The Trade Tariff noise
By: Amit Bhushan Date: 20th Aug. 2018
There seems to be very high amount of noise surrounding ‘Tariffs based adjustments’ in International Trade settings. There is political competition between the Poster Boyz of Free Trade Vs. the Villains. Outcomes being higher costs to consumers with little gains regards manufacturing jobs by ‘nations orchestrating the same’. While this may be true to some extent, however the role of emerging technologies is sought to be underplayed and undermined in the scheme of writing. If anything, this will propel the reign of distributed manufacturing, more custom-built products and the rise of small scale. And yes, not entire supply chain is moving into orchestrator countries and they already know that. What is implied here is that small scale assemblies of highly sophisticated products along with hitech and hi-capial based manufacturing would likely shift back to consumer locations, but more labor-intensive, low tech manufacturing would seek to move to ‘other competitive locations’ not caught up in the ‘eye of storm’. The era of ‘distributed manufacturing’ on the back of technology streamlining the supply chain is most likely to emerge even if some distance away for now. In part it could be that most small scale is always thought and perceived as local and low tech, and this perception would need to be transitioned to global, hi-tech and highly customizable.
The counter-tariffs may only cause a little break with some impact on ‘pricing’, but will get absorbed as ‘consumption’ from other ‘emerging markets’ rise, possibly on the back of shift in manufacturing and capital investments towards this count. While the commodity and manufacturing trade seems to be a foregone conclusion, what needs to be watched is the global trade in services. There seems to be a crying need for trade in services to be opened as emerging nations struggle to cope up with the demand to ‘create quality jobs’. Then there is also this need to tackle rising pollution levels, waste management, health-care etc. which leaders in these nations are grappling with. The ‘power-index’ is more likely to be shaped by ‘who can bring-in positive developments regards what’s being demanded’ rather than ‘the trade or military muscle alone’. While China with its high levels of sophistication in services, ability to make capital available, good infra and relatively low costs is placed ideally, however other powers would seek to leverage based on their respective competencies. Of course focus for present is ability to create (and fund) large infra and sustain the industries for some time now in anticipation that the storm would wane away possibly. Domestic pressure groups in the developed as well as emerging markets would perhaps have their say, on this eventually shapes up.
What’s important for the leaders is to anticipate the ‘change’ coming their way and be able to respond effectively to it. Then of course there might be queries regards how long would that continue and the possibilities of a roll-back of the tariffs. However nations now pariahs may find themselves in demand for ‘new trade treaties’ while those making investments may likely get prodded for ‘market access ‘ being ensured for the manufactures for the investments to succeed. It is however the play in ‘services sector’, an entirely new idea with no one’s being sure that how would it pan out in larger scheme of things. This is because of the labour a lot depends upon the ‘cost of labour’ as well as ‘ability to deliver on-time (often on the back of technology)’. The nations are sensitive to what amount of service market access would they open up for ‘global players’ and how it would impact jobs situation in their domestic arena. The erstwhile energy exporters opened up services by external ‘agents’ via on-shore providers, but are now recalibrating the strategy. The rise in maturity in service markets and trade in services would therefore be an important indicator towards the movement ahead. Let the ‘Game’ evolve…..