Security & Supply Chain: Tension in the Pacific

by Sterling J. Scott, Marketing Communications Coordinator, MHI | @mhi_sterling

President Barack Obama’s recent trip to the Asia-Pacific region underscores his administration’s continued focus on the world’s largest emerging region.

The United States, Canada, Mexico, Chile, Peru, Japan, Singapore, Malaysia, Vietnam, Australia, New Zealand, and Brunei are currently negotiating a trade agreement called the Trans-Pacific Partnership (TPP). The goal of TPP is to increase trade and investment among the partner countries and create a better balance of power, money, and ideas between the United States and its allies on the one hand and China on the other. While lauded by many as a means of encouraging innovation, and economic growth, it is criticized by many others for its ability to push American manufacturing overseas similar to NAFTA.

At the same time, tensions are brewing in the South China Sea. China has claimed sovereignty over islands in the sea and increased military presence to secure them. This is important because the South China Sea is the second most used sea lane in the world. The region is becoming an important geopolitical issue. China and the nations of the Association of Southeast Asian Nations (ASEAN) are seeking a code of conduct for the South China Sea, while China pushes for more territorial control and ASEAN pushes for the sea to remain respected as international waters.

The Pacific is quickly becoming the focus of economic and security strategy. Any collaborative efforts or conflicts that develop have the potential to affect shipping lanes and costs. This could have serious implications for supply chains.

It’s important for companies to have a real-time view of their supply chain to increase agility and mitigate any potential risks. Supply chain analytics are becoming more important in a globalized world and as the world watches very important events unfold in the Pacific, businesses need to do the same to remain responsive and adjust to changing conditions.

More information on supply chain analytics and other innovations that drive supply chains are available in the 2014 Annual MHI Industry Report which can be downloaded at www.mhi.org.

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