America’s Brexit: The Evolving Risks of Global Trade

PUBLIC
March 23, 2017
David Landsman, SAP
Scott Paul, Alliance for American Manufacturing
America’s Brexit: The Evolving Risks of
Global Trade

2PUBLIC© 2017 SAP SE or an SAP affiliate company. All rights reserved. ǀ
Public
David Landsman, Global Senior
Director, SAP Ariba Discovery
Speakers
Scott Paul, President, Alliance
for American Manufacturing

Public
Donald Trump and today’s trade policies
Reshoring
SAP Ariba’s Solutions
Q&A
Agenda

Public
Could be transformative for American
manufacturing and disruptive to the globalized
world
Or, it could be meaningless, if traditional
obstacles stand in the way
Donald Trump’s Presidency

Public
There needs to be a higher minimum
wage in Mexico
Mexican labor is significantly cheaper
than US labor
–Forcing US jobs to Mexico
–Mexican workers can’t afford US made
goods
Commerce Secretary Wilbur Ross Said…

Public
US is seeking more reciprocal trade with
countries such as China and Germany
This will boost growth
Reduce the trade deficit
Keep American production capacity
out of foreign hands
The American plan seeking to reduce the trade
deficit “is not based on higher tariffs, but rather
getting our partners to lower theirs.”
White House National Trade Council Director Peter Navarro said…

Public

Public
“It seems clear that the U.S. manufacturing crisis is related to our trade with China”
China sells $4 worth of goods to the US for every $1 of imports
China is the largest exporter to the US
As a result, Lighthizer will go hard on China’s imports and create steep taxes
This will hurt US retailers temporarily but Lighthizer isn’t worried in the long run
Trump’s pick for USTR, Robert Lighthizer, said…

Public
To “bring back” manufacturing jobs, particularly
in steel and automobiles
To lower the trade deficit
To achieve 4 percent economic growth
To create 25 million new private sector jobs
over 8 years
Trump has promised

Public
Will he aggressively renegotiate NAFTA and other trade deals?
Will he initiate trade enforcement actions against countries like China?
Will he designate any country as a currency manipulator?
Will he embrace the House Republican Corporate Tax Plan that includes the “Border Adjustment
Tax” on imports?
Will he pursue other manufacturing-friendly policies?
Trump has some decisions to make

Public
NAFTA Rules of Origin
Anti-Dumping and Countervailing Duties
Destination-Based Cash Flow Tax (Border
Adjustment Tax)
WTO Appellate Body Over-reach
Your vocabulary is about to expand

Public
Currently 62.5% of the value of an assembled
automobile must be North American content to
receive duty-free NAFTA treatment within the
North American market
Imagine the sourcing shifts if that percentage
were raised to 90%
Case Study: NAFTA Automobile Rules of Origin

Public
Imports into the United States are currently not subject to any corporate taxation. We are joined by
a handful of countries such as Somalia and Cuba in lacking such a tax.
160 nations have a Value-Added Tax (VAT) which subjects imports (and other goods) to a tax, and
rebates taxes for exports.
The DBCFT would lower the corporate income tax rate from 35% to 20%, apply it to sales, including
imports, exempt exports, allow expensing and wage deductions.
Case Study: Destination-Based Cash Flow Tax

Public
…at least not yet
China.
Congress.
Monetary policy.
Technological change and waves of history.
But here are some things Trump can’t control

Public
Steam engine (early 1800s)
Mass production (1920s)
First automation wave (1970s)
We’re at the cusp of Industry 4.0

Public
Proximity to customers matters most.
Smaller, more flexible factories means more
opportunity.
East to West sourcing flows will become more
regional.
With policy shifts, Industry 4.0 creates a new sourcing strategy.

Public
OFFSHORING: OUT
RESHORING: IN

Public
You’ll need to take a new look at reshoring.
You’ll need to rethink your supply chain.
You’ll want Trump tweeting about your
decisions in a good way…
…and not a bad way.
What Does “America’s Brexit” Mean for Sourcing?

Your Supply Chain Could be Entering a Period of Uncertainty

Public
Like financial markets, supply chains crave certainty

Financial & currency markets are dripping with uncertainty

Public
In the new global paradigm, where are the risks in your supply chain?

Have you been war gaming the potential disruption to your supply chain or the
opportunities the changing tides will bring?

Public
OFFSHORING: OUT
RESHORING: IN
MAYBE!!

Public
Manufacturing production at an all time high as
manufacturing employment decreases

Public
• Since 1989
• Halved workforce
• Doubled output
Kyocera Precision Tools

Public
• Identify the top 21 commodity candidates
for reshoring investigation
• Underperforming suppliers
• Geopolitical instability
• Trade targets for the new administration
• Work with your SAP Ariba Discovery team
to run supplier identification events in the
United States
• Live benchmarking
• Cost savings
• Transition production closer to markets of
consumption
Prudence dictates substantial
investigation
Commodities
Supply Chain

Public
The Power of the Network is the Power to Manage Change

Public
Strong supplier community = Risk Mitigation

Public
Find suppliers for common – or uncommon – things
© 2016 SAP SE or an SAP affiliate company. All rights reserved. 31Public
Major U.S. retailer: $1 million,
Artificial Christmas trees
Food distribution company: $1 million,
Peanuts in shells
Consumer products company: $1 million,
Toilet paper
Specialty retailer: $500,000,
Pickles
Major retailer: $500,000,
Organic dog treats
Beauty salon: $50,000,
Human hair

Public
Please complete session survey
Locate Session Click Surveys Button Select Breakout Survey Rate Session

No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP SE or an SAP affiliate company.
The information contained herein may be changed without prior notice. Some software products marketed by SAP SE and its distributors contain proprietary software components
of other software vendors. National product specifications may vary.
These materials are provided by SAP SE or an SAP affiliate company for informational purposes only, without representation or warranty of any kind, and SAP or its affiliated
companies shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP or SAP affiliate company products and services are those that are
set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty.
In particular, SAP SE or its affiliated companies have no obligation to pursue any course of business outlined in this document or any related presentation, or to develop or release
any functionality mentioned therein. This document, or any related presentation, and SAP SE’s or its affiliated companies’ strategy and possible future developments, products,
and/or platform directions and functionality are all subject to change and may be changed by SAP SE or its affiliated companies at any time for any reason without notice. The
information in this document is not a commitment, promise, or legal obligation to deliver any material, code, or functionality. All forward-looking statements are subject to various
risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking statements,
and they should not be relied upon in making purchasing decisions.
SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company)
in Germany and other countries. All other product and service names mentioned are the trademarks of their respective companies.
See http://global.sap.com/corporate-en/legal/copyright/index.epx for additional trademark information and notices.
© 2017 SAP SE or an SAP affiliate company. All rights reserved.

America’s Brexit: The Evolving Risks of Global Trade

Recommended

Recommended

More Related Content

What's hot

What's hot (19)

Similar to America’s Brexit: The Evolving Risks of Global Trade

Similar to America’s Brexit: The Evolving Risks of Global Trade (20)

More from SAP Ariba

More from SAP Ariba (20)

Recently uploaded

Recently uploaded (20)

America’s Brexit: The Evolving Risks of Global Trade