Take the Survey!

The U.S.-Korea Business Council is surveying companies about the impact they foresee if the Europeans get their Korea FTA in place before the U.S.-Korea FTA becomes operative.  (For new readers, the hold up in the U.S.-Korea FTA is that the Obama Administration is not pushing it and, without a push from the White House, the Senate is unlikely to ever ratify the agreement.)  U.S. companies should complete the very short survey and submit it by November 30.

FYI, Korea ratified a new FTA with India on November 6.

So, How Do You Pack it?

The U.K. Government has put up a site that is well worth a visit by exporters or wanna-be exporters anywhere.  Business Link carries an excellent guide to preparing your products for international shipment, taking you from packaging and labeling through selecting a shipper and getting your cargo out the door.  Links on the site address insurance, food labeling, temporary storage, wooden packaging, paperwork and more.  I used to teach a short course on preparing goods for international shipment; this is pretty good stuff.

Short post while I’m traveling, but this might be of use.

Will They Slow Down The Protectionists?

Australia has antidumping investigations going against products from the United States, China, Indonesia (somebody doesn’t like cheap toilet paper), Malaysia, Canada and Germany, and a countervailing duty case against China.  Canada has antidumping cases in progress against the United States, China, Ukraine and Vietnam, and a countervailing duty case against Belgium, Germany and the Netherlands.  Chile has imposed antidumping duties on Argentine flour.  Taiwan has asked its schools and colleges to favor local products and companies in construction projects, and has raised or delayed some of the customs duties it had lowered earlier.  Indonesia’s new import restrictions could be the subject of a whole separate post.  These include new tariffs on processed milk products from more than twenty countries, a safeguard investigation into wire from ten countries, buy national rules and film import restrictions, tariff increases that impact at least 66 countries, new import requirements on more than 500 products, and much more.

Japan has initiated safeguard actions against food products from the United States, Netherlands, China, Belgium, Afghanistan, Australia, Denmark, Germany, Singapore, Canada, Chile, France, Indonesia, Italy, Malaysia, Morocco, New Zealand, Norway and the Philippines.  South Korea joins the fray with an antidumping investigation into sodium hydrosulphite from China, and has raised tariffs on 16 products from 56 countries.  Mexico imposed antidumping duties on toilet sprayers from China (what is it about toilet products?) and raised tariffs on a whole bunch of products from the United States.  New Zealand continued antidumping duties against Greek peaches, and is reviewing duties on products from China and Malaysia.  Peru is investigating dumped or subsidized products from Mexico, China, Bolivia, Brazil, Canada, India, Pakistan, Turkey and the United States.  Steel bars from Russia, Korea, Japan and China are subject to a safeguard action in the Philippines.

Russia has imposed “temporary” duty increases on machinery and snowmobiles from 57 countries, introduced a “Buy Russia” policy that predates the American stimulus package, and much, much more.  Indonesian, Thai and Malaysian rubber producers have apparently tried to raise the world price of rubber through their International Tripartite Rubber Council.  Vietnam has increased customs duties on milk products from thirteen countries and on steel products from 25 countries.

The point is not to excoriate these countries.  Many of their actions are fully justified under WTO rules and some have also reduced other trade barriers this year.  My purpose is to destroy the argument that the blame for protectionism rests on Washington and Beijing.  All countries need to act intelligently.

My thanks to Global Trade Alert.  They make it a whole lot easier to track this stuff.

Chinese-Owned Property in Havana

What caught my ear was China’s growing presence and the apparent paucity of international firms represented in Cuba.  Dr. Babun said that only about 150 foreign companies are operating in Cuba.  If true, this is a sad commentary on Cuba’s perceived economic potential, and certainly shows doubts far beyond the impact of the U.S. embargo on doing business in Cuba.  Babun commented further that the economic crisis in Cuba has led the Castro government to freeze the foreign exchange accounts of most of these few foreign companies.

I was surprised to learn that China is now Cuba’s #3 trading partner, trailing only Venezuela and Spain.  Venezuela ships oil and Spain has historic ties to the island country, but China?  Babun says that China’s trade with Cuba is worth about $2.5 billion annually.  The Chinese are selling buses, locomotives, refrigerators and other consumer goods.  They are investing in nickel production, port development and operations, biotech, hotels and oil refining.  Who knew?

