March 2019 | Commentary | Checking In

Global Trade Resilience

Tags: Global Logistics, Global Trade Management, Supply Chain

Global trade analysts predicted the sky was falling, but that is not currently the case. How did they get the projections so wrong?

Keith Biondo is the publisher of Inbound Logistics magazine.

A few years ago, many business analysts projected a worldwide recession. Their reasons were sound: tariffs, trade wars, attempts to limit low-cost cross-border labor, walls, disintegration of highly regarded trade agreements. Yet their conclusions turned out to be hyperbolic.

Those projections were off for a variety of reasons. But thoughtful analysts honestly misread where the global economy was headed based on historical data and the millions of data points they had to wrap their heads around.

Here's an example. Two years ago, IL hosted a supply chain summit attended by Mexican business leaders and others heavily invested in U.S.-Mexico trade. The backdrop was an impending Mexican election where avowed Socialist Andrés Manuel López Obrador was projected to win, while the U.S. president pronounced "NAFTA bad" and "build a wall." The attendees were crying in their Tecate. My view, however, was that the overarching interests of the two countries would guide us to a less catastrophic end point.

Two years later, I again asked attendees of the same summit about prospects for the U.S.-Mexico relationship in 2019-2020. Thumbs up or thumbs down? From the podium I saw a sea of thumbs up. This was during the closing negotiations of the USMCA trade agreement and some attending had direct knowledge of how that agreement was proceeding.

Turning to Brexit, and its impact on global trade, the initial news was grim. Two recent studies, however, clearly show the bad news bombshell was a bust. Economic activity was up in most countries despite the uncertainty. I asked one well-respected analyst why we got it so wrong two years ago. "Well, there are millions of datapoints to project from," he answered.

In the United States, during that time frame, many dourly predicted a recession, high unemployment, and the impossibility of being able to compete on manufacturing with low-labor-cost countries, especially those without an overabundance of government regulations raising costs and liabilities. That did not happen—yet—but recent political events may change that. Leading transportation and other economic indicators point to a U.S. slowdown.

Millions of smart businesspeople around the globe ignore these distractions as much as possible, and set about every day to make their companies more competitive and efficient. It looks like, despite the obstacles, global trade will continue to show resilience.

Let's hope that continues.