Floral Industry Ready to Move Forward with Standard Data Protocols

Electronic ordering, receiving and invoicing using product distribution and tracking technologies that transformed the consumer products delivery system are about to become a reality in the floral industry.

Standard data protocols, including the Global Trade Item Number (GTIN, pronounced “gee-tin”) for boxes and the Universal Product Code (UPC) for bunches and bouquets, are now available.

The Floral Logistics Coalition, a consortium of six industry trade associations including SAF, says automation will help trading partners meet market demand and stay competitive.

Used for some time in other industries, the GTIN and UPC are part of an internationally recognized data standard behind bar-coding systems enabling supply chain partners to eliminate redundancies, reduce manual labor and minimize the chance for human error in the distribution process. Their implementation can help cut cost and error out of the floral supply chain, speed delivery and, ultimately, make a fresher and more consistent range of product available to the consumer.

“The entire floral industry needs to get on board with this quickly,” said Jim Wanko, executive vice president of the Wholesale Florist & Florist Supplier Association. “It can directly impact our ability to compete with other consumer goods.” Suppliers and wholesalers unable to conduct business electronically may soon find it difficult to do business with mass merchandisers, supermarkets and possibly some larger retail florists, Wanko said.

The Floral Logistics Coalition has been working for more than two years to define, test and refine the coding strategy so that the industry can move forward on the Floral GTIN Initiative. Best practices for box labeling, UPC item labeling and synchronizing data are being worked on by industry-wide committees.

The Coalition has created a website — www.floralgtin.com — as an online resource for growers, importers, distributors and their trading partners. On it are step-by-step implementation instructions, the full GTIN Implementation Guide, and a timeline designed to have the system operating by the middle of next year.

The Floral Logistics Coalition is made up of six industry trade organizations including the Produce Marketing Association (PMA), Wholesale Florist and Florist Supplier Association (WFFSA), Association of Floral Importers of Florida (AFIF), California Association of Flower Growers and Shippers (CAFGS), California Cut Flower Commission (CCFC), and the Society of American Florists (SAF). Also involved is GS1 US, the organization which oversees the international supply chain standard in the United States.

Industry members with questions about the GTIN Initiative should visit www.floralgtin.com or contact their respective organizations.

— Shelley Estersohn sestersohn@safnow.org

Protectionism, part 2

Based on my earlier post, Anonymous makes the following comment:

Since you are an economist I would have expected your title to this entry to read "Depending on Where You Sit, Protectionsim Doesn't Work Folks". The tire retailers will sell tires no matter who makes them, China, Taliban or Americans. American tire makers do care. I would rather read your list of solutions for fair trade between nations instead and maybe find out the extent that Chinese tire manufacturers are competing on an even playing field their US counter parts. By the way, you need to update this entry because the Major Indicies ended up today, I guess on news of US China trade disputes? Come on Charlie, lets leave the politics out of economics.

First, I am delighted to receive the comment (we bloggers really appreciate them) and I can also appreciate the sentiment/perspective that Anonymous provides. I will be the first to admit that I am sometimes too transparent in my political leanings, but I have always encouraged readers to "understand where folks are coming from when we read or listen to them. To me, it is important to know enough to know the difference." (click here for citation)

But I think, in this case, the economics underlying these types of scenarios does point out the shortcomings of such a protectionist strategy.

For example, let's use the graph above (HT: Mark Perry) to demonstrate the probable effects of the tariffs on consumer and producer surplus, where:

Pw is the tire price in the U.S. before the tariff and Pw+t is the higher tire price after the tariff. As a direct result of the tariff protection for inefficient domestic producers, their output expands from Q1 to Q3, and imported tires decrease from Q2 to Q4.

As a result of higher tire prices and fewer tires purchased, American consumers as a group will be worse off by the area (-a, -b, -c, and -d), which represents the loss of "consumer surplus" from the tire tariff.

American tire manufacturers will be better off by an amount represented by the area +a, because they have both increased sales (to Q3) and raised prices (to Pw+t) as a result of their protection from more efficient Chinese tire producers.

The U.S. government will collect tariff (tax) revenue on imported Chinese tires by an amount represented by the area c, which is the product of tire imports (Q4-Q3) times the tariff (t). If we can assume that the tariff revenue in area c will be redistributed efficiently to the economy, we can treat that as a net gain to the economy (this could obviously be argued by supporters of the tariff).

But when you add it all up, considering the costs of the tire tariffs, American consumers are made worse by the area (-a + -b + -c + -d). (Note: This area could be quantified as a specific dollar amount if we had information about the supply and demand for tires.)

When we consider the benefits of the tire tariffs, U.S. producers are better off by area +a, and the government is better off by area +c.

So there is a net loss to the system in that the costs of the tire tariff (-a + -b + -c + -d) are greater than the benefits of the tire tariff (+a + +c), for a net welfare loss of (-b + -d), which will be the "deadweight loss" of the tire tariff (costs to the economy that are not offset by benefits).

