The Intersection of Politics and Trade

This episode delves into the shifting geopolitical landscape affecting the supply chain, focusing on Trump's potential strategies and the scrutiny of Shein's ethical practices. We discuss the implications of recent agreements in labor relations and the economic pressures impacting the UK’s growth trajectory. 

• Discussion on Trump's vision for geopolitical restructuring impacting global supply chains 
• Importance of Greenland’s resources, particularly for the electric vehicle industry 
• Shein under scrutiny over supply chain ethics and transparency issues 
• Impact of the Longshoremen's contract on US port operations and supply chain stability 
• Challenges faced by the UK in its recent budget and employment costs 
• Recommendations for fostering economic growth by addressing taxation and trade barriers

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Chapters

• 0:02 Geopolitical Impact on Global Supply Chains
• 5:58 Shein's Appearance at the UK Parliamentary Committee
• 9:45 US Port Workers Strike Averted
• 12:44 Economic Impacts on Global Growth
• 15:50 The Recent UK Budget has placed further strain on businesses
• 17:21 Policy Prescription

Transcript

Tony Hines: 0:02

Hello, tony Hines, here You're listening to the Chain Reaction Podcast, all about supply chain advantage. Thanks for stopping by today. Great episode coming your way in a few moments. So stick around, stay tuned, stay informed. Well, this is the News Roundup All things impacting global supply chains this week Chain Reaction.

Tony Hines: 0:28

Well, there's one thing that's certain, I think, and that is that the geopolitical maps could well be redrawn in 2025 as Donald Trump and his incoming government restructure, reshape and renegotiate how they deal with the rest of the world, and Trump's been quite outspoken on this. He's made some comments about Mexico and he wants to block the back door into the United States. He's told them he's going to hit them with tariffs of 25%. He also said that the Gulf of Mexico ought to be renamed the Gulf of America. Well, a lot of relearning has to go on, lots of redrawing of atlases around the globe if that happens. The Panama Canal he wants control of that back. He says they've abused the gift that America gave to them and claims that China have control, and we've discussed this on a previous episode of the Chain Reaction podcast. He's also said that he wants control of Greenland to protect the West against threats from China and Russia, and he's questioning that Denmark. Does it have ownership of Greenland or not? You may be wondering, of course, what makes Greenland so attractive to the United States. Apart from its geographical position at the top of the world, with access to the Northwest Passage, greenland has 43 of the 50 minerals which are on the United States list of critical minerals and rare earth metals, and these are resources, of course, essential for the transition to electric vehicles. In addition, it has oil reserves and the United States already has a military base on Greenland to protect its interest. So all very interesting and quite inflammatory comments, but are these just the first steps of a negotiating tactic? He's also commented on Canada and said that Canada has an artificial border between itself and the United States. It's protected by the United States and it should become part of the United States, and that seems to have ruffled feathers as well. He's also been ruffling feathers with Europe about threatening tariffs and he's been commenting on the UK government Well, not him directly, but other members of his administration. So interesting year ahead, I think, if we think of Greenland.

Tony Hines: 2:57

Of course, it might be quite a sensible move for the United States to have some control over Greenland, because essentially that's the route of the Northwest Passage and as the ice cover melts, then that route opens up as a main sea channel. Greenland, of course, has resources that the United States but not only the United States would want to control. China and Russia would also wish to exercise a degree of control over that route. It gives them another outlet, a sea route across the top of the world, and while many may be surprised about his statement that Canada should become part of the United States, in a strategic sense, it makes sense for the United States to protect its borders, and if it protects Canada as well, then that's part of the process. And of course, then you've got the whole top of that area between the United States, canada, denmark's Greenland up to the North Pole, in control of a Western alliance. Now it could be done in other ways. It doesn't necessarily need ownership, as we know and Trump, of course, will know this from his business interests that you don't have to own everything to control it. So negotiation is the key, and these statements might simply be the opening salvo in the long negotiations ahead.

