The trade war: the need for alternatives and a clear path forward (Opinion)

Sergio Retamal is the CEO of Global4PL, an import/export supply chain operations and consulting services company. The views represented here are his own and do not necessarily reflect the opinion of Bloomberg LP and its owners.

Sergio is also a member of Bloomberg Breakaway, a network of CEOs and founders who lead established and emerging industry leaders. Find out more about Bloomberg Breakaway here.

The ongoing trade war with China is painful and the U.S. economy—along with companies that rely on manufacturing and trade relations with the Asian giant—are suffering. But, there are good reasons to confront China now, rather than later.

Why do I consider China to be a real threat?

  • China is now a considerably large economy, primarily because many countries have made China what it is today by exploiting the country’s cheap labor and manufacturing. Nonetheless, China is still dependent on the countries that helped it grow, and it may not yet have achieved the economic stature the country believes itself to have attained.
  • China continues to amass economic power. Though its lack of democratic principles hinders its development and slows its growth in becoming a truly developed economy, China is steadily expanding its economic power and should be taken seriously and held accountable for its actions.
  • China’s lack of transparency and means towards achieving economic growth continue to cause significant social unrest and economic turbulence. Yet, the country continues to reap the benefits of their services while avoiding any repercussions from stolen intellectual property, manipulating trade (in their favor), and inhumane working conditions. After decades of being used as a main source of cheap labor and production costs, China is now leveraging its position and taking advantage of the companies that are currently dependent on them. The country increasingly poses a major threat to U.S. national security due to the proliferation of stolen technology China has acquired over time, coupled with its growing economic power.

So what are my supply chain options?

It’s undeniable that China’s cheap labor and manufacturing costs combined with its growing middle class and penchant for Western goods has boded well for U.S. companies looking to source goods as well as to sell into China’s fast-growing market. However, China poses considerable and growing risk to supply chains, and the longstanding trade tensions between the U.S. and China are likely to continue. Furthermore, global supply chains are healthiest when they are both diversified and nimble.

In many respects, India mirrors China’s favorable attributes for U.S. companies—it’s a massive country in geographical size and population that is eager to grow its economy via trade and investment. Indeed, the U.S. is India’s largest trade and investment partner. The two countries are committed to deepening and strengthening their economic relationship and improving investor confidence. According to the U.S. Department of Commerce, bilateral U.S.-India trade expanded to $126.2 billion in goods and services in 2017—an impressive gain considering the overall decline in global trade during that period.

Meanwhile, President Trump hosted Prime Minister Modi at the White House in 2017 for an official visit under the theme “United States and India: Prosperity through Partnership.”

What’s next?

The question at this point is: should American companies exit China now due to looming national security concerns? Yes. It may be time for Western countries and companies to move their factories into alternate suitable locations that provide affordable labor prices, but still uphold traditionally democratic values and have a desire to cooperate with the global economy as well.

The least confrontational path would be for the U.S. and other Western allies to relocate their factories and production. We must view China as a potentially powerful threat to U.S. national security, and as such, take steps to lessen our direct and indirect contributions toward building China’s economy through American trade and investment.

In short, to solve this current and dangerous path, President Trump should make clear what the end game is with regards to the administration’s trade policy with China, along with clarifying the economic, military, and defense goals that the U.S. seeks to achieve. These issues need to be dealt with separately, otherwise it will be impossible to reach a timely and productive agreement. Once that is made clear, it will be possible to approach and formulate the necessary long-term goals to solve these issues.

Furthermore, the current situation is causing mixed reactions because no clear path is being outlined for companies to follow. With no clear plan, companies will be penalized by government forces on both sides and will have limited ability to forecast or avoid this situation. Collectively, these issues have a significant disruptive effect on supply chains and create ongoing concerns for companies in the long term.

Finally, let’s hope that we keep the pressure on China and avoid a short-term trade deal to prop up the stock market when the real cost to the U.S. economy will be disastrous and longstanding.

Sergio Retamal is the CEO of Global4PL, an import/export supply chain operations and consulting services company that helps organizations increase international sales, improve compliance, and achieve their full operational potential. Global4PL provides a full suite of supply chain services including Customs Brokerage, Air Freight Forwarding, IOR-EOR services in over 145 countries, technology solutions, and supply chain consulting services.

Global4PL is the Recipient of the “Exporter of the Year 2018 Award” by American Express.

Global4PL is a recipient of the President’s “E” Award for Export Service at a ceremony in Washington, D.C. In 1961, President Kennedy signed an executive order reviving the World War II “E” symbol of excellence to honor and provide recognition to America’s exporters. It is the highest recognition any U.S. entity can receive for making a significant contribution to the expansion of U.S. exports. Retamal and his team of professionals remain committed to upholding the standards of the President’s “E” Award for Export Service.

Sergio Retamal, whose career spans 25+ years in procurement, import/export and supply chain management, is the CEO of Global4PL. His professional experience includes management roles in the United States, Asia, Europe, and Latin America.

Retamal gained significant experience managing logistics and import/export teams in both established and early-stage companies. He is acclaimed as a leader in the field, having led global logistics for a number of Fortune 100 companies serving as a logistics instructor for the California State University system.

In addition, Retamal’s professional experience includes directing the development and management of complete supply chain networks in the United States, Asia, Europe, and Latin America. Past roles involved planning and leading global supply chain strategies for companies such as Sun Microsystems, Ryder Integrated Logistics, Cost Plus, and Micropolis.

Retamal holds a Master in Change Management from Pepperdine University’s Graziadio School of Business and an MBA in International Business Administration from California State University, Northridge. He also holds a Bachelor of Science in International Business from California State University.

In 2018, Retamal was recognized by Supply & Demand Chain Executive as a‘Pro to Know’ for an unprecedented 11th time.

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