Topic Category: World

As we enter the 21st century, globalization is affecting nearly every aspect of our lives. Ushered in with this new era are dynamic global trends that are impacting every nation, every level of industry, and virtually every business. Consequently, many economic assumptions no longer seem to apply, yet new realities still need to be defined. Basing decisions on old assumptions may lead to undesirable outcomes.

Entering the 19th Century... Again

Entering the 21st century is in many ways similar to entering the 19th century. The shift from an agrarian society to an industrial economy compelled workers to leave farms in search of factory jobs. Industrialization created anxiety and fear, and demanded that workers learn new skills.

Today, with the advent of globalization and the information economy, new skills again are demanded — but they are much more sophisticated. The internet, which in some sense is eliminating distance, has become what the railroads and electricity were for earlier ages. And these changes are having a profound effect on nations, companies and their employees.

The New Competitive Advantage

In the past, an abundance of natural resources secured a nation’s competitive advantage. Today, intelligence and technology are the new resources. As such, for companies to prosper in the 21st century, they need to harness these new resources and manage their global supply chain better than their competitors.

Education and Unemployment

Since the late 1970s, the wages of less skilled American workers have decreased relative to those of more skilled workers. Similar patterns are occurring in the United Kingdom. In contrast, countries with relatively rigid wages, such as France, Germany, and Italy, have experienced higher unemployment rates.

In the United States, unemployment bears some correlation to the level of education and skills. For example, in May 2000, the annual U.S. unemployment rate for the civilian labor force averaged 4.1%. However, of the civilian labor force age 25 years and older, the rate of unemployment was 6.1% for workers without a high school diploma. It declined to 3.7% for high school graduates, 2.9% for those with some college education, and 1.8% for college graduates.

The occupational groups projected to decline or be among the slowest growing are more likely to be dominated by workers who do not obtain education beyond high school. Conversely, occupations having the highest rates of growth are more likely to have workers with higher educational attainment.

Life-Long Learning Is Required

According to the U.S. Department of Labor’s report, Futurework, we are living in a new economy powered by technology, fueled by information, and driven by opportunity.

As the new economy emerges, it is essential that America’s young population develop the skills needed for tomorrow. It is very clear: as globalization creates opportunity, it generates more for those workers who are better educated. Because the uneducated could be left behind, life-long learning policies are essential in today’s economy and more so in tomorrow’s economy.

The Impact on Manufacturing Jobs

According to the International Monetary Fund, “nearly all research finds only a modest effect of international trade on wages and income inequality.” Thus, technology, not trade, is the real displacer of jobs. Productivity gains generated by new technologies in manufacturing have consistently outpaced productivity gains in other sectors of the economy. As a result, the United States can produce more goods with fewer workers, contends the CATO Institute, a Washington, D.C.-based think tank.

Contrary to claims made by anti-trade organizations, the vast majority of U.S. manufacturers who invest abroad are not seeking low-wage production in developing countries. In fact, in 1999, high-wage countries captured almost 90% of U.S. manufacturing foreign direct investment. This reflects greater importance of non-wage factors in overseas investment decisions.

Services Industries Are Flourishing

Every year for almost three decades, the U.S. service sector has enjoyed a trade surplus that has consistently reduced the U.S. trade deficit. In 1999 alone, U.S. exports of services decreased the overall trade deficit by more than $80 billion — that’s a 25% reduction.

Since 1980, U.S. exports of services have grown 130% faster than exports of goods. This reflects a growing importance of services both domestically and internationally. The U.S. service sector is extremely advanced and internationally competitive. With the recent introduction and availability of new, inexpensive technology — led by telecommunications, computers, and the internet — millions of people and companies worldwide now have the ability to purchase services from anywhere.

It is anticipated that the export of business, professional and technical services (accounting, advertising, engineering, franchising, consulting, public relations, testing and training, etc.) will increase rapidly. As a result, nations, companies and their employees who support trade in services are developing an edge in this era of rapid change.

The New Role of Government

Globalization has put a premium on good government and increased the costs of poor government. Consequently, governments must redefine their role in light of heightened competition among countries and companies. This is forcing governments to adopt policies that support international trade, privatization, economic stability, deregulation of capital markets, investment attraction, a fair and enforceable legal system, etc. And since economic activity is now mobile, governments must provide the technological infrastructure that supports a cluster of related industries.

