I’ve received several emails on my “A ‘Buy American’ Supply Chain” posting from last week, and a couple of people have commented on the website.  It’s certainly a topic that’s stirring a lot of conversation, particularly around the two key questions that I raised in my posting:  Are “trade wars” on the horizon, and if so, what impact will they have on your supply chains?  Will more companies adopt “near sourcing” strategies, even without legislative action, in response to the increased costs and complexities of managing long supply chains?

Regarding the first question, Scott Davis, the Chairman and CEO of UPS, gave a speech this week at the CEO Leadership Series hosted by the U.S. Chamber of Commerce in Washington, DC.  You can read the text of the speech by clicking here.  In short, it’s a passionate defense of global trade, where he discusses “the distinct and measurable advantages that flow from free and open trade” and proposes a “proactive rather than a reactive approach to the global trade issue.”  He challenges a couple of “myths” associated with global trade:

“There is a growing perception, especially here in the U.S., that globalization and free trade are siphoning off jobs to faraway places.” According to Davis, The Bureau of Labor Statistics reports that in layoffs of 50 or more people, between 1996 and 2004, less than 3 percent resulted from import competition or overseas location.  He also mentions that according to Treasury Department estimates, as many as 57 million Americans are working for companies that engage in global commerce-i.e.,  two out of every five U.S. non-farm jobs is linked to exports and imports of goods and services.

“Advocates of trade restrictions argue that our manufacturing base is being depleted, and we no longer make things.“  Here Davis points to the fact that the US is still the world’s leading manufacturer, representing nearly one-quarter of the global manufacturing output.  And the U.S. is also the world’s largest exporter of goods and services, with exports reaching $1.8 trillion. To quote from the speech, “Exports of services are growing faster than almost any other category. They surpassed $550 billion in 2008.  The U.S. trade surplus in services reached $144 billion last year. These exports, which include financial services, telecomm, and my favorite, express delivery, are often called “invisibles,” but they support millions of American jobs.”

I didn’t have time to verify all of these statistics, but I’ll assume they are accurate.  At the end of the day, however, these numbers are meaningless to people who have lost their jobs, which is why I agree with Davis’ assessment that “we, the proponents of free trade, have tended to talk from the head.  The anti-trade forces talk from the heart about lost jobs, lost homes, lost hope.  In the court of public opinion, the heart wins.”

Along the same lines, CBS’s 60 Minutes ran a segment last week called “Could “Buy American” Rule Spark Trade War?”  You can watch the video below, or read the transcript by clicking here.  The segment features interviews with Dan DiMicco, the CEO of Nucor (a leading US steel company) who lobbied for the “Buy American” provision in the stimulus bill, and Jim Owens, the CEO of Caterpillar, who was against it.

There’s a lot of good content in the video, so I recommend you watch it.  But here is the part that amused me the most.  At the very beginning of the segment, DiMicco tells Leslie Stahl “The whole purpose of your stimulus package, and it’s the right purpose, is to stop the bleeding of jobs and to create new jobs here in America, not overseas, not in China, not in Europe.”  Later in the interview, however, when the discussion shifts to the success his company was experiencing until the financial crisis hit, DiMicco says “I would definitely say that the fact that the infrastructure was growing at the rate that it was growing in China and around the world, because of that we had four or five really good years.”

And that’s what it all boils down to: global trade is good when it makes you money, and it’s bad when it doesn’t.

This debate will certainly continue, and supply chain professionals must stay informed of what happens in Washington and abroad, and weigh the risks of a trade war in their strategic planning activities.