Tony Hines: 4:24

Now what's been unsaid at the moment? What we haven't heard much about are all the other problems in the world which the United States will be involved in, and that includes sorting out the Israel-Palestine issue and how they'll set about that task, and other areas of the Middle East around sewers and the Houthi attacks on shipping, how they'll tackle that problem. And, of course, there's the Russian Russian insurgence into Ukraine and how that will get resolved. Trump did say when he was being elected to the presidential role that he'd be able to solve this one in 24 hours. Well, we'll see. And, of course, the South China Sea and what will happen with China's control of that particular area and its relationship with Taiwan and its other neighbours in Southeast Asia. It will be interesting to see how all of that is handled by the new administration in the United States.

Tony Hines: 5:25

And this, of course, has big implications for supply chains. As these geopolitical maps are redrawn, then, so too will the supply networks need to evolve, in a different way perhaps than they have in the past decade. It's about resources, it's about transportation, it's about protection and it's about economy and the economic future of the United States. And Trump's made it clear it's America first. Now, when it comes to backdoors, sheehan know all about backdoors, as, of course, do Temu. They both use de minimis to their advantage, importing lots of goods avoiding customs duties.

Tony Hines: 6:13

But this week Shein was in front of a parliamentary committee in the United Kingdom answering questions about where they source their cotton from. So I was taking a look at the Sheehan supply chain, but the answers weren't forthcoming. Well, Shein made an appearance before a UK parliamentary committee this week and we're going to take a closer look at what happened. This week. The fast fashion giant Shein faced scrutiny from the UK Business and Trade Committee over its supply chain practices, particularly concerning the use of cotton from China's Xinjiang area. Lawmakers were concerned with Shein's lack of transparency and frustrated by it. Committee chairman Liam Byrne expressed the company's reluctance to answer basic questions bordered on contempt.

Tony Hines: 6:59

The Committee's primary concern was whether Xi'an's supply chain involved forced labour, a significant ethical issue given the serious human rights abuses reported in Xinjiang. Xi'an's responses Yinan Zhu maintained that Xi'an complies with the laws and regulations in the countries they operate in and that they conduct thousands of audits through verified external firms to ensure the robustness of their supply chains. However, she refused to comment on whether Xi'an believes forced labour exists in Xinjiang, stating it was not their place to engage in geopolitical debate. There are implications, of course, for Sheehan's London listing. The scrutiny comes as Sheehan prepares for a potential £50bn listing on the London Stock Exchange, and this listing has drawn criticism from politicians and the UK's Independent Anti-Slavery Commissioner, who has raised concerns about potential ethical and governance issues. An earlier attempt to list in the United States was halted by lawmakers who demanded verification that Xi'an does not use forced labour from Xinjiang.

Tony Hines: 8:10

Xinjiang is a region in northwest China and it's been the focus of international criticism due to serious human rights violations against the Uyghurs and other predominantly Muslim ethnic minorities. Reports indicate that over a million people have been arbitrarily detained in what China refers to as vocational education and training centers, in what China refers to as Vocational Education and Training Centres, vetcs, but which are widely known as re-education camps. These camps are part of a broader crackdown that includes intense surveillance, religious restrictions, forced labour and forced sterilisations. The United Nations has reported credible allegations of patterns of torture, ill-treatment and sexual and gender-based violence. The Chinese government's policies have led to severe restrictions on fundamental rights, including religious freedom and the right to privacy and movement. These actions have been described by some governments and human rights organisations as constituting crimes against humanity or even genocide. The appearance before the UK Parliamentary Committee has cast doubt on Shein's ethical practices and transparency. The company's evasive responses have raised red flags for lawmakers and the public alike. As Sheehan seeks approval for its London listing, the UK government and regulatory bodies must ensure that companies adhere to high ethical standards to maintain market integrity and protect consumers.

