Of Crimea and Punishment

Governments attempt to impose comparable sanction burdens on each other. However, due to cultural and historic differences, a policy based mainly on sanctions will lead to inequities and substantially therefore increase the risk in international trade.

Key differences exist between Russia and western nations regarding profit, competition, risk and reward, private property and growth, and   how they affect the outcome of sanctions.

In the U.S., profit is the expected result of doing business, and low profits are usually blamed on management. By contrast, lower profits in Russia allow its government to shift the blame onto foreign culprits.

Private property is a key reward in the United States, while in Russia ‘private’ often means responsibility and risk exposure.  Since growth is key in the U.S., any inhibitors of growth are seen with concern. A wide variety of economic performance in Russia, makes its growth much less of a pressure point.

Sanctions against the U.S. may burden the population and lead to new candidates and policies.  In Russia, the sacrifices imposed by sanctions seem to indicate dedication and strength. Declining U.S. profits or growth cause doomsday scenarios, while time is expected to bring economic improvement.

Losing out on the very latest technology means falling behind for Americans. For Russians, pretty good technology is a pretty good achievement. Russian ownership of space ferries and satellites and their use by the U.S. makes them proud.

Russia’s size of 6.6 million square miles makes it the largest country in the world.  The 300 million U.S. population more than doubles that of Russia. Still, the Russian market is of great importance for many global firms.

There are only few historical rewards for former leaders. For example, though Greece invented the Olympic Games, no points are given for that ancient super action. Going first with the Greek flag when marching into the Olympic Stadium is just about all there is. Russia may well see its existing strength and market size as an opportunity for leadership.

We all are said to understand each other so much better than in the past. Yet, much of our thinking is based on our history, culture and outlook. They define our spheres of interest, which we aim to preserve. Ukraine, for example, will tend to be closer to Russia than to the United States. The average Russian understands as much about Columbus, Ohio as the average American does about Sevastopol.

Global relationships between Russia, Asia, Europe and the United States are being re-balanced. Key changes are likely to come from outside the United States. It would be unwise to undertake transformations without dampening the key concerns of key players on all sides.  

–

Prof. Michael R. Czinkota

WTO Members Meeting Updates – Cocoa and Chocolate

At the WTO Sanitary and Phytosanitary (SPS) Measures Committee meeting on 10 – 11 July 2012, several countries raised their concerns about EU’s recent decision to amend its regulation on maximum levels of cadmium in chocolate, milk chocolate and cocoa powder. They believe the move threatens their exports and the livelihoods of smallholder cocoa farmers.

According to a report published by Journal of Occupational Medicine and Toxicology, cadmium is a type of heavy metals which may accumulate in the kidney, inducing kidney dysfunction, skeletal damage and reproductive disorders. However, its maxim amount of allowance varies among individuals depending on their diets and health conditions. [1]

The concern, first raised in October 2011, is elaborated in a paper from Cameroon, Colombia, Ecuador, Ghana, Mexico, Nicaragua and Peru, and is also supported by Guatemala, Dominican Rep, Venezuela, Cuba, Jamaica and Costa Rica. The EU agreed to listen to all the concerns at the meeting.

For more information: WTO News and Updates

Next WTO members meeting will be on 17–18 October 2012.

  1.  Godt, J., F. Scheidig, C. Grosse-Siestrup, V. Esche, P. Brandenburg, A. Reich and D. A. Groneberg,  The tocity of cadmium and resulting hazards for human health.  Journal of Occupational Medicine and Toxicology. 2006 ;1:22. doi:10.1186/1745-6673-1-22.

Sanctions and Disruptions of Trade Flows

Sometimes, powerful nations try to use subtle and not so subtle sanctions and disruptions of trade flows, in order to achieve policy objectives. Yet their efforts are often met by opposing interest levels, (for example due to historical ties) which tend to negate such restrictions.

Repeatedly we can see one side, which is losing contracts, blaming it all on the corruption and nepotism on part of the winners. Yet, there may be many reasons for different approaches to business. For example, culturally, the closeness to family and desire to help one’s own home environment, may be seen as an obligation rather than a deviation. Therefore, laws and their implementation can be seen as rigorous structural supports for economic development, or as substantial barriers to culturally driven growth.