Pou/POE Manufacturers: Is It Time To Look Southward?
By Robin W. Grover and William C. Ives
Three recent developments make it much more likely that your international markets of the future will lie to the south of the United States.
Bilateral Free Trade Talks
First, President Bush made surprising progress in his meetings with Mexico’s President Salinas on the subject of a possible North American Common Market. Despite opposition from some Mexican manufacturers and a dwindling band of Mexican nationalists, Salinas agreed to Mexican participation in bilateral free trade talks scheduled to begin next spring. While Salinas remained adamant that the topics of labor rights, environmental protection and immigration must not be included in the negotiations, he did yield a bit on American financing of further exploration and development of Mexico’s vast petroleum reserves.
South America Receptive?
Second, the President met a very receptive audience on the South American continent for his idea of extending free trade to many of the other nations in Latin America. Brazil’s government agreed to cut its average tariffs in half over the next three years. Other governments, notably Chile and Venezuela, clamored for inclusion in a free trade area with the U.S.
“Uruguay Round” Collapses
Third, the so-called “Uruguay Round” of multilateral tariff negotiations collapsed, having floundered on Europe’s unwillingness to reduce agricultural subsidies and Japan’s refusal to consider the smallest change in its ban on rice imports. While the talks will be given one last chance for resuscitation by mid-February, the possibility of making real progress is growing dimmer.
What Does This Mean For Your Company?
What does all this mean for you and/or your water treatment company? Certainly, a rise in trade tensions is in store — particularly with the 12 member nation European Community (notably Germany) and Japan. The result of such product had nothing whatsoever to do with the source of the dispute. A current example is that the Bush Administration had designated products as diverse as chicory and mineral water for retaliation because of the EC’s barriers to U.S. exports of corn and sorghum.
One “offset” if you’re a domestic manufacturer or already have established manufacturing facilities in the targeted countries, is that you’re already “in the tent”, and you may benefit when your competitors’ products are burdened by high “special” tariffs.
A better “offset” is our major point in today’s column: The world is slowly dividing into three major trading blocs. The first, centered on the twelve-nation European Community, will have a powerhouse market of 320 million consumers dominated by Germany. Already, the EC is showing greater independence and an open willingness to ignore American political and economic interests, as witness its defiance on the subject of U.S. beef and pork exports.
The second, consisting of Japan and East Asia, will be heavily dominated by the former nation (a result which Japan more aggressively and far less successfully sought earlier this century).
The third, that of the U.S.-led Western Hemisphere, will, in our view, become the world’s most vital trading bloc as our Latin American neighbors move to political and economic maturity and stability. Already, Mexico, after a decade of stagnant growth, has witnessed a turnabout not thought possible. Salinas has sold off the state-owned airlines and telecommunications company, has allowed U.S. investment in many sectors held off-limits for decades, has dramatically reduced Mexican tariffs on American products, and has adopted a startling array of free-market policies.
Chile has experienced a remarkable rate of economic growth through its adoption of freer trade and market principles. Brazil shows signs of an economic reawakening. As the attraction of socialism and dictatorship fades, Latin America presents a huge potential new market for your products.
In the clamor over EC 1992, it is easy to lose sight of a vast new market on our own doorstep. The prudent exporter will not ignore it.