A SUMMER IN CANTERBURY

Scholars typically spend their summers at interesting and learn-worthy organizations. For my summer this year such destination will be the University of Kent in Canterbury, UK. There I will participate in several events. I will be help coordinate a university-wide international business seminar: Global Business in a Dynamic Environment.

The Global Business in a Dynamic Environment course (details found here) provides a comprehensive and up-to-date overview of international business and the institutions involved in the process. Although there is an underlying universality to the basic principles of business administration, it is in the application of these principles that people in international business encounter unique problems. Theory will be emphasized for a normative understanding; practical aspects are designed to show the relation of theory to practice. We will teach each other and learn from each other by the use of analogies, parables, and examples – which will help us understand and remember, which, in an era of the British Exit from the European Union has taken on major significance.

I encourage interested students and scholars to attend those events. It will allow to make lasting connections with students from around the world, studying a range of subjects but sharing personal enthusiasm. Guided by leading professors from around the world such as a large team from the University of Kent, German, and the United States, Mark Casson England, Johannes Harl, Germany, Thomas Cooke, Michael Czinkota, Gary Knight and Charles Skuba of the United States, will enable participants to gain a deeper understanding of other cultures, develop new network, make lifelong friends from a wide variety of backgrounds and benefit from globally-renowned academic excellence. Stay tuned for more information!

The teaching team members are

Prof. Martin Meyer, Kent
Prof. Michael Czinkota , Kent and Georgetown
Prof.Gary Knight, Williamette
Prof. Zaheer Khan, Kent
Prof. Rudiger Kaufmann, Mannheim
Prof. Valbona Zeneli, Marshall Center
Mr. Adam Smith, Kent

The Course schedule

So that’s my summer. How about yours? If you want to join me and a group of distinguished colleagues please contact Floortje Hoette at f.hoette@kent.ac.uk to sign up for the course/seminar or request more detailed information about the summer events.

Let Us Organize World Trade

There is broad historic agreement that the World Trade Organization (WTO) has been one the most successful international institutions; its membership accounts for more than 98 percent of world trade. However, today’s global economic landscape is changing rapidly, coupled with retrenchment and distancing from multilateral agreements. Combined, these factors impact the discernible value and role of the WTO going forward.

Changed Patterns of Trade and Investment

The expansion and development of IT infrastructure, telecommunications, and computing made the global revolution of the last few decades possible. New technologies, nonexistent when the WTO was established in 1995, have become crucial for growth and development in this decade. The outsourcing revolution has affected the developing world in a major way: global manufacturing and new services have dramatically changed supply chains; corporate espionage and intellectual property infringements supported many corporate changes in developing countries; and WTO negotiations and augmented enforcement procedures have not been able to slow that trend.

Moreover, one of the most critical issues in global trade is the aspect of unprecedented imbalances. Today, China is the new top global merchandise exporter with a total of $2.263 trillion, or 16.25 percent of world exports, according to WTO reports. It is the largest global exporter of goods, 17 percent of world exports, and the third largest importer, 12 percent of global imports.

The United States is the main goods importer with 13.4 percent of the global imports, totaling $2.4 trillion. In 1994, the United States was running an annual merchandise trade deficit of about $120 billion; by 2017, the U.S. annual trade deficit with China alone has ballooned to over $375 billion.

Stalemate at the WTO: Too Big to Be Effective?

The last successful WTO negotiation — the Uruguay Round — was a result of a strengthened, single market in Europe, the creation of NAFTA, and several plurilateral agreements, such as the Information Technology Agreement (ITA).

The Doha Round of negotiations, beginning in November 2001, aimed to achieve major reforms in the international trading system, with an explicit focus on developing nations. Nevertheless, this premise failed; disagreements concerning the agricultural sector, free trade of services, and intellectual property rights have stalled negotiations.

Twenty years ago, the principal WTO concerns were pollution, global warming, disease, and structural unemployment — none of these agenda items, arguably, have been addressed effectively, much less solved.

