Weekly Update: Top 5 International Business News Trends

The latest International Business Headlines from last week are reported to you below. Please report to their individual websites to read the full articles. Check for updates every Monday.

1.  Cyprus’ president says he expects international creditors’ latest review to approve the country’s handling of its bailout program.

http://www.businessweek.com/ap/2013-10-28/cyprus-president-expects-positive-bailout-review

2. A technological revolution is sweeping across Africa, bringing with it deep Internet penetration and exploding rates of smartphone usage.

http://www.newsweek.com/africa-start-ups-swarm-continent-388

3. The proportion of women commanding managing director roles in London has doubled

http://rt.com/business/london-female-gender-gap-844/

4. The U.S. may have monitored German Chancellor Angela Merkel for over a decade according to reports from NSA leaker Edward Snowden.

http://www.washingtonpost.com/world/europe/merkel-may-have-been-monitored-by-us-since-2002-magazine-reports/2013/10/27/7b95661e-3f32-11e3-b028-de922d7a3f47_story.html

5. For the first time in 126 years, the Vatican Bank published an annual report in an attempt to be more transparent and divert allegations of corruption.

http://www.newsweek.com/pope-francis-opens-books-first-ever-vatican-bank-report-shows-big-profits-74

How should we measure the winners?

The recent Olympics presented some interesting perspectives on competition: How do we find out who is actually winning? Is performance to be measured by wealth (medals), by leadership (Gold only) or by industry competitiveness (e.g. gymnastics)? Should the progress over time play a major role, or the number of winners as a proportion of population?

In business terms, the expression ‘competitiveness’ is viewed differently by different parties.  For example, for a firm, competitiveness means expansion, growth and profits. Whether any of these originate in or outside of a ‘home’ country plays a secondary role. When governments assess the competitiveness issue, the search is for employment growth, wide income distribution and tax revenue, and location is important for all of them. Individuals, in turn, think mainly about whether or not they will keep their jobs and have their standard of living increase. For them, location is not just one thing, it is the only thing.

Sport contests reflect capability, enjoyment and the creation of goodwill, but there are other facets as well. Performance on the sports field can affect and even transform the national spirit. It is hard to forget the national triumphant feeling in the United States in 1980 when the U.S. ice hockey team beat the Soviet Union in the same year the Soviets invaded Afghanistan.

International sports performance can also be a political gesture and a test of national virtue. For example, four decades ago when President Richard Nixon and the U.S. ping pong team visited China, the US-Sino relationship was officially established. At that time, China was considered an emerging economy and a Chinese excellence in a rather narrow sport was not seen as significant.  Now, although the U.S. is still the largest economy in the world, China is catching up and China’s teams receive global attention.  Its economy is the second largest in the world and its market is the U.S.’s third largest export destination, after Canada and Mexico.

The composition of trade between the two countries, just like the composition of the winning teams at the Olympics, has changed and demonstrated that the two economies have become more integrated than expected.  In fact, China is the only nation which imports U.S. products at the level President Obama envisioned in 2009 when he postulated that U.S. exports should double in five years. U.S. top exports to China are some agricultural crops, but also electronic and mechanical appliances, chemicals, and transportation equipment such as automobiles and airplanes. China is now General Motors’ most important market.

When China imports those manufactured goods, it assembles them and then ships them to other markets around the world, including to the U.S. market. If China’s exports drop, the demand for U.S. goods will also drop, leading to a slower growth of U.S. exports (just like the participation of fewer athletes in the Olympics makes for less interesting games).

Rule changes also have a great effect on competition. In the Olympics, the definition of what constitutes an ‘amateur’ has changed over time and has led to an increase in the number of full time athletes and to an improvement in individual performance. Similarly, what counts as a performance enhancing drug matters a lot and can lead to the disqualification of athletes. The business equivalent here is the value of the Chinese currency. Even though the Renminbi has depreciated in the last few months, many see the currency value as a determinant of Chinese competitiveness and therefore a primary issue that needs to be changed.  Similarly, export control systems in both countries take on a growing role and sometimes even appear to play out in a “tit-for-tat” game. For example, when the U.S. curbs high-tech product exports to China, China limits its rare earth exports in return. Just when the two economies are becoming deeply integrated, the US-China relationship is fraying, says former secretary of the treasury Henry Paulson, Jr.

It seems that policy decisions were more easily made when China was still a third-world country and the U.S.’s leading position was not challenged. With China moving up the scale economically and politically, there is the temptation to view China as a potential threat and adversary. However, just like the Olympic rivalry for medals, the issue to argue over should not be who has the largest overall GDP, or who exports more to whom. The world economy is becoming increasingly integrated, and we should not look for development and leadership in all fields, but rather in fields of specific capabilities and advantages.  Just as with the Olympic Games, it doesn’t matter who wins the largest number of medals; what matters is that preparation and training, competitive encounters, and excellence can lead to a more inspired and better world.

 

*by Professor Michael Czinkota and Eva Y. Tang from Georgetown University.