Shifts in supply chains are becoming more common as the tit-for-tat tariffs imposed between the US and China continue on without an end in sight. And China and the US are not the only countries imposing increased tariffs as well as non-tariff barriers to trade. Other countries that have a history of higher tariffs and non-tariff barriers to trade, may also be looking to make trade policy adjustments in order to adapt to the changing trade landscape.
How should suppliers respond?
Both China and the US and other governments have relatively quick processes in place for imposing new tariffs , however, most product suppliers need time to assess their options and re-plan their manufacturing processes and supply chains in order to respond to these measures and avoid the higher duty rates. Similarly, governments can also nimbly remove the higher tariffs, but product suppliers often have supply chains that cannot be changed as quickly and they need to determine the risk associated with creating new supply chain routes. It is not just product suppliers who are impacted. New tariffs disrupt many businesses in the supply chain and impact decisions made on product sourcing, routes to market and manufacturing.
The 11 parties to the Trans-Pacific Partnership Agreement who remained following the withdrawal of the United States have set March 8th in Chile as the date for signing the successor to that agreement, the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (“CPTPP”). Once ratified by at least six (6) of the 11 parties, the CPTPP will enter into force. Below is a synopsis of what has changed in the new agreement and an overview of opportunities for businesses operating in the CPTPP area.
The Trans-Pacific Partnership (TPP) was hailed as a visionary trade deal — connecting economies across the world as far as Japan and Chile, and pushing forward high standards on labour and the environment and removal of non-tariff barriers to trade. Yet political developments have meant the TPP as agreed cannot be implemented. President Trump announced the withdrawal of the United States from the TPP in January 2017. As currently drafted, the TPP requires 85% of the parties’ GDP for implementation and the 85% threshold cannot be met without the United States.
The United States withdrawal from the TPP has left a vacuum in global trade leadership. However, Asia Pacific is not standing still and waiting for the United States to implement its “free but fair trade” trade policy agenda. There have been significant movements forward for free trade in Asia Pacific without the United States.
Australia is considering whether to adopt modern slavery legislation, similar to that found in the United Kingdom (UK) and California . “Modern slavery” has been identified as including slavery, forced labour and wage exploitation, involuntary servitude, debt bondage, human trafficking, forced marriage and other slavery-like exploitation occurring today.
A current federal parliamentary Committee inquiry into the matter has received strong interest from a broad group including retailers, financial institutions, governments, not-for-profit organisations, universities, law firms, individuals and other interested parties. Supply chain transparency is a key area of focus for the inquiry, including requirements for relevant parties to report that their global supply chains are free of slavery and human trafficking.