Gary Locke, U.S. Secretary of Commerce

U.S. Secretary of Commerce Gary Locke laid out his export agenda last week to a conference I attended in Washington.  Some of the agenda was new, some old, some points aroused skepticism, while others were admirable.  You can read Locke’s entire speech here. Here’s my take on his agenda:

• Secretary Locke wants to enhance U.S. trade promotion.  The U.S. Commercial Service has about 1500 people around the world in 77 countries, and the Secretary rightly wants to make sure that small U.S. companies know about them and take advantage of the help they offer American exporters.  My take?  Every Commerce boss says this.  My question?  If, Mr. Secretary, you succeed in publicizing the Commercial Service, will you provide them with the resources the Service needs to meet the resulting demand?  I suspect not.  (Background: The Commercial Service budget is abysmal, falling fast, and morale is going down the tubes.)
• Locke is pushing American visa reform!  This is truly new.  I have been following this stuff since the Johnson Administration and this is the first time I have heard a U.S. Commerce Secretary so clearly push for looser rules on visas.  Secretary Locke, based on his own experience pushing exports as Governor of the state of Washington, realizes how tough it can be to get a U.S. visa in some countries – and that this is killing export business.  Secretary Locke told horror stories of foreign business visitors unable to attend trade shows in the United States or to visit U.S. suppliers to finalize deals.  He said one in three potential buyers from China can’t get a visa!  Full marks on this agenda item!
• The Secretary then argued that the United States must modernize export controls.  He had another litany of horror stories and observed that Europeans and others are reluctant to purchase controlled inputs from U.S. suppliers that would go into their own high tech products.  Current controls mean that U.S. manufacturers appear to be unreliable suppliers, lose out to foreign competitors, and foreign manufacturers don’t want to be subject to the derivative controls of using U.S.-controlled inputs.  Locke has ordered his export control staff (Commerce handles controls on dual-use products, not pure military products) to eliminate controls on products sold to our closest allies, and to create “fast track” procedures for other countries.  This, potentially, will eliminate or expedite half of the export licenses granted by Commerce.  Uproarious applause from this observer.
• Commercial counterfeiting or product piracy cost American companies up to $250 billion each year, so Secretary Locke wants ever stronger efforts to enforce intellectual property rights.  He is launching a drive to reform operations of Commerce’s Patents & Trademarks Office and wants to get tougher on overseas enforcement of IPR rights.  Good on you, Gary!
• Locke wants to leverage (”leverage” as a verb is a big thing in Washington) the entire U.S. Government to help promote exports.  As chair of the cabinet-level Trade Promotion Coordinating Committee, he is positioned to make a start at that.  Still, at least twenty different federal agencies and departments make some claim to working in export promotion and they compete furiously for attention and resources.  Most Commerce secretaries try to make sense of this mish-mash.  I wish him luck.

Three out of five ain’t bad.

Berlin November 9, 1989

My ambassador in Bonn was General Vernon Walters, interpreter for generations of U.S. presidents.  The Germans loved him, despite German being perhaps the worst of his fifteen or so languages.  Walters had been saying for months in the embassy that the Wall would come down.  Most of us thought the boss had gone round the bend.  Reports have it that Washington thought so, too, and Jim Baker apparently considered recalling Walters.  Dick Walters was vindicated wonderfully.

U.S. television should get some credit for bringing the Wall down.  My own commercial office helped sell U.S.-made series to German television, and most of East Germany could watch “Dallas” and other shows portraying the luxurious lifestyles they thought all Westerners were living.  Ossies wanted a piece of that action and some risked their lives to come across and get it.  I remember later speaking with a woman in Prague, who asked “We’ve been part of the West for a year now, so how come we aren’t all rich yet?”

West Berliners offered their eastern neighbors champagne or sekt when they came through the Wall, but the more enduring image was bananas.  Easterners could rarely find bananas and went, well, “bananas” for them.  Less evident on the TV screen, but just as attractive as the bananas, were the huge numbers of Easterners, male and female, who dove into the first Western sex shops they could find.  Freedom.

Some seized business opportunities.  That same evening as the Ossies were coming across, western Avon ladies were headed the other way!  Among the first U.S. exports to benefit from the Fall of the Wall was a custom builder in Florida who produced vans built with satellite dishes and office equipment so that western companies could operate quickly in the East.  West Germany was so desperate to augment the meager phone lines to the East that they actually broke the French monopoly on European satellite launches to hire McDonnell Douglas to put up a new communications satellite quickly.  Some of the commercial response rankles.  Pieces of the Wall went on sale to tourists almost immediately.  Many of those sold at the Brandenburg Gate or Checkpoint Charlie proved to be pieces of “a Berlin wall”.  Pick up a chunk of concrete, spray paint one side randomly, sell it to a tourist.  I have a piece in my office, but wonder if it is the real thing.

