In 1994, the North American Free Trade Agreement (NAFTA) created one of the world’s largest free trade zones and established the foundation for economic growth and increased prosperity for Canada, the United States, and Mexico. This essay sets out to examine how proposed changes to NAFTA could affect the Medical Device Industry. In recent weeks, U.S. President Donald Trump has threatened to scrap NAFTA or limit the number of economic sectors that “free trade” with Canada and Mexico could encompass. Were this to happen, the medical device industry could be impacted in both positive and negative ways. These possible changes create positive impacts for both Canada and Mexico. Most of the possibly negative changes directly impact the United States. Our research analyzes external environmental factors and the industry as a whole. We look at how the proposed changes could affect three major companies operating in the NAFTA region: GE Healthcare, Johnson & Johnson, and Medtronic. Through our research, we are able to generate potential strategies for each of these companies should the possible changes to NAFTA occur.
While studying the impact of the potential changes of NAFTA in regard to the Medical Device Industry, we first need to learn about how the industry is currently doing and how potential changes proposed could affect the industry. Our research of the Medical Device Industry uses a strategic audit approach to analyze and make recommendations to the top three companies in the NAFTA region. Were NAFTA to be scrapped or severely limited, there are a number of likely impacts on the Medical Device Industry in the United States. First, Mexico and Canada could retaliate by imposing restrictions on United States products that currently have favorable trade terms and high sales volume. Second, there is the potential for a lower trade deficit between Mexico and Canada. Third, scrapping NAFTA might bring about an end to the Value-added Tax (VAT). The VAT is a type of general consumption tax that is added incrementally throughout each stage of production or distribution. This would increase profit margins for many companies, including those in medical device production. Lastly, there could be more complications involved when American-owned factories stationed in Mexico are moved back to the United States (Varney, 2017).
Guimond, Melissa; Krouse, Jennifer; and Beauregard, Kyle
The End of NAFTA and a Future for Companies in the Medical Device Industry.
Undergraduate Review, 14, 58-67.
Available at: https://vc.bridgew.edu/undergrad_rev/vol14/iss2/10
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