastics, semiconductor— who are suffering from recent tariffs and are concerned about proposed tariffs.

One Massachusetts CEO told us: “Tariffs are by far the most serious issue my company has faced in 40 years of business—much more important than health insurance costs, regulations, and finding workers...”

These companies need tariffs eliminated.

What are the tariffs?

  • The U.S. imposed tariffs this past spring on steel (25 percent tariff) and aluminum (10 percent tariff) imports from Canada, Mexico, the EU and other countries. In response the EU, Mexico, Canada, Turkey, and Russia immediately instituted retaliatory tariffs on US exports to those countries. India will implement retaliatory tariffs this month.  
  • The U.S., separately, imposed two rounds of tariffs on $50 billion worth of Chinese products earlier this summer. The U.S. is now considering a third round of tariffs, which may take effect as soon as this week, on an additional $200 billion worth of goods from China. These tariffs range from 10-25 percent.   The China tariffs effectively tax U.S. consumers and manufacturers on many goods that they purchase from China.

The consequence of tariffs on Massachusetts companies are far-reaching:

Higher costs of doing business: Companies are paying more for components, raw materials and finished products. Firms often cannot pass these additional costs to their customers. The result is reduced profitability and reduced opportunity to re-invest in the business.

Supply-chain disruption: Companies spend decades developing and refining their supply chains. China is a valuable source for components and finished products. In many cases, these components and products are simply not available in the US, at any price. Quality and quantity requirements necessitate buying from overseas providers. Finding new suppliers is difficult or impossible.

Impact on jobs in Massachusetts: When companies must pay 15 percent to 200 percent more for materials or products, the financial impact is significant. Executives have told us their options are limited. Choosing among no new hires, decreased benefits/raises, or layoffs does not bode well for the Massachusetts economy or for companies themselves.

More competition from foreign manufacturers: One manufacturer told us that his company is already losing sales to foreign competitors who can offer a similar product at a lower price point because the US product carries a tariff and the one made in Europe or Asia does not.

General economic climate: With higher expenses and less income, Massachusetts companies may cut back on spending and investment, leaving employees with stagnant or lower incomes.

AIM has reached out to the US Trade Representative and the Massachusetts Congressional delegation to  express concern about tariffs and to encourage the U.S. to meet with China to develop a bilateral trade agreement.  AIM is in frequent contact with trade experts in Washington in order to help member companies struggling with the negative impact of tariffs. 

It’s time to re-open the gates of free trade that have made Massachusetts, its technology and its products the envy of the rest of the world. We think that’s the best America First policy.

Click here to receive updates on the tariff issue.

Topics: International Trade, AIM International Business Council, Tariff

Business Confidence Flat During July

Posted by Christopher Geehern on Aug 7, 2018 9:07:47 AM

Confidence levels among Massachusetts employers were virtually unchanged during July as strong economic growth balanced persistent concerns about tariffs and escalating international trade tensions.

BCI.July.2018The Associated Industries of Massachusetts Business Confidence Index (BCI) dropped 0.1 point to 61.2 last month after tumbling more than five points in June. The drop left the BCI three-tenths of a point lower than a year ago, though still comfortably within optimistic territory.

Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design, said employers grew justifiably bullish about the state and national economies during July while expressing uncertainty about their own prospects.

“The Manufacturing Index has dropped more than eight points during the past two months, pretty much concurrent with the escalation of trade tensions that are increasing prices, disrupting global supply chains and putting some companies in the crosshairs of retaliatory tariffs,” Torto said.

One BCI survey participant in the construction industry wrote: “The tariffs are escalating building costs. We get several price increases per week. It’s harder for most people to have the means to spend on up-keep, much less renovation or new construction.”

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.

The Index has remained above 50 since October 2013.

Constituent Indicators

The constituent indicators that make up the overall Business Confidence Index were mixed during July.

The Massachusetts Index assessing business conditions within the commonwealth gained 2.3 points to 65.1, leaving it 1.9 points ahead of July 2017.