Taiwan

There is an Associated Press report out of Taipei this morning that bodes well for business opportunities in Asia.  Leading up to the Asia Pacific Economic Cooperation (APEC) meeting, November 14-15 in Singapore, Taiwan’s rep for the APEC summit, Lien Chan, says he will meet with Chinese President Hu Jintao to discuss a possible free trade agreement between China and Taiwan.  Lien is at pains to insist that politics will not be discussed (since when is an FTA divorced from politics?) and that the proposed agreement will be a “partial” FTA.  That is interpreted to mean that agricultural trade will not be included and that Chinese workers won’t be allowed into Taiwan.  That still leaves huge room for trade expansion and will make it much easier for companies to operate on both sides of the Straits.

Part of the impetus for a China-Taiwan FTA, too, is China’s commitment to allow duty-free entry for products from S.E. Asia during 2010.  Taiwan doesn’t want to be left out and hopes for an FTA to be in place by next spring – lightening speed for an FTA.

I detect the fine hand of Vincent Siew, Taiwan’s Vice President.  I knew Vincent well when he ran Taiwan’s Board of Foreign Trade and I was the U.S. commercial officer in Taipei.  Vincent was always forward-looking when it came to business with China and is a tough, capable and pragmatic negotiator.  I can’t imagine he isn’t one of the leaders pushing for this FTA.

Container Barge

The South China Morning Post ran an article yesterday about container traffic in China’s big ports.  The ports that handle mostly ocean cargo are facing headwinds.  Preliminary reports for this October show Shanghai’s traffic languishing 9.7% below October 2008.  Similarly, Shenzhen saw a 10% year-on-year decline.  Both ports are expected to show double-digit declines in container traffic for the full year, reflecting the worldwide reduction in international trade.

China’s mainly domestic ports are looking a whole lot better, indicating that domestic consumption is fairly healthy.  The port of Guangzhou saw a 27.7% rise in traffic in September, bringing that port’s annual downturn to a more bearable 4.2% loss so far.  Guangzhou’s performance is overshadowed by Yingkou, which boasts a 29.2% increase thus far in 2009, goosed by a 57.5% surge in containers in September.

Non-containerized cargo is also growing, fueled by a still-insatiable demand for commodities.  Coal and iron ore imports are up tremendously.

Catherine Ashton © European Communities, 2009

I posted a couple of months back (see “Broken Promises”) about the failure of the G-20 nations to live up to their promises of resisting protectionism during the recession.  Now comes confirmation from Brussels, via the New York Times.  Catherine Ashton, the European Union’s trade commissioner, issued a report on Friday that concludes that the EU has felt the adverse consequences of more than 220 new or proposed protectionist measures since October 2008 (admittedly, most from outside the G-20).  Mercifully, Ms. Ashton concludes that the “protectionist worst-case scenario has been avoided.”  I’m relieved, but not relaxed.  The recession may be lifting in some countries, but the seductive promises of protectionism abound.

It is generally trade disputes between the major trading blocs that grab the headlines, so I am pleased to see that the United States is low on the list.  In terms of number of actions, says the report, the biggest perpetrators against the European Union are Russia and Argentina.  Indonesia, Belarus, Mexico, Vietnam, Brazil, Egypt and Paraguay were also cited for joining the protectionist bandwagon, though they are given credit for being more “selective” than Russia or Argentina.

For you true policy wonks out there, the full 72-page report is here.

Mad About Trade

I finished a terrific new book during my recent trip to Washington by Daniel Griswold, director of the Center for Trade Policy Studies at the Cato Institute.  Mad About Trade: Why Main Street America Should Embrace Globalization gives all the counterarguments you wish you could remember when facing down the legion of anti-trade troglodytes.  Griswold makes short work of arguments against allowing foreign investment in the United States, against allowing U.S. investment overseas, against imports, against offshoring and that a trade deficit necessarily harms the country.  Although aimed at American readers, the book is just as useful for foreign readers.  Just substitute your country’s name wherever America appears and you have arguments that can serve you well at home.

Perhaps his most valuable contribution is his emphasis on the impact of trade and investment on consumers.  Politicians seem to forget that ALL of their constituents are consumers who are hurt by any action that raises prices or limits choice among consumer goods.  The pols pay close attention to companies or unions who imagine they are hurt by trade or investment, but ignore the biggest voting bloc of all.  I suspect this is true in every country in the world.