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      - page 47 / 47





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primarily international economic, trade, and investment policy now also has a clear domestic effect. The globalization of supply has added complexity to both the managers of the supply chains and to policymaking.

As the 111th Congress and the new Administration consider changes to economic policy, the basic issues raised by global supply chains may come into play, particularly considerations of the incidence of policies. For example, is the goal of a policy to support business to promote the overall efficiency and profitability of U.S. parented supply chains even if significant segments of those chains are located abroad, or is the goal to induce companies to move production or other business activity to the United States even if such action reduces supply chain efficiency and the ability of the U.S.-parented supply chain to compete in the global marketplace? In international trade and investment policies, does the incidence of the policy fall on overseas segments of American parented supply chains? If the policy is to reduce imports into the United States, what effect will that have on global supply chain operations? Is there a balance between trade policies designed to increase U.S. exports (e.g., by reducing tariffs abroad) and those that may induce U.S. companies to move production overseas (e.g., easing foreign country limits on direct investments). As global supply chains attempt to maximize their efficiency and profitability, they face trade-offs between border transaction costs (including tariffs), factor costs (including labor and capital), logistical costs (including shipping), external business costs (ease of doing business, regulations, etc.), and various risks (including security, financial, and political risk). How does government economic policy influence these factors and trade-offs in ways that are in accord with, rather than counter to, U.S. national goals?

  

Dick K. Nanto Specialist in Industry and Trade dnanto@crs.loc.gov, 7-7754


The Kearney Alliance assisted in travel to Tokyo, Japan, and Shanghai, China for interviews by the author of various businesses and organizations engaged in supply chain operations.

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