Supply chain executives fear rising protectionism

In the past, economic downturns often have spurred governments to adopt trade barriers. That remains a concern among supply chain professionals today. An online survey of 58 supply chain managers in North America, Europe, and Asia found universal worry about the effects of economic troubles on the future of world trade.

A spate of anti-trade initiatives prompted a group of companies to conduct research on this topic in March 2009. They included the global logistics service provider BDP Internation al Inc., its Centrx consulting unit, Adler Research, and King's Road Consulting (all based in the state of Pennsylvania, USA) and Rubicon Consulting Pte. Ltd. of Singapore.

"The fact that seventeen G20 [economic organization] members and other countries have implemented nearly fifty measures restricting trade since last November has dramatic implications for global supply chains," said Richard J. Bolte Jr., chief executive officer of BDP International, in announcing the results of the survey.

Eighty-four percent of the respondents said they believe that rising protectionism could turn a global recession into a depression, and 60 percent predicted that a global depression would cause the collapse of globalization. "The survey underscores the broad-based concern among global traders that a sharp increase in protectionism could result in dire consequences, including a depression and a resurgence of economic nationalism that could hobble the global economy for years, if not decades, to come," said the researchers in their report, "Managing Your International Supply Chain: What companies are saying about the recession and its effect on international supply chains."

When asked how economic conditions would affect their own companies, about 21 percent of the respondents said it would significantly reduce their export activity. Meanwhile, 17 percent said they believed that protectionism would contribute to higher costs of materials.

Nearly half of the respondents said that their companies are placing a greater emphasis on "nearshoring" to reduce supply chain costs. And 81 percent said their companies' biggest near-term priority was cost-based selection of transportation modes. Another immediate priority, cited by 57 percent, was renegotiation of transportation contracts—even those signed just months earlier—to reflect current supply and demand conditions.

Interestingly, the researchers found that supply chain managers from different parts of the globe had varying concerns. Ninety-five percent of the North American respondents were "highly concerned" or "moderately concerned" about rising unemployment. That contrasts with European respondents, who were more worried about the disappearance of emerging markets. One-hundred percent said they were "highly concerned" or "moderately concerned" that emerging markets they relied on both for sourcing and as customers for exports would dry up. Finally, the greatest concern for Asian survey takers (100 percent) was a prolonged reversal of globalization.

One positive note that tempered respondents' gloomy outlook: Three-fourths of the survey takers said they believed that the recession would not last another 12 months.

Source: "Managing Your International Supply Chain: What Companies Are Saying About the Recession and Its Effect on International Supply Chains," BDP International and Centrx, April 2009.]