• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • SCB YouTube
  • Login
  • Subscribe
  • Logout
  • My Profile
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management (Big Data/IoT/Blockchain)
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Supply Chains in Crisis
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • THINK TANK
  • WEBINARS
    • On-Demand Webinars
    • Upcoming Webinars
    • Webinar Library
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » FedEx Probe Shows Trade War Chill for Global Companies

FedEx Probe Shows Trade War Chill for Global Companies

FedEx Probe Shows Trade War Chill for Global Companies
June 3, 2019
David Fickling, Bloomberg Opinion

Once upon a time, multinational corporations were such an essential and respected building block of the world economy that only die-hard anti-capitalists opposed them.

How things have changed. While popular discontent at the role of cross-border companies may have died down, they now find themselves in the sights of a far more dangerous enemy. As the world’s two biggest economies take pot-shots at each other, it’s multinationals that are getting caught in the political firing line.

China’s Ministry of Commerce has said it will establish a list of “unreliable entities” for foreign companies that discriminate against the country’s firms or otherwise threaten its industries or national security. The government started an investigation of FedEx Corp. too, accusing it of misdirecting packages. That looks a lot like a retaliation against President Donald Trump’s decision last month to blacklist Huawei Technologies Co., preventing U.S. companies from doing business with the Shenzhen-based telecommunications giant.

The new atmosphere is bad news for companies like Apple Inc., Toyota Motor Corp., and Constellation Brands Inc., which depend on supply chains spanning borders where tariff levies are now rising. At the same time, it’s little more than an acceleration of a trend that’s been crystallizing for a while. 

Fragmentation Grenade

The building blocks of the multinational corporation — supply-chain fragmentation, and foreign direct investment — are eroding.

The former can be considered the extent to which industries concentrate their activities in countries with the strongest comparative advantage, improving productivity by (say) locating a car company’s tire-making in a place with ready access to rubber while its final assembly is set up somewhere with a large workforce.

Global Slowdown

Such fragmentation had been sharply retreating even before Trump’s election as U.S. president. The share of foreign value-added in gross exports from members of the Organization for Economic Cooperation and Development fell to 19 percent in 2016 from 23 percent in 2012, according to figures from the group, meaning activity was increasingly happening in fewer countries. That trend has been even more pronounced in emerging markets, falling to 33 percent from 38 percent in Thailand; to 30 percent from 41 percent in Taiwan; and to 16 percent from 25 percent in India over the same period. Next to those countries, China’s decline to 17 percent from 21 percent looks almost modest. 

To split up a supply chain, you must first spend money on the myriad facilities it will use around the world. But growth in foreign direct investment is heading toward its weakest levels since the Cold War. New FDI inflows of $1.43tr in 2017 came to just 5.2 percent of the existing $27.66tr inward investment stock. The value of new greenfield FDI projects came to just $720bn in 2017; that was the second-lowest figure since 2005, after 2012. The $53bn of greenfield investments in China was the lowest since 2003.

Mistrust of Foreigners

That decline is what makes the current situation particularly risky for multinationals. In their days as the bogeymen of anti-globalization protesters, they were unpopular because they were powerful. Now, they’re losing influence because they’re weak. Carlos Ghosn, the embodiment of Davos Man, sits under virtual house arrest in Japan, removed from his positions at Renault SA and Nissan Motor Co. and cut loose by the French government. In Vancouver, Huawei’s chief financial officer, Meng Wanzhou, awaits her next extradition hearing. Executives considering travel to Japan, or China — or even, now, Hong Kong — will want to think twice about whether the journey is worth the legal jeopardy.

It’s hard to see this changing soon. President Trump’s mantra of bringing jobs home depends on knitting those fractured supply chains back together, but this time in America. The increasing use of Washington’s Office of Foreign Assets Control to extend U.S. jurisdiction not just to domestic companies, but to any company globally that transacts in dollars, means that every step outside home territory is freighted with risk. 