Business Survival 2001

Of the 500 companies originally comprising the S&P 500 in 1957, few currently remain on the list. Why? According to Arie de Geus, author of The Living Company, “The average life expectancy of a multinational corporation — Fortune 500 or its equivalent — is between 40 and 50 years.” Long-lived companies, he contends, are sensitive to their environment, cohesive with a strong sense of identity, tolerant, and conservative in their financing.

With the fast-paced changes brought on by globalization, greater pressure is put on companies to adapt or perish. Lester Thurow, author and MIT professor, states that “businesses must be willing to destroy the old while it is still successful if they wish to build the new that will become successful.” He points out that four of the five makers of vacuum tubes never successfully made transistors after transistors replaced vacuum tubes, and even the fifth is today not a player.

High Risks With High Rewards

Successfully navigating in unfamiliar territory without a map is not easy. But there is a big upside. Globalization is presenting tremendous opportunities never seen before. Those who welcome its changes and carefully adapt will be well positioned to seize the opportunities that arise, while minimizing the risks that follow.

This article appeared in September 2001. (BA)
Topic: World
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In the late 1990s, Asia suffered a devastating financial crisis that not only squashed its economic growth, but also impacted the world’s economy. Today, however, Asia’s economic outlook appears bright — and even though Asian growth rates will slow in the short-term, U.S. exporters may wish to reconsider pursuing Asian markets.

World Demand Severely Affects Asian Growth

Many Asian economies, including Hong Kong, China, and South Korea, experienced exponential growth in the 1990s, much of which can be attributed to IT (information technology) output. In mid 2000, this changed when U.S., European, and other economies began to slow.

For example, the U.S., which consumes nearly half of the world’s IT products, decreased its demand. As a result, Asian output and economic growth were adversely impacted. Consequently, Asian gross domestic product (GDP) growth is expected to decline from 7% in 2000 to approximately 5% this year. Yet, this rate is still among the world’s fastest.

U.S. FDI in Asia Is Up

U.S. foreign direct investment (FDI) in Asia continues to grow. In 1999, on a historical-cost basis, it reached $146 billion, up from $118 billion in 1998. Japan was the largest recipient of U.S. FDI, receiving $48 billion in 1999. Following were Singapore, Hong Kong, Indonesia, South Korea, China, Thailand, and Taiwan.

Exports to Japan Are Up; Growth Is Slow

Japan is the world’s second largest economy and third largest U.S. export market. In 2000, the U.S. exported $65.3 billion to Japan. This represented an increase of 13.6% since 1999. However, Japan’s GDP growth rate registered 1.7% in 2000, and is forecasted to grow by 1% in 2001 and 1.1% in 2002.

China’s Economy Continues To Blossom

After years of declining growth, China’s GDP rate rose 8% in 2000, and is anticipated to reach 7.5% and 7.8% in 2001 and 2002. The U.S. exported $16.2 billion to China in 2000 — an increase of 24% over 1999. U.S. FDI in China, on a historical-cost basis, is considered small at $6.5 billion. However, China is likely to join the World Trade Organization this year, and as part of its accession agreement, China has committed to significantly reduce trade barriers, which is likely to accelerate Chinese imports and attract greater investment.

Hong Kong Experienced a Growth Spurt

U.S. exports to Hong Kong were $14.6 billion in 2000, up 15.6% over 1999. Hong Kong’s GDP growth rate rose significantly from 3.1% in 1999 to 10.5% in 2000, and is projected at 4% and 5.5% in 2001 and 2002. The absence of trade barriers has fueled Hong Kong’s economy. Plus, it has made good progress in addressing copyright piracy.

South Korea Is on the Right Path

South Korea’s GDP slowed to 8.8% in 2000, and is anticipated to reach 4.2% and 5.5% in 2001 and 2002. The South Korean economy bounced back from the Asian financial crisis rather quickly, and its economy is undergoing solid reform, especially in the financial and corporate sectors. U.S. exports to South Korea reached $27.9 billion in 2000, a 21.5% increase over 1999.

Taiwan’s Diagnosis Is Favorable

Taiwan’s economy is expanding. In 2000, its GDP growth increased 6%, up from 5.4% in 1999. Projections for 2001 and 2002 are 5.1% and 5.8%. The U.S. exported $21.4 billion to Taiwan in 2000, up 27.4% from 1999.

