Professor Charles Skuba has presented preliminary research by him and Professor Czinkota on “Restructuring the Policy/Business Tangent” in a conference session titled “The Future of Globalization: Some Key Concerns and Possible Solutions” at the 2010 American Marketing Association Summer Marketing Educators’ Conference. We have posted an abstract of the presentation for your consideration and opinions. Click to read it.
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Restructuring the Policy/Business Tangent
Michael Czinkota, Georgetown University and University of Birmingham
Charles J. Skuba, Georgetown University
Abstract
In 2010, with economic growth still fragile in the developed economies, international businesses are looking to China, India, Brazil, where economic growth rates are stronger, as well as other emerging economies for expanded sales. The G-20 has replaced the G-7 as the key forum for international economic cooperation. Political pressures to correct currency and trade imbalances have been growing as governments in developed nations seek solutions to job losses and de-industrialization, and governments in emerging economies seek continued expansion. A “rebalancing” of national current accounts is seen by many economists and political leaders as necessary if a stark rise in protectionism is to be avoided. Governments cannot be expected, for the sake of the theoretical ideal of “free trade”, to sit back and watch the uncontrolled effects on their societies of businesses constantly seeking efficiencies. Political leaders will only support trade liberalization subject to the needs of domestic policy. An open market orientation will be maintained only if governments can provide reasonable assurances to their own firms and citizens that the openness applies to foreign markets as well. Among the top economies, export-driven countries like China, Germany, and Japan consistently run large current account surpluses. The U.S., the world’s largest economy, runs huge deficits, driven in large part by imports of Chinese manufactured goods and petroleum. With 9.5% unemployment rate and a 16.5% underemployment rate, many Americans are anxious and angry. Economic insecurity and jobs are the issues driving the domestic U.S. political dialogue in the Congressional elections of 2010. Pressures from labor unions and some manufacturing sectors to take action against “unfair competition” has been increasing, particularly as the shares of U.S. merchandise imports from China and Mexico have grown the most in the last two decades.”
Using our framework of Trade Policy Responses to Changing Economic conditions, we analyze international trade policy in the United States. We break down trade policy responses into four areas: export promotion, export restriction, import promotion, and import restriction. The United States has traditionally encouraged exports, though export promotion expenditures were primarily concentrated in the agricultural sector. There have also been efforts to reduce globally the barriers to imports. In 2010 the Obama Administration has announced an ambitious program of export promotion in the form of the National Export Initiative with the goal of doubling U.S. exports in the next five years. This includes increased funding for existing export promotion programs and adding personnel in the Department of Commerce’s International Trade Administration as well as increased emphasis on Bush Administration public-private partnerships to educate small businesses on exporting. President Obama has also stated that Congress should pass renegotiated Bush Administration free trade agreements with Colombia, Panama, and South Korea.
Counterbalancing this Administration commitment is a Congress that has been increasingly hostile to trade. With strong labor union opposition as well as increased nativist sentiment among American voters, the Democratic majority in Congress, as well as some Republican Members, have opposed free trade agreements and have demonstrated the intent to impose import restrictions. This is evidenced by “Buy American” provisions in the American Recovery and Reinvestment Act of 2009, some elements of the “Make it in America” legislative agenda of the House Democrats, a 2010 bill to revoke NAFTA, new fees placed on H1-B visas, and Congressional hearings on China currency manipulation issues. The deindustrialization of America is a growing political issue. The continued leadership of the United States in international trade is in question. How businesses and academics contribute new ideas will be critical.
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