More people seem to be talking about international trade than they have in years, whether they are directly involved in importing and exporting, or they are merely engaged as citizens while the latest policy changes shake out.

With all of the publicity surrounding Brexit, CETA and NAFTA renegotiations it’s no wonder chins are wagging. So we thought this was the perfect time to ask the experts what’s in store for global business, and where tomorrow’s biggest threats and opportunities will be.

FITT’s upcoming Your Future in Global Markets conference will address just that, so there were no better experts to ask then those who will be leading these discussions at the conference. Five of the #YourFuture2017 speakers obliged us and shared their insights in this month’s #TradeElite Twitter chat.>

Here’s what they had to say.

Panelists:

Nicole Verkindt (@OffSetMarket) – Founder, OMX, “Dragon”, Next Gen Den, Panellist, CBC News, The Exchange based out of Toronto, Canada

Amy Karam (@AmyKaram) – Author, speaker, instructor and global expansion and competitive strategy consultant based out of Ottawa, Canada

Jyll Saskin Gales (@jyllsaskingales) – Export Consultant, Google based out of Toronto Canada

Marcos Vaena (@MarcosVaena) – Chief, Sector and Enterprise Competitiveness, International Trade Centre, based out of Geneva, Switzerland

Adrian Mutton (@AdrianMutton) Founder and CEO of Sannam S4 and U.S. Business Centers, based out of Washington D.C. and London, England.

Let’s get the threats outta the way first. What’re the biggest threats global businesses will face in the next year, 5 yrs, beyond?

A1 Biggest = macro threats e.g. politics. Micro = resistance to change. Focus on micro threats, they’re in your control #tradeelite

— Jyll Saskin Gales (@jyllsaskingales) August 17, 2017

A1. Consumers moving to more minimalist lifestyles, the move from rural to urban (esp. China), Climate change. #TradeElite

— audrey ross (@tresAudrey) August 17, 2017

A1: A big threat is increased protectionism and a halt to global trade #tradeelite

— OMX (@offsetmarket) August 17, 2017

A1. It would be obvious to link politics and uncertainty. Uncertainty can breed lack of confidence. #globalbiz needs confidence #tradeelite

— Adrian Mutton (@adrianmutton) August 17, 2017

A1: One of biggest threats for #globalbiz is lack of cross cultural IQ in business practices #tradeelite

— Amy Karam (@AmyKaram) August 17, 2017

@FITTNews #TradeElite A1: Volatility (incl political), accelerating technological change/disruption. SMEs need to be on top of their game.

— Marcos Vaena (@MarcosVaena) August 17, 2017

Q1. But uncertainty also presents opportunity. I prefer to think in those terms! #TradeElite

— Adrian Mutton (@adrianmutton) August 17, 2017

What are some things businesses of all sizes can do today to prepare to face these threats?

@FITTNews #TradeElite A2: Business need to leverage global networks to diversify risk. More engagement with youth to understand the future.

— Marcos Vaena (@MarcosVaena) August 17, 2017

#TradeElite Great innovation networks at global level @impacthub @seedstars are some great examples! @ITC_Youth another excellent initiative

— Marcos Vaena (@MarcosVaena) August 17, 2017

A2 Focus on growing your core competencies (product, customers, culture), not on becoming a diplomat, currency expert, etc. #tradeelite

— Jyll Saskin Gales (@jyllsaskingales) August 17, 2017

A2: Biz can increase partnerships with ‘the other side’ in order to gain more insight & clarity on dynamics eg enlist govt help #tradeelite

— Amy Karam (@AmyKaram) August 17, 2017

A2. In short, get out there. Work hard to with pinpoint the opportunities. Don’t rely on hyperbole. Trade can mitigate risk #TradeElite

— Adrian Mutton (@adrianmutton) August 17, 2017

A2. Nothing! Most are out of Biz control. Make a product / service you believe in & treat your customers ?#TradeElite

— audrey ross (@tresAudrey) August 17, 2017

@FITTNews #TradeElite A2: eCommerce still holds huge opport 2 expand markets and go global, esp. for SMEs @ebaygr has good data to prove it

— Marcos Vaena (@MarcosVaena) August 17, 2017

Is there any emerging tech that could help businesses and individuals mitigate risks in tomorrow’s global trade environment?

