What You Need to Know About Global Supply Chains, with the AP's Joshua Goodman

NIKOLAS GVOSDEV: Welcome, everyone, to this edition of The Doorstep podcast. I am your co-host, senior fellow at Carnegie Council Nick Gvosdev.

TATIANA SERAFIN: And I am Tatiana Serafin, also a senior fellow here at Carnegie Council, welcoming in a minute Josh Goodman from the Associated Press (AP), who is going to talk to us about a story that has not been covered a lot, which is the parts of the supply chain that are not disclosed to us, the public, but that matter very much at the doorstep.

Before that, I wanted to speak with you, Nick, because I saw in my feed lots of protests going on in the city. Everybody is talking about the Van Gogh being "destroyed" by Just Stop Oil. Actually the piece is fine, but there is a lot of movement on climate here and in the United Kingdom. There are going to be big protests here this week on climate. "Are we in the era of protests again?" is perhaps the meta question.

The other big protest that is happening that I thought was fascinating and talks to what we have been talking about—this idea that people are connected in ways that national governments are not addressing—there is this big protest planned this weekend with Iranians and Ukrainians joining together to fight for their voices, human rights, and world attention, and I thought that was a fascinating combination. Have you seen it? What do you think?

NIKOLAS GVOSDEV: I think it speaks to a breaking down of barriers and a recognition that many of the struggles that people are engaged in are interconnected. A number of years ago, when we had human rights violations during wars and war crimes, you often had a sense of: "Well, that's different. How am I affected by it? Why is this my concern? My issues are my issues; your issues are your issues."

Now what we are seeing is, as you said, a growing sense of the interconnectedness. The protest movements in Iran against the Islamic Republic particularly focus on the issue of women's rights but also questions of democracy in general and Ukrainians are fending off an invasion in which the Islamic Republic has been transferring capabilities to Russia. But there is an understanding that these are linked struggles—struggles for freedom, struggles for human rights, struggles for dignity. That old Polish slogan "For your freedom and ours" is actually taking on a new meaning in this era, that the freedom of Iranian women and the freedom of Iranians to choose their own destiny is connected to Ukraine's ability to enjoy the rights of self-determination and peace.

We are also seeing a parallel movement where Syrians and Ukrainians are working together to try to track serial war criminals, Russian personnel in Syria who are now deployed in Ukraine, and perhaps detect and hold people accountable for things that they have done. Again, in years past those would have been separate, stove-piped protests. The Syrians would be in one bucket and the Ukrainians in another, but now there is this idea of them all coming together and that, yes, borders don't perhaps matter.

Some of this again is also, as you said, when we had our talk almost two years ago with Dr. Tyree about, "Are we in a new movement of protest?" I think we are, and I think people are realizing that these causes are interconnected in a way that before would have been much more stove-piped protests, the Ukrainian protest, the Iranian protest, as opposed to these things coming together.

TATIANA SERAFIN: I want to add, I think people are connecting over social media even though all the tech stocks have tanked—we will talk about that another time—but they are feeling this interconnectedness that drove us to create this podcast in the first place—borderless Internet. I think they are really feeling that. I think young people are especially feeling that. In my classes the cause of Iranian women is as passionate and has nothing to do with the fact that we don't like Iran and that they are a pariah government—it has everything to do with the humanity of it. I will be interested to see how this weekend pans out, and we will talk more about it in later episodes.

Now I do want to go back to this idea because we are pre-midterms, and I want to tease that we are going to do a special election podcast next week looking at what these young people are thinking, doing, and acting on, and perhaps one of the issues is going to be inflation, shipping, the shipping supply chain, and the ethics of them, so we will head over to Josh right now to talk more about that.

Thanks so much for joining us today, Josh. There are so many articles that you write that I want to talk about, but today I want to focus on your recent piece, "U.S. Businesses Propose Hiding Trade Data Used to Trace Abuse," primarily because we are coming up to an election where everybody is talking about inflation and everybody is talking about shipping and how we don't have stuff and how that affects costs.

