New President, New NAFTA

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The Trump Administration will seek modest changes to the North American Free Trade Agreement renegotiation process. According to a draft of a letter sent to Congress last week, the Administration is seeking a more conventional approach to trade negotiation.

NAFTA, which was established in 1994 between Canada, the U.S., and Mexico, aims to reduce trading costs, increase multilateral investment, while helping North America become more competitive.However, during the 2016 presidential campaign, President Trump made the debate over free trade one of the central topics of his campaign.

What is the plan for the renegotiation?

The persistent U.S. deficit in goods trade with Canada and Mexico demands that the administration take quick action to revise the relationship and adapt to the new global environment. In 2016, the U.S. deficit in goods with Canada is $42.848 billion (Data from Census.gov.foreign-trade/balance), which is only 2% of the total Canadian trade of $545 billion.

The trade deficit in goods with Mexico is $63.191 billion. Exports are $231 billion, made up primarily of auto parts and petroleum products, while imports are $294 billion, with cars, trucks, and auto parts being the largest components.

In addition, this administration believes that Mexico has taken millions of manufacturing jobs from the U.S. Should the U.S. or Mexico just leave NAFTA?

My short answer is NO. According to the data provided by Mexican government, more than 80% of Mexican goods exports are tax free to the United States, and since the signing of the trade agreement, all kinds of US companies in Mexico have grown with large number of jobs.

In the United States, some U.S. manufacturers get hurt because of NAFTA, while most American farmers profit from the agreement. Withdrawing from NAFTA will aggravate the U.S. goods trade deficit and tensions will continue to escalate, and eventually this will lead to the rupture of NAFTA.

Mexican cars will be more competitive in the United States due to depreciation of the peso, and the trade deficit will expand. On the other hand, Mexico is the third largest agricultural export market for the United States and U.S. exports of agricultural products will be more expensive for Mexican consumers.

As President Trump moves to revisit the North American Free Trade Agreement with Mexico and Canada, some are concerned these negotiations would actually limit the aggregate benefits the United States can gain. Some even claim that the United States may be handing a leadership role to China, a country that has repeatedly ignored intellectual property laws and manipulates its own currency.

Handing this role to a country who’s bad practices are at the helm of whats wrong with global economy could make for a trying situation, and one that President Trump should think about before passing the torch to China.

Birmingham Insights on Asia — (2) The Impact of the Government Policy on the Small and Medium-Sized Enterprises’ (SMEs) Export Activities in China

Gallery

This comment is based on Zheng Guan’s Dissertation written under the supervision of Prof. Michael Czinkota at the University of Birmingham, UK.
Recommendations for the Government Sector
1) Enhance SMEs’ export assistance and promotion activities. The government should develop more preferential export policies

Birmingham Insights on Asia — (1) The Impact of the Government Policy on the Small and Medium-Sized Enterprises’ (SMEs) Export Activities in China

Gallery

This gallery contains 1 photo.

This comment is based on Zheng Guan’s Dissertation written under the supervision of Prof. Michael Czinkota at the University of Birmingham, UK.
On a year-to-year comparison of export activities, most of firms surveyed exported more. However due to increased costs caused

Armenian Perspective: THAT COMPLICATED THING CALLED “CORRUPTION”

by Anna Astvatsatryan

I was driving home and talking on the phone with a friend, so the police stopped me. I know, I know, you shouldn’t use mobile devices while driving. So I was completely ready to answer for my “crime” and pay the fine, which in my country you are able to pay on spot.

Anyhow, after parting ways with the police officer, I remembered that usually you need to sign a receipt of payment, which he never asked me to do. All of a sudden, I found myself in the middle of a bribery act, that I didn’t even realize.

Corruption is a very tricky matter. It can halt the development of a whole country and destroy democracy. It can help people avoid useless regulations and paperwork, therefore save a lot of time and money. For example, a study showed that in countries with high number of regulations, corruption actually helps new entrepreneurs to start a business and enter the market. It also has a so-called “greasing” effect for importers, when they can avoid a line and paperwork at the customs by just paying a bribe.

If we dig deeper, corruption is in a way compensating the lack of trust between the government and people. It helps businesses have at least some kind of a guarantee from the government official. If there was more trust in justice and equal opportunities for every business or individual, the power of corruption would decrease significantly.

But how can you build trust with an official that would rather take a bribe?

Well you could try by these:

  1. Build trust with your partners, competitors and other citizens
  2. Know your rights (I could have avoided paying a bribe if I remembered the official fine payment procedure)
  3. Ask for advice. There actually are people called lawyers that know what you can and cannot do, your rights and responsibilities, the Constitution of your country and a lot of other very useful and extremely important information, and you don’t always have to pay for their services.

Corruption can still be harmful or beneficial, depending on the case. Nevertheless, building trust will help decrease a lot of the harmful and unnecessary corruption and create a civil society that does not need any corruption at all.

 

Global Update: VP Biden in India

Vice President Biden urged India to lower barriers to foreign trade and investment on Wednesday, July 24th 2013, in order to strengthen its economy.

Foreign businesses, including Wal-Mart, have reduced their investment plans in the country. India’s weak public policy has led its foreign direct investments to crumble by 21% this past fiscal year.

Sreeram Chaulia, a professor at the Jindal School of International Affairs in Haryana, claims “India’s value as a market for U.S. goods and investment is losing sheen. What the Americans don’t want to see in India is protectionist and populist policies.”

In order to increase investment in the country, Michael Froman, the U.S. Trade Representation, pointed out that “investors look for a consistent commitment to, not sporadic outbursts of, reforms. Most importantly, they look for the enduring confidence that comes from long-term, sustained, high levels of growth.”

If India chooses to follow Froman’s advice, US companies will pounce on the opportunity to get a foothold in this lucrative market and growth will soon be at her doorstep.