A3 Must have tech that enables easy analysis, collaboration and communication within companies. Necessary for #globaltrade #tradeelite

— Jyll Saskin Gales (@jyllsaskingales) August 17, 2017

#TradeElite Q3: Great tools can be used by companies to spot threats and identify opportunities: https://t.co/8PFXf4e2m1 @ITC_MktAnalysis

— Marcos Vaena (@MarcosVaena) August 17, 2017

A3. More agile transportation like drones & being more diligent about who is in your supply chain. #TradeElite

— audrey ross (@tresAudrey) August 17, 2017

A3: tech definitely helps eg. ecommerce good way to access new markets, comms improved etc. Also present own challenges though #tradeelite

— Adrian Mutton (@adrianmutton) August 17, 2017

#tradeelite A3: No tech foolproof. Need to understand how 2 use it and interpret the data. Digital skills a must 4 future-proofing yr biz

— Marcos Vaena (@MarcosVaena) August 17, 2017

A3 We’ll be talking more about emerging tech at the Your Future in Global Markets conference #tradeelite

— Jyll Saskin Gales (@jyllsaskingales) August 17, 2017

Moving into opportunities, what are some of the biggest, opportunities tomorrow’s global businesses can take advantage of?

A4 1) Billions of people still coming online globally 2) For Canadian biz, non-English markets are often untapped opportunity #tradeelite

— Jyll Saskin Gales (@jyllsaskingales) August 17, 2017

A4. Staying in-the-know about Free Trade Agreements so that you can have extra benefits for selecting that market. #TradeElite

— audrey ross (@tresAudrey) August 17, 2017

A4: Opports tomorrow’s #globalbiz can take advantage of: growing number of #emerging mkts customers and their rising income #tradeelite

— Amy Karam (@AmyKaram) August 17, 2017

A4. It’s always about finding a niche product / service that makes lives easier. @offsetmarket found one! #TradeElite

— audrey ross (@tresAudrey) August 17, 2017

#TradeElite A4: Google “Fast Expanding Markets” (FEMs), great concept and interesting opportunities. Credit to @Exp_Mark @Terencecmtse

— Marcos Vaena (@MarcosVaena) August 17, 2017

Are there any markets that may challenge the BRICS in terms of import/export opportunities for global businesses?

A5. Sorry – Brazil & Russia are not markets you want to be in right now. South Africa good market. Indonesia, volatile. #TradeElite

— audrey ross (@tresAudrey) August 17, 2017

A5. IMHO BRICS is dead. Move on to CIVETS (Columbia/Indonesia/Vietnam/Egypt/Turkey/South Africa) (ok, except Egypt). #TradeElite

— audrey ross (@tresAudrey) August 17, 2017

A5 BRIC sounds fancy and got good marketing, but they are just 4 of 100s of markets out there, ready for your products/services #tradeelite

— Jyll Saskin Gales (@jyllsaskingales) August 17, 2017

A5 No “one size fits all” magic market for everyone, depends on your business goals. Lots of data out there to inform decisions! #tradeelite

— Jyll Saskin Gales (@jyllsaskingales) August 17, 2017

A5. Big question. Having worked a lot with the I in BRICS, there is a lot to go after! Not easy to unlock but tough to ignore #TradeElite

— Adrian Mutton (@adrianmutton) August 17, 2017

#TradeElite A5: Size of market not always the answer. Many firms go for niche and specialization. Finding your right market “fit” is key!

— Marcos Vaena (@MarcosVaena) August 17, 2017

In your view, do the opportunities of tomorrow’s global marketplace outweigh the challenges for those just getting started?

#TradeElite A6: Born-global SMEs show that the sky is the limit. Digital is a great equalizer, lower barriers n levels playing field 4 SMEs

— Marcos Vaena (@MarcosVaena) August 17, 2017

A6. Yes. There are so many resources to help you & it’s worth it. #TradeElite

— audrey ross (@tresAudrey) August 17, 2017

A6: absolutely. its an indisputable necessity to pursue tomorrow’s global mkts despite the challenges. else #leftbehind #tradeelite

— Amy Karam (@AmyKaram) August 17, 2017

Any other thoughts you’d like to share on tomorrow’s global marketplace?

