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

Global Business: Trade, Broken Down

In business, trade is a big word. Not in the sense of how you spell it, but rather how we use it, as there are many compartments to trading with different countries. From exports, to labor, to production and prices, trade isn’t just the exchanging of goods. Lets break it down and use the example of clothing.

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Green electricity and the international trade challenges

Questions about the future of the electricity trade focus on the rise of renewable energy, which is seen as a means of mitigating greenhouse gas emissions from the electricity sector. Many governments wish to integrate renewable power into their transmission and distribution systems and offer tax or other incentives for its generation.

Read also: African Energy: U.S. Dept of Commerce Delegation will travel to Ghana and Nigeria

  “My take is that the future will be increasingly distributive,” said Fereidoon Sioshansi of energy consultants Menlo. “Instead of producing a lot of power at centralised plants and shipping it long distances you can generate most of the power you need, perhaps through solar panels on your rooftop.”

 ok3On the other hand, the idea of a global grid enabling long-distance electricity trade has been gaining currency. The global grid would also absorb renewable energy, integrating it into transmission and distribution systems. But it requires high levels of investment and the modernisation of infrastructure, and this can be problematic, not least in the developing world.

 “The main challenges of the electricity trade in Africa include financing, lack of capacity and planning and maintenance issues,” said Callixte Kambada of the African Development Bank, who made a contribution on the African regional experience.

 Despite that African electricity was becoming increasingly interconnected to parts of southern Europe and the Middle East. “I think it’s only a matter of time before we have a global grid,” he said.

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Does Free Trade Undermine International Rules Protecting the Environment?

MONICA MYLORDOUSEP 24 2014 FULL PIECE

The WTO was created to promote free trade: to remove barriers between countries, to allow them to concentrate on products with a comparative advantage, leading to maximum international productivity. This, however, often challenges rules protecting the environment. Although the WTO has shown an increasingly open approach towards environmental issues, free trade is still the Organisation’s backbone and trade liberalisation its main goal.

One might argue that the WTO was conceived as a trade organisation, and its Members agreed to that mandate. Indeed, many of its Members are developing countries that have resisted including environmental protection concepts – such as sustainable development – in the WTO.

The WTO’s dispute settlement system was not designed to resolve challenges regarding trade and environment, legitimacy, globalisation and international law’s fragmentation. Although it does adjudicate trade-environment disputes, their resolution involves scrutinising the trade-friendliness of environmental laws – not whether the WTO Member’s actions/laws are appropriately green.

International environmental law, on the other hand, ‘provides the global institutional means for engaging the global ecological challenges’. Consisting of a loose affiliation of treaties, principles and customs, it is a complex evolutionary system of law, further complicated by a dizzying array of stakeholders. There is considerable tension between the environmental goals and the rapid growth in international trade that places pressure on the earth’s ecosystems.

Fragmentation has been named one of the past decade’s most provocative international legal issues. As illustrated, WTO free trade rules have repeatedly undermined international rules of the environment. Even if coincidentally benefiting both free trade and environmental protection, it is within WTO constraints. However, one can refrain from criticising the WTO dispute settlement mechanism as its decisions comply with the mandate under which it operates, which, due to the current fragmentation of international law, does not cover environmental protection. Nonetheless, this should not eclipse the need for change, especially since environmental problems that threaten humanity – such as climate change – demand international cooperation. Schoenbaum calls the WTO to give specific recognition to environmental values, as necessary. Perhaps international environmental law must also be strengthened, through the establishment of sufficiently powerful institutions to represent non-economic concerns and penetrate specialist systems.

COUNTRY OF ORIGIN EFFECTS

Buyer behavior is affected by the national origin of products and services. Many consumers are relatively indifferent to where a product is made. Other consumers favor goods produced in their home country. Country of origin (COO) refers to the nation where a product is produced or branded.  Origin is usually indicated by means of a product label, such as “Made in China”. When consumers are aware of a product’s COO, they may react positively or negatively. For example, many people favors cars produced in Japan, but would be less upbeat about cars made in Russia. Most people feel confident about buying clothing made in Italy, but would be less receptive to clothing from Mexico. Such attitudes arise because consumers hold particular images or conceptions about specific countries. Consumers assume that Japan produces high-quality cars and that Russia makes low-quality cars. While such beliefs are often rooted in reality, many are simplified opinions, false stereotypes or effect the slowness of accepting change.

Buyer reactions to COO are influenced by various factors.  First, COO stereotypes vary depending on the origin of the judge and on the category of the product being judged.  For instance, while Japanese cars are disdained by Indians, they are prized by Russians. While people in Brazil love Japanese consumer electronics, they spurn Japanese apparel.

Second, opinion varies depending the national origin of the firm and the location where its product is actually made. Many consumers love German Volkswagens, even if the car is produced in China, Poland, or some other location outside Germany.

Third, as the capacity of countries to perform well in specific industries improves, the COO phenomenon varies over time. Until recently, for example, few Westerners would have visited India to undergo surgery.  However, many now perceive India as an excellent value for obtaining medical care for various conditions, and spend the time and money to travel there to receive heart operations, cosmetic surgery, and other procedures.

Finally, the tendency of consumers to discriminate against foreign products varies by demographic factors.  For example, senior citizens and people with limited education tend to shun products that originate from abroad.