Exploring the Government Threat to Globalization: Our Continued Analysis of DHL’s Global Connectedness Index

We often take the positive side of globalization for granted. Yet the rise in anti-dumping cases (some with merits no doubt, some without) filed by US companies (see related articles on our sister site MetalMiner here, here, here and here) suggests that global trade is not necessarily free trade in an equal sense. Yet staying vigilant by not overreacting from a policy standpoint is of critical importance (one wonders if Brazil was less protectionist, by example, how much greater a global economic superpower it could be today – the China and Germany of Latin America).

In this regard, DHL’s Global Connectedness Index has some recommended guidance that we should all pay closer attention to. Specifically, its authors observe, “The biggest threats to globalization may come from policy fumbles or protectionist interventions rather than macroeconomic fundamentals. Even after the IMF’s latest downward revision, the world economy is still projected to grow faster from 2014 to 2019 than over any of the past three decades.”

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Yet countries that either cheat the system on the export side (in the metals industry, for one, there are many) as well as those that erect barriers to imports (the US is quite guilty here as well, with the sugar market as perhaps the sweetest example of this irony), often stand to lose the most by their actions. US consumers, for example, pay more for sugar (and use less of it – in favor of high fructose corn syrup), than we should.

From a procurement standpoint, we have long recommended in the metals markets that category leaders and executives have a point of view on trade and trade policy given that that policy changes can directly impact cost and risk – and can shift supply bases over night.

My better half and our CEO was recently quoted in USA Today on the topic of how countries and companies skirt trade rules even after rulings against them.

This type of perspective and market/country intelligence can never be fully outsourced in strategic categories in procurement. Reading MetalMiner (for metals) or outsourcing market intelligence to Beroe or Smart Cube is insufficient. Developing internal resources to have an appreciation for the nuances of trade and policy and ultimately how it impacts sourcing, cost, inventory and lead times for strategic supply categories is now a necessity.

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