The U.S. Index ended the month at 61.9, rising 1.9 points after sliding 9.3 points the previous month. The US Index was 4 points better than a year ago.

July marked the 101st consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.

The Current Index, which assesses overall business conditions at the time of the survey, rose 0.1 point to 63.6. The

Future Index, measuring expectations for six months out, fell 0.4 point. The Current Index gained 2.4 points during the year while the Future Index lost 3.1 points.

Operational Views

Employer views of their own companies weakened.

The Company Index declined 1.5 points to 59.7, down 2.5 points for 12 months. The Employment Index ended the month at 54.5, a 0.5-point decrease for the month and 1.2 points lower than a year ago. The Sales Index lost 0.6 point for the month and 2.3 points for the year.

Non-manufacturing companies (63.0) were more optimistic than manufacturers (58.6). Companies in the eastern part of Massachusetts (63.6) were more bullish than those in the west (57.6).

“The Massachusetts economy itself remains strong and it accelerated sharply in the second quarter, bucking the expectation of slower growth due to low unemployment and demographic constraints,” said Elmore Alexander, Dean of the Ricciardi College of Business, Bridgewater State University.

“The recent surge in state economic growth reflects strong gains in employment, earnings, and consumer and business spending.”

New Laws in Massachusetts

AIM President and CEO Richard C. Lord, also BEA member, said employers spent much of July digesting a raft of new public policies passed by the Massachusetts Legislature as it wrapped up the formal portion of its 2017-2018 session.

“Employers face new restrictions on the use of non-compete agreements, imposition of paid family leave, an increased minimum wage and a wholesale shift in the generation of the energy they use,” Lord said.

“And that’s on top of the $200 million annual assessment on employers to close a budget gap in the MassHealth program. Employers clearly have a lot to think about.”

Topics: International Trade, AIM Business Confidence Index, Massachusetts economy

Tariff Announcements Drive Down Business Confidence

Posted by Christopher Geehern on Apr 3, 2018 8:28:21 AM

Confidence among Massachusetts employers weakened during March amid roiling international trade tensions and volatile financial markets.

BCI.March.2018The Associated Industries of Massachusetts Business Confidence Index (BCI) declined a point to 63.5, retreating from a 17-year high in February. The BCI has gained 1.1 points during the past 12 months and remains comfortably within the optimistic range.

But virtually every element of the March confidence survey lost ground, led by a 1.7-point drop in the US Index of national business conditions. Several employers blamed the Trump Administration’s decision to level tariffs on steel, aluminum and other products for their uncertain outlook.

“Tariffs on stainless steel and aluminum will negatively impact our bottom line in the short run and could prevent our customers from providing new projects due to increased costs,” wrote one employer.

Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design, said the steel and aluminum tariffs raise the prospect of retaliation by other nations against products made by Massachusetts companies.

“Trade wars reduce the competitiveness of Massachusetts companies and increase costs for consumers. Announcement of the tariffs sent financial markets into a tailspin last month and some of that uncertainty rubbed off on employers,” said Torto.

Cranberries, for example, a key Massachusetts agricultural export, were among the products targeted for retaliation by the European Union before the administration exempted that region from the steel and aluminum tariffs. Massachusetts companies exported $27.5 billion worth of products to foreign markets during 2017, with the largest share (13.5 percent) going to Canada.

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.

The Index has remained above 50 since October 2013.

Constituent Indicators

The constituent indicators that make up the overall Business Confidence Index were mostly lower during March.
The decline in the US Index was matched by a 1.6-point decline in the Massachusetts Index assessing business conditions within the commonwealth. The Massachusetts Index stood at 66.9, leaving it 3.2 points higher than in March 2017.

The U.S. Index ended the month at 65.2, 5.3 points better than a year ago. March marked the 97th consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.

The Current Index, which assesses overall business conditions at the time of the survey, lost 1.5 points to 62.6. The Future Index, measuring expectations for six months out, declined 0.6 points to 64.4. The Current Index has risen 0.8 points and the Future Index 1.4 points during the past 12 months.