China, too, has been getting less and less dependent on foreign trade for more than a decade, in line with its rising wealth and increasingly state-directed economy. The risk of becoming an “unreliable entity” means companies are increasingly being forced to choose sides between Beijing and Washington.

Multinationals will no doubt survive this. Their first incarnations grew up in an epoch when trade barriers were so high that you often had to set up a plant in a foreign country if you wanted to sell products there at all. Compared with that, times aren’t so hard. But the era of the apolitical global company dedicated only to its bottom line seems increasingly in the past. Henceforth, businesses that don’t want to play politics will increasingly find that politics ends up playing them.

RELATED CONTENT

RELATED VIDEOS

Logistics Global Logistics Transportation & Distribution Global Trade Management Global Supply Chain Management Global Trade & Economics Supply Chain Security & Risk Mgmt Automotive High-Tech/Electronics
KEYWORDS Automotive Global Trade & Economics Global Trade Management High-Tech/Electronics Transportation & Distribution
  • Related Articles

    As Trade War Continues, Pharma Companies Prepare for Alternatives

    Trade War Pain Is Coming for the Global Economy in 2019

    The Price Tag for Global Trade-War Uncertainty Is $585 Billion

David Fickling, Bloomberg Opinion

More from this author

Subscribe to our Daily Newsletter!

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • DOCUMENTS BEARING THE INSIGNIA OF US CUSTOMS AND BORDER PROTECTION LIE ON A TABLE

    New CBP Regs Call for Greater Diligence by Brokers in Reporting Security Breaches

    Freight Forwarding/Customs Brokerage
  • A WORKER IN A WAREHOUSE, SUPERIMPOSED WITH GRAPHICS SHOWING SUPPLY NETWORK

    Enabling Intelligent Visibility With Supply Chain Analytics

    Data Management (Big Data/IoT/Blockchain)
  • A GROUP OF WORKERS RANGED IN AN OFFICE, OF DIVERSE RACE, GENDER, AGE AND PHYSICAL ABILITY

    Podcast | The Supply Chain Workforce of the Future Is Already Here

    HR & Labor Management
  • A HAND TURNS A LARGE, LIGHTED DIAL WITH THE WORD RISK ON IT iStock-NicoElNino-1364371014.jpg

    Measuring KPIs and KRIs for Comprehensive Supplier Performance Management

    Technology
  • INSIDE A WAREHOUSE, TWO HANDS HOLD A TABLET COMPUTER SHOWING A MAP OF THE WORLD

    Five Ways to Increase Supply Chain Visibility

    Data Management (Big Data/IoT/Blockchain)

Digital Edition

Scb nov 2022 sm

2022 Supply Chain Innovator of the Year

VIEW THE LATEST ISSUE

Case Studies

  • New Revenue for Cloud-Based TMS that Embeds Orderful’s Modern EDI Platform

  • Convenience Store Client Maximizes Profit and Improves Customer Service

  • A Digitally Native Footwear Brand Finds Rapid Fulfillment

  • Expanding Apparel Brand Scales Seamlessly with E-Commerce Technology

  • How a Global LSP Scaled its Security Program and Won More Business

Visit Our Sponsors

Orderful Yang Ming Alithya
Barcoding Blue Yonder BNSF Logistics
CoEnterprise Data Capture Deposco
E2open GAINSystems Generix
Geodis GEP GreyOrange
Here Honeywell Intelligrated IFM
Infor Inmar Keelvar
Kinaxis Korber Lean Solutions Group 2H
Liberty SBF Locus Robotics Logility
LogistiVIEW Lucas Systems MCA Connect
MPO Nvidia Old Dominion
OpenText ORTEC Overhaul
Parsyl PMMI QIMA
Redwood Logistics Ryder E-commerce by Whiplash Saddle Creek Logistics
Schneider Dedicated Setlog Holding AG Ship4WD
Shipwell Tecsys TGW Systems
Thomson Reuters Tive Trailer Bridge
Vecna Robotics Verity
Verusen
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • On-Demand Webinars
    • Upcoming Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright ©2023 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing