About Michael Czinkota

Professor of International Marketing, Business and Trade at Georgetown University, Washington, DC, U.S. and University of Kent, Canterbury, UK - http://www.faculty.msb.edu/index.htm http://www.twitter.com/#!/michaelczinkota http://www.facebook.com/169628456631

The Coronavirus: A New Risk of Trade

Over the past three generations, analyses of trade have indicated that speed of innovation and change is supportive of improved living standards. Growth of a country’s international trade has typically been more rapid than growth of the domestic economy. 

There is strong historic support for the benefit of speed. The Roman empire’simpact on thought and development can still be felt today. Its territories, also in the Middle East, were expanded less through armed conflicts, but rather through the speed and improvements offered to its international collaborators. The Pax Romana insured that merchants could travel safely on the roads that were built, maintained, and protected by Roman legions. The common coinage facilitated the speed of business transactions throughout the empire. Central market locations through the foundation of cities and excellent communication systems enabled the development and distribution of innovations. 

But conditions change. On February 2, the U.S. State Department placed China on a travel advisory of ‘Level 4: Do Not Travel’ due to the novel coronavirus (Covid-19) outbreak.  As of February 12, the death toll from the virus is at least 1,113. 

It matters how quickly something can be provided to a specific location. Also needed is control of the speed of distribution combined with the capability to plan for the “what if” question in case a disruption of shipment is required. 

We need to discover and systematically assess possible trouble spots of globalization and highlight the consequences of dependence. It is vital for the formulation of strategic visions to understand the need and capacity for disruption.

In the 1970s, Professor Bernard LaLonde of The Ohio State University expanded his analysis of inventory carrying cost to include the expense of capital tied up in the storage of goods. With interest rates of 17 percent and higher during the Carter presidency, his innovative assessment of expense and risk changed corporate inventory management substantially.  

The speed of Chinese viral contamination sends us a risk signal for trade. We discover that rapid propagation does not just work for incoming and outgoing goods and services. Just as there has been substantial growth in health care tourism, where patients obtain lower cost medical services by traveling abroad, the expansion of viral infection can be hard to contain. 

Rapid distribution outwards and inwards can be deteriorating and distracting. The coronavirus outbreak is our wakeup call to be alert, not just to the benefits but also the risks encountered in international outflows and inflows of services, ideas, thoughts, and goods.

This problematic raises the key issue of how to deal with such risky occurrences. One useful approach is the consultation with experts who have experienced sudden, frequent, and unexpected risk conditions. Such expertise can be sourced best from the Middle East where there have been many past occurrences of uncertainty, scrutiny, and restraint. Local experts may be able to help manage hostile business environments both at home and abroad. They can anticipate repercussions from disruptions and also calm down hyper reactions. And therein lies much of the wheel of fortune: if enough people believe in a condition, their understanding may well become reality. Let us not accept complex issues without expert insights.

Keywords: Coronavirus; Covid – 19; Risk; Global Trade; Outflow; Inflow; Bernard LaLonde; Distribution; State Department; International Trade

Conservative Faculty, Student Voices Feel Underrepresented at Georgetown University

The national trend for political party registrations and ideological leanings of college professors skews Democratic and liberal, according to data from the Higher Education Research Institute. This increases polarization of academic segmentation which can make nonpartisan discussions difficult. 

Last week, I was interviewed by The Hoya, the Georgetown University student newspaper, about my conservative viewpoint and how that affects the relationship with other faculties and my students. Please check out the article here: https://thehoya.com/conservative-feature/

Cause-Related Marketing in International Business: What Works and What Doesn’t?

Recently, I co-authored “Cause-Related Marketing in International Business: What Works and What Doesn’t?”with Prof. Demetris Vrontis, Prof. Alkis Thrassou, Dr. Michael Christofi, and Dr. S. M. Riad Shams. The paper is published in the International Marketing Review. 

We brought together empirical and theoretical advancements connecting the research gap of cause-related marketing (CRM) changes in the international context. We also focused on how extant and emergent variables and constructs can be leveraged in order to develop insights into what does and what does not work in international business in the context of CRM.

Strategic Agility in International Business: A Conceptual Framework for “Agile” Multinationals

This February, the Journal of International Management published “Strategic agility in international business: A conceptual framework for “agile” multinationals,”an article I co-authored with Dr. S. M. Riad Shams, Prof. Demetris Vrontis, Prof. Zhanna Belyaeva, and Dr. Alberto Ferraris.