Operational Views

The only element to gain ground was the Employment Index, which rose 0.9 points for the month but remained 1.7 points behind its level of a year ago. The Company Index, meanwhile, reflecting employer views of their own operations and prospects, was off 0.7 points to 61.7.

Manufacturing companies (65.4) were more optimistic than non-manufacturers (61.3). Large employers (68.8) were more bullish than medium-sized (60.3) or small businesses (65.2).

“There is no question that the whirlwind of events taking place in Washington, from the tax bill to trade sanctions, are affecting the outlook of Massachusetts employers,” said Barry Bluestone, Professor of Political Economy at Northeastern University, and a BEA member.

“But it’s also worth noting that the only two elements of the BCI that have declined during the past year are the Company Index and the Employment Index, two measures tied to the performance of individual companies. Overall confident remains strong, but those elements will be worth watching.”

Trade Battles

AIM President and CEO Richard C. Lord, also BEA member, said the announcement of tariffs and subsequent modifications of those tariffs by the administration has generated uncertainty among employers.

“Trade barriers are cause for concern in a state that exported more than $27 billion worth of goods in 2017,” Lord said.

“AIM and its member employers continue to believe that free trade and open markets remain the best way to ensure growth in the global economy.”

Topics: International Trade, AIM Business Confidence Index, Massachusetts economy

Four Companies Earn Global Trade Awards

Posted by Kristen Rupert on Oct 16, 2017 8:30:00 AM

Associated Industries of Massachusetts today announced that its 22nd annual AIM Global Trade Awards will go to a developer of productivity software, a maker of abrasives that generates half of its revenue overseas, a UK-based technology consulting company and a startup bringing Internet connectivity to the developing world.

international.flagssmall.jpgThe awards recognize Massachusetts companies and public agencies of all sizes that have demonstrated excellence in international trade. The 2017 honorees, with locations across the region, represent a wide range of Massachusetts industries and include Aspen Technology, Darmann Abrasive Products, Cambridge Consultants and WrightGrid.

The four winners will be honored during the AIM Global Trade Symposium & Awards Breakfast on November 1 from 8-11am at Babson College’s Knight Auditorium in Wellesley.  In addition to a panel with executives from New Balance, Greentown Labs, the Canada Consulate, Northeastern University and Kinefac, the event will feature keynote speaker Nariman Behravesh, Chief Economist at Massachusetts-based IHS Markit who is ranked as Top Forecaster by Bloomberg and the Wall Street Journal.

The Symposium & Awards program is sponsored by MassPort, Massachusetts Manufacturing Extension Partnership, Wolf & Co. and The Provident Bank.

“From innovation in product development to technologies that enhance traditional manufacturing, international trade plays a pivotal role in the health of the Massachusetts economy,” said Richard Lord, President and CEO of AIM. “We are delighted to honor the achievements of these local winners, who exhibit best practices in conducting and advancing global business. Massachusetts continues to be a world leader in exporting technology, products and ideas that make a difference.”

This year AIM launched the Global Innovation Award, presented to WrightGrid.  This award recognizes early stage companies making valuable contributions to international trade and focusing on the global market as the business evolves. 

President’s Award:  Aspen Technology

Aspen Technology, founded in 1981 as a result of an MIT research project, creates software that optimizes manufacturing in multiple industries including oil and gas, chemicals, engineering and construction, transportation, pharmaceuticals and more.

More than 2,100 companies across the globe use AspenTech software to increase throughput, reduce unplanned downtime, improve margins, reduce costs, achieve operational excellence and become more energy efficient.  More than 35 years after its founding, AspenTech’s US headquarters in Massachusetts is home to more than 500 employees who continue to push the boundaries of innovation.

 A publicly-owned company with over half of its sales coming from international business, AspenTech has more than 30 offices around the world.

