WASHINGTON INSTITUTIONS FOR INTERNATIONAL TRADE

Screen Shot 2015-07-09 at 1.01.23 PMTo paraphrase the Philosopher Ludwig von Wittgenstein: “If you are not part of the discussion you are like a boxer who never goes into the ring.” It is important to be in the ring, and this course will permit students to be situated in the crucial nexus of international marketing and government activities, and allow them an opportunity to become part of the discussion.

We hear a lot about the growth of world trade, globalization, and imbalanced distribution of incomes. Yet, how does one understand all the issues, thoughts and arguments involved? Who decides what information and approaches to use and how to use them? How does one develop a time frame and context for addressing entrenched and novel issues? Misunderstandings can be rife. Only a few decades ago, Bill Gates of Microsoft, on a visit to Georgetown University, pronounced that there was no need for his company to have a Washington office. Oh ye of little faith – today the firm has ‘seen the light’ and supports a major operation in Washington D.C.

In order to learn from the past, we must understand what was done before us, and appreciating the context in which changes occur. Over the past half century, international business and trade have mushroomed in importance, and, in the last two decades, have reached and passed a tipping point. Social and economic shifts have taken us from the backroom discussions of experts to public disputes around the world. From ignorance, we have entered into the stage of too much information. A new sense of transparency and accountability offers new directions to businesses and their executives. The emergence of a public moral sense and scrutiny about international injustices encourages companies and governments to reduce corruption and abandon unsavory practices.

The role of governments has changed drastically, first shrinking in the 1980s and 1990s, but now coming back with a vengeance, dictating the direction and strength of international business activities. After decades of aiming for more open markets, even the liberal trading nations and the trade-supporting politicians within them are developing a tendency to restrict imports and encourage exports. In blatant disregard that someone’s export has to be someone else’s import, governments try to protect home industries and keep their own economies stable and revitalized. Yet, in spite of many efforts to that effect, global imbalances are persistent and distortive.

Over the long haul, we can distinguish patterns of ebb and flow in the international business and trade arena. Publicly, we are often told one thing – such as the need for the free flow of international trade – but when looking at actual decision patterns, actions might differ from pronouncement. Just like Saint Augustin who prayed in about 400 A.D., “Lord, make me chaste, but not yet,” policymakers and government executives often develop strong, if not nontransparent measures to delay or even defeat the easing of international trade flows. There are also times when change cannot happen quickly enough, when everyone aims to streamline and fast-track legislation and international accords by limiting the influence of deliberate legislative votes.

There are the subtle and not so subtle efforts at sanctions and disruptions of trade flows, yet they are often met by opposing interest levels, which sometimes negate such restrictions. Repeatedly we see one side, which is losing contracts, blaming it all on the corruption and nepotism on part of the winners. Particularly in the international arena, cultural differences can lead to very different ways of doing business. Just think of countries where competitiveness plays a key role, and compare them to nations where closeness to and support of family members is crucial for business. Business decisions and partners are likely to be evaluated in a very different fashion. In such instances, administrative actions and laws can be seen as rigorous structural supports for economic development, or as substantial barriers to growth.

The use and meaning of terminology also has its (often temporary) major effects. For example, for decades, the use of the term “Most Favored Nation (MFN)” status in international trade negotiations has led to demonstrations and even street battles. Now, the problem has gone away, since governments have changed the terminology and only speak of “Normal Trade Relations” (NTR), a goal that seems to be acceptable to all. Definitions which shape our understanding of core issues such as “fairness”, “market gaps”, “dumping” and “natural” can be changed or amended, and thus present us with new realities. Nowadays, one discusses and often re-evaluates the meaning and adjustment of key business pillars such as risk, competition, profit, and ownership, which perhaps gradually prepares us for a new environment. Many of today’s business executives discover that their activities are but one integral component of society. Politics, security, and religion are only some of the other dimensions that historically, and maybe again in the future, are held in possibly higher esteem than economics and business by society at large. Those who argue based on business principles alone may increasingly find themselves on the losing side.

We all need to work on including in our considerations the restauration of the future. Just consider how different things will be in a mere 25 or 50 years—keeping in mind that the ballpoint pen only came to the U.S. market in 1945, the computer game Pong only entered the market in 1972, and electronic or email on personal computers only advanced in the late 1980s. Will we look as retro to our descendants as our ancestors appear to us today (if we bother to look)? Yet, at the same time we are only a brief constant in a world of change.

We complain about the new phenomenon of pirates in Somalia—though such a profession was very popular in the Caribbean or during Roman times in Sicily (which is where Pompeius earned his early reputation when he brought about their demise). We highlight the disruptions from terrorism but neglect that already the crusaders had been writing home about their fear of terror. We debate new approaches to teaching and communication, but don’t stop to think what effect Gutenberg’s printing press, wireless telegraphy, or the introduction of radio had on monks, business and society. We deplore the differentiation of groups based on religion, but conveniently forget the impact of Torquemada and the inquisition, of Luther’s theses on the church doors of Wittenberg, of the persecution of Jews or Mormons.

By enhancing our understanding of what Washington-based institutions dealing with trade do to maintain influence and achieve growth, we will learn how to cope with government in our business activities down the road. We will also obtain input regarding impending changes, both highly and lowly visible. In this course we will be cognizant of one of Secretary Rumsfeld’s key policy pronouncements: “There are known knowns, which are things we know that we know. There are known unknowns; that is to say, there are things that we now know we don’t know. But there are also unknown unknowns; these are things we do not know we don’t know.” It is expected that we develop a better understanding of the known unknowns, and perhaps also enter the business and policy chambers of unknown unknowns.

Insight Washington 1: THE ECONOMIC BENEFITS OF U.S. TRADE

Why does President Obama advocate Trans-Pacific Partnership (TPP)? How can TPP grow U.S. businesses, create local jobs, and expand the middle class? The Council of Economic Advisors published a report, The Economic Benefits of U.S. Trade 2015 (click for the full report), which presents original empirical evidence, alongside a summary of the extensive economic literature, on a broad range of effects of enhanced U.S. trade and U.S. free trade agreements (FTAs). Highlights from this report include:

  1. U.S. businesses must overcome an average tariff hurdle of 6.8 percent, in addition to numerous non-tariff barriers (NTBs), to serve the roughly 95 percent of the world’s customers outside our borders.
  1. Exporters pay higher wages, and the average industry’s export growth over the past twenty years translated into $1,300 higher annual earnings for the typical employee.
  1. Middle-class Americans gain more than a quarter of their purchasing power from trade. Trade allows U.S. consumers to buy a wider variety of goods at lower prices, raising real wages and helping families purchase more with their current incomes.
  1. Over the past twenty years, the average industry’s increase in exports translated into 8 percent higher labor productivity, or almost a quarter of the total productivity increase over that time.
  1. When countries make trade deals with China, outsourcing of American jobs increases, while U.S. trade agreements do not change the rate of U.S. investment abroad.
  1. Trade raises labor standards and incomes abroad, helping developing countries lift people out of poverty and expanding markets for U.S. exports.
  1. The United States has a $43 billion surplus in agricultural trade and is a worldwide leader in agriculture, employing almost 1.5 million American workers.

 

USTR Updates Additional FY 2011 Tariff-Rate Quota Allocations for Raw Cane Sugar

U.S. Trade Representative increases the quota of U.S. sugar imports. Click here to read the announcement.
Any thoughts why such an increase happens, why now, and why for those countries listed? Are there countries missing that should have been included? Let us know what you think in the comments.