Tony Hines: 9:48

The International Longshoremen's Association is the union representing 45,000 poor workers in the United States, and their agreement with employers was coming to an end. It was being renegotiated and had to be renegotiated by January, the 15th. Well, the good news is that the strike has been averted and a six-year deal has been approved. It raises the wage costs by 62% over the six-year period. The workers on the US East Coast and Gulf Coast and their employers reached agreement on a tentative deal, a new six-year contract, which is averting the strikes. That could have clogged up supply chains and, of course, it would have taken its toll on the economy, pushing up prices and costs for many that use the ports. The International Longshoremen's Association, the ILA, and the United States Maritime Alliance, usmx, the employer group, said in a joint statement it's a win-win.

Tony Hines: 10:48

The deal includes a resolution in automation, which had been the trickiest of problems that they were facing. The agreement protects current ILA jobs. It establishes a framework for implementing technologies that will create more jobs and it will allow the ports to modernize on the eastern gulf coasts. It makes them safer, more efficient and creates the capacity needed to keep the supply chains moving. The talks had been extended until January 15th and I reported this in a previous edition of the Chain Reaction podcast and the sticking point seemed to be the deal on automation.

Tony Hines: 11:28

Shipping industry executives and customers were concerned that parties would be unable to overcome the impasse by the due date. Unable to overcome the impasse by the due date, which would lead to a second strike just days before the new president takes office. A three-day strike back in October triggered a surge in shipping prices, cargo backlogs, and it affected 35 ports in the United States. So it appears to be win-win for all parties 62% wage increase over six years for the workers and members of the International Longshoremen's Association, as well as the aversion of the strike. The agreement will bring back some certainty to ocean shipping and reduces the risk of disruptions on East and Gulf Coast ports. It also paves the way for essential future growth with the automation matter resolved, and it means that the resilience of US supply chains is protected. That's according to Jonathan Gold, nrf Vice President of Supply Chain and Customs Policy.

Tony Hines: 12:45

Well, in the United Kingdom much has been made of Rachel Reeves, the Chancellor of the Exchequer, claim that she wants to have a budget for growth. Problem is, the budget that was actually put in place is not a budget for growth. It's a budget that simply put up cost. It put up national insurance cost, which is like an additional tax on employment for employers, and many of those employers have said that they won't be able to hire people as planned because it's going to cost them too much. It's going to push up their cost and it's fairly obvious really that that would have been the outcome. So why did the government push ahead with that? It doesn't seem very sensible. Of course, the Chancellor of the Exchequer this week has headed off to China to seek her growth plans through more trade with China, and it's hoped that that will generate £600 million worth of trade. But that doesn't seem a great deal when you put it against all the additional cost and all the additional problems of doing trade elsewhere.

Tony Hines: 13:46

Sainsbury's one of the largest private sector employers. It's a large retailer in the United Kingdom and Simon Roberts, chief executive of the UK's second biggest supermarket, has joined Tesco and Marks Spencer in saying that the speed of the national insurance change that's coming to the industry is clearly unprecedented. It will bring inflationary pressure. So it's not simply going to put the cost up for the employers but it's going to put the cost up for everybody else buying food and buying goods from stores. And many local small independent retailers are also feeling the pinch and I spoke to a few where they've said they won't be able to hire people and a couple of them are actually even planning to close.

Tony Hines: 14:33

So difficult times. But it does seem fairly obvious. If you increase taxes in the way that this has happened, that pushes up cost, it takes money out of people's pockets, it's inflationary. And, of course, if you wanted to increase growth, then you'd give people more disposable income so that they could have discretionary spend, spend more and that would grow more in the economy. Discretionary spend, spend more and that would grow more in the economy. But that hasn't happened and I can't see anything in the budget that has done that at all. So serious problems, I think, for the UK economy if that line persists, and already we're being told in newspaper articles and press releases and comments from ministers and, of course, other politicians that it's likely that the government will be forced to cut its spending plans. It's already being rumoured that defence expenditure will need to be cut from the promised increase and delayed until the 2030s. Well, that's a long time, especially in the current climate where there are lots of threats around the world, so it doesn't seem very sensible the whole thing.

