I think it's fair to say that if you're in business in the Great Lakes region and you have operations on both sides of the border, you're thinking about plans B and C.
Three months ago I was probably more of an optimist about where we started, but I'm probably sitting at about 50/50 with respect to where we're going with the negotiations from a modernization standpoint.
The challenge is that there are issues from the last 25 years—real issues, technical issues—that we need to address, but we seem to be overloading the conversation with new issues and proposals, particularly from the U.S., that are unworkable. From my perspective, unless there is a major shift in that conversation, I'm not sure how we get to a successful outcome.
It's still early days, though. We just finished the fourth round, but each round seems to be getting a bit tougher. I'm hoping that cooler heads will prevail among the negotiating teams, and that businesses in the United States will start speaking up very loudly over the next couple of weeks about the importance of doing trade with Canada and Mexico. If we end up in a position where the talks break down and a decision to withdraw from NAFTA is ultimately made by the President, the default is going back to most favoured nation status, which would obviously create some new tariff structures.
From what I understand from business, as much as they don't want to go in that direction, they would probably live with it. It's certainly going to add costs to consumers. I was speaking to a company yesterday that makes appliances, and the tariff rate for them would likely go to 8%, which would probably add between $50 million to $60 million to their supply chain. That's going to be passed on to the consumer in additional costs. I think people are starting to figure out what that world looks like in new MFN tariff rates, but I hope we don't get there, to be honest.
The second point I would make as we're thinking about NAFTA is that there are new opportunities with Europe through CETA, and this region needs to start thinking really hard about how this region serves as a platform for serving Europe. We've been very focused on north-south engineering of our business and supply chains, and there are reasons we did that. However, with the opening of a 500-million-person marketplace in Europe, I think it's time for us to also start thinking about how this region can serve Europe.