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Trade Winds: A Four-Part Series On Shifting Attitudes Toward Trade Agreements

Trump's trade policies will have an impact on shipments of export cargo and import cargo in international trade.

Trade Winds: A Four-Part Series On Shifting Attitudes Toward Trade Agreements

On November 10, only two days after the election of Donald Trump to the United States presidency, Canadian Prime Minister Justin Trudeau remarked that he would be willing to discuss changes to the North American Free Trade Agreement (NAFTA).

The Canadian leader’s comments were in response to consistent declarations by the president-elect that NAFTA was a “disaster,” “defective” and “the worst trade deal ever” and needed to be renegotiated.

NAFTA isn’t the only free trade agreement (FTA) that has been the target of the president-elect’s criticism. The 12-nation Trans-Pacific Partnership (TPP), which would cement America’s economic ties with the economies of Asia and challenge the emergence of China as a regional hegemon, has also been called out by Trump as a bad deal for the U.S.

Many commentators have suggested the protectionist sentiment of Trump’s campaign was convenient political posturing. Only time will tell if that’s true. What we know for certain, however, is that those protectionist politics are reflective of a groundswell of resistance to trade activity and a resurrection of the Buy America movement. That groundswell has been incorrectly associated exclusively with disenfranchised workers in the country’s Rust Belt, who have seen a reduction in once abundant and lucrative production-line jobs. It is not only they who are growing resistant to globalization.

According to recent research conducted by Livingston International, protectionist sentiment among businesses in the U.S. is more than triple that of Canada with 27.3 percent of non-global American businesses stating they prefer to buy and sell locally, versus 8.4 percent in Canada.

Even more revealing are the sentiments harbored by U.S. businesses that do actively engage in free trade, with two-thirds stating the free trade agreements the U.S. has entered into have not had any noticeable impact on their businesses’ ability to compete. Those views are particularly pronounced among small businesses in the U.S. where almost half (45.9 percent) believe FTAs will not have any noticeable impact on their ability to compete, versus one-third of medium and large businesses.

To dismiss these views as being a short-term aberration or simply irrelevant would be irresponsible. They are indicative of a growing global movement of trade protectionism that was the source of discontentment that led to the UK’s Brexit and nearly prevented the signing of the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union; a deal that was seven years in the making.

It would be equally irresponsible to suggest all FTAs are universally advantageous. Each agreement is unique and results in some industries winning and others losing. The organizations and workers disaffected by past and current agreements have grown reasonably resistant to the ill effects of global trade on their success.

The reality, however, is that the trade genie is not going to be put back into its bottle. The United States is only five percent of the world’s population—a world population and economy that is increasingly interconnected through global supply chains, regional trade blocs, and capital markets. To effectively compete with the other 95 percent of the world, America’s economy will need to trade with other markets and often through trade agreements that can reduce costs but sometimes add regulatory complexities.

To take the president-elect at his word, the U.S. will be embarking on a four-year odyssey of making existing trade agreements more advantageous. If there is a remedy to heal the disenfranchised, renegotiating better terms for existing FTAs may just be it. One alternative—scrapping the agreements altogether—is simply not viable if America is to continue to engage in global commerce and maintain its economic leadership. The other alternative—the status quo—may only add to the groundswell of protectionism and, in turn, a move toward isolationism.

Given the prominence of trade issues within the president-elect’s campaign platform and the zeal with which he campaigned on those issues, it is reasonable to predict that significant changes await those organizations that have made trade integral to their business model. It is foreseeable that businesses may need to continue to navigate the complexities of global trade within the framework of a new trade regimen. Successfully adapting will require careful planning and engagement with trade services partners to better understand what prospective changes might mean to the unique circumstances of each individual business organization.

The next four years will be critical to the evolution of America’s approach to diplomacy and multilateralism. All eyes will be on Washington as the new White House administration finds what many of its constituents have long yearned for—an approach to trade that is as moderate as it advantageous. The only question is exactly what that might look like.

Susan Pomerantz is a senior director of consulting for trade services firm Livingston International. She has 35 years of experience in international trade and extensive knowledge of import and export regulatory requirements. Susan has been a speaker on trade education at local universities and compliance conferences and has served on the State of Florida’s committee for international trade and banking.

Brexit will effect supply chains and the logistics of shipments of export cargo and import cargo in international trade.

Preparing Your Supply Chain for Brexit

The United Kingdom’s vote to leave the European Union has been rattling markets and supply chains for the last few weeks. Uncertainty rules while the world waits to see how and when Britain will eventually decide to exit.

Although no one knows what this will mean for exporters, it is important to look forward and keep your supply chains moving. No matter the outcome, there are three measures supply chains should take now to cushion the potential impact.

Form a Plan B

Were you blindsided by the Brexit outcome? It was a surprise to many companies, which is why so few have a Plan B. But it is important to think ahead and develop a backup supply chain plan that does not use the United Kingdom as an entry point to Europe, because the U.K. may apply new import policies.

There is a chance your company won’t need to implement this emergency plan. However, if you wait until the outcome is announced before forming it, the process will be much more stressful. The earlier a plan is created, the smoother the transition if you need to use it.

Analyze Your Free Trade Agreements

Look at your supply chains to determine whether your company uses any free trade agreements (FTAs) that involve the United Kingdom. With 22 FTAs between the United Kingdom and individual countries, and five multilateral FTAs involving Britain, there are at least 52 countries that could be affected. All of these FTAs will have to be renegotiated, and you need to be prepared to research alternatives.

Monitor Your Supply Chain

Your company should continually monitor and remodel its supply chains based on all the changes that could happen between the time the clock starts on Britain’s two-year withdrawal and the end state.

Don’t get too attached to any plans you create, because conditions will change during this time. It is important to be flexible and stay current on the latest Brexit news so you can update all strategies accordingly.

Preparing your company for Brexit’s impact is a complicated and lengthy process. There is no such thing as a quick transition period. You will have to constantly reevaluate and update all of your plans and tactics, based on the ever-changing news. It could take up to two years for Britain and the European Union to finalize their arrangement, which leaves much room for change during that time.

There are ways to alleviate this process. Working with a trade compliance consultant will simplify everything by helping you take an objective, holistic view of your supply chain, identify opportunities and mitigate threats. A consultant will make sure your plans and tactics are on the right track, and will help you better prepare.

It is possible you won’t need to make any changes as a result of the Brexit referendum. However, if anything does need to change quickly, the extra preparation will prove worthwhile.

Susan Pomerantz is senior director, GTM Governance and Compliance at Livingston International.