Time to Reassess Your Target Markets

Leading U.S. exports to Asia include computers, peripherals and software, aircraft and parts, electronics, telecommunications, scientific and medical equipment, and pharmaceuticals. As the region improves economically, you may wish to pursue in-depth research and reassess your target markets since Asian trade and investment opportunities are likely to rise.

This article appeared in April 2001. (CB)
Topic: World
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The European Union (EU) is currently negotiating with 13 countries to have them become full members of the European trade bloc. As this process continues and additional countries are admitted, the EU’s level of global influence will increase. What does all this mean for your business?

The Big Kid on the Block Has Company

Since World War II and throughout the Cold War period, the United States has been unquestionably the world leader in terms of trade and economic policy. In fact, the Cold War provided much of the glue that held the American-Western European alliance together. However, since the end of the Cold War, and in light of the EU’s expansion plans, the U.S.’s position of dominance is being challenged.

Topic: World
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Leaders of the Asia-Pacific Economic Cooperation (APEC) forum met in Brunei on November 12 and 13 for “APEC 2000,” the twelfth ministerial meeting.

Established in 1989, the 21-member organization includes: Australia, Brunei Darussalam, Canada, Chile, China, Hong Kong, Indonesia, Japan, North Korea, Malaysia, Mexico, New Zealand, Papau New Guinea, Peru, the Philippines, Russia, Singapore, Chinese Taipei, Thailand, the United States, and Vietnam.

Purpose of the Meeting

According to the APEC Secretariat, the forum’s main theme, entitled Delivering to the Community, “signified the need for sustaining economic growth to raise incomes and reduce poverty in the region.” The agenda was organized in accordance with three themes: Building Stronger Foundations, Creating New Opportunities, and Making APEC Matter More.

Building Stronger Foundations

The ministers reaffirmed their commitments to the goal of free and open trade and investment. With the understanding that achieving this goal will be difficult, the APEC Secretariat expressed the need to explore more creative and efficient ways to prepare its members for success.

Creating New Opportunities and Making APEC Matter More

APEC said the revolution in information and communication technology has transformed the ways of doing business. It believes the new economy presents both developed and developing members with new opportunities, and sees itself as a catalyst to help its members seize these opportunities.

APEC also welcomed efforts that provide focus on the tangible benefits that have accrued in the region, and said it has ensured that its programs are more relevant and meaningful.

Meeting Outcome

No major agreement resulted from the meeting. This is not unusual considering many participating national leaders are “lame ducks” and therefore not well positioned to implement any far reaching legislation. But more importantly, differences of opinion between developing and developed country members over the ability to participate in the globalization process, the information technology revolution, and the planning of the APEC agenda made any major consensus unlikely.

The U.S., Japan, and Australia pushed to obtain an agreement to establish a new round of talks under the auspices of the World Trade Organization. But with globalization under scrutiny, APEC pledged to address the disparities in wealth and knowledge in hopes of bringing the benefits of globalization to all its members.

Keep Your Eye on Relationships

Issues such as globalization and the “digital divide” will continue to affect the relationship between the wealthier and poorer countries.

This article appeared in October 2000. (CB)
Topic: World
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From its rise to prominence on the international market, to its dramatic economic downturn in 1998, followed by political upheaval and separatist movements, Indonesia has remained in the spotlight.

Recent events, including the September 13, 2000 bombing of the Jakarta Stock Exchange, have further shaken confidence in Indonesia’s political and economic system. As a result, it’s necessary to proceed with much caution in this country of 200 million people, which is comprised of 300 different ethnic groups living on 13,500 islands.

Severe Economic Crisis

Indonesia’s crisis of 1998 was precipitated by the rapid devaluation of currencies throughout Southeast Asia. Massive numbers of Indonesian companies faced bankruptcy, and a sharp rise in inflation occurred, followed by the collapse of the banking sector.

In early 1998, the value of the Indonesian rupiah fell considerably. Thus, on June 1, 1997, 1998, 1999, and September 21, 2000, one dollar equalled 2430, 11350, 8090, and 8820 rupiahs, respectively.

According to the U.S. Trade Representative’s office (USTR), Indonesia’s gross domestic product (GDP) dropped precipitously from 1998 to 1999. Widespread government corruption under President Suharto’s regime was revealed, followed by protests and violence that led to Suharto’s resignation.

Economic Recovery Followed by Instability

Aid from the International Monetary Fund, the World Bank, and the Asian Development Bank appears to have helped. The rupiah stabilized and interest rates and inflation decreased. Importantly, the country’s GDP in 1999 ticked into the positive, with a rise of 0.1%. However, growth prospects for this year are difficult to estimate.

