How do global value chains fare during a trade war?
Conventional wisdom suggests they are among the first casualties.
Outdated views of trade state that jobs are created only by exports. Imports, which have the long-recognized potential to deliver consumers benefits, were often assigned the role of job-destroyers. Such mercantilist views drive the thinking of today’s trade skeptics, as they weaponize tariffs in the old-fashioned view that companies operate wholly within borders and their misguided belief that their actions are only imposing harm on foreign workers. President Trump’s fondness for tariffs, and the natural retaliatory reaction from our trading partners when such tariffs are actually imposed, seems to bear out this thinking.
There would seem to be no place for global value chains, which crisscross borders and repel national identities, in such a trade war.
And this might be the case if global value chains weren’t so ubiquitous. And so important to our daily lives.
Global value chains are the largely unseen “army” of U.S. workers who collaborate in a highly integrated network to get a product from concept to consumer (and in our increasingly circular economy back to concept again).
Former U.S. Trade Representative Ambassador Ron Kirk, once described this army this way.
“There’s the port worker who unloads your container, the truck driver that carries it to a distribution center or a store, the marketing executive that trumpets its arrival, and the retailer who rings up each individual sale. And that’s just domestic sales – every foreign sale you make supports American designers, customs and logistics professionals, and financing and transportation experts.”
Increased tariff talk and actions have awakened these global value chains so they are increasingly more visible and vocal. These armies have launched their own trade war of sorts, arguing that countless millions of American jobs depend on access to global markets and global suppliers. They point to the tariffs the U.S. has imposed on its major trading partners, arguing that this raises the cost of imported and domestic materials. They point to the retaliation that foreign powers have imposed on the U.S., arguing that this raises costs abroad and depresses both sales and commodity prices. They point to the mere threat of tariffs, arguing that this induces uncertainty that depresses investment plans and retirement portfolios.
And this advocacy has translated into greater awareness by policy makers on the role that global value chains play in how our basic economy functions. Like never before, Members of Congress understand the complex supply chains that converge to produce an automobile in Tennessee, or the highly integrated team that turns a cotton seed from Texas into a pair of jeans in Mexico that is sold to a consumer in Wisconsin. Further, as headlines scream of the damaging effects of these new “Trump taxes,” more Americans begin to appreciate the role these global value chains have in their community. From keeping their neighbors employed, to paying their teachers’ salaries, to stocking their homes with affordable and basic essentials they need every day.
Weaponizing this awareness of global value chains may be the most important outcome of this trade war. As it grows stronger, and more pointed, the ability of the trade skeptics to wage their fight will be constrained.
Ironically, this awareness may be nothing more than a properly placed sense of gratitude toward the vast army that serves us through these global value chains.
This thought was perhaps best described by a Jewish sage – Ben Zoma – nearly 2,000 years ago as the monumental body of Jewish law, known as the Talmud, was being developed. Ben Zoma expounds on how grateful he is for all the people who contribute to his day. He writes:
“How hard Adam must have labored so that he could eat a piece of bread; he had to plough, and sow, and weed, and tend, and harvest, and thresh, and winnow, and sift, and grind, and mix, and knead, and bake, and after that he could eat, whereas I am able to wake in the morning and find all this already done for me. And how hard Adam must have labored so that he could have a garment to wear; he had to shear the sheep, and bleach the wool, and beat it, and dye it, and spin it, and weave it, and wash it, and sew it, and after that he could be clothed, whereas I am able to wake in the morning and find all this already done for me. How many workers wake up every morning to stand at the door of my house? I wake up in the morning, and find all these things before me.”
While we would wager that there are more folks involved in these global value chains now than there were in Ben Zoma’s day, his wisdom and the sense of gratitude we must feel for all these unseen helpers remain timeless.
For more on global value chains, and the jobs they add to the U.S. economy, check out usglobalvaluechain.com.
This article is used with permission. (c) Fashion Manuscript. It originally appeared in Fashion Manuscript here
Stephen Lamar is Executive Vice President at the American Apparel & Footwear Association (AAFA). Steve is responsible for the design and execution of AAFA lobbying strategies on a series of issues covering trade, supply chains, and brand protection. In these roles, Steve also advises AAFA member companies on legislation and regulatory policies affecting the clothing and footwear industries. Steve is also President of the Washington International Trade Association (WITA), a non-profit, non-partisan organization dedicated to providing a neutral forum for discussion of international trade policy and related issues.