International trade can provide stability in access to goods as well as acting as an engine for growth. As technology improves, the global supply chain becomes more advanced and more actors become involved. The threat of more frequent natural disasters and the potential for terrorism or transnational criminal activities facilitated by global transportation networks, there is an ever-greater need to ensure the security and efficiency of supply chains. This past week at the World Economic Forum in Davos, Switzerland, US Secretary for Homeland Security Janet Napolitano unveiled the latest National Strategy for Global Supply Chain Security (the Strategy). The launch of this updated policy is timely given President Obama’s desire to boost American manufacturing, new bilateral trade pacts with Colombia and Korea and the impending Trans-Pacific Partnership. This post seeks to shed light on the policy and briefly demonstrate the importance of ensuring an operational global supply chain security regime.
Each year 12 million containers are shipped into the US alone. (US Dept. of Transportation, 2009) It is no wonder, then that the Strategy has two primary goals: promote the efficient and secure movement of goods, and foster a resilient supply chain. Security will be integrated as a key component of supply chain operations, but not in such as way as to slow down shipments. For this goal, the US seeks to:
· Resolve threats early to expedite the flow of legitimate commerce.
· Improve verification and detection capabilities.
· Enhance security of infrastructure and conveyances in order to protect the supply chain and critical nodes, through limiting access to cargo, infrastructure, conveyances, and information to those with legitimate and relevant roles and responsibilities.
· Maximize the flow of legitimate trade by modernizing supply chain infrastructure and processes to meet future market opportunities; developing new mechanisms to facilitate low risk cargo; simplifying our trade compliance processes; and refining incentives to encourage enhanced stakeholder collaboration.
Furthermore, disruptions to the global supply chain due to natural disasters or disease can have staggering consequences. Therefore to improve its sustainability, the government aims to:
· Mitigate systemic vulnerability to a supply chain disruption prior to a potential event by using risk management principles to identify and protect key assets, infrastructure, and support systems; and promoting the implementation of sustainable operational processes and appropriate redundancy for those assets.
· Promote trade resumption policies and practices that will provide for a coordinated restoration of the movement of goods following a potential disruption by developing and implementing national and global guidelines, standards, policies, and programs.
As with other public government strategies, the Strategy “provides strategic guidance to departments and agencies within the United States Government and identifies our priorities to stakeholders with whom we hope to collaborate going forward.” With the focus on the “worldwide network of transportation, postal, and shipping pathways; assets and infrastructure by which goods are moved from the point of manufacture until they reach an end consumer; and supporting communications infrastructure and systems,” the policy to “strengthen the global supply chain” naturally relies upon external actors (including other states, multinational corporations and multilateral bodies, to name a few) to be successful. As the opening quote suggests, the US does not plan to facilitate detailed actions on its own. Rather, the government is encouraging feedback and involvement “from host governments, industry partners and other stakeholders” to produce the best initiatives and actions to secure the global supply chain.
There are already frameworks and initiatives in place to facilitate global supply chain security, affecting actors differently. The Container Security Initiative and the SAFE Frameworks of the World Customs Organization (WCO) have been critical to these efforts. However, needing to follow or fulfill requirements of different states can become costly and strenuous for businesses of different sizes. On 1 January 2012, a new version of the Harmonized System Nomenclature entered into force by the WCO as “the world’s global standard for classifying over 98% of goods in international trade”. The WCO is the ideal mechanism for dialogue and implementation of security concepts and standards; the SAFE Framework provides such standards to synchronize varying initiatives. Mutual recognition of security regimes, then, “could become a reality in the future”.
Compliance with regulations falls on the responsibility of the stakeholders (at various levels in the international trade sector), who therefore they must bear much of the cost.* This increased financial burden can have several impacts upon actors and the economies in general. First, those with more financial resources will be in a more favorable position to comply with requirements over those with less experience or resources. Second, investors may turn away from those countries that are less integrated into the “international transport structures for supply chain security. Third, the lack of funding by the WCO and other international organizations for implementation may lead to marginalization or decreased competitiveness of those less able to incur the necessary costs. Keeping current with customs regulations, fees and security requirements can become burdensome; however the Strategy and its ultimate initiatives aim to speed up rather than slow down global trade, and is anything but inward-looking.
In May 2011, New Zealand and the United States signed a joint statement on global supplychain security cooperation. The Asia-Pacific region has a significant role in international commerce and within the supply chain. The two states saw the agreement as a way forward for further collaboration on similar issues. In fact, through Project Global Shield (launched in 2010), New Zealand, the US and close to 60 other countries “share information with each other to ensure that chemicals entering their countries are being used in safe and legal ways, leading to successful interdictions of a number of suspicious shipments and providing promising investigative leads on the smuggling of precursor chemicals into Afghanistan and Pakistan”.
Overall, “container transit is far from being completely ‘visible’ and safe”.* There will always be challenges to security, or threats to shipments from nature. That the US took its time in developing a cohesive Strategy and plans to continue collaboration and dialogue with stakeholders is a positive move. The Strategy acknowledges cooperation is needed, which is a good perspective for policymakers to have. The aim has been for containers to be inspected and cleared for dangerous and unlawful contents before they get close to US borders, so effective and secure networks will be essential.
For further reading:
Frank Altemöller. “Towards an international regime of supply chain security: an international relations perspective.” World Customs Journal. Volume 5, Number 2. [http://www.worldcustomsjournal.org/media/wcj/-2011/2/Altemoeller.pdf]