by Rick Lowe
As alluded to in yesterdays blog, Trade with China. What are the correct numbers? Mrs. Tanya Wright, president of The Bahamas Chamber of Commerce made some interesting observations in this Nassau Guardian Business story of Thursday, September 14, 2006.
The story by Barry Williams, Guardian Staff Reporter implies that Mrs. Wright expects a backlash from some Chamber member firms because she says "there has been a cocooned competitive environment".
While she might be correct, it is important to note that only government can create a "cocooned competitive environment" for local business people by charging excessive import duty to protect them etc.
In this particular case (trade with China), I am at a loss to see how business people could possibly expect protection from other business people that have the good sense to look for product from another part of the world.
Maybe a business could object if they have the exclusive right from a supplier on this side of the world for product that is purchased from Chinese manufacturers. Other than that, I can’t see the big deal.
The objective for business is to compete for the consumers business with minimal government interference, and hopefully trade with China will do just that.
What am I missing?
There are Bahamian businesses that have been importing goods from china for years now, but the reality is that it is only viable in a very limited number of products.
More significant however is the recent implementation of a standards act to supposedly “protect” Bahamian consumers from inferior imported products. while at the same time we are looking to import goods from a country that still has a long way to go with regards to quality especially if the buyers “agent”is not standing nearby to ensure quality conformity.
China will produce any quality of whatever you want to buy in large quantities and are masters at increasing their profit margin by reducing quality preproduction.
And lets not talk about the instruction manuals that start out written in chinese, and get translated into english by the Japanese! U.L. listing as an example is an option, as is any other countries standard so hadn’t we better define our own?
China is not the panacea that politicians wish to convince us of, but then they are not business minded are they.
You better bet the Chinese are though.
Quite a few Bahamian businesses have been burned in china and I have a feeling that more will, especially as we are used to U.S. standards and brands, and although manufactured in china, big brother the U.S. is the market to be satisfied. We would be wise to piggy back their methods.
On a final note, buying cheap is not the whole picture, supply and demand and inventory turns are more critical in small markets.
Do we want to wait 3 months for plywood from china post hurricane when we can get chinese plywood from Florida in two days?
I think we should let the natural avenues of business prevail and innovate instead of letting atificial criteria sink our collective boat.
More on this later.
Freeports potential contribution to the rest of the Bahamas.
Here is a current example of the as yet unfulfilled potential freeport has.
Argentinian beef is currently shipped from Argentina to the Freeport Container port, then cross loaded onto a vessel to N.Y.
The trailers are then distributed throughout the eastern seaboard of the U.S. including Florida, where we then buy and ship the beef into the Bahamas for wholesale and retail distribution.
What is wrong with this picture?
Freeport, from a logical perspective has the potential to become the “supply warehouse” for the whole country, insofar as the international shipping routes include Freeport as a stop.
Why? Because Hutchinson Whampoa in effect leases/controls the exit /entry ports of the Panama canal as well as owning and operating the container port in Freeport. Over one million trailers a year in and out.
And yet an insignificant amount stops here. In fact the facility is not at all set up for local procurement.
Imagine if the Bahamas could for instance pull some of these beef trailers as needed to supply national demand through existing supply outlets.
Anyone know the drop in price that we would, or should see in beef prices? ( 20 % min)
Now multiply that by almost all the food stuffs and commodity items that do currently travel through Freeport , but destined for other markets, mainly U.S.
Why go to China when China is here and here with commodities that already have the quality control assured by a market much larger than our own?
if our government had our best interests at heart, they would facilitate the potential of this made to order situation wouldn’t you think?
Well an American Co-op, Associated Grocers are doing just that. By locating a cross docking facility in Freeport, the Co-op will not pay U.S. import tarrifs on goods imported to the U.S. and re-exported to the carribean and South America, and those markets should see a 20-30% drop incost of goods due to more direct shipping routes and unessesary tarrifs.
But initially at least we the people of the commonwealth of the Bahamas will not be able to source from this site in Freeport, even though Bahamian companies currently source from Assosiated Grocers out of their Miami distribution site.
Now I do not fault the U.S. company at all.
They are here to realize a benefit for their company and their international customers.
So it is a Bahamian government stipulation that goods for Bahamian markets cannot be sourced from the Freeport location.
At least initially we cannot take advantage of an advantage sitting in our own back yard.
Maybe this drives home the point that if we rely on politicians to facilitate business, we may end up with none.