‘You need to know where the risks are’ on trade

Glenn Asham, CPA, explains the pros and cons of NAFTA and how the NAFTA negotiations can impact Canadian businesses.

Glenn Asham, CPA, CA is chief financial officer, executive vice-president of finance and treasurer of Winnipeg based New Flyer Industries Inc., one of the largest manufacturers of heavy-duty transit buses in North America.

With the future of the North American free-trade agreement [NAFTA] up in the air, I’m worried about the prospects for my business and the economy. What’s your take on the negotiations?

There’s no doubt that any major changes to NAFTA’s current structure will likely have broad implications for numerous Canadian industries. Clearly there’s a move towards greater protectionism in the U.S.

If Canadian companies engaged in cross-border trade are to remain competitive, they need to stay abreast of the negotiations and be ready to integrate possible changes to the rules into their business strategies.

How can my business prepare for a future that is largely uncertain?

I guess the way I look at it, the more knowledgeable you are about your business, the better off you will be. Canadian exporters that are not already tracking what percentage of their supply base and production takes place here versus the U.S. need to begin compiling that information. The ultimate goal: to consider how operations might be altered to meet stricter rules of origin for tariff-free goods.

At New Flyer, we operate in an industry [transportation manufacturing] that has been under scrutiny and regulation in terms of free trade for quite some time. Between 80 to 90 per cent of our transit bus sales come from the U.S. and probably two-thirds come from customers that need to meet Buy America content requirements.

As a consequence, we’ve had to adjust our operations to comply with those rules. We’ve made strategic acquisitions in the U.S., and we go through audits and give certifications to our customers, contract by contract, to show we meet Buy America requirements.

For Canadian companies that have not had to deal with significant government regulation in the past, changes to NAFTA will no doubt bring about some level of concern and anxiety. But I think you need to be forward looking. You can’t always plan for the what-ifs, but you at least have to think about them, so you know your alternatives.

Are there other export markets I should consider?

Canadian companies may want to look beyond North America for possible export markets that might mitigate lost sales to the U.S. The Canada-European Union Comprehensive Economic and Trade Agreement [CETA] and the potential of a modified Trans-Pacific Partnership [TPP] may offer increased opportunities, for example.

What role can a CPA play in ensuring I’m ready for changes?

In today’s world, it’s still important to produce historical financial statements. But from a management support point of view, I believe trying to forecast is every bit as important, if not more so. Accountants are well-positioned to offer perspective on the impact NAFTA’s provisions will have on businesses and their personnel. Understanding how new regulations can affect contracts, budgets and company performance is all part of the job.

In addition, we are well able to translate the kinds of strategies a business might formulate to deal with the changes into specific business objectives and actions, and follow up by implementing them.

At New Flyer, our strategy is to run multiple plans for everything. If we’re looking at working on a project, we develop a base plan and then we sanity-check it in terms of the downside risk. The goal is to determine if the worst-case scenario takes place, how badly it will hurt.

Produced by Globe Edge Content Studio. The Globe’s editorial department was not involved.