Newly elected President Wahid has attempted to implement structural reforms and liberalization measures initiated by former interim President Habibie and several international financial institutions. However, Wahid’s effectiveness and ability to monitor his appointees’ actions is questionable. Also, the banking sector continues to face stiff problems while massive corporate debt hangs overhead.

Sustaining economic recovery has been challenging. Recent violence in East and West Timor, in Aceh, a region fighting for political autonomy, and in Hebrides, where Islamic groups are pitted against Christians and ethnic Chinese, has shaken confidence in the government.

Trade and Investment

Investors who have not pulled out of Indonesia during the turmoil have incurred much risk. However, with this risk have come opportunities with low price tags. According to the USTR, the stock of U.S. foreign direct investment in Indonesia reached approximately $6.9 billion in 1999, an increase of 4% over 1998. This is concentrated in the petroleum, manufacturing, and financial sectors.

U.S. exports to Indonesia rose to $8.3 billion in 1996, but declined to $2 billion in 1999. Prior to the instability, sectors predicted to expand included information technologies, security and safety industries, and industrial chemicals.

Also significant were food processing, paper and paperboard, telecommunications, medical equipment, mining, oil and gas equipment, and education and training services.

Follow the Market Closely

Indonesia offers a wealth of natural resources, a modern telecommunications sector, and plenty of opportunity — with risks. Currently, predicting this level of risk is challenging.

This article appeared in October 2000. (CB)
Topic: World
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A nation in constant change, South Korea has experienced a wide spectrum of political and financial turbulence during the last 50 years. Amidst cold-war hostilities from its northern neighbor, South Korea has achieved international prominence as an economic powerhouse. This is a growing market you might wish to consider pursuing.

It’s Back on Track

Since its plunge into financial crisis in 1997, South Korea has worked hard to repay large portions of its foreign debt. Today, it remains a formidable contender in a strategic region. Many of the reforms implemented by President Kim Dae Jung, in response to the 1997 currency collapse, have succeeded in creating a more open market-oriented economy.

The Market Is Expanding

Analysts predict that with its strong private consumption and increasing stock market, South Korea will continue to be an important U.S. export and investment destination. For example, in 1999, it ranked as the United States’ sixth largest export destination, with almost $23 billion in goods. This represented an increase of 40% over 1998. And, in 1998, U.S. foreign direct investment in South Korea, on a historical-cost basis, reached 7.4 billion, an increase of 70% since 1994.

High-Tech Goods Are in Demand

Demand for many imports is rising, especially for high-tech computer and semiconductor equipment. Opportunities also exist in the energy and telecommunications sectors following the privatization of South Korea’s state-owned facilities.

Asia-Pacific nations and the European Union, especially Britain, recognize this growing market potential and are actively pursuing South Korea. Consequently, U.S. firms could expect greater competition in the future.

The Challenges Ahead

Recent increases in South Korea’s monthly current account deficit and short-term debt indicate more improvements are necessary to prevent another economic emergency. Analysts believe South Korea must continue to ease its restrictions in trade, especially in the steel and automotive industries. South Korea’s future is also inextricably linked to its relationship with North Korea.

The Two Koreas

South Korea is on the verge of a period of unprecedented and fundamental change, following its President’s recent historic summit meeting with North Korea’s Kim Jong Il. This was the first-ever meeting between the two nations, which are still technically at war.

Sharing a common history and language, both Koreas have much to gain from increased dialogue and economic cooperation. Greater stability, a likely outcome of the summit, will promote more investment in the South. A unified Korean peninsula would foster many more foreign investment opportunities in the North and South.

The combination of South Korea’s capital and management experience, coupled with North Korea’s educated workforce and competitive wages, would jumpstart the South’s stagnant textile, clothing, and accessories industries. Timely investment ventures in construction and transportation could capitalize on the North’s proximity to China, Russia, and Europe.

This article appeared in April 2000. (CB)
Topic: World
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Recovery from the recent economic and financial crisis that threatened the countries of the Association of Southeast Asian Nations (ASEAN) is underway. As a result, this market of approximately 500 million people, again, is offering tremendous opportunities to U.S. exporters and investors.

Association Promises Regional Stability

ASEAN was formed in 1967 by Indonesia, Malaysia, the Philippines, Singapore, and Thailand to promote political and economic cooperation and regional stability.

