Sourcing businesses are facing more and more issues they can neither influence nor predict

Sourcing businesses are facing more and more issues they can neither influence nor predict

Seemingly endless trade-related government announcements in the US and UK throughout January were full of ideas for greater national control. But none offered a single detail that sourcing firms could use – making business planning a nightmare for buyers and potentially disrupting supply chains, says Mike Flanagan.

Trump wants America to buy American…

That's why he confirmed the US would renegotiate the North American Free Trade Agreement (NAFTA) treaty with Mexico. But he gave no indication what changes he's seeking. Among his immediate team, and Republicans in Congress, there are many different views about the priorities for renegotiation – and he'll need congressional approval for most of the changes he is likely to want.

However, until the US has fully thought through its anti-import proposals, there is limited benefit in looking for alternative apparel buying strategies. Even analysing vulnerabilities in a firm's current buying strategies isn't easy.

…but other Americans want to look virtuous…

It's not just the new nationalism of Trump and Brexit that is creating long-term buying uncertainty.

While Trump was tweeting opposition to imports in December, the US Republican Senator Bob Corker was piloting the End Modern Slavery Bill through Congress. His campaign got presidential approval in late December for a law mandating Federal seed funding for an End Modern Slavery Initiative seeking to raise $1.5bn over the next few years.

The initiative started with California's Transparency in Supply Chains Act, effective since 2012. This simply made larger, California-based businesses publish information about their operations and immediate suppliers. Legislators thought such information would help the public decide what pressure to impose on firms they might disapprove of.

Theresa May, now Britain's Prime Minster, then legislated a similar requirement for all larger companies operating in the UK – and to the whole of their worldwide supply chain.

The focus is modern slavery – in international (and UK) law a crime so tightly defined it excludes, for example, Uzbekistan's forced cotton labour. But UK consultancies are advising businesses to publish information about a far wider range of activities than prescribed by Britain's Act – and lobbyists are constantly pitching for more "undesirable" activities to be added.

We may all agree on the need to eliminate modern slavery. But in the five years since the California Act became law, the idea has moved from a limited requirement to publish information about companies' operations to a massive, amorphous, global project – creating unpredictable new pressure on sourcing.

…virtue can't easily be separated from the new nationalism…

On 22 October, Donald Trump promised that on the day of his inauguration, he would:

"...direct the Secretary of Commerce and US Trade Representative to identify all foreign trading abuses that unfairly impact American workers and direct them to use every tool under American and international law to end those abuses immediately."

He'd not actioned this promise at the time of writing – partly because he hadn't yet got his nominees into either of these posts. But when he does, what could be a greater "unfair abuse" than claims a supplying country used modern slavery?

At some point, anti-Trump activists are going to realise that "identifying foreign trading abuses" is an open invitation to enlist Trump's nationalistic trade philosophy into high-minded campaigns against developing countries' low wages, poor environmental standards and attacks on human rights at work.

And that Obama's parting gift of $1.75bn can fund those campaigns.

…and it's not just America…

Meanwhile, the German Ministry for Overseas Development has begun to put gentle pressure on most major businesses involved with apparel and textiles in Germany to join the Partnership for Sustainable Textiles. It hasn't just recruited German firms, or the usual corporate good citizens: current members include C&A, Primark and H&M, as well as Germany's discounters, including KiK, which is constantly targeted by activists for alleged misbehaviour.

The Partnership isn't a government department. It's a voluntary organisation, designed to agree common "social, ecological and economic" goals throughout members' supply chains – including plans to "lay down the steps that will be needed to raise the level of wages."

The Ministry's Dutch equivalent has subsequently sponsored a similar initiative in the Netherlands. It's not that clear what, specifically, these "voluntary" buyers' codes are going to require.

…then there are the tweets…

Donald Trump tweets a few vaguely worded threats about government contracts. And the possibility of higher import duties seems to stimulate companies to announce they've dumped plans to move production abroad – without the messy business of years spent piloting complex legislation through Congress.

…not just in rich countries…

China's unembarrassed 2015 plan to "raise the domestic content of core components and key materials to 40% by 2020 and 70% by 2025" doesn't mention plans to obstruct imports. But few Western businesses dealing with China will deny that pressure to avoid foreign goods has grown since the beginning of the century.

The widespread local support for Modi's 'Make in India' campaign isn't the result of legal constraints: such "patriotic" campaigns are an increasing part of life in many countries.

…it's got a sinister side, too…

During the 2008 recession, Chinese apparel traders in Moscow markets suddenly found themselves forced out of their stalls when the Russian government decided the easiest way of cutting imports was to put clothing importers out of business.

And on 26 January 26 this year, the Turkish government simply took over the Aydinli Group after earlier arresting the clothing manufacturer's CEO, Ömer Faruk Kavurmaci, for suspected involvement in the attempted July coup.

…but it's a business planning nightmare.

The new nationalism is combining with apparently "high-minded" initiatives to confront sourcing businesses with more and more issues they can neither influence nor predict.

Until they've got a clearer idea of the detailed political proposals flowing from these initiatives, buyers can do little more than list the problems they're probably about to come up against.

Those five-year plans aren't going to need rewriting every year: they're going to need reviewing almost daily as more details emerge of what's waiting to hit us all.