Moving Stuff Gets Harder

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Trains can be difficult

The physical movement of goods is slowing down around the world, says the World Bank. The Bank released its 2012 review of trade logistics last week, with the snappy title of Connecting to Compete 2012: Trade Logistics in the Global Economy. There are some outstanding exceptions to the slowdown, but the retreat in the past two years is blamed on the global recession and economic issues in southern Europe. This is a contrast with almost universal improvement between 2007 and 2010, before the recession really clobbered shipping.

“Trade logistics is key to economic competitiveness, growth, and poverty reduction. Unfortunately, the logistics gap between rich and poor countries continues and the convergence trend experienced between 2007 and 2010 has stalled as events like the global recession, and the European debt crisis shifted attention away from logistics reform.”
~ Otaviano Canuto, World Bank Vice President for Poverty Reduction & Economic Management

Don’t get me (or the Bank) wrong. There has been improvement in shipping logistics over the past couple years. The World Bank report is based on reports by freight forwarders and express carriers about 155 countries, and they say that logistics and cargo handling have gotten better in places as diverse as Chile, China, India, Morocco, South Africa, Turkey and the United States. The Philippines, Benin, Malawi and Madagascar were also outperformers.

The biggest problems seem to be with below-par rail services (90% of the respondents expressed dissatisfaction here) and with government agencies that handle enforcement of sanitary and phytosanitary rules. The World Bank also expressed concern about the adverse impact of logistics issues on food supplies:

In developing countries, particularly in landlocked and poor ones, transport and logistics account for 20-60 percent of delivered food prices. For instance, they make up 48 percent of the cost of U.S. corn imported by Nicaragua.

You can see the country rankings on the World Bank’s Logistics Performance Indicators here. Here are the top and bottom ten:

source: World Bank

When Good Programs Go Bad

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It doesn't look discriminatory, does it?

BioPreferred sounds nice and green. It is a program created in 2002 and run by the U.S. Department of Agriculture, with the objective of increasing production and consumption of bio-based products. Over the years, the BioPreferred program has picked up a secondary goal of encouraging bio-based products to substitute for imports of petroleum products. The program has two major parts. One is a voluntary BioPreferred labeling program. The other establishes preferences for bio-products when U.S. federal agencies do their procurements. Whether encouraging greenery or promoting energy independence, the program seems like a good idea.

The BioPreferred label seems non-controversial and I don’t see any trade implications from the labels. It is the federal procurement program that bothers me. Here it is straight from the FAQ section of the BioPreferred website:

Q: Does the BioPreferred program require that the (agricultural) raw materials be grown in the U.S.?
A: Products that contain imported agricultural materials would not qualify under the USDA Federal Procurement Preference.

A simple preference for bio-based products seems comfortably covered by Article XX of the General Agreement on Tariffs & Trade, but that article does not excuse countries from their obligations to provide national treatment and to be non-discriminatory. It has been a while since I helped negotiate the original GATT Agreement on Government Procurement, the basis for the current WTO agreement, but I doubt this prohibition on imports passes anybody’s smell test. I don’t know if any country has seen fit to challenge the BioPreferred procurement preference, but it seems an open-and-shut case to me. I have long railed against countries that use environmental, health or safety excuses to discriminate against imports, and this seems to be such a case.

The preference does not cover all products, though more are being added all the time. Currently, the preference applies broadly to construction materials, groundskeeping supplies (e.g., mulch, fertilizers), industrial lubricants and fluids, janitorial supplies (e.g., floor strippers, oven cleaners), personal care products (e.g., shampoo and conditioner) and food service supplies (like disposable forks). There is a miscellaneous category that establishes preferences on things like candles, bed linen and packaging materials. Here is the complete list of 77 covered product categories. I had no idea the United States had a discriminatory procurement preference for lip care products, did you?

Best Ways To Find U.S. Suppliers

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I posted yesterday about how businesspeople overseas can find good suppliers from the United States. This comes from a webinar I recently did, in which other presenters covered finding suppliers at trade shows or using Commercial News USA. I love trade shows and definitely include them among my favorite ways to find American business partners.

Today, I look at using American Chambers of Commerce and American Embassies to find U.S. partners. American Chambers (colloquially known as AmChams) are found in more than 100 countries. Many people assume, because this is the way it works in their countries, that AmChams are somehow connected with the U.S. Government. No way! AmChams are private sector, non-profit organizations loosely affiliated with the U.S. Chamber of Commerce. The U.S. Chamber is located in Washington, DC so that it can lobby the U.S. Government, the White House and the Congress. That means the U.S. Chamber often disagrees with the U.S. Government, so don’t assume that an AmCham is a shill for U.S. policy.

At the same time, don’t assume that every AmCham overseas is going to help you find U.S. suppliers of the goods or services you are looking for. Some AmChams are well financed with professional staff, others are small – dependent on volunteers who have day jobs they get paid for. If an AmCham has a member who has the product you seek, they will probably direct you to that member. AmChams exist to help their members, so they may not help you find a company that competes with a member. They may be eager to help you if they think that could lead to winning a new member. The bottom line is that you should talk to your local AmCham. They may help or they may not. They are different everywhere.

American embassies or consulates can be your most powerful ally if you are looking for U.S. suppliers. After all, part of their mission is to do whatever they can to boost American exports, so you might as well take advantage of that. When you contact a U.S. embassy or consulate, ask for the commercial section. Or ask for the agricultural section if you are looking for agricultural or food products. Most U.S. embassies have one or both of these sections. They also have an economics section that may be able to help you in the absence of a commercial or agricultural section.

Friendly commercial section in Singapore

Commercial sections are staffed by specialists, both American and from the host country, who know how to locate U.S. suppliers. Same for the agricultural sections. They don’t charge you anything for their help, and it can impress a marketing manager back in America if they hear from an American embassy about their product. In larger embassies, there may even be somebody who specializes in your industry and knows the U.S. companies personally. They may well know when visitors from these companies are coming to your country, or which firms will exhibit at an upcoming trade show. They can help you if you decide to travel to the United States to visit a trade show or see a company. While they cannot issue you a U.S. visa themselves, they may be helpful if you need to talk to the consular section about a visa.

If the commercial section can’t find a quick answer for you, they are in touch with a network of 109 offices in the United States and can alert them that you are looking for a particular product. Those offices, like the commercial section, are part of the U.S. Department of Commerce and they have incredible contacts in their communities. If you only use one method to find American suppliers, my strong advice is to use the commercial or agricultural sections at your American embassy.