One can only conclude therefore that America will be worse off with the tire tariff, not better, and we (collectively) will suffer from higher tire prices, a net loss of jobs, lower economic growth, and a reduction in our country's standard of living.

That is why economists almost universally support free trade and oppose tariffs and trade protection - economic analysis and empirical evidence clearly show that there are always net welfare losses from tariffs. Therefore, politics aside, it will be Americans in the end who will be punished with the punitive tire tariffs.

Protectionism doesn't work folks

Here is a recap of the headlines regarding the recent tariff on imported tires:

Obama to impose tariffs on Chinese tires: Obama imposes tariffs on China tires for 3 years, a decision that could anger Asian powerhouse

China Strikes Back on Trade: Beijing Threatens U.S. Chicken, Car Parts After Washington Slaps Stiff Tariffs on Tires

Stocks head lower on US-China trade concerns: Major indexes fall in early dealings amid concerns about US-China trade dispute

Tire Tariffs Are Cheered by Labor: Mr. Obama ordered the tire tariffs after the United States International Trade Commission, an independent government agency, determined that a more than tripling of Chinese tire imports had disrupted the $1.7 billion tire market....President George W. Bush had rejected four similar recommendations from the trade commission, angering organized labor.

"One of the most amazing and overlooked details about the "punitive tire tariffs" is that they were actually opposed by the domestic tire industry (Goodyear and Cooper). It was the United Steelworkers who filed the complaint, not domestic tire workers or the domestic tire industry." (Mark Perry)

From the NY Times:

Mr. Obama, responding to a complaint by the United Steelworkers, imposed a 35% tariff on Chinese tires for cars and light trucks. China has deplored the administration’s decision, suggesting it caved to domestic support for protectionism. The Tire Industry Association, which represents American tire retailers, said the decision was ill-advised and would lead to higher prices for consumers.

Dollar is rebounding

The U.S. Dollar index for major currencies reached its highest level this year, and is at the highest level since December 21, 2007 (see chart below). Oil fell yesterday by almost $5 per barrel in the spot market to $112.43 (brent spot) and $115.20 (WTI) and below $115 in the futures market. The stock market rose by +300 points.

Middle class expanding -- globally, that is.

While much attention has been placed on the shrinking middle class here in the U.S., Jim O'Neill, chief economist at Goldman Sachs, offers an interesting commentary of the expanding middle class globally in this weeks Financial Times:

In the midst of the current widespread gloom and doom in the west, it is important not to lose sight of the true structural themes shaping our era.

Linked to the current mood, commentators often depict an embattled and shrinking middle class, with sharply rising financial inequality. However, globally, this is simply not true. One of the most startlingly positive phenomena for many generations continues to unfold around the world. We are in the middle of an explosion of the world’s middle class - about 70m people a year globally are entering this wealth group.

The phenomenon may continue for the next 20 years, with this global middle accelerating to 90m a year by 2030. If this happens, an astonishing 2bn people will have joined the ranks of the middle class. This demonstrates that, contrary to widespread opinion, global inequality is declining significantly, not increasing.

It is important for everyone in the so-called developed world to be constantly aware that these powerful shifts in global wealth are good not only for the developing world, but for them too. If you take a look at a chart of recent US export growth, you may well think you are looking at the wrong data series. But you are not. US exports are indeed growing at close to 20 per cent and it is this that is stopping the housing and credit crunch from driving the US into a deep recession. Aspects of the same phenomenon can be seen in Japan, Germany and even the UK.

The new middle-class explosion is going to remain the market opportunity for us all, or certainly for those of us who are prepared to respond to the new realities.

This, of course, makes trade and regulatory policies all the more important for green industry-related imports and exports. The current APHIS Q37 and other free-trade negotiations (e.g. Columbia) have perhaps even more far-reaching implications than we otherwise surmised. I'll be speaking at a colloquium at the annual meeting of the American Society for Horticultural Sciences this week discussing this issue in more detail.

Click here for the full FT article.
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Reasons for rising food prices

Ok, I realize that this post might seem peculiar at first given that this is a green industry oriented blog. But remember that the supply chain for our products is quite similar to that of perishable foods. Therefore, logically, any supply chain dynamics affecting one industry must also affect the other. Given that premise, let's proceed.

Much attention has been placed in the media on the fact that market prices for major food commodities such as grains and vegetable oils have risen sharply to historic highs of more than 60 percent above levels just 2 years ago. Many factors have contributed to the runup in food commodity prices. Some factors reflect trends of slower growth in production and more rapid growth in demand, which have contributed to a tightening of world balances of grains and oilseeds over the last decade.

Recent factors that have further tightened world markets include increased global demand for biofuels feedstocks and adverse weather conditions in 2006 and 2007 in some major grain and oilseed producing areas.

