Visit from the Director, Supply Chain, Professional and Business Services, Maureen R. Smith

It is an honor and a pleasure to have Mrs. Smith visit us in the Seminar on International Trade. After many decades with government, Maureen is more than a total Insider. Simultaneously she is a historian, a pivotal link, an interpreter and able to derive the benefits of understanding where other only shrug.

Your Georgetown international education and training is spot-on, enhanced by cohorts who became Presidents, senators and judges as well as key business executives and Georgetown deans. Thank you for your insider insights.

International Managers Have Choices

Many areas politics and law are not immutable. Viewpoints can be modified or even reversed, and new laws can supersede old ones. To achieve change, however, some impetus for it – such as the clamors of a constituency – must occur.

The international manager has various options if rules are disliked.

One high-risk option is to simply ignore prevailing rules and expect to get away with doing so. A second option is to provide input to trade negotiators and expect any problem areas to be resolved in multilateral negotiations. Drawbacks are that this is a time-consuming process, and issues remain outside the control of the firm.

A third option involves the development of coalitions and constituencies that can motivate legislators and politicians to implement change. Even simple changes, such as the way key terms are defined, can positively influence the business environment. Consider, for example, the change in terminology used in the United States to describe trade relations between two nations. For years, attempts to normalize relations with China by granting “most – favored nation” (MFN) status drew the ire of objectors who questioned why China deserved to be treated in a “most favored” way. Lost in the debate was the fact that the term “most favored nation” was taken from WTO terminology and indicated only that China would be treated like any other nation for the purpose of trade. When the term was changed to “normal trade relations,” tension eased.

Beyond the recasting of definitions, firms can effect change in other ways. A manager may, for example, explain the employment and economic effects of certain laws and regulations and demonstrates the benefits of change. The firm might also enlist the supporting help of local suppliers, customers, and distributors to influence decision makers. The public at large can even be involved through public statements or advertisements calling for action. Developing coalitions is not easy task. Companies often turn to lobbyists for help, particularly when addressing narrow economic objective or single-issue campaigns. Lobbyists are usually well-connected individuals and firms who can provide access to policymakers and legislators in order to communicate new and pertinent information. Brazilian citrus exporters and computer manufacturers, for example, use U.S. legal and public relations firms to provide them with information about relevant U.S. legislative activity. The Banco do Brasil has used lobbyists to successfully restructure Brazilian debt and establish U.S. banking regulations favorable to Brazil.

Although representation of the firm’s interests to government decision makers and legislators is entirely appropriate, the international manager must also consider any potential side effects. Major questions can be raised if such representation becomes very impactful and overt. Short-term gains may be far outweighed by longer-term negative repercussions if the international firm is perceived as bullying or exerting too much political influence.

Based on Fundamentals of International Business, 3rd. by Michael R. Czinkota, Ilkka A. Ronkainen, and Michael H. Moffett.

Michael Czinkota (czinkotm@georgetown.edu) teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent. His latest book, forthcoming in October 2018, is “In Search for the Soul of International Business”.

Trump fostering a new era of prosperity for US-EU relationship

The walk over burning coals with tariffs rattling has been completed and soothing coolness has returned. EU Commission President Juncker came to Washington with a publicly pronounced low level of expectations. But, as could be expected, when it was all said and (hopefully) done, acerbic argument gave way to collegial progress. The United States will be able to sell more of its products to Europe, and, in exchange, the treat of prohibitive tariffs will be eased.

Some believe that these developments were unexpected – like Manna from heaven. Not so! The Trump Administration had undertaken many steps to indicate that trade was a key concern. Unlike the experience of other administrations, President Trump persisted in his intent to support American business domestically and internationally. The shot across the bow of the ship Europa helped to concentrate the minds of policy makers. Yes, they still have other problems, such as NATO, Household deficits, Brexit, migration, and more. However, with the imposition of significant tariffs, Trump made it clear that trade had to move up on the list of important policies to consider.

After much hesitation, the adjustment steps began to take place. And rightfully so, when one considers that it has been more than 70 years, three generations , since the setting in place of U.S. sponsored world trade mechanisms such as the International Monetary Fund, the World Bank and the General Agreement on Tariffs and Trade. Back then, the principal dimension was the strengthening of European economies in order to improve local standards of living and achieve a meaningful defense against the then Soviet Bloc. In support of these goals, the U.S. willingly accepted its leadership cost to a growing excess.

The world changed, as did its opportunities and threats. But the U.S. negotiation approach stayed the same, support others, don’t worry about the drawbacks to the privileged U.S. firms. Over time, the U.S. started to fall behind – lots of imports, few exports, and still no major support from the government. When Trump took on his campaign, he promised changes in the trade picture, and he even lived up to that goal after he won the election. He started to use an anvil and hammer approach to break through old fashioned restrictions and chains. When other nations complained, he warned them of the sparks that could fly during the hammering in a larger forging process. His watchword was ‘reciprocal’ relations.

Now, it has worked out. With reason on both sides there will be progress and stronger linkages. It is gratifying to see how past barriers can be converted into linkages. Decades ago, for example, the river Spree in Berlin clearly marked the distance and separation between East and West Germany. Today, the very same river offers easy crossing and pulls the two river banks together. Its flow encourages rather than inhibits linkage.

The willingness to acknowledge shortcomings and engage in the collaborative implementation of solutions is a new engine for growth. Trump has coached this right, the EU and Juncker are good co-captains. Let the new game begin!

Professor Czinkota (czinkotm@georgetown.edu) teaches International Business and Trade at Georgetown University and the University of Kent. His forthcoming book in October 2018 is In Search for the Soul of International Business.

This commentary was published first by The Hill; Washington D.C. On July 29, 2018

Getting Closer with the U.S. on Trade Matter

 

Annäherung im Handelsstreit mit den USA

Der Handelskrieg zwischen den USA und der EU ist abgesagt. Ganz im Gegenteil wird über ein breites Handelsabkommen verhandelt. Das ist das überraschende Ergebnis des Besuchs von EU-Kommissionspräsident Jean-Claude Juncker bei US-Präsident Donald Trump. Beide Seiten haben etwas bekommen und auch schon einen gemeinsamen Gegner ausgemacht. Eine Einschätzung zu der plötzlichen Lösung gibt Michael Czinkota, Professor für internationale Handelsbeziehungen an der Georgetown University in Washington, im Journal-Interview.

Gestaltung: Robert Uitz-Dallinger, Andrea Maiwald

http://oe1.orf.at/player/20180726/520648/070820

Interview with China Global Television Network on Possible Outcomes for US-China Trade Deal

Here is my televised discussion with China Global Television Network’s Elaine Reyes on the possible outcomes for the US-China trade deal, following the agreement on Saturday. Enjoy!