DC Velocity - January 2017

S p ec i a l Re p ort S IT E SE L E C TI ON

54 DC VELOCITY JANUARY 2017 www.dcvelocity.com 4. UNCERTAINTY IN INTERNATIONAL TRADE

It’s not just local or national concerns that are altering how companies make warehouse site-selection decisions. Export opportunities and trade agreements are also of growing importance to our clients. But there seems to be growing resistance in some regions toward free-trade agreements, as demonstrated by “Brexit”—the United Kingdom’s planned departure from the European Union (EU)—and opposition to the Trans-Pacific Partnership (TPP) in the United States.

In general, we believe that it will take years for the details
of Brexit to take shape, and to understand its resulting
pivotal site-selection variable here in the U.S.—will have to
be expanded and better funded by U.K. policymakers.

It is likely that Brexit will also have the effect of slowing the pace of negotiations for the Transatlantic Trade and Investment Partnership (TTIP) agreement between the United States and the EU. That trade pact would create the world’s largest free-trade zone—dwarfing even the North American Free Trade Agreement (NAFTA). Today, the U.S. and the EU together account for one-half of global gross domestic product (GDP) and one-third of all world trade. New DC investments related to TTIP in Europe as well as in the environs of U.S. East Coast ports like New York/New Jersey; Charleston, S.C.; and Savannah, Ga., are also likely to stall given the slowed pace of TTIP negotiations.

The Trans-Pacific Partnership—which would have connected the U.S. with 12 countries accounting for another 40 percent of global GDP—has been soundly rejected by the incoming Trump administration. Donald Trump’s populist position on free trade overall is creating apprehension within the U.S. supply chain and is raising questions as to what trade and tariff challenges shippers will be facing— factors sure to influence location decisions about new DCs.

Meanwhile, Canadian export opportunities and trade pacts are gaining the attention of the U.S.

logistics industry. Canada has free-trade agreements with 40 countries, while the U.S.

has only 20. Popular support for free trade with Japan and China has historically been much higher in Canada than in the U.S. Also, Canada now has its own free-trade accord with the EU, the Comprehensive Economic and Trade Agreement (CETA) signed by Prime Minister Trudeau in October 2016. As a result, more U.S. companies are eyeing DC options in places like eastern Ontario to take advantage of Canada’s global trade accords as well as to serve cross-border markets in the vast Northeast megalopolis region stretching from Boston to Baltimore.

These four trends clearly show that warehousing has been at the crux of many changes in the past few years: new technologies, new customer demands, and new talent requirements. Meanwhile, a sluggish economy and an uncertain future have company executives keeping a close watch on costs. To navigate these changing times, warehouses and distribution centers will need to transform their operations to meet new economic realities while continuing to monitor costs like never before.