Other factors that have added to global food commodity price inflation include the declining value of the U.S. dollar, rising energy prices, increasing agricultural costs of production, growing foreign exchange holdings by major food importing countries, and policies adopted recently by some exporting and importing countries to mitigate their own food price inflation.

In assessing prospects for the future, there are a number of uncertainties and concerns:

Global economic growth: If rapid growth continues, particularly in developing countries, it will continue to put upward pressure on food commodity prices through increases in food demand.

Energy prices: If petroleum prices continue to rise, costs of agricultural production will rise, as will the cost of processing, and the cost of transporting products to markets both within a country and exporting to other countries. Continued high petroleum prices will also sustain the global incentives to produce more biofuels.

Biofuels production: In USDA’s 10-year agricultural projections, global growth in biofuels production begins to slow in the next several years and production from grains and oilseeds flattens out in the next half decade. World food commodity prices are not projected to retreat to past levels. However, several years into the future, the underlying long-term trend in rapidly increasing global demand is expected once again to be the primary contributor to future upward pressure on food commodity
prices.

Supply response capacity of the global agricultural production system:
• Cost of inputs: Continued increases in production costs, especially in energy-related costs, will restrain the world’s production response. Higher costs for fertilizer, fuel, and seeds could cause farmers without access to credit to plant less than they otherwise would have, or to shift to crops requiring fewer inputs.

• Additional cropland (quantity and quality): What will be the long-run impact of higher world food commodity prices on the amount of land used to produce the crops? What is the productivity of the land that will be used to increase production?

• Water shortages: How quickly will constraints on the amount of water available for agricultural production become more widespread?

• New seed varieties and use of biotechnology: Will higher food prices encourage some countries to adopt the use of biotechnology, especially genetically modified seed for crops? Will future research focus more on yield-enhancing varieties rather than cost-reducing innovations?

• Biophysical response to climate change: How will climate change affect agricultural production? How will it change temperatures, precipitation, the length of growing seasons, and variability of yields? How, and under what circumstances, will climate change increase and/or reduce production? In affected regions, how difficult will it be for producers to shift to different crops, to adopt new cropping patterns, and to adjust production practices to the new environment?

With such low world stocks of food commodities, food prices are vulnerable to a production shortfall in one or more major production areas. If a significant shortfall occurs this year due to weather or disease, food prices might continue to rise sharply from the current high level.

Although trade flows can mitigate some of these effects, new or existing trade restrictions or barriers can exacerbate price impacts. However, if good crop production conditions exist in the Northern Hemisphere during the next 6 months, food commodity prices could retreat significantly from their current highs.

Will the real trade issues please stand up?

President Bush said Monday that a trade agreement with Colombia is "dead" unless House Democrats agree to hold a vote on the pact, effectively admitting defeat on a White House priority. The standoff over Colombia began last week, after Bush submitted the trade agreement to Congress and urged lawmakers to approve it within the normal deadline of 90 legislative days. The Democrat-controlled House then voted to postpone the decision indefinitely, saying the pact does not provide enough protections for workers. As projected, this has spiraled into a political issue rather than one made on economic intuition.

On economic grounds, there's no reason to reject the agreement. Colombia's exports already enter the U.S. market duty-free under the 1991 Andean Trade Preference Act. Meanwhile, many U.S. exports to Colombia face stiff tariffs -- up to 35 percent on autos, 15 percent on tractors and 10 percent on computers -- most of which would ultimately go to zero under the agreement.

Yet, it's politically convenient to oppose the trade agreement because the popular imagery is that trade destroys U.S. jobs. The loss of almost 4 million U.S. manufacturing jobs since 1998 seems easy to explain by cheap imports or the flight of plants to Mexico, China and other poorer countries.

Nothing could be further from the truth. Although this has occurred, job losses also stem from greater efficiency (fewer workers producing more goods) and slumping domestic demand (for communications equipment and computers after the dot-com bust and for housing materials and vehicles now). Nor has falling factory employment crippled overall U.S. job creation.

The fact of the matter is that trade has become a lightning rod for a myriad of grievances (job insecurity, wage inequality, eroding fringe benefits). But even if trade caused all the factory job loss, its impact is shifting. The dollar's dramatic depreciation (down an inflation-adjusted 20 percent since early 2003) has enhanced the competitiveness of U.S. exports. Export growth now represents a major source of job creation and economic expansion.

It is no longer necessary to rely on elegant theories of comparative advantage, more consumer choice or greater competition to favor open trade. Jobs and economic growth will suffice. Indeed, without export-led growth, the economy may face a sluggish future.

Even after the current economic slowdown ends, the outlook is worrisome. Consumers are heavily indebted. Housing will recover and reach previous highs, but probably not for several years. Government spending is constrained by growth in the rest of the economy, unless Congress sharply raises taxes or deficits. Exports and related investments are our best hopes. Let's hope we don't shoot our other foot by constraining part of the current economic solution.