Last week, I wrote about how Mexican truckers are suing the United States for $6 billion for not complying with the trucking provision of NAFTA (which follows the $2.4 billion in punitive tariffs Mexico slapped on U.S. exports back in March).  Now our neighbors to the north are proposing taking action against the U.S. in response to the “Buy American” provision included in the stimulus package passed by Congress in February (see “A ‘Buy American’ Supply Chain“). 

According to a news report, “The Federation of Canadian Municipalities endorsed a controversial proposal to support communities that refuse to buy products from countries that put trade restrictions on products and services from Canada.”  In the words of Sherbrooke, Quebec, Mayor Jean Perrault, “This U.S. protectionist policy is hurting Canadian firms, costing Canadian jobs and damaging Canadian efforts to grow our economy in the midst of a worldwide recession.”  The federation agreed to wait 120 days before implementing the measure to give Canadian trade officials time to negotiate a resolution with the United States.

The article also highlights the “unintended consequences” of these types of protectionist actions.  Simply stated, many Canadian companies source components for their products from the United States.  Therefore, any restrictions placed on Canadian finished goods would impact part suppliers in the United States.  The same holds true for any punitive actions Canada might take against the United States-i.e., Canadian companies and local economies would also be negatively impacted. 

There is no U.S. economy, there is no Canadian economy…there is only a Global Economy.

My favorite segment from the article, however, is a picture of a tattoo which reads: ‘Buy American Buy Union’.  The tattoo is on the arm of United Auto Workers union local 594 president Don Skidmore.  A picture truly is worth a thousand words.

Another Reuters news item, related to global trade, caught my attention this week: “GM intervention by U.S. raises free trade questions” by Susan Cornwell (the article also includes a very telling ‘Buy American’ related picture).  My main takeaway from the article is that instead of complaining, other countries will likely use the government’s intervention with GM as an excuse to continue (or to start) subsidizing their own industries.  Are we heading down a slippery slope here?

When designing an “optimal” supply chain network and making strategic supply chain decisions, does it matter if GM is 60 percent owned by the government?  What role does empathy play in deciding where to build or source product from?  Would a wise government employee with the richness of his experience make smarter supply chain decisions than a logistician who’s only worked in the private sector?

Okay, I’m being a bit sarcastic here.  But my point is that government intervention, both here in the United States and abroad, is casting dark shadows on global trade as we know it.  At the moment, I think the actions Mexico and Canada are taking are just warning shots that in the long run may amount to nothing.  But it’s always better to heed a warning than to ignore it, so stay informed of what’s happening and prepare accordingly.