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Running head: LITERATURE REVIEW 0

Impact of Global Trade Policies on Supply Chain Strategies

Lesline Abonwoh

2024/12/08

Literature Review

The business environment of the world economy is always affected by policies, both protective (e.g., tariffs and quotas) and restraints (e.g., export controls). These trade policies are meant to moderate international commerce and safeguard the country’s industries, but they have issues for MNCs in managing their supply chain networks. As a result of globalization, it becomes critical to know how much trade policies impact the supply chain. The following literature review reviews the effects of global trade policies on the supply chain of MNCs based on more than 15 articles sourced from academic journals in an attempt to establish prominent trends, challenges, and strategic actions.

Analysis of Existing Literature

The Impact of Trade Policies on Supply Chain Configuration

There is a vast literature on trade policies' impacts on supply chain management. Citing Duemler (2021), trade barriers include tariffs and quotas that may raise business costs, control market access, and congest the normal trading relations necessary for supply chains. This has been most apparent in the trade war between the USA and China, where tariffs resulted in major cross-border changes in global value chains. Likewise, Garrett (2010) discusses how individuals needed to change ways of managing a supply chain to avoid undue costs resulting from increased import tariffs.

Trade Wars and Supply Chain Reconfigurations

The current trade-war situation, like the US-China one, has prompted many reactions in the supply chain relationship. The MNCs were adjusted compelled due to high tariffs on moving their production operations to countries with lower tariffs (Dong & Kouvelis, 2020; Yildiz, 2020). The authors stated that this reconfiguration is not exclusive to minimizing cost but includes the ability to address changing regulations and avert penalties. This shift has promoted the need to find liberal and change-sensitive supply chain models to respond to changes in the trade regime.

The Role of Free Trade Agreements

FTAs aim to remove trade restrictions between two or more countries, allowing MNCs to increase market access and decrease expenses. Cross-border trading and the efficiency of supply chains have been central aspects facilitated by FTAs, including NAFTA and EU Single (Pelkmans, 2020; Kowalczyk & Riezman, 2013; Tharp, 2021). However, the use of these agreements has come under pressure recently due to increasing nationalism and protectionism around the globe, which makes international relations complicated for business.

Supply Chain Risks and Resilience

As with most areas of policymaking, a particularly highlighted feature of trade policy is its need to affect the reliability of supply chains; Klingler-vidra and Kuo (2021) categorize international trade policies as bringing about decision uncertainties in the form of tariffs and regulatory concerns. Examining the literature, one comes across managing resilience, which is the ability to precondition the supply chain to respond to external shocks such as geopolitical tensions, natural disasters, or policy shifts. To avoid such risks, most MNCs embrace more open procurement models, such as near-shoring and supply chain diversification (Baldwin & Freeman, 2022; Basu, 2023).

Technological Innovations and Adaptation

In this perspective, MNCs have fashioned new ways of gaining competitive advantages through supply chain management in response to the latest trade policies. As stated by Novoszel (2022), it is important to adopt various technologies such as AI and Blockchain to create increased visibility in controlling the supply chain, ensure efficient enhancement of tracing the flow of products, and cut down compliance costs heavily. These technologies increase firms’ ability to address issues related to trade policies faster and more efficiently and improve their supply chain networks and competitiveness.

The Economic Impact of Trade Policies on Supply Chains

Trade policies consequently have profound economic impacts on MNCs. According to Harrison & Rodríguez-Clare (2010), although tariffs offer local industries some protection from import competition, they increase cost structures among firms that engage in business in foreign nations. This can lead to high customer costs, low demand, and even poor performance of the entire supply chain. Furthermore, trade policies interrupting the smooth flow of goods mean that more time will be wasted on movement and logistics costs (Sheu et al., 2006).

Compliance and Regulatory Challenges

Another hurdle international trade policies create is meeting numerous and varied requirements within various markets. According to Zhang’s (2023) argument, it is not easy for MNCs to be conversant with international trade laws and regulations across different countries, given that the statutes diverge regarding import/export control, product standards, and labeling rules. This increases business costs, possibly forcing organizations to obtain structures like lawyers and compliance departments.

