Edward Snowden’s Impact on Your Supply Chain by Kelly Barner

Edward Snowden is the former National Security Agency (NSA) contractor that is currently a fugitive from justice. According to a June 23rd article on CNN, “Snowden has revealed himself as the source of documents outlining a massive effort by the U.S. National Security Agency to track cell phone calls and monitor the e-mail and Internet traffic of virtually all Americans.” Snowden cannot return to the United States without facing prosecution, and has been in Hong Kong and Russia while he tries to find a country that will accept him as a legal resident.

Most recently, Snowden appealed to Ecuador for asylum. Regardless of whether or not it is granted, discussions of the possibility have soured diplomatic relations between the U.S. and Ecuador.

Since 1991, trade between the U.S. and Ecuador has been governed by the Andean Trade Promotion and Drug Eradication Act (ATPDEA). “The pact, initially aimed at helping Andean countries in their fight against drugs, reduces tariffs on hundreds of millions of dollars’ worth of trade in products such as cut flowers, artichokes and broccoli.” (USA Today, 27 June). Ecuador’s exports include a wide range of products. $54B in oil was exported to the U.S. in 2012, and the CIA World Factbook lists bananas, cut flowers, shrimp, cacao, coffee, wood, and fish among their top exports. In 2012, the U.S. exported a total of $9.5B from Ecuador according to the U.S. Census Bureau.

When the U.S., through Senator Robert Menendez, chairman of the Senate Foreign Relations Committee, threatened to withdraw trade advantages if Snowden was granted asylum, Ecuador’s President Correa preemptively renounced the benefits, saying they were being used as “blackmail” (Sydney Morning Herald).

This change will impact supply chains in a number of industries including retail, restaurants and food service and pulp/paper products. Corporations that have production facilities in the country include Kimberly-Clark, Kraft Foods, and Novartis (Great Place to Work). Companies in the U.S. may do business with Ecuador in any tier of their supply chain, and it is a perfect example of the need to manage risk in advance. The current government has expressed Anti-American sentiments in the past. Before his re-election in January, he even warned that the CIA would likely try to assassinate him (Global Research).

Even if availability does not become an issue, costs will increase without ATPDEA. On May 7th, the Ecuadorian Trade Office in Chicago announced the “Keep Trade Going” Campaign to raise awareness around the quality of their products. “One key outreach effort on the part of Ecuador’s Chicago Trade Office, during the past year, has been to work very closely with the investor group that is establishing a new Chicago Perishable Center within O’Hare airport.” The result will be that imports from Ecuador will be more available to the Midwestern market in the U.S. That is all up in the air as diplomatic relations are strained over Edward Snowden.

For procurement, watching for risks from countries like Ecuador is becoming a key competency. Recognizing where trade advantages are in play is critical as economics are often the first card played in response to diplomatic challenges. Since commodities may have a greater impact on second and third tier suppliers than first tier suppliers, knowing where supply partners source is important.

Depending on the spend analysis solution, it may be possible to quickly identify international spend in high-risk countries. Since the spend may be associated with U.S. payment locations, look at spend categories that are likely to be based on commodity availability and cost. Since very large suppliers probably have duplicate sources of material, focus attention on the small to mid-sized companies that may not. Take the opportunity to find out where companies source during RFPs or supplier review meetings.

For now, Edward Snowden sits in limbo in a Russian airport, waiting to find out if his petition for asylum will be granted. As countries are raised as possible host locations, those of us with supply chain responsibility will have to follow his case. As evidenced by Ecuador’s renunciation of trade benefits from the U.S., diplomatic talks may cause changes in advance of decisions about asylum.

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