#TradeElite A7: Check out the “DRIVE” framework at https://t.co/x6NyJwgnJB great resource on future-proofing your business @Exp_Mark

— Marcos Vaena (@MarcosVaena) August 17, 2017

A7: the world is becoming smaller, so we hope everyone starts to jump in and participate. #tradeelite

— OMX (@offsetmarket) August 17, 2017

A7. The ONLY way to succeed in #GlobalBiz is to be @FITTNews Your Future in Global Markets conference Oct 2-4 Ottawa. #TradeElite

— audrey ross (@tresAudrey) August 17, 2017

Thanks Audrey! We won’t say ONLY, but it will help for sure! #TradeElite #YourFuture2017 https://t.co/hHoSHXBpFA https://t.co/ZgETejVgoj

— FITT (@FITTNews) August 17, 2017

Read the rest of the chat and follow future discussions by following the #TradeElite hashtag. Stay tuned for the next #TradeElite chat, coming up Thursday, September 14 at 2:30-3:30PM ET.

The post The biggest threats and opportunities in tomorrow’s global marketplace appeared first on Trade Ready.

For most who work in international trade, a free-trade agreement between the United States and the European Union makes sense. The EU, after all is the United States’ largest trading partner. In 2017, the United States imported $417 billion in goods from the EU, while exporting $270 billion in goods to the bloc.

The Transatlantic Trade and Investment Partnership (TTIP) has been seen as a way to further open trade between the United States and the EU. For the United States saw the partnership as a way to close the trade deficit, while European leaders hoped it would further bolster trade. On both sides of the Atlantic, TTIP proponents said the partnership could spur further economic growth and add trade and manufacturing jobs.

Amid the Brexit vote and contentious elections in Europe and the United States, TTIP negotiations came to a halt in October of last year after 10 negotiating sessions that spanned three years. With the election of Donald Trump and his outspoken, negative views on free trade, most assumed that the TTIP was a dead deal.

But suddenly, trade leaders in the United States and Europe are discussing resuming TTIP talks, and touting the benefits of a trade deal between the United States and the EU.

Trade leaders on reviving TTIP

On the U.S. side, the first indication that TTIP discussions could resume came in a Sunday morning news interview with U.S. Commerce Secretary Wilbur Ross in May.

It’s no mistake that, while we withdrew from [the Trans-Pacific Parternship trade negotiations], we did not withdraw from TTIP,

Ross stated. “The EU is one of our largest trading partners, and any negotiations legally must be conducted at the EU level and not with individual nations.

“Thus, it makes sense to continue TTIP negotiations and to work towards a solution that increases overall trade while reducing our trade deficit.”

U.S. Trade Rep. Robert Lighthizer more formally addressed resuming TTIP negotiations in June during a U.S. Senate Finance Committee hearing in June. During the hearing, Lighthizer told U.S. legislators that TTIP is currently being reviewed by members of his team, and so far, there is a positive view on moving forward with U.S.-EU trade negotiations.

Lighthizer said he had spoken with EU Trade Commissioner Cecelia Malmström about resuming talks on negotiating an EU-U.S. trade deal.

“On TTIP, we certainly agree that that’s an important negotiation,” Lighthizer said of his discussions with Malmström. “I’ve talked to her about bilateral issues and co-operative issues. I’m not here to make any announcement about it, but it is something that we certainly realize the importance of.”

There’s a lot of momentum behind [a trade deal]; there are a lot of reasons to do it. On the other hand, it wasn’t accomplished, so there are obviously problems.

Lighthizer said any discussions on resuming TTIP would likely be put off until after Germany’s elections in September.

Meanwhile, EU officials have been relatively quiet on TTIP since Trump’s election, though they have cautioned the U.S. against protectionist trade policies and expressed an eagerness to resume U.S.-EU trade talks on several occasions. At the same time, the EU has been adopting similar free trade agreements with other countries, including Canada and Japan, and has expressed a desire to strike more agreements.

