Rules that come back to bite

Mahmudur Rahman | Published: September 23, 2018 21:28:43

The stickiest point in the Brexit disorder is without doubt the 'hard border' that the European Union (EU) bureaucrats are insisting on, leading to 'imploring' by Theresa May not to insist on unacceptable terms. Michel Barnier has made a concession by saying the border could be at a market or at a company, thereby changing the horror of border barriers to a little more paperwork. That would allow,  perhaps smoother movement of people and lesser baggage of baggage checks.

Interestingly enough, the same 'rules of origin' so triumphantly trumpeted during the World Trade Organisation (WTO) discussions, is back to bite one of the creators. It really is a certificate to prove a product part is or not manufactured in a country stated. In an economic market the relevance is little but for the UK it will be a very big deal. The necessity of backward linkage industry has never suddenly loomed as large and the spotlight has once more fallen on the small and medium-sized enterprises (SMEs) that can be the missing link. International trade is all about cheaper sourcing allowing for better margins. While it works downwardly unfairly in the Ready-Made Garments sector whereby buyers ask for more investments in compliance while squeezing prices further, it cuts both ways when rights activists call for higher wages and more facilities for workers. Somewhere someone is missing the point.

In the world of marketing percentages, numbers are kept aside for marketing spend and social responsibility and/or all the efforts towards zero-based budgeting. There's always some fat to be found for trimming. There's no point in expecting Garments to rake in foreign exchange when it's the value addition that's important. Primary outsourcing may be in vogue but the west doesn't like secondary outsourcing and yet that is the next obvious stop for cost reduction. Quality parameters are obviously important but based on cost and design, cheaper product inputs will obviously not match quality standards of higher priced brands.

Of strategies to counter consumer recession some brands opted for cheaper utility products, a challenge in maintaining brand resilience. And while the brand gurus hemmed, hawed and tore out their hair, newer brands stepped in, fulfilled the brand promise and drew droves of consumers their way. Marketers swear by the maxim that brands must delight beyond their promise. Ingredient substitution doesn't necessarily weaken the equation. If that were so Apple would be dead in their tracks for outsourcing from China.

It's difficult when local products are priced higher than imported ones but that's a different battle all together - a battle of scale. The answer is to explore the tertiary areas of outsourcing whereby not just labour, the ingredient substitute is just as acceptable. Soy milk didn't come up by chance; it was necessity.

Ms. May might be reminded that the UK has foregone its traditional strengths and ventured into the sexy domains of the services world. The country that valued hard labour now finds that 1,17,000 European citizens left the UK in 2017 leaving massive labour shortages in health, agriculture and real estate. Her own citizens are not keen on such jobs or the pay-rates offer. Perhaps the hat is on a wrong angle.


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