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Why the Imports Picture Is Cloudy at Best for 2009

Why the Imports Picture Is Cloudy at Best for 2009

In a subdued holiday season when many Americans are hunkering down at home — assuming they still have a home — few consumers are giving thought to global challenges.

But at least one such global hurdle will impact them in 2009: How imported products will fare in the face of safety concerns and the international financial crisis.

Consumers and retailers rely on imports for a significant percentage of food and nonfood items consumed every year. But that robust trade will be tested next year by developments ranging from government regulatory actions to buying decisions from retailers concerned about demand slowdowns.

On the regulatory front, government agencies are gradually stepping up import oversight activities in the face of safety scares, even though some observers contend more needs to be done. The Food and Drug Administration's year-old Food Protection Plan aims to extend the agency's presence around the world with new offices. The agency is also seeking authority to deny entry of imports if FDA inspection is refused or delayed, and to have more access to food records during crises.

Such plans will be tested by real-time food scares. One of the most recent, the discovery of the chemical melamine in Chinese dairy products and also in trace amounts in some U.S.-produced infant formulas, has put more pressure on the FDA to get tougher using recalls or other measures. Meanwhile, the U.S. Department of Agriculture is beginning a program to randomly test processed meat and poultry products in stores for melamine.

These developments indicate there will be more questions about imports next year and increased pressure on producers and importers to comply with heightened standards. In the near-term, imports will be surrounded by more uncertainty, but eventually the scrutiny will likely make the process more transparent and trustworthy. At the same time, U.S.-produced products may get a boost from all the concerns about imports.

The other factor impacting imports is the global financial slump. A falloff in consumer demand hits imports particularly hard because those products often need to be booked with greater lead times. Retailers will be less inclined to place big bets if they are worried about the outlook for demand. That was a particular concern this holiday selling season as retailers feared their nonfood seasonal import plans were too ambitious. If that turns out to be true, expect more caution in 2009.

Despite all the concerns about global trade, for some practitioners the glass remains half full. Wal-Mart Stores, in recently announcing top-level management changes, shifted global procurement into the sphere of Eduardo Castro-Wright, who was also named vice chairman and continues to oversee the U.S. division. The move was hailed by financial analysts, who see it helping the giant retailer grab new opportunities in international procurement. That's a timely reminder that there are upsides as well as pitfalls to global commerce. Lately, Wal-Mart has become good at recognizing all kinds of possible opportunities, and it's apparently doing the same with worldwide sourcing.

TAGS: Walmart