NAFTA and the High Price of Oil.

August 13th, 2008

A high profile Presidential election issue this year has been the loss of jobs particularly in the manufacturing area to low cost of labor countries out side of the USA and North America like China. This practice is known as off shoring. If the price of oil continues to rise

A high profile Presidential election issue this year has been the loss of jobs particularly in the manufacturing area to low cost of labor countries out side of the USA and North America like China. This practice is known as off shoring. If the price of oil continues to rise, that problem may be solved for us. So, where are the new sources of supply located and how would you find them once this happens.

I read a couple of good articles today. One was a post on the Spend Matters blog located at www.spendmatters.com titled Your eProcurement Implementation Sucks (and What You Can Do About It). The first area suggested as to what one can do about it is to “deploy a central registration and supplier management hub to onboard suppliers and manage supplier content / catalog information from the start.” The next article by David J. Lynch was the USA TODAY cover story in the Money section titled Transport costs could alter world trade. In summary the article discusses the fact that the North American countries could see an increase in production related jobs as a result of rising oil costs. In the article Jeff Rubin an analyst at CIBC World Markets in Toronto states that “Globalization is reversible” Now, if our presidential candidates hurry up, they can take credit for this before it even happens. Another source from Morgan Stanley indicated that high fuel costs could reshape global trade into regional blocs and result in the USA going to other low cost areas such as Mexico instead of to China which is 7500 miles away. Only time will tell the outcome, but one thing is certain, long term fuel costs are not going down.

So, how does all of this relate to NAFTA and to the Spend Matters blog post? The first hint is in a name North American Free Trade Agreement. North America is made up of the United States, Canada and Mexico. Although NAFTA is primarily focused on agricultural products traded between North American Country’s it also represents one of one of the most successful trade agreements in history and has contributed significantly to increases in agricultural trade and investment between the United States, Canada and Mexico. If the trade increases realized since this 1994 agreement went into affect, maybe it can translate to other areas. Regional low cost manufacturing bases could have the same type of regional impact on many types of retail goods. In support of the Spend Matters blog, it is even more important that North American Retail Companies have a source that can tell them where suppliers within the trade zone are located by category and product. It is also important that the supplier community be able to register at such a site in order to be easily accessible to regional retailers.

Are you aware that a tool like this already exists which can tell you that there are 928 general merchandise suppliers located in Mexico, 1,585 Grocery Suppliers located in Canada, and 1,940 Pharmaceutical suppliers located in the United States. Please visit the SafeSourcing Query Tool at www.safesourcing.com and view solutions/query tool to learn more.

I look forward to your comments.

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