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Free Trade Is Good For Supply Chains, And Politicians Need To Recognize This

Supply chains have adopted new innovations because of free trade, not despite it

27Oct

Given the torrent of scandal, personal abuse, and accusations, it’s easy to forget that somebody is going to have to run the country after the election. While it is understandable that you would have missed any policy announcements, both candidates have spelled out their positions - perhaps not always coherently or with any real specificity - around trade, immigration, and development of infrastructure. The implications for supply chain managers of their dramatically different plans are significant, and they need to be prepared.

One issue where both Clinton and Trump have been particularly vocal is trade. The Republican Party has always been pro-trade, more so than their Democrat counterparts, but Trump has driven a significant shift away from this position. Essentially, Trump is a protectionist. He wants to tear up trade agreements with other countries and cut border adjusted value added taxes, arguing that trade has brought about the demise of US manufacturing by forcing American products into competition with countries where wages, labor, and environmental standards are far lower than America’s. Trump has said he will withdraw from the as yet unratified Trans-Pacific Partnership (TPP) and will renegotiate NAFTA to get a better deal for US workers. He has pledged to appoint ‘tough and smart trade negotiators’ to fight on behalf of American workers. Although perhaps the current administration could argue that they have hardly

Trump’s rhetoric around trade relationships with other countries has been confrontational, to say the least, particularly with China - despite his own company’s many supply chain partners in the country. He has said he will instruct the Treasury Secretary to label China a currency manipulator, and will instruct the US Trade Representative to bring trade cases against China. He’ll also put a 45% import tariff on Chinese goods.

Clinton, on the other hand, is more outward looking, despite having toned down the rhetoric in order to appeal to Bernie Sanders’ supporters. She has argued in favor of what she has called ‘smart and fair trade’. In leaked speeches, she told attendees that her ‘dream is a hemispheric common market, with open trade and open borders,’ indicating not so subtly that she is still keen to promote trade between countries, despite her flip flopping on TPP, a bill she helped to draft. She will also lead a drive to bring manufacturing back to America, and has pledged $10 billion investment in ‘Make it in America Partnerships’, which aims to ‘link together all parts of the supply chain and build on the strength of a region in particular industries.’ This will go only to partners who pledge not to shift jobs overseas or undermine ‘Buy American’ standards. She will also look at existing trade agreements, like NAFTA, although her language is somewhat less bellicose than Trump’s.

The benefits of a global supply chains are clear for all to see, bringing down prices and creating jobs, albeit not in manufacturing. There are costs, and these costs are easy to understand, which is why Donald Trump has been so successful in exploiting fears around them. However, his concerns are misguided. Trump himself has been successful because of free trade, and bashing our trading partners is unhelpful. This is not exclusively a Trump issue, Clinton also needs to settle on a position and not try to pander to those who would see free trade abolished in favour of a more insular country. TPP has its problems, but supply chain managers will be hoping that these are resolved and the shift away from free trade is halted.

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