But what I don't think people are talking about is this other aspect that you cover in this piece that I feel is so important. In the conversation of higher costs, shipping containers being stuck in ports, and things not getting to you I think is lost this lack of oversight of this multi-trillion-dollar industry. This is what your piece covers, and this is what I want to talk about today. At Carnegie Council we look at the ethics of issues that we cover, and you very much talk about the ethics of the supply chain, where goods come from, and this effort of transparency and an effort not to have transparency.

Let's go to the beginning so readers understand this piece in terms of understanding what we as consumers, as the doorstep, have a right to know. What kind of access to trade data should we have? You have looked into this history of trade data. Frankly I was shocked about what we don't have, but I will let you take us through the background of what we have access to and what we should have access to.

JOSHUA GOODMAN: I was shocked as well. It is actually surprisingly not so much that we have access to as the public. Our trade rules date back to the 1930s, the Tariff Act—that we hopefully learned or still learn in high school—in the 1930s was to prevent cheaper imports coming into this country, made sometimes from slave labor, so there have been laws on the books for almost a century that try to protect American manufacturing from unfair foreign competition.

However, those were written in the day when trade internationally was still a relatively small part of our economic matrix. It allows the public access, for example, to data filled out on customs forms on only items that are coming into our country by ships, by vessels, and what people perhaps don't know is that is only about 50 percent of the goods that come into the country every year. Everything that comes in on trucks from Mexico and Canada, rail from those two countries, and especially from air freight, which is a very booming part of trade especially for high-value, low-weight items like diamonds, gold, etc., those items we know almost nothing about.

Customs and Border Protection (CBP) officials do know. They see the forms, but I think what needs to be said here is that there is so much trade, $2.7 trillion a year of goods coming in and out of this country, that CBP officials, although I think they are well-intended and they have all these laws on the books to make sure that supply chains are clean and not using forced labor, cannot do it all. In fact a lot of items and containers don't get inspected, and that is why it is important for the public, journalists, activists, nongovernmental organizations, and lawyers to be able to size up the data themselves.

We can be "citizen inspectors," if you will, for the goods that are coming into the country and hopefully identify—as the AP and other journalists have done—cases that deserve greater scrutiny, whether that is shrimp being made by Philippine fishermen basically held in slave-like conditions aboard vessels, whether that is Uyghurs being forced to make shoes in concentration camps in Xinjiang Province of China, or whether it is children harvesting cacao in Ivory Coast. There are lots of areas where trade data can become part of the sleuthing that goes into finding out how clean or not our supply chains are or the supply chains of the major companies who sell these goods to consumers like you and me.

NIKOLAS GVOSDEV: As you are talking about the companies, let me ask whether these are sins of omission or commission. At least Americans will tell pollsters—whether they will actually do this in fact is maybe a separate question—that they would prefer not to buy goods sourced by slave labor, made in places where environmental and labor standards are not followed.

Is there a sense that the data is simply hard to track because of bureaucracy, or do companies prefer not to have to call attention to this precisely because they don't want the bad consumer reputation, or at least they want to be able to have that plausible deniability of saying: "We thought everything in the supply chain was fine, and as long as we were not alerted to something we can say, 'Well, we didn't know?'" Do you have a sense that, as you said, these are arcane rules from the 1930s and the data can be hard to track, or do you have a sense that maybe companies are happy to keep these rules arcane because it may avoid unpleasant public relations issues at the consumer end?

JOSHUA GOODMAN: It is not just public relations (PR). There are legal implications as well. There are laws on the books that prohibit the importation of goods made from slave labor. The Uyghur Act that was just passed is very tough, and a lot of companies fought that, so I think it is not just PR. I wish it was just that, but they also very much are concerned about the fallout.

I want to be clear. I have seen those same polls. Consumers definitely attest to wanting goods that are produced in an ethical manner, but I don't think a lot of people spend time looking at this issue, to be frank. What they probably want more, especially in a time of heightened inflation in the United States, is for the goods to arrive cheaply to their doorstep.

There is a little bit of doubletalk on all sides. On the consumer side people want their cheap goods and don't really want to do the homework sometimes that is required, and on the industry side they have some initiatives, they all have corporate social responsibility statements now and environmental and social guidelines. I think a lot of companies do honestly believe in those guidelines, but they are sort of belied by actions like the one that we raised in the story.