What TTIP could accomplish

TTIP aims to iron out a lot of details in European-U.S. trade. The agreement would make trade more transparent and easier for businesses in both countries, according to U.S. Trade Rep. Lighthizer’s office. It also would better lay out environmental, health and safety protections. Previously, one of the sticking points of TTIP negotiations was language on Investor-State Dispute Settlement (ISDS). Detractors have said ISDS procedures were too secretive, but in other trade deals, the EU made steps to create a more transparent ISDS process.

Businesses trading between the EU and the United States could see a big drop in tariffs if TTIP were to pass. While the average tariff for all products traded between the two is 1.6%, there are still tariffs as high as 25%. One leaked TTIP document showed that the agreement would lower tariffs by 97.5%.

In the end, it seems that both sides realize that the strong EU-U.S. trade relationship calls for a new trade agreement. While TTIP talks look like they are likely to resume, it stands to be seen whether EU leaders can balance their desire for free trade with the current tone of U.S. trade politics.

The post Will we see a revival of TTIP negotiations? Trade leaders say, ‘yes.’ appeared first on Trade Ready.

Imagine this situation: You are an exporter driving southwards on your favourite highway and ahead you see red traffic cones and barriers in the way. You are forced to slow down and notice that some of the barriers have the words “NAFTA debate”, “Soft-wood lumber disputes”, “Dairy regulations” and “Other competitors’ products” on them. You instinctively reach for your GPS to recalibrate, but your fellow passengers tell you “keep going, let’s see what happens”.

Don’t just stand around – do something!

Many Canadian exporters are hoping that the current phase of U.S. protectionism will not be too serious and that given time, cooler heads will prevail. However, apart from any potential changes to NAFTA, there are other important changes taking place in world markets that could affect Canadian exports.

For example, foreign government elections could affect our trading partnerships; many world leaders are changing their attitudes towards international relationships (e.g. Brexit); major environmental changes are affecting people throughout the world; electronic hacking is changing global communications, etc. All these changes make it increasingly difficult for Canada to rely on traditional alliances to plan for our trading future.

Instead of a passive “wait and see” attitude, perhaps it is time to look more aggressively for alternative export markets and recalibrate the Canadian exporters’ Global Positioning System towards other directions.

There is a wealth of up-to-date data, detailed reports and real-time market intelligence available through federal and provincial government sources. This practical, current and timely information is collected by hundreds of locally-engaged sector specialists, who have been hired from local industries by almost 260 offices in 150 countries around the world. They have been hired for their experience and contacts in specific business sectors and their job is to search for export opportunities for Canadian businesses.

These talented professionals have a great deal of real-time information on current on-the-ground marketing trends, and intimate knowledge of what specific products are sought by local importers abroad. Unfortunately, this knowledge is often denigrated by “blood-and-guts” exporters who wrongly claim that civil servants know little about the day-to-day realities of exporting.

Taking a practical look at the available options for Canadian exporters

In view of our unsettled exporting future, this writer decided to look for potential export markets which do NOT fall into Canada’s established and traditional markets. The top 28 destinations for Canadian exports, according to Global Affairs Canada, include the U.S., China, UK, Japan, Mexico, South Korea, Germany and India. But this list fails to include many other smaller and lesser-known, but still worthwhile markets like countries in North Africa, Brunei, Thailand, Trinidad and Tobago and others.

At random I chose “Consumer Products” and “Transportation” as export sectors and searched for information on the Trade Commissioners Service (TCS) website. I sought data on the top foreign markets which the trade commissioners abroad reported as the best opportunities for export.

Consumer Products

1. The TCS identified the top potential markets for Canadian consumer products as Bangladesh, Finland and Germany.
2. I picked Finland and searched for Finnish importers. Several company profiles, data on 2017 consumer trade shows taking place in Helsinki, and directions on how to export to Finland and Scandinavia were listed.

Transportation

1. At random I picked Kenya and found a list of 25 importers of transportation-related products with full contact information and the territory they cover.
2. These 25 companies are seeking auto parts, engine parts, automotive electrical equipment, engines, pumps, tractors, electric motors and other equipment.

While the TCS website was encouraging, I decided to take the opposite approach and (again at random) picked Thailand as a target country. I Googled  “Thailand Importers”, which provided a link with 18 names and addresses of importers, distributors and trading houses, all seeking to buy a wide range of foreign products including softwood lumber, woodworking machinery, furniture and garden products. In addition, when I Googled “Thailand Import Agents”, there were listings of commission agents seeking to represent foreign exporters of various products including food, paint, medical devices and chemicals.