In this paper, we reviewed mainstream studies on agility in the international business context, discussing its relevance and proposing main aspects of strategic agility to clarify further this indistinct concept.Moreover, we provide a novel conceptual framework based on the integration of agility in different operational areas that organizations should foster in order to remain flexible in facing new developments. Our synthesis represents an innovative strategic direction for MNEs to understand better strategic agility, which clearly extends the concept of flexibility, while managing stakeholder relationships in order to develop key dynamic capabilities.

You can read the article here:  https://www.sciencedirect.com/science/article/pii/S1075425320300351

Trump and Reagan: Whose Trade Policy Wins?

Professor Michael R. Czinkota

After signing the United States – Mexico – Canada agreement and ‘Phase 1’ of the China trade deal, President Trump has now moved his international trade focus onto some of the closest U.S. allies, the European Union. During the World Economic Forum in Davos, Switzerland, he proposed tariffs on auto imports from the EU, on wines, cheese, yogurt, and handbags from France, and on whiskeys from Ireland. 

The international trade policy efforts by Trump are remindful of President Ronald Reagan. Both presidents are stars of the Republican party and very frowned upon by Democrats. Trump and Reagan were focused on reducing the U.S. trade deficit and increasing the global competitiveness of the U.S. industry.  A look onto the past will provide a better understanding on whether Trump’s bold approach to trade policy wins over Reagan’s more sedate procedures. 

The 1980s:

The U.S. trade deficit was significant and growing precipitously. In the early Reagan years, it averaged $30 billion and reached $123 billion by late 1984. 

Reagan’s preference for free trade contributed to the Administration’s initial lassitude on this deficit. Gradually, however, calls for protectionism emerged. Examples were the U.S. automotive and footwear industries. Even clothespins were considered by some worthy of protection against foreign imports. In response, Reagan signed the Trade and Tariff Act of 1984 to reduce unfair global trade practices. There were also additional efforts to increase exports. Reagan announced bilateral trade agreements with Israel, and later with Canada. New rules were implemented to ease U.S. trade with China, yet the trade deficit continued to rise and reached $148 billion in 1985. 

The final, major trade legislation of the Reagan administration was the Omnibus and Competitiveness Act of 1988, which authorized negotiations in the General Agreement on Tariffs and Trade (GATT) and required the U.S. Trade Representative to take aggressive corrective action against countries that had large trade surpluses with the U.S.

The end of the Reagan years coincided with a sharp rise in globalization forces. The emergence of new technologies in transportation, communications, and information dramatically lowered the costs of international business and marked a rise of worldwide competition.

Trade Policy After 2016

Similar to Reagan, Trump has focused on fair trade. Some consider his approach more aggressive and populist. Trump ignited a new fervor in international trade policy. His tariffs have been imposed rapidly and often with little debate. His style has managed to concentrate the focus of trade partners. The constantly hammered message says: trade is now important to the U.S. 

Trump has argued consistently that the U.S. has been ignored or treated unfairly for decades in trade-related matters. He has pushed an “America First” policy with no more ongoing global support from the U.S. He renegotiated the North American Free Trade Agreement (NAFTA), eliminated the Trans-Pacific Partnership (TPP), as well as criticized major companies such as Carrier, Ford, and Mondelez – for selecting their production location without patriotic consideration. 

Trump tariffs of 2018 covered about $304 billion of imports into the U.S. Together with other forms of protection, they have had limited effects on the U.S. trade deficit. Some countries filed formal complaints against the U.S. with the World Trade Organization (WTO).  Trump responded by threatening corrective measures against the WTO if U.S. interests were not considered.

Comparing Reagan and Trump

Reagan’s policy endeavors were initially quite modest but became more assertive over time. Efforts sought to reduce the growing U.S. trade deficit with Japan and bolster American industrial exports. Trump’s trade deficit is significantly larger both in real and relative terms. Trump’s policy uses more harsh, aggressive, and clear approaches stating his expectations and demands, as well as reflecting the consequences of nonconformity.

Efforts by both the Reagan and Trump administrations to “level the playing field” have met with insufficient success. The powers of China and emerging markets are rising. American influence around the world should not become precarious. The time is right for further enlightened action on international trade. Countries need to understand the drivers of U.S. policy, which requires embracement of new approaches, new linkages, and new leadership directions for an entirely new era. 

Professor Michael Czinkota teaches international marketing and business at Georgetown University. His most recent book is In Search for the Soul of International Business, 2019. He served as Deputy Assistant Secretary in the U.S. Department of Commerce in the Reagan and Bush Administrations. 

Key Words: United States – Mexico – Canada agreement, President Trump, President Ronald Reagan, Trump tariffs, World Economic Forum, World Trade Organization (WTO), Omnibus and Competitiveness Act of 1988, General Agreement on Tariffs and Trade (GATT) and international trade policy