IMPACT OF THE TRADE AGREEMENT : CORPORATE STRATEGY : U.S. Firms Map Ways to Profit From the Accord
American companies--ranging from international giants such as Procter & Gamble and Hewlett-Packard to a small Santa Monica waste disposal firm--have already begun determining how to capitalize on the proposed North American Free Trade Agreement.
“Some companies are getting on the ball and trying to get in before the NAFTA rush begins,” said Coleen Lassegard, assistant director of studies and programs at UC San Diego’s Center for U.S.-Mexican Studies. “It’s a whole new ballgame there.”
The potential beneficiaries are diverse, with new opportunities opening for firms from financial services to oil services to heavy manufacturing to consumer products.
Here is a sampling of companies and what the trade agreement means to them:
United Parcel Service
Familiar on U.S. streets, United Parcel Service’s brown vans will become increasingly common south of the border as free trade generates additional delivery business. Not only will international shipments increase under free trade, but deliveries within Mexico are expected to rise as well.
“This is something that we have been looking at for quite some time,” UPS spokesman John Flick said.
Already in the last four years, UPS has slowly expanded its Mexican operation, UPS de Mexico, to more than 400 people. In 1988, it launched air service between the two countries, and last year UPS vans and trucks started delivery service in 12 Mexican cities. The company will soon expand its fleet of vehicles from 65 to nearly 200.
In addition to Mexican domestic service, UPS is experimenting with cross-border delivery to handle the heavy volume of traffic between Mexican maquiladoras --manufacturing plants that operate just across the border in Mexico--and their sister facilities in the United States.
UPS, however, does not have a lock on the Mexican market. Mexican-owned companies and U.S.-based firms such as Federal Express and DHL are also expanding to meet increasing demand.
NationsBank
As the largest bank in Texas, NationsBank sees great potential for expanding its lending and investment banking operations in Mexico, said Roberto Sanchez, senior vice president and manager of Mexico-based business for the Charlotte, N.C.-based bank.
“While Mexican banks have had pretty much free access to the U.S. market, we have been very limited as to the things we can do in Mexico,” Sanchez said. “We’re very much looking to this agreement in financial services to open up the market to us.
“Certainly the whole border area is one we would like to focus on a lot more, which certainly puts us right there at Northern Mexico,” he said.
Clean-Up Technology
William Reese, president of Clean-Up Technology, hopes that ratification of a free trade accord will give him enough security to commit the equipment of his small Santa Monica-based waste disposal company to jobs south of the border.
“My concern as a business owner would be in going down without any protection,” he said. “I’ve held off on Mexico, quite honestly. I’m afraid to go down and put equipment down there and have it be gone” through nationalization.
Reese, who will fly to Mexico in the next few weeks to scout possible sites for jobs, is optimistic about the potential.
“There’s obviously a lot of clean-up work to be done in Mexico,” he said. “There’s not a lot of expertise in our business” in Mexico.
Parsons Corp.
The proposed free trade agreement has engineers at Pasadena-based Parsons Corp. ready to hit the drawing boards.
Mexico needs to expand or modernize everything from oil refineries to sewage plants if it wants to compete effectively in a North American free trade zone. Designing and building those and countless other facilities is where Parsons and other engineering firms enter the free trade picture.
Parsons’ Mexican partner, Latisa, already employs more than 350 in its main office in Mexico City.
Although much of the additional work will be handled by Mexicans, Parsons’ U.S. engineers will be relied upon in the conceptual stages of projects and in managing the different phases of design and construction.
“We have seen an industrial expansion,” said Joel Bennett, president of Parsons’ environmental services unit. “The trade treaty . . . is going to increase our business opportunities.”
Hewlett-Packard
Mexico’s attempt to leap into the Computer Age has proved a boon to companies such as Hewlett-Packard, which sells about $190 million a year worth of high-tech products to Mexico. As fast as Mexican high-tech sales have grown, H-P expects the pace to pick up even more with a free trade accord.
Under NAFTA, H-P and other high-tech firms would see the eventual elimination of Mexican tariffs ranging from 10% to 20% on imported computers and related products. In addition, the treaty would codify many of Mexican President Carlos Salinas de Gortari’s efforts to liberalize Mexican trade laws and policies. For example, Mexico has already phased out some rules requiring foreign-based manufacturers to export a certain amount of their production.
Perhaps the biggest boost for H-P sales in Mexico would result not from lower tariffs but from reinvigorated Mexican companies responding to the competitive challenges of free trade.
Procter & Gamble
Shampoo, deodorant and other U.S. consumer products are popular in Mexico but are costly because of import duties. The elimination of the duties is expected to boost sales for Procter & Gamble and its competitors.
“Obviously we do business in Mexico, Canada and the United States, and this agreement is good news for us,” P&G; spokesman Terry Loftus said.
As many as 2,000 new jobs will be generated in the United States alone for Procter & Gamble and its suppliers, and it will reduce costs by about $40 million across the region over the next few years, Loftus said.
