Election 2016 and Your Supply Chain

They fear:

• Higher cost of goods;
• Higher risk of delays and disruptions;
• More red tape; and
• More challenges procuring materials and resources.

Those concerns are well-founded. U.S. presidents do have enough power to single-handedly have an impact on trade. Specifically, U.S. presidential authority to restrict trade agreements and other forms of international commerce is quite broad and supported by both precedent and legal authority.

But just what are the major party candidates’ positions on issues related to your supply chain? Let’s take a look.

The Trans-Pacific Partnership (TPP) Agreement

Both Trump and Clinton oppose the TPP.

The TPP is a trade agreement seven years in the making among twelve Pacific Rim countries (though not China). It’s intended to promote economic growth and job creation, in part, by lowering both non-tariff and tariff trade barriers. But the agreement has been the subject of much controversy, perhaps worsened by the secrecysurrounding its negotiations. The United States signed the TPP in February 2016, but the Senate has not yet ratified it.

Neither Clinton nor Trump support the TPP. As Supply Chain Management Review writes, both candidates have made this agreement “a proxy for the fear that American workers are being left behind.” Admittedly, Clinton didsupport the agreement as Secretary of State, but she now officially opposes it and calls it “flawed.”

Trump opposes it with even more vehemence, having said of it, “These trade deals strip our country of its jobs and wealth.”

The North American Free Trade Agreement (NAFTA)

Both Trump and Clinton oppose NAFTA, at least as it stands today.

NAFTA is a long-standing trade agreement between the three countries of North America – Canada, the United States and Mexico – that creates a trilateral trade bloc, a free trade zone with reduced trade barriers. Ninety-five percent of economists believe NAFTA has been generally favorable to the United States, but its advantages have come at a cost. The Economic Policy Institute has estimated that the United States has lost 700,000 jobs because of NAFTA.

Thus, both Trump and Clinton oppose NAFTA to varying degrees. Trump, in particular, has strongly criticized NAFTA for the jobs it has cost U.S. workers and has promised to scrap or completely rewrite the agreement.

Clinton’s position on NAFTA, as with the TPP, has moved over time. When NAFTA was signed by her husband, then President Bill Clinton, she spoke in favor of the agreement. She wrote in her 2003 memoir Living History: “Although unpopular with labor unions, expanding trade opportunities was an important administration goal.”

But today, her stance has changed. She said of NAFTA in a speech in Detroit, “Too often past trade deals have been sold to the American people with rosy scenarios that didn’t pan out.” She has called NAFTA “a mistake” and indicated that she would also renegotiate the agreement.

The World Trade Organization (WTO)

Trump opposes the WTO, while Clinton appears to support the organization.

The World Trade Organization is an intergovernmental organization, with well over 100 member nations, that regulates international trade. Its most important functions are to provide a framework for new trade agreements and to provide a forum for dispute resolution. However, the WTO has been the object of fierce criticism. For example, though its purpose is to reduce trade barriers, it is not a “free market” organization, and it has been accused of unfairly favoring wealthier nations. However, without membership in the WTO, the U.S. would lose preferential access to many markets, which would result in higher prices on many imported goods.

Trump has indicated that he would consider withdrawing from the WTO because it is a “disaster.” He has specifically blamed the WTO, and China’s entry into it, as responsible for the loss of U.S. jobs.

Clinton hasn’t commented as directly on the WTO as Trump, but she supported China’s entry into the organization, and has advocated for using the WTO to bring trade cases against China (as has Trump).

Physical Infrastructure

Both Clinton and Trump support increased spending on infrastructure.

The U.S. is facing degrading infrastructure; and in the absence of action, the American Society of Civil Engineers says there will be a $1.44 trillion infrastructure funding gap over the next decade, which will affect exports and productivity. In fact, infrastructure issues cause more than just supply chain problems: they contribute to increased congestion, are estimated to be a factor in about one-third of all highway fatalities (according to Logistics Management), and cost the average American family $3,400 annually.

In turn, both Clinton and Trump would work on improving infrastructure in the U.S.

Clinton has said, “When it comes to the physical infrastructure, we have to take care of what we already have, upgrade it, modernize it.” She released a proposal in November 2015 that would increase federal investment in infrastructure programs by $275 billion, with $10 billion to address tens of thousands of “structurally deficient” bridges and $200 million to bolster the U.S. Department of Transportation’s congestion relief programs.

Trump has criticized Clinton’s commitment to infrastructure as inadequate. In an interview on Fox Business Network’s Varney & Co. show, he said, “[Clinton’s] numbers [are] a fraction of what we’re talking about” and suggested he would dedicate triple or more of Clinton’s proposed amount to infrastructural improvements. In his nomination acceptance speech at the Republic National Convention in July 2016, he said, “We will build the roads, highways, bridges, tunnels, airports, and the railways of tomorrow.”

Takeaways

Although Trump and Clinton appear to share the same opinion on many of these issues related to trade and the supply chain, there are subtle but notable differences.

Trump speaks repeatedly about the dangers of international trade agreements when it comes to American jobs and wealth. He has consistently opposed free trade deals in favor of arrangements that would more explicitly protect American interests, and has indicated that he would seek to withdraw the U.S. from its participation in such agreements and organizations. Trump contends that repatriating manufacturing and production of goods will produce the most benefit for workers and for the country in general.

Clinton has similarly expressed concerns that many free trade agreements have not been favorable enough to American interests, and therefore she opposes many of them now – to some degree. But in general, she believes that it’s important to participate in world trade on a reciprocal basis, as she indicated in the MSNBC Democratic Primary debate in February 2016. It would not be entirely accurate to call her pro-trade or anti-trade. As Gene Sperling, director of the National Economic Council in both the Clinton and Obama administrations, told the Washington Post: “She’s case-by-case on trade.”

Pro-trade advocates have, in general, criticized both candidates for their stated positions. The anti-trade rhetoric throughout the election cycle has worried multiple parties, from emerging countries to the International Monetary Fund. From a supply chain perspective, as The Wall Street Journal writes, any effort that increases trade barriers or disadvantages U.S. trading partners “could hurt American industries that depend on international supply chains.”