A great reputation and hard work will open doors

While the above are mere examples, and many variables would affect successful export contracts (including competitive pricing, transportation costs, import tariffs, etc), successful exporting to new markets is based on the following facts:

1. Our Brand. That all-important first contact with potential international customers is easier because we have the greatest door opener in the world: the Canadian brand. Our reputation immediately opens doors all over the world, giving any Canadian exporter a salesman’s vital “foot in the door”.
2. The 200-20-2 rule: Anyone who has worked in a call centre or made “cold” calls knows these numbers. They work in any business development activity, in any country, and in any product sector. The concept relies on percentages: if you make about 200 calls you will develop approximately 20 new contacts, and they will invariably produce 2 export deals.
3. Knocking on doors. There is an inescapable logic that states that “if you don’t knock on the door, nobody will open it”.

Let’s knock on new doors by recalibrating our exporters’ GPS (after all, it IS global) and look for other destinations for our exports. They may not be as easy and accessible as our traditional U.S. market has been, but with a little effort and imagination Canada does not have to “wait and see” but can take proactive steps to becoming a truly global exporter.

The post Why it’s time to recalibrate Canada’s exporting GPS appeared first on Trade Ready.

As populist nationalism surfaces across the globe from the U.S. to Europe, Russia and India, adverse effects on free trade are no longer a possibility, but a reality.

In Europe Brexit may only be the beginning. Though Macron’s victory seems to have put an end to Frexit concerns for the time being, Grexit remains a distinct possibility in Greece, and after the Renzirendum, the Italian referendum last December that caused Europhile Prime Minister Renzi to step down, the term Quitaly also popped up.

In the U.S., travel bans, visa restrictions and publicity about both have already cost the U.S. significantly in the loss of tourism and business income. The U.S. President has revoked American participation in the Trans-Pacific Partnership (TPP), and in doing so also killed the Transatlantic Trade and Investment Partnership (TTIP). Trump has also targeted NAFTA, causing Mexico and Canada to wonder if North America will be taking a step backward in business collaboration.

Also in the Americas, a Latin-American free trade zone has been going nowhere for decades. This January, however, the Latin American Integration Association (best known by the acronym for its Spanish name, ALADI) tried to breathe new life into it in light of what´s been happening north of the border.

Closely tied to increasing barriers to trade are impediments to the free movement of labor. Global businesses rely on a diverse workforce, and restricting immigration does not do them any good. Just witness the reaction of many Silicon-Valley multinationals to the travel ban decreed by the new U.S. administration.

Politics is changing the field for global business

Much of global politics for the past few decades seemed to agree with the economic theory that factors of production are best utilized when they are free to flow towards their most efficient use. That was the logic behind, for instance, the European Union´s Schengen Agreement in 1985, aimed at doing away with border controls. In 2016, however, as a reaction to the European refugee crisis, border controls were “temporarily” reinstated in seven countries (Austria, Denmark, France, Germany, Norway, Poland, and Sweden).

Meanwhile, in Asia, The Economist reports on impending labor shortages in countries like China or Thailand. Unfortunately, immigration and visa regulations hinder immigration from countries with labor surpluses like the Philippines or Bangladesh.

All this political mayhem coincides with the reported retreat of the multinational firm, per The Economist. According to their numbers, the profits of multinationals as a group have dropped by 25% in the span of only five years. And politics has little to do with it. Instead, a combination of maxed-out economies of scale and tax arbitrage comes into play. Many multinationals are just too big to be successful. And arbitrage has brought the tax burden as low as it can go.

Moreover, it is not only multinational corporations that feel the heat. In an increasingly complex world, small and medium-sized companies can be hard-pressed to find the resources to navigate the waters of international business.

So, in some ways, it seems that the runaway success of globalization over the past 20-25 years has sown the seeds of its own troubles. As wealth shifts around the planet, steelworkers in America’s Rust Belt stare into the abyss, the “huddled masses” in Africa go looking for greener pastures, and the rising middle class in China´s megacities scrambles to hire illegal domestic workers from the Philippines.

