Future of North American Trade
Scenarios and Economic Implications
Political change, protectionist agendas, and a growing row over the North American free trade agreement’s imbalance of benefits endanger its continued existence. Disruptive technologies, new digital business models, and changing social values also question its validity. Scenarios can help to navigate the changing environments of NAFTA.
Clearly, NAFTA renegotiations are likely to have far-reaching consequences for the economic and political landscape in North America, as well as for the current trade partners. Threats to cross-border value chains arise from potential legal divergences and trade barriers. Closed borders could lead to economic recession, political instability, and social unrest. However, intensified economic integration or new trade ties could also open up new opportunities.
We have developed four scenarios to illustrate what trade could look like in North America in 2030.
What are possible future scenarios?
Scenario 1: Beyond Success
In this scenario, digital entrepreneurship in North America is booming. A modernized NAFTA provides the ideal framework conditions for digital businesses to take off. Universal internet access, e-governments, and a fully opensource approach make the movement of goods, services, and capital much easier, along with creating new businesses. Labor and migration reforms have enabled NAFTA to realign toward highly skilled employment.
Scenario 2: Digital Crusaders
In this world, the isolation of the US following the abolishment of NAFTA allowed Mexico to catch up to US competitiveness by absorbing foreign talent and know-how. While Canada established deep trade integration with Europe, Mexico fostered its ties with China and South America, thanks to their interest in its new capabilities.
Scenario 3: Breakdown
Following the breakdown of NAFTA in our third scenario, Mexico intensified its alliance with Latin America to emerge from recession and foster the region’s socio-economic development. Canada strengthened its ties to the EU to compensate for its small domestic market, while the US has isolated itself both politically and economically.
Scenario 4: North American Union
In this scenario, political, economic, and social integration has united the NAFTA members into a strong economic union that collaborates on key political issues and the elimination of trade barriers. A lack of technological advancement forces each country to specialize in its comparative advantages to support its neighbors.
All of these scenarios demonstrate the complexity of potential NAFTA renegotiation outcomes which will affect several areas of a company at the same time. This means that preparing your company comprehensively for NAFTA requires interdisciplinary advice from one source. Deloitte’s extensive network covers all functional areas and industry sectors, offering you the support you need to take you from strategy development to implementation.