As the 2016 election heats up at the end of the 2015 year, and people set their political lines and affiliations in the sand, businesses are paying close attention to how the upcoming political race will affect their global supply chains. Will changing federal regulations raise or lower manufacturing costs? How will trade agreements affect the countries where companies plan to do business? Will the heated talks about immigration laws have any impact on the growing workforce labor found in neighboring countries?
Trade Agreements and the Supply Chain: A Fluctuating Political Landscape
One of the biggest pieces of legislation, and the most secretive, is the Trans-Pacific Partnership. Businesses around the globe have been left in the dark concerning most of the trade pact details. Yet one detail is certain. If the agreement makes it through Congress, it can strengthen trade relationships between the 12 countries that are already members of the pact while coaxing other countries to eventually become part of the agreement.
So what does the Trans-Pacific Partnership have to do with supply chains? Predictions established by Moody’s Investors Services have hinted that the trade pact could lower costs for all member nations, while creating more economic growth for the United States, according to Supply Chain Quarterly. The agreement will also have smaller nations, such as Malaysia and Vietnam, ready to increase production processes from the influx of new consumer demand established in other countries.
One thing that should be noted is that China is currently not part of the trade pact. This situation can affect business interactions and growth in such a country as China will have the option to either decide to become a Trans-Pacific member or seek to create its own trade pact along the Asia-Pacific region with Europe and Africa. Currently, global businesses interested in finding new trade areas are paying close attention to the emerging economies located in Africa due to its younger workforce (most of the population is 25 years old or younger) that is slowly moving to larger cities. With global labor rates impacted by this young workforce, countries will be seeking out new business opportunities in this county as it will increase global supply chain demands.
Yet this trade pact still has several obstacles to overcome — one of which is the highly controversial Investor-State Dispute Settlement. This provision in the trade accord would give certain broad powers to multinational companies to protect their business investments by challenging a country’s regulations in a tribunal setting. With opposition to this part of the trade pact from both US political parties, and with the continued secrecy in regards to other provisions that are included in the pact that has yet to be revealed, it will become a hot-button topic during the 2016 presidential election.
Revisiting Federal Regulations on Manufacturing Costs
Briefly touched upon during the 2016 presidential debate were the growing federal regulation costs that have negatively impacted manufacturers. The US business sector may spend close to $420 billion to adhere to compliance, health and safety regulations. As more regulations are introduced, these driving costs will be felt throughout global supply chains as manufacturers seek to balance their budgets and lower their operational costs while increasing their production rates.
Nobody is sure on whether the costs of these regulations will come back into focus during the 2016 presidential election by participating candidates. Yet with the Trans-Pacific Partnership taking center stage on the debate table, manufacturers will be paying close attention as the trade pact will certainly introduce new federal regulations that will tie into their production costs. Seeing how the candidates will handle these regulations will allow manufacturers to take the appropriate actions to persevere and better manage their global supply chains.