CHEManager
This article originally appeared on CHEManager Europe
In The Red Tape - For decades, governments and companies around the world focused almost exclusively on tariffs as the biggest impediment to global trade. Today, tariffs are at a 30-year low, but trade remains seriously constrained.
The chief culprit? The many inefficiencies, chokepoints and nontariff barriers that hobble global supply chains and increase the costs of trade. Companies ignore these barriers and costs at their peril.
Many corporate leaders know of these obstacles from direct experience. For example, one diversified chemical company exports acetyl and other products to the United States. It needs approvals for every shipment from as many as five U.S. regulatory agencies. The requirement delays 30% of inbound shipments, often causing cancellations from customers who are fed up with waiting.
How significant are such barriers overall? Bain & Company, in collaboration with the World Bank, analyzed the business implications of nontariff supply chain barriers - everything from border delays and inconsistent product regulations to poor infrastructure and rampant corruption. The analysis demonstrates that reducing even a subset of these obstructions could bring about an increase in global gross domestic product that is six times greater than the potential increase from removing all tariffs.
These findings have broad, long-term implications for policymakers: They suggest that governments need to refocus efforts on creating supply chain efficiencies if they want to truly unlock the economic potential of global trade. For companies operating in international markets, the message is more immediate. Making the right choices about where and how to deploy assets globally requires full understanding and analysis of how supply chain barriers affect return on investment. Failing to anticipate the costs and risks involved can wipe out the business advantages of sourcing, operating or selling in foreign markets.
Published in October 2013
