What advantages did Smith ford Pharmaceuticals have by owning manufacturing facilities in Canada prior to NAFTA?
NAFTA is the North American free trade Agreement between the United States, Canada, and Mexico. NAFTA created the world’s largest free trade area, which now links 450 million people producing $17 trillion dollars’ worth of goods and services. (Ustr.gov, n.d.). U.S, goods exports to NAFTA in 2010 were $411.5 billion, which was up 23.4% from 2009, U.S. goods imports from NAFTA totaled $506.1 billion which was up 25.6% from 2009. There have been several advantages that Smitheford Pharmaceuticals has benefited from owning facilities in Canada one of them being the free will to do research and come up with different medicines. Working in Canada was a big advantage for this company because the productivity growth improved dramatically before NAFTA, the cost of living in Canada is lower than the United States but only has 1/10 the people, and with Canada being the 12thlargest exporter in the world (Amadeo, March 2018).
Some disadvantages are that the only state that it borders is the United States which makes shipments of goods to other markets more expensive. Which dips into the profits of the company. NAFTA came into effect and caused manufacturing industries to withdraw part of their production from the high-cost of the United States. Stricter trade tariffs have also hindered manufacturing in Canada.
With the passage of NAFTA, what advantages remain by having manufacturing facilities still in Canada according to your research and your own judgment
NAFTA has created the integration manufacturing of three large countries with the tariffs gradually being eliminated. Having trade barriers is important because it will not just let one country take complete advantage of the market. In 2016 US agricultural imports from Canada totaled &24.9 billion while exports amounted to $25.3 billion (Poulit, 2018) Canada is one of the best places to take advantage of to manufacture and create jobs and make money. I feel not having NAFTA there would be kios and it will cause the economy to drop and jobs will be lost in the millions.
The legal regulations of conducting business overseas can be somewhat complex, but there are many guidelines that can help make the business successful and keep you from getting in trouble by the law. The first aspect of doing business overseas I would like to talk about is the GATT/WTO. GATT which stands for General Agreement on Tariffs and trade, and WTO is the World Trade Organization. These cover the international trade in goods, the workings of GATT agreement are responsibility of the Council for the trade in goods which is made up of representatives from all WTO member countries (WTO.org, 2014). World Trade Organization membership will help integrate doing business more peacefully into the international community and opens China’s market to increased foreign competition. WTO is the only international company that deals with the rules of trade between nations. WTO is a rules-based, member driven organization all the decisions are made by the member Governments, and the rules are the outcome of negotiations among members (WTO.org, 2014).
As a midlevel manager of production operations at Smitheford Pharmaceuticals, we have set up a meeting with you to discuss the following areas that need improvement concerning the manufacturing facility in Canada and the challenge that NAFTA has placed over us regarding transportation. We need to make improvements regarding where our facilities are located, the costs of transportation, tax benefits, our national presence and labor costs. I am here to present factual evidence for the upcoming decision whether we should move our main facility to the US or keep the location Canada and in the Colorado cites that the current facilities reside.
The North American Free Trade Agreement (NAFTA) was enacted on January of 1994. Its purpose is to remove the trade barriers among the three countries of the United States, Canada, and Mexico. (MUSE, 2018). This immediately lifted tariffs on much of goods produced, its value and origin. NAFTA created a free trade market for these countries, to stimulate economic growth and give the countries equal access to each other’s markets. (www.cbp.gov/trade/nafta) Prior to 1994, tariffs and taxes on imported and exported goods were high, resulting in companies paying high taxes for selected goods.
What advantages did Smitheford Pharmaceuticals have by owning manufacturing facilities in Canada prior to NAFTA?
By owning manufacturing facility in Canada prior to NAFTA, Smitheford Pharmaceuticals had the advantage of employing highly skilled individuals at a much lower cost. Since Canada has a highly decorated education system, the availability for manufacturing jobs were abundant with the acceptance of lowered offered salaries into a commemorated company. And, since Smitheford is a pharmaceutical company, perks could have been added such as health care and free prescription coverage to sweeten the deal for its employees. The cost of living in Canada is much lower than the cost to live in the United States. Smitheford also had advantages in research and development, with the freedom to develop pharmaceuticals at much lower costs rather than the US developers who must abide by so many rules. Hence, US rules and regulations in the end cost so much more. Smitheford saved money by a few of these advantages before NAFTA was enforced.
With the passage of NAFTA, what advantages remain by having manufacturing facilities still in Canada according to your research and your own judgment?
The advantages that remain after NAFTA was enforced was the free trade market, high economy and lower prices on goods and oil. By importing oil from Canada, the prices per barrel decreased, and this also eased political tension from the import of oil from the Middle East. (Amadeo, K. 2018) By establishing a free trade market, the transportation costs were virtually nothing between Canada and the US. There were no taxes for import/export over the border. This in turn saved Smitheford much money, which was recycled back into the company.
I believe that it would be wise to keep the facility in Canada in the future. Canada has the means to keep Smitheford successful. There are abundant opportunities for health care and pharmaceutical developments, it would be in Smitheford’s favor to have the upper hand at research and development. This in turn will create more jobs and a much stable economy in the health care field. Transportation remains at a lower cost, and the loyalty that Smitheford has created with Canada provides a stable future for the employees. Smitheford Pharmaceuticals is about quality and having high quality goods, services and above all research and development is key to its prolonged success.