Critique of the Literature

Although many works focus on the threats trade policies, bring to their supply chain systems, only some look into the areas where MNCs can long-term strategize to safeguard their networks. While many papers have been written and many speakers have spoken on the subject, most of their recommendations are short-term, for example, moving the production base to other countries or developing other production technologies. However, less stress is placed on assessing the future shifts in trade policy and the signals that should help to prepare for them. Furthermore, whereas technology revolutions are popular topics to be debated, there are scant approaches to how companies can use these technologies in the various supply chains to offer enduring solutions.

Conclusion: Gaps in the Literature

Reading through previous literature expounds on various inadequacies in the former analysis of the effect of global trade policies on the structure of the MNCs' supply chains. However, an absence of research pays attention to the development of more extended supply chain strategies that consider changes in the global trading environment and the impact of technology on future supply chains. Furthermore, many authors only examine the effects of cost. In contrast, less discussion considers trade policies' strategic and operational impact, especially how firms can strengthen their positions to address potential risks. These gaps call for more research in this study area, as the research interest is how this global business environment impacts supply chain configurations in MNCs.

References

Baldwin, R., & Freeman, R. (2022). Risks and global supply chains: What we know and need to know. Annual Review of Economics, 14(1), 153–180. https://doi.org/10.1146/annurev-economics-051420-113737

Basu, R. (2023). Sustainable Green Supply Chains. Managing Global Supply Chains, pp. 271–287. https://doi.org/10.4324/9781003341352-19

Dong, L., & Kouvelis, P. (2020). Impact of tariffs on Global Supply Chain Network Configuration: Models, predictions, and future research. Manufacturing & Service Operations Management, 22(1), 25–35. https://doi.org/10.1287/msom.2019.0802

Duemler, J. (2021). Contract digitization and analytics: Goodbye paper audits; welcome to real-time scoring. Journal of Supply Chain Management, Logistics and Procurement, 4(2), 182. https://doi.org/10.69554/mfzn8913

Garrett, G. A. (2010). Government contract audits and compliance. CCH : Navigant.

Harrison, A., & Rodríguez-Clare, A. (2010). Trade, foreign investment, and industrial policy for developing countries*. Handbook of Development Economics, pp. 4039–4214. https://doi.org/10.1016/b978-0-444-52944-2.00001-x

Klingler-Vidra, R., & Kuo, Y. C. (2021). Brexit, supply chains and the contest for supremacy: The case of Taiwan and the semiconductor industry. A New Beginning or More of the Same? 183–203. https://doi.org/10.1007/978-981-15-9841-8_8

Kowalczyk, C., & Riezman, R. (2013). Free trade: What are the terms-of-trade effects? The Tricontinental Series on Global Economic Issues, 149–164. https://doi.org/10.1142/9789814390125_0010

Krok, D. (2023, November 10). Trade policies and their impact on Global Economics. EconMethodology. https://www.econmethodology.org/trade-policies-and-their-impact-on-global-economics/

Novoszel, L. (2022). Supply Chain Resilience Framework. Springer Series in Supply Chain Management, pp. 33–39. https://doi.org/10.1007/978-3-030-95401-7_3

Pelkmans, J. (2020). Business Dimensions of EU’s new fees. The EU and the New Trade Bilateralism, pp. 18–31. https://doi.org/10.4324/9780429060052-2

Sheu, C., Lee, L., & Niehoff, B. (2006). A Voluntary Logistics Security Program and International Supply Chain Partnership. Supply Chain Management: An International Journal, 11(4), 363–374. https://doi.org/10.1108/13598540610671815

Tharp, G. (2021). Recommendations for usage, commercial contracts, and cost recovery in government contracts. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4101961

Yildiz, N. (2020). Effects of US-China trade disputes on global trade relations case study: Latin America. Transnational Corporations Review, 12(2), 203–214. https://doi.org/10.1080/19186444.2019.1698247

Zhang, J. (2023). US-China decoupling: Trade war, Corporate Investment Disclosure, and Supply Chain Shift. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4669313