For Want of a Plane

Michael R. Czinkota

High hopes were placed into the G20 meeting in Buenos Aires. After all, many policy leaders with different voices were present. In particular, German Chancellor Merkel’s role as a seeker of compromise was fully scripted. She was to assure low tariff levels for cars with President Trump, broach new approaches for debt management with Argentina and discuss issues on Ukraine with President Putin. Alas, the expected discussions were disrupted. The Chancellor’s ride did not get there.

When Mrs. Merkel departed Germany, all plans seemed to be on track. Cabinet members, the German Foreign Service team and a gaggle of journalists had moderately filled the Chancellor’s official airplane. But after only one of thirteen hours of flight time the machine had to turn around for an unplanned landing. Communication was on the fritz, gas could not be ditched and the subsequent landing back in Cologne/Bonn was heavy. Harsh as it sounds, parked planes don’t fly.

Minor the inconvenience say you. In an era when the CEO of a declining U.S. multinational firm like GE’s Jeff Immelt always had a back-up plane accompany him, surely all the German Air Force had to do was roll out the spare and fly on. Perish the thought! There was a back-up plane. But it had taken off homeward bound for budget reasons once the main trip seemed on track. Also, the spare crew could not perform within regulation time limits.

The German airline Lufthansa was all out of planes for trips to Argentina. Only the Spanish airline Iberia had a direct hop out of Madrid. Not all passengers were excited when their quite empty cabin was suddenly filled up by bureaucrats and guards. Yet others reported that Mrs. Merkel was quiet, focused and smiling at Selfies.

Wagging tongues have suggested that, in light of the harsh electoral decline of her party, Mrs. Merkel wanted to get re-acquainted with more popular forms of transportation. Others wonder what Germany’s founding Chancellor Bismarck or, worse yet, what President Trump would have said to this failure. Perhaps the lack of a plane tosses Germany, or even the entire European Union into political turmoil.

The problem is not the short-term direct effects, but rather the long-term repercussion which paints reality. How effective are international marketing slogans and expectation emphasizing progress and technology, when the country leader’s plane won’t fly and airports won’t operate? What happens to the brand value of time when a key leader arrives half a day late? How can one be a useful arbiter while not on location? And all this happened just when CEBIT, one of Germany’s largest trade fairs for technology and communication had to close down. Is all this witness to a transition away from leadership struts to execution missteps?

The German aircraft debacle is of major import and impact. Mrs. Merkel may have become more forgiving to her staff. But even though she nods and smiles more, her partners in international discussions take delays very seriously. For them, late is late, which greatly undermines efficiency.

As to President Trump’s perspective on these events, he may worry less than expected. First, the problems reaffirm his demand for a substantial increase in European spending on defense. Of equal importance: why should he care about the quality of German planes – he has his own and they fly.

Professor Czinkota (czinkotm@georgetown.edu) teaches international marketing and trade at Georgetown University and the University of Kent in Canterbury. His latest book is In Search For The Soul of International Business, (Businessexpertptress.com) 2019

Package from China: Who pays the freight?

Michael R. Czinkota


Running a small business which ships low weight merchandise, say 10 T-shirts or small hardware from China to the United States, made logistics cost easy. The U.S. provided for a large shipping discount of 40% to 70%.


Such generosity came from U.S. membership in the Universal Postal Union (UPU). Founded in 1874, the UPU is the international postal organization in Switzerland, committed to a smoothly running international postal system.

In 1969, the UPU’s developed country members implemented discounts for poor nations when shipping small parcels. China then was isolated with few outward shipments. In consequence, consumers in Washington, the shipping cost of a face cream was more affordable from China than from Los Angeles. Today, however, China delivers more than one billion small packages a year to the U.S. and the special discount treatment continued.

Then there came change. The Trump administration announced U.S. withdrawal from the UPU as of October 17, 2018. The objective was to arrive at competitive and fair global shipping rates. This move showed the Trump Administration’s willingness to leave quit multilateral agreements judged unfavorable to U.S. interests. Although the UPU withdrawal process takes one year, U.S. deep discounts for Chinese packages ended immediately.
Now China Post has introduced a new Express Mail Service. It raised the price of packages to the U.S. from $ 30 to $34 for the first 0.5kilogram shipped. Who pays, who benefits?
The United States Postal Service (USPS) can use higher payments from China. But transshipments through other nations and competition will lead to reduced shipping volume.

The price advantage of many Chinese e-commerce vendors declines. Higher cost of shipping reduces this advantage even further. Most endangered are eBay type international vendors. Sellers who compete on price alone face higher cost and more competition. To survive it will become new practice to find alternatives for product and service delivery both for processes as well as markets.

Adjusting the rules for new conditions makes sense. Few parameters conditions have remained static for 144 years. The UPU should get ready for a significant restructuring. What applies to China, the U.S., and other relationships, applies to other nations as well. One should expect further exploration of antiquated subsidies which have been bypassed by new market conditions. Such tracking can identify new opportunities for change and innovation.

De-subsidization will create market alternatives based on new forms of delivery. Such adjustments will be cost analyzed and competitively compared to achieve higher efficiency. Legislators and internationally active framers of distance trade, such as the World Bank and the World Trade Organization can use this opportunity to pinpoint, develop and scale up models which reflect transport cost sensitive sectors and practices. In addition to greater accuracy and fairness, the President’s initiative for higher prices can lead to higher capabilities, more efficiencies and better services. A good start!

Professor Czinkota teaches international business and trade at Georgetown University and the University of Kent. His latest book is ‘In Search For The Soul Of International Business (Businessexpertpress.com) 2018

Visit From Mr. Frank Vogl at the Seminar

Mr. Frank Vogl, a veteran in international economics and finance and also the co-founder of Transparency International and the Partnership for Transparency, came to share his insights about International Business and corruption. What an insider!

International Food Trucks in Kent

Many are chosen, but few are selected. Like many other universities, Kent highlights its international orientation. For me, Kent is one of very few universities where international food trucks lure students for breaks and meals. Well done!