Ambassador’s Award:  Darmann Abrasive Products

Darmann Abrasive Products, headquartered in Massachusetts, produces specialized abrasive products for customers that need to generate very fine finishes on their materials.  Its fine grit abrasive stones and wheels serve precision manufacturing industries ranging from automotive parts to medical supply.

Darmann’s offices in Poland, Brazil, Mexico and China, staffed by locals, enable it to offer high-level global customer service.  An employee-owned business, Darmann has adapted products for new foreign markets.  The company invested in its manufacturing plant to add capacity to meet global demand.  Exports represent more than 50 percent of the company’s annual sales.

Diplomat’s AwardCambridge Consultants

Cambridge Consultants uses innovation and new technologies to help clients worldwide develop first-to-market products or improve existing products.

Working from a laboratory setting, the company’s engineers, scientists, mathematicians and designers can take a product from concept to manufacturing.  The Boston office features a 'virtual operating room' where surgeons undertake mock surgery to show how existing tools are inefficient and in need of innovation.

The company serves a diverse range of industries including medical device, industrial and consumer products, digital health and wireless.  Cambridge Consultants is headquartered in the U.K. and has 80 employees in Boston, with plans to add 60 new jobs in Massachusetts by 2018.

Global Innovation Award:  WrightGrid,

WrightGrid, a startup based in Somerville's clean-tech incubator Greentown Labs, is focused on bringing internet connectivity to the developing world.  Its seven-foot-tall, solar-powered WiFi and phone-charging machines are made for people with mobile phones but no reliable electricity or Internet connection. The company’s technology is specifically designed for the Africa market and its products are being deployed in the Democratic Republic of Congo and Ghana.  WrightGrid's stations are entirely manufactured in Massachusetts. Metal Crafters in Methuen develops the frame of the units and Circuit Hub in Deerfield creates the circuit board and electronics.

The AIM International Business Council helps Massachusetts employers engage in international trade and expand their global business activities. Through seminars, referrals, and e-newsletters, the AIM International Business Council provides companies with the resources they need.  For more, visit


Topics: Global Trade Awards, International Trade, AIM International Business Council

NAFTA Ready to be Renegotiated

Posted by Kristen Rupert on Jun 9, 2017 11:54:52 AM

The North American Free Trade Agreement (NAFTA) will be renegotiated in August. If you export to Canada or Mexico or source from these countries, NAFTA changes will likely affect you. 

international.flagssmall.jpgWhat’s behind NAFTA modernization?  This trilateral treaty—among the US, Canada and Mexico - dates back nearly 25 years.  Since NAFTA took effect, the Internet and smart phones have come to play a major role in business sales and distribution.  Industry sectors, cycles and supply chains have changed dramatically.  So there’s nearly universal agreement that NAFTA needs to be updated.

NAFTA negotiators are being encouraged to:

  • do no harm
  • be timely
  • avoid erecting new trade barriers, and
  • make NAFTA better for U.S. consumers, businesses and workers.

Here in Massachusetts, NAFTA has brought great benefits.  Trade between Massachusetts and its two closest neighbors has soared over the past two decades.  Canada is the Bay State’s top trade partner, with more than $3 billion in Massachusetts-made products shipped to Canada in 2016.

Last year, Mexico was the second-largest destination for Massachusetts products, with $2.5 Billion in Massachusetts goods shipped to our neighbor south of the border.  More than a quarter of a million jobs in Massachusetts, many in manufacturing, depend on trade with Canada and Mexico.

AIM strongly supports NAFTA.  The association will submit comments on NAFTA to the federal government and we urge AIM members to do so as well.  We have already heard from a number of member companies and we encourage businesses - especially manufacturers - to share their stories of how NAFTA has helped them grow.  These personal narratives can be shared with AIM, your industry association, your US Congressional Representatives and the US Trade Representative.

To send a NAFTA letter to the Federal Register Notice (FRN), which must be done by Monday, visit and search for docket number USTR-2017-0006.  Then click the “Comment Now!” button to make sure your comments are registered. 

Please contact Kristen Rupert at AIM,, with any questions about NAFTA renegotiation.