This quasi-governmental advisory committee called the Commercial Customs Operations Advisory Committee had the great idea of proposing to CBP that they make all the data confidential, including the 50 percent that right now we have some limited visibility on, which is the goods coming in on ships. This goes in the complete opposite direction of what they profess publicly in their corporate and social responsibility statements, so I think it was important to highlight that issue.

There has also been action taken in the courts by companies and by the U.S. Chamber of Commerce to basically say: "Look, we can't be held responsible for what happens to our suppliers overseas. This is an extraterritorial overreach by the U.S. justice system, and although we do our best to make sure our goods are not being made by slaves and in hostile working conditions it is not up to the U.S. courts to enforce that. That is better addressed by private industry and Congress."

This is precisely why it is important for journalists and citizen reporters to have access to this data. Government is overwhelmed, and I think the industry has a natural incentive to not be as forthcoming let's say with some of this data.

TATIANA SERAFIN: Can we go back to this proposal from the Commercial Customs Operations Advisory Committee? Supposedly it is now being looked at by the CPB. Do you have any sense of timing on this? Part two of that question, which I find interesting—to your point about do people really care or how invested are people when maybe we should ethically be more invested—there was a sentence there that the CPB came back to your query and said: "Well, this proposal is developed with information from public meetings." What public meetings? How does one go to a meeting of this advisory committee? Is it truly public?

This is what I'm getting at. For us to activate our doorstep—because I do also think that our role is to share this information and say, "Hey, this is going on"—are these really public meetings? Are they publicized?

JOSHUA GOODMAN: These are good questions. I am asking the same ones. I should say that for this story I reached out to three of the members of the Committee, the ones that I name in the story, just because they are big names that all of us know. None of them commented to me. I did hear back from one of them, but I have not heard from anyone from the Committee itself.

Yes, these meetings are public. I don't think a lot of people know about them, but they are public. My understanding is that they had one in September I think in Chicago, and I think there is an opportunity for virtual participation. In terms of the process itself I think it is still very early stages, so there will be a chance for people to make their voices heard.

Let's face it. This is an advisory committee. The ultimate decision is up to the CBP. My understanding from talking to some experts is that this committee was tasked by the CBP to come up with proposals to streamline rules and regulations. It is taken very seriously. It has obviously access that the general public does not. The members of the committee are all vetted. It is not self-appointed. It is not an industry group. They serve I think two-year terms, and the government knows who is on the committee.

The story came out the same day that members of the committee were meeting in closed-door sessions with CBP as well as other agencies like Treasury. I saw the Drug Enforcement Agency was on the list. So they have a real foot in the door that perhaps the public doesn't have, but I don't believe that this is just something that the CBP is going to rubberstamp.

To be fair to the CBP, these are not their proposals. These are the proposals of an industry group that I think, rightly or wrongly, feels that they are being forced to meet additional compliance measures, and they want not just a stick but some sort of carrot on the part of regulators to make their jobs as freight forwarders and importers a little bit easier.

I was told about a third of the proposals traditionally are accepted, another third are deferred for lack of resources or needing additional study, and then a third are rejected. It is a proposal that has legs just by virtue of who is proposing it, but it is not a done deal. Hopefully maybe with our story and other groups that have voiced their outrage over this, this will probably not go forward, but it does show you some intent on the part of companies who, like I said, talk about cleaning up their supply chains and being responsible corporate citizens, but blocking access to this information goes in the opposite direction of what they are avowing publicly.

I also want to say something that is very important. I am a little reluctant to reveal this, but I didn't know this either. There already exists a mechanism by which companies can make individual shipments confidential. I didn't know this until after my story was published.

There are certain processes and certain eligibility requirements, but basically even for that small part of the pie, for that 50 percent that comes in on vessels, there are 22 categories that need to be filled out on a Customs declaration form. There is already a process in place where big importers, people who have a track record for doing things right, can request that certain amounts of that data be confidential.