Clearly, the world has changed. And clearly there are some dark clouds on the horizon. What should global business leaders be doing in this uncharted territory?

10 ways you can do what’s right for your business

In the end politicians don’t do business. They only have the ability to either get in the way, or to help facilitate more success. Either way, it’s up to business leaders to get the deals done and to export and import, as well as encourage tourism and investment. We simply need to keep the faith and move forward.

We should have faith that trade is good. Push past any populist noise to do what is right for your business.

Whether you’re in the U.S., Europe, Africa or Asia, 85% or more of new opportunities in the next 5 years are somewhere else outside of your country. Go for it!

Here are some tips you can use to grow globally and successfully:

1. Listen to your tribe. Know your customers and listen to their pains and needs.
2. Create joy for your customers. Keep customers satisfied and wanting more from your team.
3. Globalize. Whatever it’s called and in whatever form it takes, globalize your firm. Prioritize your growth opportunities and execute effectively.
4. Leverage technology. More than ever technology will drive the opportunities, from artificial intelligence, to machine learning, big data and more – be familiar.
5. Have a global vision. View the world holistically and be aware of low hanging opportunities.
6. Stay focused. Keep the main thing the main thing.
7. Add diversity. Add people from different cultures and of different ages, especially young people, to your team. They’ve grown up in the internet age and will help keep you on track.
8. Improve communications. Know your message and keep your team and community aware of progress and next steps. Don’t fear repetition.
9. Stay ahead of shifting news. Keep your ears open for the latest news and make quick decisions.
10. Adjust as you go. Be faster, better, and more flexible than your competors.

Speak now or forever hold your peace

Business leaders must remember that consumers around the world are the primary drivers of the economy, not politicians. In an extreme case like Venezuela, politicians can completely destroy an economy with comprehensively bad policy. But in that case, business leaders have not been given a chance to provide their input in order to help.

In most countries in Europe, Asia and the Americas, business leaders have a voice and typically are not shy to share their opinions. You shouldn’t be either. Speak out for your business and trade in general, and push forward with the tips above, and we’ll all be the better for it.

The post Will populist politics pull the plug on trade progress? Survival tips for executives appeared first on Trade Ready.

To get a sense of the types of changes to expect we can look at the contrasting the viewpoints held by incoming U.S. Trade Representative Robert Lighthizer with those of his predecessor, Michael Froman.

The two men take nearly opposite approaches to trade: According to Lighthizer, American jobs and businesses must be protected from what he views as unfair global competition, while Froman has expressed that negotiating free trade deals helps America to set the standards for international trade policies that benefit American economic growth.

Their differences are illustrated by their past statements on trade, along with their stances on two major trade issues: Renegotiating NAFTA and reducing the trade deficit with China.

Protectionism vs. globalism

Lighthizer is a well-known trade attorney who served as the United States’ deputy trade representative under Pres. Ronald Reagan. He has long cautioned Republican lawmakers against free trade and encouraged protectionist policies as a way to spur economic growth. He has also been an outspoken supporter of Trump’s protectionist trade policies since his unsuccessful 2012 run for president.

“The recent blind faith some Republicans have shown toward free trade actually represents more of an aberration than a hallmark of true American conservatism,” Lighthizer wrote in a Washington Post piece voicing his support for Trump in 2011.

Since accepting the nomination to serve as Trump’s Trade Representative, Lighthizer has reinforced his support for Trump’s anti-trade “America First” policies.

Froman, a former treasury department chief of staff, assistant to the president and deputy national security adviser for economic affairs for both Clinton and Obama, had served as trade secretary since June of 2013 and actively worked toward free trade agreements. Froman has said that establishing free trade agreements allows U.S. industries to profit from their surpluses, and it allows businesses to offer their services globally. At the same time, Froman has said, free trade agreements help level the global playing field for U.S. businesses.

Renegotiating NAFTA

Lighthizer: Just days he was approved as U.S. Trade Representative, Lighthizer sent a letter to the U.S. Congress announcing his intention to reopen NAFTA negotiations. While the letter did not include details of the goals of the renegotiation, or mention Trump’s previously stated objectives in renegotiating the treaty, Lighthizer has said NAFTA has benefitted U.S. agriculture and investment services, but has harmed manufacturing.

