Saturday 22nd Jul 2017 - Logistics & Supply Chain

Managing an extended supply chain just got a bit harder

Strictly speaking, nothing much has changed. US President Trump has “withdrawn” from the Trans-Pacific Partnership – a trade agreement that encompasses about 40 per cent of global trade.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

But, of course, in the US the deal was never formally approved and implemented.

Nothing much has changed. However, it is clear that Trump is determined to push ahead with his campaign that promises to dismantle (as far as he is able) the free trade environment that has been driving the growth of economic globalisation and the extended supply chains that have benefitted from liberalisation.

With the Trans Pacific Partnership gone, the prospects for the proposed Trans Atlantic Trade and Investment Partnership are also bleak.

The World Trade Organisation coined the phrase “Made in the World” referring to the fact that increasingly products are not made in a single country, but are assembled from components that have themselves been made in a number of other countries. And its latest statistical analysis shows this process meant that the value of global trade in 2015 was almost twice as high as in 2005.

How Trump’s view of the world will translate into everyday reality and affect this is moot. But what is clear is that if the US is relinquishing its role as a driver of global trade, others are prepared to step in.

Speaking at the World Economic Forum last week, Chinese President Xi Jinping made it clear that China is determined to push ahead. “There is no point in blaming economic globalisation for the world’s problems, as that is not the case and will not help with solving the problems,” he said.

He went on: “We should not develop the habit of retreating to the harbour whenever encountering a storm.”

And, addressing the threat of protectionism, he said: “Nobody will emerge as a winner in a trade war.”

So far, nothing much has changed, and change will be slow. But, the environment in which extended supply chains thrive is changing. The uncertainty resulting from that will make planning and developing extended supply chains harder for years to come.

 

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