I don't know how many companies are taking advantage of that—I understand not that many right now, and I certainly don't want to give anyone a good idea—but there are definitely already mechanisms in place to address what is a legitimate concern on the part of the importers of: "Hey, we want to have our business information confidential. We don't want our main competitor to be tipped off on how we are sourcing a product that we can sell to the public for 20 cents cheaper," or whatever it is.

I am definitely sensitive and understand that companies do worry about this. In fact I know that many companies do the same thing as journalists. They look at the data as well to get that competitive leg up. It is perfectly legal, but obviously if you have worked hard to establish a good business relationship in China or somewhere else you want to protect that first-mover advantage and not have the guy down the street come and steal a supplier from you.

So it is very complex; it is not just one-dimensional. But I do think that overall, given how much of a priority this is for our society, both Republicans and Democrats have come together and said, "We do not want products made from slave labor coming from China or anywhere else," and given the fact that there is a domestic manufacturing industry in the United States that also has been pushing for this I think again it cuts across the aisle—it is one of those rare issues where I think Republicans and Democrats can find a lot of common ground—and it is important that we not lose that extra set of eyeballs on this data and that we can all play our role in holding people accountable when maybe sometimes unknowingly they are using suppliers that are not doing it in an ethical way.

TATIANA SERAFIN: I do want to mention because it is in the story that we are talking about big companies that have global reach like Walmart, General Motors, and Intel. These are not people where we would be worrying about their profits. I think from that side too we have to look at what can they pay for in order to improve transparency and meet their ethical obligations.

You mentioned that this is an issue that goes across the aisle, but there is also a business lobby, and you do mention this Chamber of Commerce case in the story. I would like you to bring us up to where it is today because I think that is also an interesting case. Maybe this is a bipartisan issue in Congress, but definitely the business side is pushing, as you alluded to earlier in our talk, to not have these links to what is happening abroad because it is extraterritorial reach.

JOSHUA GOODMAN: That's right. The same day this proposal came out there was a friend of the court brief filed at the Appeals Court in Washington by the Chamber of Commerce. They got a great lawyer to write it. It was on a case that had already been decided in the company's favor, but an activist lawyer sued the big tech companies—Google, Apple, Dell, Microsoft—on behalf of dead and maimed children from I believe the Democratic Republic of Congo because they were supplying cobalt that was eventually used—I think a lot of it was processed in China—in products that we all purchase, electronics.

The case was dismissed by the district judge for lack of sufficient ties to the working conditions on the part of the American companies. The decision was appealed by the lawyers for the children, and the Chamber of Commerce decided to file this brief. They played the victim themselves, basically saying that these forced labor provisions and laws that we have add substantial legal and reputational costs on the companies that transact overseas and asking the court to reaffirm the lower court's decision, basically saying that they cannot be held responsible or liable for what's happening down their supply chain if they didn't know about it.

You can't have it both ways. It seems like if you want to talk the talk you have to walk the walk, and some of the activists quoted in my story are very critical of that court filing by the Chamber of Commerce. I will just leave it at that.

The truth is there are serious concerns about our supply chain. I became interested in this issue personally because of seafood. I have done a few stories on seafood imports. We have a relatively new seafood import-monitoring program in the United States that only covers 12 species, some of the most threatened species I might add. This is important. Ninety percent of our seafood in the United States is imported.

There is a report to Congress that the National Oceanic and Atmospheric Administration, the regulatory agency, does every two years, and it found that when it audited companies importing these 12 species something like half of them failed the audits. That means that by the government's own measure potentially half of this stuff is illegal fishing. Some of it may be just clerical errors, people filling out the forms wrong, whatever, but that goes to what I was saying. The government can't handle the volume that we are talking about, kind of like drug trafficking. I used to work in South America where the drug traffickers just send boatloads of the stuff and it is worked into their cost system that some of the shipments will get caught. There is plenty of fish rotting on U.S. docks because it has been stopped, inspected, and failed. Lo and behold, these single-purpose-vehicle importers don't show up to claim it.

There are definitely concerns about our supply chains in the United States, and I don't think the answer is to make it harder for the public to trace those supply chains. It has to be I believe to make it more visible, and I think you will see hopefully a lot more groups, activists, and legislators coming along not just to prevent proposals like the one that this committee is making but to try to open up the other parts of our import data set that currently and have for decades been closed.

