COMMENTARY: Chaos theory

Political change has brought uncertainty to importers and exporters, but it also provides a greater chance to differentiate    In 2007, I sat down with the managing director of a major logistics company in India for an interview.
   The topic of the discussion was how U.S. companies could manage what seemed to be a very chaotic logistics situation in India. Bad roads, mercurial traffic patterns, a lack of freight rail and container port capacity, customs agents with sticky fingers. It all seemed like a lot to manage.
   This executive sat back, smiled, and said something to the effect of: “In this environment, it’s easier to separate yourself from the pack. If you can manage all that chaos, customers will turn to you instead of your competitor.”
   If, on average, it took 14 days to get a container from Delhi to a port in south India, imagine how valuable you would be as a service provider if you could deliver it in seven days for a similar price. And imagine how uncompetitive you’d be if it took 21 days instead?
   The implication was clear: in a chaotic situation, there’s a broader band of potential outcomes than in a stable situation. And that creates clearer winners and losers.
   Another example would be transpacific sailings from, say, Shanghai to Los Angeles. The band of transit times on that route is very narrow and thus allows little chance for differentiation.
   I thought back to that conversation with the Indian logistics executive as I pondered the last few months since the U.S. presidential election.
   There has been so much upheaval, both enacted and threatened, since Donald Trump won the election that it had me thinking about how companies respond to chaotic situations. One can view the raft of policy changes – from trade, to taxation, to health care, to immigration – as burdens on a business. Or, one can view those changes as opportunities.
   I’d make the case that this period of change has widened the band of possibilities from a trade compliance and logistics perspective. There are more potential outcomes than ever before, largely because Trump doesn’t seem bound by the normal protocols of the presidency.
   U.S. trade professionals have, over the course of his first 50 days as president, had to consider the potential of:

   • A border adjustment tax on imports
   • Specific and significant tariffs on imports from Mexico and China
   • The renegotiation of, or withdrawal from, the North American Free Trade Agreement
   • The end of the Trans-Pacific Partnership
   • A new definition of rules of origins

   That doesn’t take into stalled talks with the European Union over a free trade agreement, a potential trade war with China, or a totally changed alliance structure in the liner shipping industry.
   That’s a lot to manage in a few short weeks. But think about it from this perspective – if you view chaos as an opportunity to rise above competitors in a fragmented, largely undifferentiated field, these times can be exciting.
   In a sense, this uncertainty around trade policy has plunged the United States into a situation that resembles those in developing nations, where companies have to deal with constant changes and challenges. They have to create structure and strategy where it seems little is stable.
   But here’s the thing: trade professionals should be well-placed to handle this chaos. They are accustomed to dealing with frequent (and often irrational) change. Trade regulations change all the time. Enforcement levels change all the time. Governmental compliance systems change all the time.
   The average trade professional lives in a world of chaos. So maybe view the uncertain trade policy future in the United States not as a chance to be dragged into the mire, but to soar above the confused masses.