Brunei joined in 1984, and Vietnam in 1995. Laos and Burma were admitted into full membership in July 1997. Cambodia became the tenth member in 1999.

ASEAN commands far greater influence on Asia-Pacific trade, political, and security issues than its members could achieve individually. Its success has been largely based on its use of consultation, consensus, and cooperation. U.S. relations with ASEAN have been excellent since its inception.

ASEAN Offers Sound Export Destinations

In 1999, the United States exported about $38 billion in goods and services to ASEAN, which has a gross domestic product of $600 billion. Within the larger ASEAN markets, U.S. exports to the Philippines were up by 6.5% since 1998, while those to Singapore and Indonesia edged up slightly, expanding by 2.8% and 1.7%, respectively. Exports to Malaysia were down by 3.9%, and those to Thailand fell 6.3%.

Foreign Investment Needed for Recovery

While ASEAN nations recognize that further liberalization of trade is required, they independently pursue support, cooperation, and investment from the private sectors of the major countries. And they understand the need to retrain and retool their work forces.

With nearly two decades of building strategic alliances and working relationships, the U.S.-ASEAN Business Council has become the premier private organization in the United States representing the ASEAN private sector. The Council is committed to promoting U.S. competitiveness in this dynamic global growth market.

Singapore Is Important

Of the ASEAN nations, Singapore imports the most from the United States. This is largely due to its status as a transshipment point for the rest of Southeast Asia. Additionally, it is one of the most highly developed and sophisticated industrial, commercial, financial, and consumer economies in the world.

The United States remains Singapore’s largest investor, accounting for 44% of total foreign investment commitments in 1998.

An Important Gateway

Singapore is also an excellent market (and test market) for U.S. products. Its role as one of the principal gateways to Southeast Asia typically offers American manufacturers distribution through interested local buyers or regional buyers in other Southeast Asian countries.

Shipments from the U.S. to Singapore were about $16.5 billion in 1999. This primarily included electronic equipment, electrical machinery, aircraft and parts, optical, photographic and measuring devices, and plastics.

Singapore levies minimal import duties and presents no significant non-tariff barriers to trade. Analysts of the Singapore economy are unanimous in their prognosis that the economic outlook has brightened considerably since the beginning of the year, notwithstanding the significant challenges that remain.

Malaysia Struck Hard by Crisis

After nearly a decade of strong economic growth averaging 8.7% annually, Malaysia was hit hard by the regional financial and economic crisis of 1997-98. But signs of recovery are appearing. Its economy is expected to have generated positive growth in 1999 after having contracted by 7.3% in 1998.

Despite the regional economic downturn, Malaysia remains an important trading partner for the United States. In 1999, U.S. exports to Malaysia totaled about $9.1 billion. Malaysia remains attractive for foreign investment in the petrochemical industry and for electronics export manufacturing. Most sectors of the economy are widely open to trade.

U.S. Investment in Malaysia Considerable

U.S. direct investment in Malaysia is concentrated in oil and gas, followed by manufacturing, primarily semiconductors and other electronic products. According to Department of Commerce statistics, U.S. investment was $6.2 billion in 1998.

Trade and investment prospects remain strong in infrastructure, information technologies, industrial automation and process control equipment, medical and health products and services, education, human resource development, and furniture and environmental engineering.

With the return of stability and growing optimism, Malaysia’s highly trade-oriented economy has started to reverse its course.

Philippine Economy Shows Modest Growth

The Philippine economy has now turned the corner on the Asian financial crisis and is experiencing modest growth. U.S. exports to the Philippines, which represented nearly 23% of total Philippine imports in 1998, are projected to increase this year. For U.S. exporters, this is a good time to pursue business opportunities in this market.

Despite an overall 16% decline in foreign direct investment in the Philippines in 1998, the U.S. is the largest foreign investor in the country with a cumulative equity investment of $2.72 billion in 1998. This accounted for nearly one-third of the country’s total foreign direct investment.

Exports Increased in 1999

Compared to other Southeast Asian nations, trade with the Philippines recovered quickly in 1999. U.S. exports to the Philippines were about $7.2 billion in 1999, up from approximately $6.8 billion in 1998.

Leading U.S. export sectors to the Philippines include telecommunication equipment, information technology, power plant equipment and services, food processing equipment, building products, and hotel and restaurant equipment.