Tony Hines: 15:48

The recent UK budget has put significant strain on an already fragile economy. Far from being a budget for growth, it's had the opposite effect. Several key issues have emerged. Firstly, increased employment costs. The rise in employer national insurance contributions and the national living wage has led to higher costs for retailers and other businesses. This has resulted in potential job losses and higher prices for consumers. It's inflationary, it's increasing cost and it's reducing investment opportunity. Inflationary pressures is the second matter. The current policies are potentially inflationary, leading to rising interest rates and higher bond rates, and this increases government repayment costs and places a heavier tax burden on businesses and individuals, and Britain's tax rate is already at its highest. The third thing it's reduced consumer spending. The lack of measures to boost consumer spending has led to decreased economic activity. Higher taxes and costs have left consumers with less discretionary spending power, further slowing down the economy. And fourthly, we still have lots of post-Brexit frictions. The ongoing frictions with the European Union have hindered trade and business interactions, limiting growth opportunities and creating additional challenges for businesses. It would be far better to concentrate on our biggest trading partners in Europe and leverage more with them.

Tony Hines: 17:18

So what can we do to improve matters? Well, firstly, if we want to create a more robust economic environment, the following policy changes are recommended Lower employment taxes. Reducing employment taxes can lower employment costs, enabling businesses to increase capacity and hire more people. This can stimulate economic growth and reduce unemployment. Secondly, invest in training. Offering selective grants or tax advantages for job-related training can encourage employers to boost capacity in essential sectors. This investment in human capital can drive productivity and innovation, and it should be rewarded. Thirdly, campaign for productivity and innovation. Addressing inefficiencies in both government and the private sector through a national campaign can enhance productivity and foster a culture of innovation.

Tony Hines: 18:08

Fourthly, lower income taxes. This might seem like a paradox, but I think this is the way to go Reduce income taxes and that can put more discretionary spending power in the hands of consumers, stimulating the economy and boosting consumer confidence. It creates a better environment for everybody, of course, as sentiment changes and people feel more secure and more able to spend and they are being rewarded fairly for the work they do and not being taxed heavily. No point in giving people pay rises and then taxing them heavily. That creates more discretionary income and that higher discretionary income, of course, will yield more taxes higher taxes through the spending that the consumers will make, earning VAT and other taxes for the government by lowering income taxes, taxes on people's earnings. That would take pressure off wage rise requests, where people are asking for pay rises to deal with the higher taxes that they have to pay right across the board. If they feel that they're more valued and the income they earn is actually a reward for the work they do, they're more likely not to ask for such inflationary wage increases.

Tony Hines: 19:24

Fifthly, prioritise defence spending. Ensuring national security by addressing external threats is essential for a stable and secure environment and conducive to economic growth. We'd have to invest more in defence. That, in turn, will create more employment and it will create growth. Enhance trade with the European Union. Remove those post-Brexit frictions. Tackle it will create growth. Enhance trade with the European Union. Remove those post-Brexit frictions. Tackle it head on. Don't keep running away, don't keep talking about the past, but actually get on with the job in hand and facilitate smoother business interactions and economic growth. Strengthening partnerships with the European Union can open new opportunities for trade and investment. Seventh, leverage digital technologies. Embrace digital technologies such as artificial intelligence, automation, blockchain, internet of things, which can optimize production, improve exchange and consumption processes. This can drive efficiency, reduce cost and create new opportunities for innovation.

Tony Hines: 20:22

Eighth, encourage global cooperation. Strengthening partnerships to compete effectively on the international level can position the UK as a leader in emerging sectors. And ninth, establish knowledge clusters Create hubs for exchanging knowledge. In future, key industries can drive innovation and growth, ensuring the UK maintains a significant influence in global markets. By implementing these policies, the UK can build a robust and forward-looking economy that is resilient to external shocks and capable of sustained growth. We need disciplined imagination. Well, that's it for this week To be continued. And why do I say that? Well, you'll be first to know when new episodes arrive and you'll be sent a mail that will tell you a new episode is out and you can be one of the first to hear the new episode. I'm Tony Hines, I'm signing off and I'll see you next time in the Chain Reaction Podcast.