Topics: International Trade, NAFTA

Massachusetts Exports Rise; Trade Policy Remains Unclear

Posted by Kristen Rupert on Feb 16, 2017 9:16:13 AM

Recently-released year-end 2016 trade statistics tell a positive story for Massachusetts.

Product exports from the commonwealth increased 2 percent last year, outperforming many other US states.  Massachusetts exports totaled nearly $26 Billion in 2016.

international.flagssmall.jpgAt the same time, the relationship with our top three trade partners—Canada, Mexico and China—is likely to change as a result of new trade policies sought by the Trump administration.  What might this mean for Massachusetts companies?

The new president and his executive team have committed to renegotiating long-standing trade relationships and agreements.  First in line is NAFTA—the trilateral North America Free Trade Agreement among the US, Canada and Mexico that took effect 23 years ago.

 Many experts agree that changes to NAFTA are long overdue.  However, there is concern that the Trump administration may abandon NAFTA altogether and pursue separate bilateral agreements—one with Canada and a separate one with Mexico.  This would create significant disruption for many companies with global supply chains across North America. 

The new Trump trade team is not yet installed, which will likely delay negotiations about NAFTA.  Advocates within the manufacturing community, however, are already gathering stories about how individual US companies have grown jobs as a result of business with Canada and Mexico.   Getting this data to Congressional leaders and the new presidential administration will be critical in persuading Trump trade professionals to tweak, and not eliminate, NAFTA. 

Another proposal in play is the border tax.  Imports would be taxed at a rate up to 20 percent.  A complementary plan to reduce the overall US corporate tax rate is being touted as a potential offset.  The border tax would mean that large importers such as Walmart and Target would suffer and likely pass along cost increases to customers, while big exporters—Caterpillar, GE, Boeing - would benefit.  Small companies dependent on components produced in China or Mexico would also be hard hit by an import tax.  As with all tax rate changes, we’ll see winners and losers. 

No China trade announcements have been made since President Trump was inaugurated.  His telephone call last week with China president Xi Jinping was a first step toward repairing the damage caused by Mr. Trump’s earlier denunciation of the US’ long-standing “one China” policy.  Mr. Trump had suggested imposing tariffs of up to 45 percent on imports from China, but that proposal has not yet gained traction.

In a promising development, Mr. Trump last week signaled his support for the US Export-Import Bank, which has been operating for more than a year without a board quorum and unable to approve loans of more than $10 million.  Mr. Trump’s statement represents a departure from his previous skepticism about Ex-Im Bank. The president may make a statement about Ex-Im during his visit to Boeing in South Carolina tomorrow. 

If you are one of the more than 10,000 exporting companies in Massachusetts and you have concerns, praise or questions about proposed federal trade policy, please let AIM know.  We are in regular communication with industry and government leaders and your insights are invaluable as we convey what’s important about trade and growing the Massachusetts economy. 

Topics: International Trade, Massachusetts economy, Donald Trump

Trump Policies on International Trade Take Shape

Posted by Kristen Rupert on Jan 5, 2017 11:27:58 AM

President-Elect Donald Trump’s international trade leadership team is now complete. 

international.flagssmall.jpgRobert Lighthizer was announced this week as US Trade Representative.  Lighthizer joins incoming Commerce Secretary Wilbur Ross, new National Trade Council head Peter Navarro, and Jason Greenblatt, special representative for international negotiations, as Trump’s picks to set and execute US trade policy.

 What might we expect from this team?  What are the issues to watch in 2017?

NAFTA.  The North American Free Trade Agreement with Mexico and Canada is widely expected to be renegotiated.  An update of NAFTA is welcomed by many trade experts.  NAFTA came into force in 1994, before the rise of the Internet.  Because of the breadth, depth, complexity, and influence of technology on trade today, new rules are needed.  Mexico and Canada have signaled a willingness to modernize the treaty—under certain conditions.  Scrapping NAFTA altogether, which Trump previously championed, would threaten millions of US jobs.