Size is also an issue. The WTO is comprised of 164 members, with widely diverse perspectives, levels of development, linkages, and ambitions. The WTO system has become unwieldy because of the unanimity requirement of its voting process. The result: progress with new agreements is at a standstill. Case in point is the reduction of trade tariffs, which, at a global 3 percent of Most Favored Nations status, is at the same level as in 2000.

China: A “Rule Shaker” or a “Rule Maker”?

The West’s open invitation for China to join the WTO in 2001 paved the way for its rise to a global economic power. Since then, the balance of power at the WTO has changed dramatically. Chinese outward investment in the global economy has increased thirtyfold, from $7 billion (making up only one percent of the global FDI) to almost $200 billion (13 percent of the global FDI).

China entered the WTO as a “rule taker,” evolved into a “rule shaker,” and now aims to become a “rule maker.”

In fact, economic relations between China, the United States, and the EU define many of the agreements and disputes at the WTO. Xi Jinping’s “China Dream” of national rejuvenation could be seen as a way to reshape the international economic system, putting China at the center.

China has not been an easy partner for the West. Initial optimism that China would turn toward a free market economy has yet to come to fruition. Moreover, with its “capitalism with Chinese characteristics,” the country has taken the main benefits of the open trade system by creating major distortions and causing disputes that the WTO lacked the capacity to handle. Controversial issues include intellectual property rights (IPR), free market revisions through government subsidies and state-owned enterprises (SOEs), unequal conditions for market access with major restrictions to market entry in China, and unfair technology transfer. Foreign firms operating in China struggle against restrictive regulations — the government often requires them to hand over their intellectual property as a condition of market access. Asymmetrical market access and lack of reciprocity are magnified further at political levels.

With the existing WTO rule book, it is difficult to hold China accountable. Implications of Chinese “market distortion” and “unfair competitive conditions” consume global trade relations rhetoric; these opinions, voiced loudly by the current U.S. administration, are also shared broadly by other players, such as the EU and Japan. Due to high trade deficits, the United States is pushing for WTO reforms, increasing tariffs, and blocking the nominations of seats on the WTO’s appellate body (where the U.S. is a major player in the dispute resolution process) as leverage. Desired reforms aim to regulate market distortions caused by government interventions, simplifying the process of gathering information on unfair trade and investment practices, broadening the scope of banned subsidies, and setting boundaries to proportionate retaliations. But, at the end of the day, why would China agree on reforms that jeopardize its state-run economic model?

The WTO as a Reflection of a “New World”

The WTO does not operate in isolation from changes and new developments impacting trade. In the last two decades, the world’s macroeconomic environment was shaken by at least two significant events: the spread of terrorism, and the financial crisis of 2008. Terrorism has enhanced the inward focus of the political and economic aspects of national security; the global recession has caused an inward retraction of production and services. International economic issues were largely ignored as attention shifted to domestic job creation, the security and protection of domestic credit markets, and enhancing liquidity. Further, financial and political conflicts seem to foster greater polarization among legislators in many countries around the world.

As a result of continued stalemates and disagreements at the WTO, external actors are adopting a new “do-it-yourself” approach defined by preferential plurilateral trade negotiations — handmade for and benefitting only a limited number of players.

In addition, there is the issue of China’s growth in influence. In September 2018, the United States together with  the EU and Japan signed a brief statement voicing shared concerns regarding the future of the WTO, questioning its validity as a primary platform for multilateral trade. As an immediate result of difficult trade relations between the United States and China, and tremendous  pressure applied by the current U.S. administration, China afforded European companies access to some sectors, while pledging to cooperate with the EU on WTO reforms — a decision taken in July 2018 during the EU-China Summit.

