Who Is In Your Global Value Chain?

 

What is a global value chain?

Most of us easily understand the concept of global supply chains because we use them every day. They are the collection of suppliers scattered throughout the world on which we rely to source, manufacture and distribute our goods. They include manufacturers, materials suppliers, shippers and service providers that help us all to work together.

On the other hand, global value chains encompass the full range of activities that firms and workers are involved in to bring a product or service from its conception to its end use and beyond. Global value chains go deeper and wider than global supply chains, and include the many workers whose often unseen contributions are critical to bringing a product to market.

The better question we should ask is “Who is in a global value chain?”

For promotional products, as for much of our economy, global value chains stretch throughout the United States and around the world. They start with your own coworkers and employees. Look around at the many people in your company who make your business run. The designers, sales team, administrative staff, computer programmers, custodial crew and bosses—all are part of your global value chain. Look further and you’ll see the same in the workforces of the vendors, suppliers and other partners that help make you successful—materials providers, finishers, delivery services, logistics professionals, financial institutions and so on. Wherever you sit, you are surrounded by an army that makes up your global value chain.

Value, it seems, comes with many faces, skills, abilities, talents and personalities. But why is this important now? Because global value chains are under attack. 

To promote more Made in America purchases and more U.S. manufacturing, the White House and some in Congress have taken rhetorical aim at the policies that enable these global value chains to thrive. For example, last year many of us were engaged in a fight to defeat the Border Adjustment Tax (BAT) because we rely on global value chains that included offshore partners. 

To some extent, this is nothing new. Although the current administration has greatly increased the focus on trade deficits as a lens through which it sees trade policy, past administrations have long emphasized exports to the disadvantage of imports to craft trade policies. Such perspectives explicitly ignore the immense contributions made to the U.S. economy by U.S. companies (and their workers) that rely upon imports. Further, traditional trade data measures do not fully capture various elements of U.S. value-added inputs, research and development, intellectual property, and other value within an exported or imported product. Failure to account for these dynamics when constructing a successful trade policy is like trying to win a boxing match with one arm tied behind your back.

Ironically, it is the increasing challenge to these policies that has given many in the business community the voice to speak out. A new group of forward-looking companies and associations—the U.S. Global Value Chain Coalition (USGVC)—has recently been formed to tell the story about how U.S. global value chains equate to good U.S. jobs. Including trade associations like PPAI and AAFA, the USGVC will educate policymakers and the public about the role that global value chains play in supporting local economies.

In October, the USGVC released its first report. The study, [find it at https://bitly.im/Z4soE] by noted economist Dr. Susan Hester of Moongate Associates, quantifies the U.S. contribution to apparel global value chains. By taking proprietary data from several major U.S. brands and retailers, Hester estimates that the U.S. value added in any given article of imported apparel averages about 75 percent of the retail value of the final garment. Dr. Hester notes that the U.S. jobs that comprise this 75 percent value share are a combination of blue and white-collar jobs and, judging from Bureau of Labor Statistics (BLS) data, are well-paying.

Hester’s study and the anecdotal experience of USGVC member companies show that imports allow these companies to concentrate U.S. employment in those elements of the global value chain, including manufacturing, where U.S. workers are most competitive. This means that different companies can employ a wide range of supply chains to design, make and sell goods all over the world, using a variety of import scenarios. In our industry, where constantly evolving fashions are the norm, there is an infinite series of production and distribution combinations. No two value chains are alike. For some companies, imports are a key input used to manufacture a product that is then sold domestically or exported. For others, imports are the final products, often drawing upon previously exported U.S. goods and services. 

Such thinking, well known in our industry but not well understood among policymakers, provides new opportunities to tell our story in new and compelling ways. It is often said that “all politics are local,” because members of Congress are most interested in hearing the opinions of their constituents. Global value chains keep many of those constituents gainfully employed. USGVC will help connect the dots so that members of Congress and administration officials, as they conceive of and execute trade policies, understand who these global value chains are.

They are all of us.

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Join The Work Of The USGVC

In September, PPAI joined the U.S. Global Value Chain Coalition as one of its founding members. The coalition has been formed to tell the story of the U.S. global value chain by educating policymakers and the public about the role that global value chains play in supporting local economies. Partners include the American Apparel & Footwear Association, and many other associations and companies. 

The coalition was established, in part, in response to the proposed Border Adjustment Tax, which, fortunately, was defeated in 2017. The proposal would have affixed a 20-percent tax on all imported goods and jeopardized the welfare of industries that rely on imported goods.

Too often, because products are manufactured overseas, some lawmakers diminish the value of such products to the U.S. economy. The coalition will compile the data to make the case for the value of the global supply chain. In October, the coalition released its first report in which it quantified the U.S. contribution of apparel global value chains—among the findings is that the U.S. value-add in any given imported apparel article averages about 75 percent of the retail value of the final garment. These global supply chains support the U.S. economy and provide stable, well-paid jobs for U.S. workers.

Membership in the coalition is open to industry companies. By joining the coalition, companies will have the opportunity to contribute data to build the next economic study and financially support the work of the coalition. For information, contact Anne Stone, PPAI director of public affairs, AnneS@ppai.org, 972-258-3041.

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Steve Lamar is executive vice president at the American Apparel & Footwear Association (AAFA). He is responsible for the design and execution of AAFA lobbying strategies on a series of issues covering trade, supply chains and brand protection. Lamar is also president of the Washington International Trade Association (WITA), a nonprofit, nonpartisan organization dedicated to providing a neutral forum for discussion of international trade policy and related issues

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