China.  Trump speaks frequently about China’s currency manipulation, steel-dumping and aggressive trade practices.  His trade appointees are likely to stand tough on China—and this toughness may serve the US well.  However, a proposal to hit some China imports with significant tariffs is meeting resistance. AIM has heard from Massachusetts manufacturers concerned that components they source from China may become prohibitively expensive.

Russia.  The US levied trade sanctions on Russia in March 2014, after the Crimea incursion.  Many European countries did the same.  Given Trump’s frequent praise of Russian president Vladimir Putin and his desire to strengthen ties with Russia, might US sanctions be lifted?  Complicating the US-Russia relationship is Russia’s ongoing cyberwarfare against the US, which appears to have affected the recent US presidential election.   Trump’s Secretary of State designee Rex Tillerson, CEO of ExxonMobil, is known to have business ties with Russia.  More will be learned during confirmation hearings.

Brexit.  The 2016 vote by citizens of the United Kingdom to leave the European Union surprised the world.  New UK Prime Minister Theresa May is overseeing “Brexit” and has proposed March 2017 as the start date for the two-year process.  However, the recent requirement for a Parliamentary vote to approve Brexit and the appointment of a new UK ambassador to the EU have muddied the Brexit waters.  The UK is searching worldwide for hundreds of trade negotiators needed to lead trade talks with the EU.  Although US President-elect Trump has signaled interest in negotiating a bilateral trade agreement with the UK, that country cannot negotiate any new trade agreements while it is still part of the EU.  So any US-UK agreement would have to wait until 2019 or 2020.  In the meantime, US and UK diplomats are working to continue and grow the US-UK trade relationship.

Key Europe Elections.  The Brexit vote was the first step in the resurgence of populism in Europe.  Concerns about immigration and terrorism have driven European voters to rebuff convention and vote for change.  Italy’s recent vote was a win for populism and resulted in the resignation of the Italian Prime Minister.  France is holding its presidential election in May.  Current president Francois Hollande will not seek re-election.  Former Prime Minister Francois Fillon beat ex-president Nicolas Sarkozy in the primary to become the conservative nominee for president.  Marine Le Pen, leader of the Far Right National Front, is her party’s nominee.  A Socialist Party nominee will be selected this month.  In Germany, Chancellor Angela Merkel will run for a fourth term in the Fall 2017 elections.  She has been Chancellor for 11 years and she leads the Christian Democrats Union party.  The EU-US trade relationship is the largest trade relationship in the world, so any changes in leadership in the key EU countries will affect US commerce.   

Other issues to watch:

The US Export-Import Bank lacks a quorum and cannot approve loans of more than $10 million.  Will the new administration break the logjam?  Cuba is now welcoming US commercial cruise lines and airlines.  JetBlue—Massport’s largest carrier—hopes to be approved for future non-stop flights between Logan Airport and Havana—but only if the further opening of the Cuba market continues under a new US presidential administration.

Israel is not a significant trade partner for Massachusetts, but there’s a strong Massachusetts-Israel talent pipeline and Israeli-founded companies represent thousands of jobs in the Bay State.  Will the recent UN vote on Israeli settlements affect that relationship?  Will the Trump administration’s pick for US Ambassador to Israel move the US embassy from Tel Aviv to Jerusalem?

The Trans-Pacific Partnership (TPP) is considered to be on life support, as President-elect Trump has promised to withdraw from this 12-country pact.  Key concerns on abandoning TPP are the US relationship with its long-time trading partner Japan, the rising influence of China in the Pacific region, and the likelihood that many Asian countries will now sign on to the China-led Regional Comprehensive Economic Partnership Trade Agreement, or R-CEP, which will lower trade barriers in the region but will not benefit the US.

Other US Free Trade Agreements.  The US now has 14 FTA’s covering 20 countries.   Will the Trump trade team renegotiate these?

It’s going to be an interesting year for trade.

Topics: International Trade, Manufacturing, Donald Trump

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