Since the appearance of President Xi Jinping at the World Economic Forum two years ago, Beijing has been signaling that it is willing and prepared to assume the role of a new custodian of globalization. However, it seems obvious that China would not accept any reforms at the WTO, or any level, that would jeopardize its own economic model and welfare. At the same time, China wants to preserve the existing global trade order, as the outside world is more crucial than ever for its economic development.

Today’s global economic realities are not only introducing a new set of concerns and means of doing business, they are also challenging the very effectiveness of the WTO’s historical role as an arbiter of world trade.

Valbona Zeneli is the Chair of the Strategic Initiatives Department at the George C. Marshall European Center for Security Studies. The views presented are those of the author(s) and do not necessarily represent views and opinions of the Department of Defense or the George C. Marshall European Center for Security Studies. 

Michael R. Czinkota is a professor at the University of Kent in Canterbury and at the McDonough School of Business at Georgetown University, He is a former Deputy Assistant Secretary of Commerce in the United States Department of Commerce. 

The Ignorant Wise Man

American companies were assured that because of its size and the diversity of its resources, the American economy could satisfy consumer wants and national needs with a minimal reliance on foreign trade. The availability of a large U.S. domestic consumption power and the relative distance to foreign markets resulted in many U.S. manufacturers simply not feeling a compelling need to seek business beyond national borders. Subsequently, the perception emerged within the private sector that exporting and international marketing were simply too risky, complicated, and not worth it. 
This perception also resulted in increasing gaps in international marketing knowledge between managers in the U.S. and those abroad. This gap shaped different incentives to innovation. The Late-developing Advantage Theory can illustrate those differences, not only at a national, but also at a firm specific level. A less favorable position can always be an opportunity and motivation. While business executives who deal with small market sizes are willing to learn about cultural sensitivity and market differences, many U.S. managers remain blissfully ignorant of the global economy. Given such lack of global interest, inadequacy of information, ignorance of where and how to market internationally, unfamiliarity with foreign market conditions, and complicated trade regulations, the U.S. private sector became uninterested and fearful of conducting international business activities. 
However, conditions have changed. Traditional education institutions are becoming more attuned to the international dimension. Universities and particularly business programs are emphasizing responsibilities and obligations at the international level both in theory and in practice. Meanwhile, some government agencies are paying closer attention to the international needs of the U.S. business community. The U.S. Department of State offers training and instruction in business-government relations to domestic firms.
Newly emerging economies also accelerate the process of rising public attention. For instance, electronic commerce has made it more feasible to reach out to the global business community, whether a firm is large or small. International events can lend a new focus to business. In 2018, Alibaba generated US$30.69 billion in sales on Double Eleven or November 11th, which is known as a day of special promotions, and now includes a large share of international sales. Related industries and supply chains, such as transportation and logistics, are prospering with the growing volume of international trade as well.
In effect, U.S. corporate interests given to international markets both as an opportunity find both customers and suppliers to be growing. How can the U.S. maintain a sustainable competitive position? How can the managers further learn from what used to be former students? The need and demand for international marketing expertise can be expected to rise substantially. Overall, avoiding ignorance is the first step to becoming wiser.
Professor Czinkota (czinkotm@georgetown.edu) teaches international marketing and trade at the University of Kent in Canterbury and Georgetown University. His latest book is “In Search For The Soul of International Business”, (businessexpertpress.com) 2019 Shiying Wang (sw1115@georgetown.edu) of McCourt School of Public Policy, Georgetown University contributed to this commentary.

http://www.srilankaguardian.org/2019/01/the-ignorant-wise-man.html

Wake Up the Smartest

In this newest video, Professor.Czinkota speaks about how the book was written in short chapters with witty illustrations enabling the reader to digest a little information at a time and wake up the smartest person in the room.

Making the World & Ourselves Better

In this video I speak a little bit about my new book.

It’s available now at Amazon. https://www.amazon.com/?fbclid=IwAR0IIHpntZ-p3Q8C9XbkIaW_BaUKv9U7j3cz2MiVgBtMrImI5iarvBfbH3M