There has not been in recent memory a period in which international trade has experienced the degree of volatility it has over the past two years.
From the emergence of new trade blocs in the east to the renegotiation of NAFTA in the west, to the possibility of a trade war between two of the world’s economic powerhouses and the realignment of sea carriers around the world and the shortage of truck drivers across North America, one struggles to recall a time of comparable change.
For organizations with business models heavily reliant on international supply chains, the volume and frequency of change in global trade is an understandable cause for consternation, particularly when these developments force companies to undertake costly shifts in processes and operations and/or potentially compromise agreements with trade partners.
While change may be constant, it doesn’t have to be disruptive. Businesses who proactively identify the potential for risk within their supply chains will have a better chance at implementing effective contingencies and guard against operational disruptions. However, only a select few who are taking the time to do so.
According to a study conducted by Livingston International in early 2018 of businesses that currently use NAFTA, only four percent of small businesses, six per cent of medium-sized businesses and 18 percent of large businesses had contingency plans in place in the event of a U.S. withdrawal from NAFTA. The lion’s share of businesses surveyed (46 percent) said that while they were concerned the NAFTA negotiations may not be successful, they had only a general sense of the impact on their business and had not yet started contingency planning. An additional 29 percent said they had not considered whether or not the negotiations will be successful or unsuccessful or how an unsuccessful negotiation could affect their business.
At the time of the study, the threat of a U.S. NAFTA withdrawal was a very real possibility (and continues to be today). Such a scenario would have had far-reaching impact on businesses that rely on suppliers, vendors or distributors in NAFTA markets. Yet few had considered what they might do to reduce their risk exposure.
Trade transformation doesn’t have to be seen negatively. There are many changes that have taken place that could offer businesses substantial opportunity for growth, cost savings, improved quality and numerous other advantages.
For example, the recent signing in principle of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), a free trade agreement involving 11 Pacific Rim nations, offers businesses in countries like Canada and Australia the opportunity to forge new relationships with suppliers in budding manufacturing centers in Asia. Such partnerships could be an opportunity to source materials or components at a lower cost, or an opportunity to put in place a backup trade lane in the event a primary supplier is unable to deliver on a shipment.
Similarly, businesses in Canada could be reducing their dependence on the U.S. market by investigating new market opportunities in the European Union, a political entity comprising 28 nations and 500 million people with which Canada signed and implemented a free trade agreement in 2017.
But to truly realize the benefits of such risk and opportunities, a thorough investigation and analysis of existing supply chains is required. Such analysis isn’t legal, regulatory, process or management oriented – it’s all of the above.
To truly understand the impact of a change in trade policy, environment or process, you need a team of people who are able not only to look at all aspects of a supply chain, but how each affects the other and the degree to which an opportunity in one link could cause risk in another and counteract the benefits of the opportunity.
When it comes to offering a 360-degree view of the supply chain, Livingston International offers a team of experts with unparalleled depth and breadth of expertise. An elite trade services firm offering customs brokerage, freight forwarding, trade consulting and global trade management, Livingston boasts specialists in everything from customs compliance and duty drawback, to risk mitigation, audit preparation, trade lane configuration and warehouse management.
As one of North America’s oldest and most trusted customs brokers, Livingston has built a reputation for integrity, reliability and proactivity. It serves not only as a dependable agent but also as a trusted adviser and strategic business partner to global business looking to optimize their supply chains.
With change as the new normal in global trade, Livingston is strategically positioned to provide in-depth analysis and support to international businesses that want to minimize their risk exposure while continuing to seize critical opportunities.
For more information about how partnering with Livingston can benefit your business, contact firstname.lastname@example.org or 1-800-837-1063.