The made-in-Mexico version of the famous Fender Stratocaster guitar, played by numerous rock and roll luminaries including Jimi Hendrix and Eric Clapton, could become a casualty of the renegotiation of the North American Free Trade Agreement (NAFTA), one analyst claims.
The first round of renegotiation talks kicked off in Washington yesterday.
Fender has made the iconic instrument at a factory in Ensenada, Baja California, since 1987. Cheaper labor costs allow Fender to make a simplified version of the instrument there that sells for around US $600, half the price of its United States-made counterpart. That enables the company to compete with cheap Asian-made guitars.
While purists insist that the U.S. Stratocaster sounds better, the availability of a cheaper version means more people can play their very own Strat. Other U.S. guitar manufacturers — C.F. Martin & Co. and Taylor Guitars — have also transferred part of their production to Mexico.
Since NAFTA came into force in 1994, figures show that exports of Mexican-made guitars to the U.S. have increased by 90%, reaching US $38 million in value last year.
But a manufacturing analyst from market research company IBISWorld believes that if any new tariffs are imposed on the Mexican guitars, Fender will be forced to make adjustments or even reconsider its viability in Mexico.
“It wouldn’t be unbelievable to see them close down that plant and move to a place where they can trade more freely,” Rory Masterson told news agency AFP.
However, Morris Cohen, a professor of manufacturing and logistics at the University of Pennsylvania, who visited the Fender factory the day after Donald Trump was elected president, holds a different view.
“They were not that concerned,” Cohen said of the workers. “They explained . . . that even if NAFTA is eliminated, 35% tariffs are not going to happen overnight.”
He added that virtually all Mexican exporters have effective mechanisms to respond to such challenges.
Mexico is currently the third largest supplier of imported guitars to the U.S., Masterson said, accounting for 21% of the market and exceeded only by China and Indonesia.
Under current NAFTA arrangements, guitars are exported tariff-free in North America but stricter rules of origin being pushed by the U.S. that are primarily aimed at the automotive industry could also affect the Mexican Stratocaster.
Source: El Economista (sp)