Free trade and democracy are diminishing targets

Redwood Comment
Published:  24 October, 2018
Dr Mike Redwood

For as long as anyone can remember the U.S. and the EU tanning industry has been pushing for free trade on a global basis. The belief was that, at the end of the day, free trade pulled everyone up. At the same time, it was felt that as emerging markets traded more and became richer they would be pushed towards western style democracy by their better educated citizens.

Whether this was ever a realistic point of view is open to debate, but it was sincerely held. The schism in the International Council of Tanners was created when a President was appointed from a rich nation which had not opened its market. It is fortunate that this is resolved, as both the geopolitical world and the leather one has fast progressed to new territory where difficulties abound.

Recent voting and opinion gathering has made it clear that while our industry is already battling to work out how to fit into the joint pressures (and opportunities) from Industry 4.0 and changing consumer expectations we need to add another term – deglobalisation. This ugly sounding term is about trying to move the world back to a state where production for the domestic market becomes the focus of the economy rather than production for export markets.

The Great Depression

The last time we had such a period was during the Great Depression starting in 1929 and effectively not ending until 1945. Since then, free trade again started to expand and the world has had generally steady, even unprecedented growth. However, what most of our top politicians and business leaders, the global elite, missed was that many people got left behind by this and we now see a world where increasing numbers citizens all round the world, further infuriated by the outcomes of the 2008 financial crash, do not believe in free trade.

So, on top of the existing pressures to shorten supply chains to improve transparency and shorten response times, there is a new pressure to not let employment, intellectual property or capital out of the home country. This is complicated for a leather industry that has to think about where its best raw material comes from, the most suitable location for each stage of production, where finished product manufacturing will be located and where the consumers are. For tanners with a wet-end that is capital intensive and finishing more labour intensive this will create new dilemmas.

Leather has always been globally traded and that is why in our history we have Russian Leather, Spanish Leather, Cordovan, Morocco Leather and the like and how the Hudson Bay Company began with the import of skins and furs to Europe, while the Dutch shipped beaver skins out of what is now Manhattan. The latest round of global development was really kicked off in the late 1960s, when South Korea pulled agriculturalists out of the fields to make shoes for the U.S. and built a tanning industry (which they supplied with European technology and hides bought at the U.S. hide auctions) to support it. Dismantling all this will not be easy.

Harley-Davidson perhaps offers a warning. Chasing younger customers and females on the one hand, it has moved some production away from its home base to escape tariffs on products destined for Europe. No one seems very happy about this or convinced that U.S. anger will be suitably offset by higher sales. A tough dilemma for them, not dissimilar to many dilemmas we will see in the leather industry as supply chains get reconfigured.

Dr Mike Redwood

October 24, 2018

mike@internationalleathermaker.com

Follow Dr Mike Redwood on twitter: @michaelredwood

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