Topic Category: Trade & Finance

Question: Globalization is affecting manufacturing. What’s the good and the bad?

Answer:

The integration of traditional manufacturing, new technologies, national markets, and improved supply chain management— all spawned by globalization—is transforming American manufacturing. In the process, resources have shifted to sectors with competitive advantages.

As a result, productivity has climbed to new highs and due to the American ability to change and improve, innovation is flourishing. Brawn power—the use of muscle on the factory floor—is quickly being replaced by brainpower.

Topic: Trade & Finance
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Buried beneath the daily stories about car bombs and insurgents is an underappreciated but comforting fact: The world has somehow become a more peaceful place.

War Is Declining

As one little-noticed headline on an Associated Press story recently reported, “War declining worldwide, studies say.” According to the Stockholm International Peace Research Institute, the number of armed conflicts around the world has been in decline for the past half century. In just the past 15 years, ongoing conflicts have dropped from 33 to 18, with all of them now civil conflicts within countries. As 2005 draws to an end, no two nations in the world are at war with each other.

Topic: Trade & Finance
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In today's extremely competitive business environment, securing foreign marketshare is essential for many companies to succeed well into the future. But to achieve this, it is imperative to first identify, assess and choose the right markets to pursue. Although market selection may seem obvious to some, selecting the wrong ones can be disastrous.

By establishing a set of guidelines and performing a thorough analysis, you will reduce the risks. To make the job easier, consider some of our guidelines below.

Topic: Trade & Finance
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Are the U.S. government’s new antiterrorism policies and regulations for cross-border commerce serving, in effect, as non-tariff barriers? If so, are they trumping the long-standing objective of maintaining a relatively open and easily crossed international border between the U.S. and Canada?

What are the principal costs involved in complying with the new security mandates? And, what are the likely strategic responses of American and Canadian companies to these new security regulations when it comes to decisions related to supply line logistics, direct investments, and the location of production?

Topic: Trade & Finance
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People who live in countries open to the global economy enjoy a higher standard of living, on average, than those trapped behind high-tariff barriers. They eat better and live longer. Their children are more likely to attend school than work in the fields. They can speak, assemble and worship more freely and elect their rulers democratically. And because economically open countries are more likely to be democracies, they are less likely to fight wars with each other.

Topic: Trade & Finance
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FAQ: What is the impact of the U.S.-Chilean Free Trade Agreement?

Talking Points:

On September 3, 2003, after years of intense negotiations, President George W. Bush signed the U.S.-Chile and U.S.-Singapore Free Trade Agreements. As a result, Chile and Singapore joined Israel, Canada, Mexico, and Jordan to become the United States’ fifth and sixth free trade partners.

As the first comprehensive trade agreement between the United States and a South American country, the U.S.-Chile Free Trade Agreement is anticipated to boost bilateral trade and investment. Largely modeled after NAFTA, the Chilean accord encourages progress on the Free Trade Agreement of the Americas, which is anticipated to be completed in the near future.

Topic: Trade & Finance
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FAQ: What is the impact of NAFTA on the United States?

Talking Points:

Formal NAFTA negotiations began in June 1991 and were completed in August 1992. The trade accord, ratified by both the U.S. House of Representatives and the Senate in November 1993, was implemented on January 1, 1994. Although more than a decade has passed, the question of whether NAFTA has had a positive or negative impact still persists. The perceived loss of U.S. economic preeminence vis-à-vis the rest of the world, coupled with the reduction in the number of U.S. manufacturing jobs, have generated frustration among many Americans. In addition, in this period of globalization, the fear of losing one’s job is echoed daily. Without foundation, much of this frustration has been vented on NAFTA.

Topic: Trade & Finance
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FAQ: How does the value of the dollar impact the U.S. economy?

Talking Points:

The effects of a rising or declining dollar are complex and not always well understood. When the dollar decreases in value, U.S. exports typically become more attractive abroad. In turn, companies selling more goods and services often hire more workers. But a decreasing dollar has other consequences. For example, U.S. manufacturers who rely on imported components and materials find it more costly to produce their goods. In turn, these manufacturers may absorb this added cost, which will reduce corporate profits and possibly impact hiring. Or, they may pass this increase on to consumers, which could lead to inflation. Additionally, a dollar that is weakening or declining in value for lengthy periods of time or at a rapid pace can dampen investor confidence and result in less U.S. inbound investment. In turn, this can make it difficult to finance budget deficits and may lead to higher interest rates. Thus, business expansion becomes more costly and compromises the ability of companies to hire new employees.

Topic: Trade & Finance
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FAQ: What are the theoretical benefits of free trade?

Talking Points:

International trade theory has its roots in the 18th-century writings of Adam Smith. Not only did he refute arguments for restricted trade, which relied on the belief that material gains acquired by one nation were done so at the expense of the other, but he demonstrated the potential gains of free trade. Thus, trade among nations is not a zero sum game, but rather, a win-win situation.

Topic: Trade & Finance
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According to some analysts, the dollar is set for a fourth consecutive and unprecedented year of decline. To some, this is good news; to others, a disaster.

Some Historical Perspective

In March 1973, the Federal Reserve’s Nominal Major Currencies Dollar Index was set at 100. In March 1985, the U.S. dollar reached its highest level at 143.90, while its lowest point came about 10 years later, in April 1995 when it fell to 80.33. In December 2004, the index continued to fall, slipping to 80.19, as compared to major currencies.

Topic: Trade & Finance
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