Buyer Analytics

With U.S. unemployment now reaching 5.7% one would hope that purchasing professionals would consider the impact of domestic versus global sourcing. A number of factors come into play, but all things being equal, it appears that trading with Latin America may be a better alternative.

Here are some interesting facts to ponder...

In a recent editorial in the WSJ, Michael Boskin, professor of economics at Stanford University made the following statement:

Since Nafta was passed (relative to the comparable period before passage), U.S. manufacturing output grew more rapidly and reached an all-time high last year; the average unemployment rate declined as employment grew 24%; real hourly compensation in the business sector grew twice as fast as before; agricultural exports destined for Canada and Mexico have grown substantially and trade among the three nations has tripled; Mexican wages have risen each year since the peso crisis of 1994; and the two binational Nafta environmental institutions have provided nearly $1 billion for 135 environmental infrastructure projects along the U.S.-Mexico border.

In short, it would be hard, on balance, for any objective person to argue that Nafta has injured the U.S. economy, reduced U.S. wages, destroyed American manufacturing, harmed our agriculture, damaged Mexican labor, failed to expand trade, or worsened the border environment.

According to a Bloomberg news release:

The increasing U.S. trade deficit with China resulted in the loss of 2.3 million American jobs between 2001 and 2007, including 366,000 last year, according to a study released Wednesday by the Economic Policy Institute.

Those displaced workers lost an average $8,146 last year as they ended up in lower-paying jobs, the institute said.

Meanwhile, workers in export-linked jobs are paid 4.4 percent less than were workers who lost their jobs to exports, the study found. That's because U.S. exports to China are heavily commodities, including agricultural goods, while 98 percent of Chinese imports were manufactured products, the report said.

Making a decision to source globally when the domestic economy is suffering could be considered part of the ethical procurement equation. Certainly worth some thought as part of the strategic sourcing evaluation.