The Sourcing Post

In the Economix blog hosted at The New York Times, there is a very enlightening posting by Simon Johnson an entrepreneurship professor at M.I.T. in which he makes a very good point by saying that we shouldn’t focus all our attention in the US markets, as its GDP only accounts for less than 25% of the global output.

As he puts it, there are significant risks associated with the lack of action and market intervention in the EU. The fiscal expansion and bank bailouts now all over the news in the New World, are very timid on the other side of the pond.

And top Europeans are still at the denial game (yes, policy makers need to appear confident; but no one is inspired by the sight of heads in the sand). Despite serious problems in the banking systems of many European countries, the fall in global trade, and the general global move to lower spending, the commission is clinging to a forecast of basically zero growth in 2010 (more precisely, they predict a 0.1 percent fall).

This situation in reality is giving some emerging economies the chance to become more competitive. They are mid-sized, and their governments seem to be more aggressive in the steps they are taking to bolster their economies.

The danger, as Professor Johnson explains, is that the bigger economic blocks, threatened by this new competitiveness from outsiders, with increase protectionism and further slow the international trade. Hope it doesn’t happen.

In a post today in The Huffington Post, Ralph Gomory describes, among other things, some ways to correct the US trade imbalances. In his post, he outlines four different steps to align national and corporate goals in the US. Step 1 is “Balancing trade”. It is in that section of the post where he refers to some very interesting ways to accomplish it.

Excerpt:

Fortune magazine eloquently described the need for balanced trade and suggested an approach to obtaining it. Under the Buffet plan, exporters would receive certificates equal to the dollar value of the goods they export. Importers would need to buy these certificates to cover the dollar value of the goods they import. The certificates would be sold on an open market. This would force the value of imports to match the value of exports and, in contrast to quotas or tariffs, would not be aimed at particular countries or industries. This plan and some of its variants have been carefully studied (see forthcoming reports from the Economic Policy Institute) and it is now time to take this approach seriously.

The above comment is startling, because, as he mentions in his article afterwards, it can be considered protectionism. Clearly, is not easy to balance US trade deficit, and the solutions that are being proposed are starting to get unorthodox.

So, what do we do as Sourcing specialists? How do we manage our material and services flow from outside of the US when (and if) the government steps in to cap the outflows of cash? Are we developing internal or alternative sources? Can we develop those efficiently and profitably? What about US competitiveness? These are good questions that need to be answered during the debate about this issue, and our profession must contribute to it as the subject matter experts. After all, when the CEOs started to cut costs bowing to pressures from Wall Street, it was us, the sourcing guys, who helped accomplish it, and we are also the ones who clearly understand the challenges to reverse the move.