NAFTA: Would withdrawing benefit the US?
Around one third of US trade is with Canada and Mexico. Manufacturing unions blame NAFTA for sending US manufacturing jobs abroad and President Trump campaigned on a platform to reverse the offshoring of recent years. The question is whether withdrawing from NAFTA would be of economic benefit to the US? There is no doubt that NAFTA is in need of reform. It was originally set up in 1994 before the digital and e-commerce era. The US has produced a list of negotiating objectives.
The top priority is to reduce the trade deficit with NAFTA, though this is somewhat bizarre since trade is almost in balance. Most of the US trade deficit is with China. The other priorities initially seemed reasonable and read more like an aspiration to move towards a Single Market with the harmonization of rules. Unfortunately, the US then made some additional demands around US content shares in autos, access to public works contracts, reducing the role of the dispute mechanism and dismantling Canada’s supply management system for dairy and poultry. While these were initially deemed as unpalatable by Canada and Mexico, they appear reluctantly to be coerced towards a compromise.
There is ambiguity about the ability of President Trump to withdraw from NAFTA without the approval of Congress. At a minimum he has to give six months’ notice and even this could be subject to legal challenge. This period of uncertainty would probably be used to strike a deal. But what would be the cost if the US did withdraw? In this case tariffs would be introduced in line with the most-favoured nation principle. This implies an average tariff of around 3.5% on US imports, but weighted by the share of trade actually covered by NAFTA and the types of goods, the effective tariff would be not much more than 2%. So the static cost appears relatively small, but this probably understates the damage given the negative impact on US exports and disruptions in cross-border supply chains. Still, it should not be as bad as a hard Brexit since border controls and customs checks are already in place.
There is a serious risk that President Trump issues the notice to withdraw from NAFTA, but this would most likely be part of an aggressive negotiating strategy from the US. This could lead to some further concessions from Mexico and Canada as ultimately falling back on WTO rules is in no countries’ interest. In addition, given the economic hit would be more severe in Mexico and Canada (as they have extremely high trade shares with the US) both their exchange rates would be liable to weaken against the US dollar, wiping out any incentive to move production back to the US. The bigger danger is what the US approach to NAFTA implies for US handling of wider international trade issues. The US has already imposed tariffs on some specific product areas (solar panels, washing machines) and is looking into aluminium and steel. At least this followed a process and is not just a snap decision from President Trump. The main worry is the potential for the US probe into Chinese intellectual property practices to trigger trade sanctions which could then spark a trade war. In the meantime, talking down the dollar will help President Trump meet some of his objectives, even if eventually it only ends up delivering higher inflation and interest rates.
Tim Drayson, MacroMatters
Marketing matters: from IBM to Kyndryl
Prior to joining Kyndryl as Chief Marketing Officer, Maria had a 25-year career at IBM, most recently as the tech giant’s CMO where she oversaw all marketing professionals and activities across North America, Canada and Latin America. She has held senior global marketing positions in a variety of disciplines and business units across IBM, most notably strategic initiatives in Smarter Cities and Watson Customer Engagement, as well as leading teams in services, business analytics, and mobile and industry solutions. She is known for her work with teams to leverage data, analytics and cloud technologies to build deeper engagements with customers and partners.
With a passion for marketing, business and people, and a recognized expert in data-driven marketing and brand engagement, Maria talks to Business Chief about her new role, her leadership style and what success means to her.
You've recently moved from IBM to Kyndryl, joining as CMO. Tell us about this exciting new role?
I’m Chief Marketing Officer for Kyndryl, the independent company that will be created following the separation from IBM of its Managed Infrastructure Services business, expected to occur by the end of 2021. My role is to plan, develop, and execute Kyndryl's marketing and advertising initiatives. This includes building a company culture and brand identity on which we base our marketing and advertising strategy.
We have an amazing opportunity ahead at Kyndryl to create a company brand that will stand apart in the market by leading with our people first. Once we are an independent company, each Kyndryl employee will advance the vital systems that power human progress. Our people are devoted, restless, empathetic, and anticipatory – key qualities needed as we build on existing customer relationships and cultivate new ones. Our people are at the heart of this business and I am deeply hopeful and excited for our future.
What experiences have helped prepare you for this new opportunity?
I’ve had a very rich and diverse career history at IBM that has lasted 25+ years. I started out in sales but landed explored opportunities at IBM in different roles, business units, geographies, and functions. Marketing and business are my passions and I landed on Marketing because it allowed me to utilize both my left and right brain, bringing together art and science. In college, I was no tonly a business major, but an art major. I love marketing because I can leverage my extensive knowledge of business, while also being able to think openly and creatively.
The opportunities I was given during my time at IBM and my natural curiosity have led me to the path I’m on now and there’s no better next career step than a once-in-a-lifetime-opportunity to help launch a company. The core of my role at Kyndryl is to create a culture centered on our people and growing up in my career at IBM has allowed me to see first-hand how to prioritize people and ensure they are at the heart of progress in everything Kyndryl will do.
How would you describe your leadership style?
I believe that people aren't your greatest assets, they are your only assets. My platform and background for leadership has always been grounded in authenticity to who I am and centered on diversity and inclusion. I immigrated to the US from Chile when I was 10 years old and so I know the power and beauty that comes from leaning into what makes you different from other people, and that's what I want every person in my marketing organization to feel – the value in bringing their most authentic self to work every day. The way our employees feel when they show up for themselves authentically is how they will also show up for our customers, and strong relationships drive growth.
I think this is especially true in light of a world forever changed by the pandemic. Living through such an unprecedented time has reinforced that we are all humans. We can't lead or care for one another without empathy and I think leaders everywhere have been reminded of this.
What’s the best leadership advice you’ve received?
When I was growing up as an immigrant in North Carolina, I often wanted to be just like everyone else. But my mother always told me: Be unique, be memorable – you have an authentic view and experience of the world that no one else will ever have, so don't try to be anyone else but you.
What does success look like to you?
I think the concept of success is multi-faceted. From a career perspective, being in a job where you're respected and appreciated, and where you can see how your contributions are providing value by motivating your teams to be better – that's success! From a personal perspective, there is no greater accomplishment than investing in the next generation. I love mentoring younger professionals – they are the future. I want my legacy as a leader to include providing value in work culture, but also in leaving a personal impact on the lives of professionals who will carry the workforce forward. Finding a position in life with a job and company that offers me a chance at all of that is what success looks like to me.
What advice would you give to your younger self just starting out in the industry?
I've always been a naturally curious person and it's easy for me to over-commit to projects that pique my interest. I've learned over years of practice how to manage that, so to my younger self I’d say… prioritize the things that are most important, and then become amazing at those things.