Sectors offering the greatest investment potential for U.S. firms are electronics/semi conductor assembly, energy (including the power generation industries), franchising, and information technology.

ASEAN’s Future Is Bright

As 1999 began, there was concern that the Asian crisis which started in 1997 would spread and produce instability. It was widely believed that this would undermine trade between ASEAN countries and the United States.

As 2000 advances, it is apparent that the countries of Southeast Asia have learned from the mistakes that contributed to their economic slump. And, as they strive to grow in security and strength, this will bring greater opportunities to U.S. exporters in the near future.

This article appeared in January 2000. (CB)
Topic: World
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The financial crisis that crippled much of Asia in 1997 destabilized financial markets in both developed and developing countries. As a result, Latin American growth, measured in real gross domestic product (GDP), fell from 5.4% in 1997 to 2.3% in 1998. The region’s difficulties were compounded by natural disasters that struck with unprecedented strength. However, given Latin America’s macroeconomic stability and commitment to free market policies, economic projections for the year 2000 are favorable — generating new opportunity for U.S. exporters and investors.

Topic: World
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The founding countries of the Mercado Comun del Cono Sur (MERCOSUR) — Argentina, Brazil, Paraguay, and Uruguay — have suffered from the economic slowdown in Latin America that began last year.

Nevertheless, U.S. exports to the trade bloc have increased 245%, from $6.5 billion in 1990 to $22.5 billion in 1998. And as we enter the new millennium, Mercosur imports are expected to continue to rise.

A History of Economic Liberalization

Formed in 1991, Mercosur was designed to stimulate members’ economies. To achieve this, the trade bloc proceeded to emulate the Chilean growth model, which was based on unilateral tariff reductions, privatization of publicly owned industries and services, and openness to foreign investment.

On January 1, 1995, Mercosur established a customs union, introducing a system of common external tariffs. As members opened their markets to greater competition and reduced inflation, production levels and demand for imports, especially capital goods, rose. By 1996, imports from member countries increased by 314%, compared with 185% from non-member countries.

Strained Internal Relations

Primarily because of Asian economic problems, recent economic growth in Brazil and Argentina decreased from 1997 levels. And the surprise 30% devaluation of Brazil’s real and abandonment of the fixed exchange rate in January 1999 boosted its exports. This, combined with poor regional growth, strained Brazil’s relations with the other Mercosur countries, especially Argentina.

During periods of economic decline, countries sometimes erect trade barriers to protect their industries from imports. Brazil and Argentina took that step. Consequently, trade between the two Mercosur members dropped 20% during the first six months of 1999.

Enter the European Union

During this time of fragile recovery, the leaders of the 15-nation European Union (EU) and Mercosur met in August to discuss a possible free-trade agreement. A significant impediment, however, is the highly subsidized EU farm sector, which effectively limits South American agricultural exports to the EU.

Nevertheless, EU-Mercosur negotiations may prompt the U.S. to renew talks to create a Free Trade Area of the Americas, creating a hemispheric free trade zone. Thus, a budding relationship between the EU and Mercosur sends a clear message that Europe could pose real competition for the U.S. in South America.

Franchising in Brazil

Brazil’s economy, the largest in South America, is rapidly expanding its presence in world markets. And franchising is becoming big business. With strong annual sales, the Brazilian franchise industry reached about $11.5 billion in 1997. Currently, two-thirds of the foreign franchises (66 companies) are headquartered in the United States.

The best franchising prospects include training courses, construction, and personal fitness. Other major non-franchise imports include crude oil, capital goods, chemical products, foodstuffs, and coal.

Argentine Privatization under Way

Argentina recently completed one of the world’s most ambitious airport privatization programs. And between 1999 and 2004, investment in airport infrastructure is expected to exceed $1.7 billion. Consequently, airport ground support equipment is anticipated to become a prime U.S. export to Argentina over the next decade. Other major projected imports from the U.S. include vehicles and parts, chemicals, telecommunications equipment, and plastics.

Calling Paraguay

Paraguay’s economy is largely service oriented. The need for improved communications has resulted in a significant demand for telephone and computer equipment. And the need for better transportation has brought about investment in road construction.

The country also has a large underground market, which involves thousands of micro-enterprises and urban street vendors, as well as the re-export of imported consumer goods and office equipment to Brazil and Argentina.

Geriatric Equipment for Uruguay

Uruguay’s proportionally large elderly population should be an attractive market for geriatric equipment and services in the near future.

