This is part two in a series of Political Risk Management and Trade Development blogs illustrating how current events impact your business and its future. We’ll discuss the Coronavirus, Brexit and Locusts!
Now that we have been totally consumed by the Coronavirus, how has your business responded? Is it in denial, or is it paralyzed? What’s your plan to emerge? These questions could be asked of any of today’s topics.
For those of you who read part one, “Political Risk Management,” my view into the crystal ball has always asked a simple question, what happens before the unexpected occurs?
None of us could have ever imagined that a global pandemic would have put businesses around the world at a complete stop. Like most of you, I too want to know what the end of this scenario looks like. Politically we know that at least in the U.S. we shouldn’t expect President Trump to offer an FDR-style recovery. War with China isn’t a likely outcome either… Wars are usually zero endgame situations anyway.
Put aside President Trump’s dislike of China for a moment and recall that American businesses had been operating on the thought that integration of global markets would promote political cooperation and a leveling of those so-called “rules of the game” around the world… for the most part it did however, China didn’t play by the rules.
For decades, the two countries have had a basic bargain: the US invents, China builds, everybody wins. But there's a growing view among politicians in the US that, rightly or wrongly, this bargain is [a] bad one. Sure, it's given Americans access to cheaper imported consumer goods, they say, but it's also cost millions of US manufacturing jobs and strengthened a strategic adversary that doesn't share American values. At the same time, they say there are national security concerns about Chinese firms supplying technology to US critical infrastructure, including the 5G data networks that will power the next phase of the digital revolution. (GZERO Media, 2019)
This could be your first clue that the winds of change are soon to blow harder. Thus, you have a choice: keep your dependence on China or find an alternative strategy. Is President Trump’s nostalgia for a 1950’s USA complete with Mom, Baseball and Apple Pie our future? Are you ready if in fact it does come to fruition?
How you are positioned at the end of this crisis will ultimately dictate your future success.
Perhaps start your research with a review of one of my favorite videos from the 1980’s, Back to the Future! Available here at Amazon just in case you didn’t have a copy. www.amazon.com/gp/product/B00498XR9U/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=B00498XR9U&linkCode=as2&tag=maplecreek-20&linkId=bd856204076792742ea9ae50ef60babf
What about British Prime Minister Boris Johnson’s battle with the virus? He’s now been moved to an Intensive Care Unit… what does BREXIT without Boris Johnson look like?
We wish Mr. Johnson a speedy recovery.
Locusts! This year’s swarm of locusts in East Africa are literally as widespread and, dare I say it… of biblical proportions which all but guarantee a humanitarian crisis that will far outweigh the current Coronavirus pandemic.
Some of you may remember famine relief fundraisers in the 1980’s, perhaps most famously was Live Aid, the impact of which became center of foreign policy for many western governments.
All of these situations will affect your business even if you don’t “do” business in Africa.
Political Risk Management and Trade Development run hand in hand which brings me to restate the point of this blog - successful companies are prepared, they anticipate threats and plan for all eventualities. My 30+ years in supply chain management have taught me a couple critical skills… anticipate the impact of the weather, illness, labor unrest and public discord. It didn’t prepare me for a global pandemic, but the recovery skills are the same.
So, what does the end of this pandemic look like and how do we emerge?
Take a step back… Look around… Here’s a chance to reestablish or reinvent your business. Even the fortune 500 will come out the other end differently. Is the opportunity manufacturing consumer goods? If it is, will they satisfy the appetite created by China’s low-cost production? Is producing that consumer good in Mexico a better alternative? After all Mexico is a party to the new USMCA where your product could be imported into the US duty free. What about this fourth industrial revolution and its promise to improve the quality of life throughout the world? Seems to me that improving the world’s quality of life is overdue and perhaps profitable.
One thing for sure is that the world’s economy will revive. Nationalism will continue build in the US, however the dependence on China’s support for many poor countries will likely be hard to overcome. You may need to rethink your positions in Africa and Central America where contracts and product specifications are tailored to Chinese products.
My company, Maple Creek International Trade provides Political Risk Management, Trade Development and Trade Compliance tools to navigate your business through these murky times by anticipating issues before they become issues.