TATIANA SERAFIN: So you have seen an effort to open rail, freight, and airplane data.

JOSHUA GOODMAN: There is an interesting case about airplanes that I get into a little bit in the article. In the mid-1990s there was legislation—don't ask me the name—that was passed that actually required airline manifests to also be made publicly available. It lasted on the books for three or four months, and then another piece of legislation came in as a rider. The air cargo industry shut it down and a different set of legislation basically disavowed and closed that loophole.

This was challenged in court because in fact the original law, the first law, has never been taken off the books. It was just superseded by this subsequent law. Two trade data platforms, Panjiva and ImportGenius, sued unsuccessfully—they lost their appeal as well—arguing that there is not clarity here and that in the absence of clarity the air manifests also need to be made public. They lost, and I understand they may be considering re-filing in a different jurisdiction, but air freight manifests would seem to be the candidate closest to being open for the first time.

Right now I think the clearest and cleanest way to do this would be additional legislation. I don't know if there is appetite or not in Congress for that, but I do think it is an interesting case of an issue that could potentially enjoy bipartisan support. Democrats and Republicans I think have all voiced concern about supply chains in China and they have all voiced concern about the decline of American manufacturing, so this is potentially a rare case here where we could see some action.

NIKOLAS GVOSDEV: I wanted to pick up on that last point because that is exactly where my thinking on this was going, which is the domestic American side of this. It is not simply a matter of human rights violations or environmental and labor violations overseas but also that this could be used by everything from American fishermen—I didn't realize the percentage of our seafood that comes from outside the United States; you always think, particularly in New England, how much is supposedly locally sourced—and American companies could basically make the case of: "Our supply chains are clean, they are secure, and we don't have these issues."

Are domestic manufacturers allies in trying to make this information more public because it would seem to be good business if you are a domestic shoe manufacturer to be able to advertise about how your corporate rival's shoe made in China, Vietnam, or Bangladesh has all of these problems, but made here in the good U.S. of A.—minimum wage, environmental standards—is there a sense that it is not just activists but that also domestic American firms may want to join in on this simply for the reason that it may be good for business?

JOSHUA GOODMAN: Yes. I was pleased to see that a letter was sent to the CBP commissioner from 38 different groups. Among the signatories I noticed was the American Federation of Labor-Congress of Industrial Organizations. The United States has a highly regulated industry, whatever industry that is. There are some things that the U.S. industry will not be able to compete with from a cost perspective, but as consumers value the way things are manufactured I think they can be pretty certain that the conditions in the United States, whether regarding workplace hazards or environmental regulations, are going to be some of the best in the world. That should give people more certainty when they buy, that if they buy an American product, that if they buy American seafood, for example, that it is caught in an ethical way.

Again, I know the seafood industry pretty well. These guys would love to bring more of a light to these issues because they are the first impacted on it. Shrimp fishermen in the Gulf of Mexico or longlining fishermen all across the East Coast have seen their numbers decimated over the years, but I can tell you they comply with standards of integrity that do not exist elsewhere in the world. They literally get dinged and fined for catching one fish that they shouldn't have or going over their quota.

I am not trying to say they are perfect, but I know that the regulations here are far better. We have requirements that observers need to be on boats. In many places now in New England, for example, there are requirements that cameras be placed on boats so that we can evaluate what is actually going on when they are at sea. These don't exist elsewhere.

It will be interesting to see if they form an alliance with environmentalists. Environmentalists traditionally have been very critical of some of these groups in the United States as well, but I think in this case there is a growing realization that American manufacturers are not the worst.

There is a bit of a balloon effect here. We highly regulate the industry in the United States, but the seafood industry is global. The fish don't respect national boundaries. If we are going to protect our waters in the United States and keep a close, vigilant eye on American fisherman, it doesn't necessarily mean that our oceans are going to be any better. There is a transfer effect by which the problems are pushed beyond our borders.

TATIANA SERAFIN: Looking at the seafood industry as perhaps a role model of transparency might be a topic of conversation for another time. Thank you so much for your time today, Josh. We really appreciate it.

JOSHUA GOODMAN: Great. Thank you for having me.