Other favorable prospects for U.S. exporters include chemicals, manufactured goods, machinery, transport equipment, food processing equipment, and computer hardware and software.

Positive Economic Growth Ahead

With a population of more than 200 million people, a growing middle class, and positive economic growth predicted in 2000, trade among members of Mercosur and with the United States is anticipated to increase, offering U.S. exporters greater opportunities.

This article appeared in October 1999. (BA)
Topic: World
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China offers U.S. companies an expanding export market for high value-added goods, such as aircraft and computers. In turn, China typically provides U.S. importers with inexpensive, lower technology goods that often displace other Asian exports to the United States.

As bilateral trade expands, the annual review process of whether or not to grant China Normal Trade Relations (NTR), formerly called Most Favored Nation (MFN) trade status, has made planning difficult for U.S. companies. And whether or not China is admitted into the World Trade Organization (WTO) could significantly impact your business.

The Impact of Normal Trade Relations

On July 27, Congress, again, voted to extend NTR to China. When a country has this status, its products enter the United States at a normal duty rate. Without NTR, goods are assessed duty rates exceeding 50%, making them noncompetitive here.

Under the U.S.’ Jackson-Vanik amendment to the Trade Act of 1974, a measure originally directed against the former Soviet Union, NTR may not be granted to any non-market economy determined by the President to restrict free emigration. Today, the U.S. does not grant NTR to Afghanistan, Cuba, Laos, North Korea, Serbia/Montenegro, and Vietnam.

The Annual NTR Debate

The denial of NTR for China would result in the U.S. imposing such high tariffs on Chinese goods that trade likely would be severed. In retaliation, China would probably curtail imports of U.S. goods.

Trade analysts believe this would not curb the U.S. trade deficit. Instead, the import gap quickly would be filled by other Asian suppliers. Additionally, denying China NTR could lead to deteriorated U.S.-Chinese relations, fostering an environment of alienation and suspicion. Any future U.S.-Chinese cooperation on sensitive issues, such as human rights, environmental and intellectual property protection, nuclear proliferation, China’s currency stability, and India-Pakistan tensions, would be unlikely.

What China’s WTO Membership May Mean

If China is admitted to the WTO, it will receive permanent NTR status from the U.S. Consequently, the annual review process will cease. But the real benefits of China’s WTO membership include greatly improved access to Chinese markets for U.S. and other WTO member goods, services and investment. Plus, China must also adhere to WTO rules.

China Will Reduce Trade Barriers

With regard to industrial products, if accepted into the WTO, China agrees to allow U.S. firms to import, export and distribute their goods within its borders. China also agrees to significantly reduce tariff levels to rates comparable with major trading partners and to below those of most developing countries, to bind all tariff concessions, and to phase-out all quantitative restrictions on imports.

According to the U.S. Trade Representative, China will reduce average industrial product tariffs from 24.6% in 1997 to 9.44%, and further down to 7.1% on what the U.S. considers “priority” products. Importantly, Chinese duties will gradually decline from 100% to 0% on autos, and from 13.3% to 0% on semiconductors, computers, telecommunications equipment, and other information technology.

China’s agricultural imports will be subject to new measures that address trading rights, distribution, high tariffs, quotas, the application of unscientific standards, reliance on state trading companies, and export subsidies.

China will reduce its average agricultural product tariff to 17%, and down to 14.5% for “priority” products. Thus, duties will drop from 45% to 12% on beef, and from 40% to 12% on citrus goods.

China is among the most closed markets to service imports. For WTO membership, China has agreed to improve access to certain service sectors, including telecommunications and financial services.

U.S. Exports to China Continue to Rise

In 1990, U.S. exports to the People’s Republic of China and Hong Kong were $11.6 billion. Last year, U.S. exports to China, which included Hong Kong, exceeded $27 billion. This represented an increase of 134%.

This emerging powerhouse of almost 1.3 billion consumers is one of the world’s largest economies, and represents one of the United States’ fastest growing export markets. As China’s economy continues to expand, U.S. exporters will benefit — and to an even greater extent if China is admitted to the WTO.

Be Informed and Prepared

U.S.-China policy is delicate. Therefore, as events unwind, your access to China’s market may improve, remain the same, or possibly decrease should unforeseen events occur. Consequently, it’s essential to have a flexible plan that allows you to seize opportunities and mitigate risks.

This article appeared in October 1999. (BA)
Topic: World
Comment (0) Hits: 3282

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