Additionally, he said:

The 23-year-old trade agreement needs to be modernized to address digital trade, intellectual property rights, the rules for state-owned ventures, regulatory practices and environmental and labor regulations.

Froman acknowledged that NAFTA needed to be updated, but he said provisions in the Trans-Pacific Partnership addressed NAFTA’s blind spots. With Mexico and Canada on board for the TPP, issues left out of NAFTA, such as energy, investor protections and intellectual property rights, would have been hashed out. The now-abandoned TPP made renegotiating NAFTA irrelevant, according to Froman.

Addressing trade with China

Lighthizer: When it comes to challenging China on trade, Lighthizer has been known to use strong language. He has said that U.S. policy allows China to “rig trade in its favor” to support a $270-billion trade surplus with the United States. Lighthizer has accused China of currency manipulation, intellectual property theft and employing unfair trade subsidies. To address this, Lighthizer has said he will appeal to the WTO to use its laws to address Chinese trade violations. Trump, meanwhile, has threatened a 45% tariff on Chinese imports as a way to lessen the trade deficit.

Froman largely viewed the TPP as a strong stance against Chinese trade dominance in Asia. By negotiating the TPP, Froman said, the United States would be able to set trade standards for the region. Withdrawing from TPP would have “broad and deep consequences, both economic and strategic,” Froman has said, as it leaves China to create its own trade bloc within the region.

Withdrawing from the TPP “would be the biggest gift any U.S. president could give China,” Froman stated.

Of course, Trump announced U.S. withdrawal from the agreement as his first executive action after being sworn into office in January, 2017.

Can we expect a tempered approach?

While Lighthizer is unabashedly protectionist on his approach to trade, many trade industry experts, including those who know him personally, have said Lighthizer could be the force needed to temper Trump’s aggressive “America First” policies. After all, Lighthizer has spent his career as a trade attorney, putting trade theory into practice, and he does have experience under Reagan negotiating bilateral trade agreements. That means that while the United States’ current trade rhetoric is a marked change from the past, U.S. trade in practice may continue to be one of globalization, albeit more measured.

The post FACEOFF: How does a new U.S. Trade Representative shift the country’s approach to trade? appeared first on Trade Ready.

Although the RCEP has been in negotiation for several years, its significance has increased sharply following the decision by President Trump to pull the United States out of the Trans-Pacific Partnership on his third full day in office.

The TPP was signed on February 4th, 2016, involving 12 nations including the United States. However, there was a major disagreement between the Obama administration and the Trump administration about whether or not the TPP is favorable for America.

The result is that America has now pulled out of the TPP. Following America’s exit from the agreement, the RCEP has the potential to replace it as the dominant trade deal in the Asia-Pacific region.

Who would be included in the RCEP?

While the deal has not been finalized yet, the following nations are all said to be potential members of the RCEP.

South Korea                             Singapore

Japan                                        Brunei

China                                        Thailand

India                                          Indonesia

Myanmar                                  The Philippines

Vietnam                                    Australia

Cambodia                                 New Zealand

These 16 nations have a combined population of 3.27 billion people, or 46% of the world’s population, and a GDP of approximately 19.2 trillion dollars – 24% of global GDP.

What are the most significant implications of the deal?

One of the most significant implications of the RCEP is that the world’s two most populous nations, India and China, would be involved in a large trade bloc. Neither of these nations are a part of the TPP.

The RCEP is set to cover trade in goods, services, and investments, intellectual property issues, economic and technical cooperation, dispute settlement, competition, and a number of other concerns. This deal would be a landmark trade development in the western Pacific region.

The RCEP covers many of the same issues as the TPP, but does not contain as stringent protections for human rights, labor, and the environment as the former agreement.

Ultimately, the RCEP could create one of the largest free trade zones ever enacted and lead to an unprecedented amount of trade activity between member nations. However, both workers and the environment may not enjoy the same protections as they would have had in deals like the TPP.

China and America are moving in opposite directions on free trade

The greatest driving force behind the RCEP appears to be the fact that the leader of the United States believes that it is not beneficial for the country to be involved in enormous multilateral free trade deals, unlike China.

In fact, President Trump campaigned on a platform of opposition to both the TPP and NAFTA, a free trade agreement between the United States, Canada, and Mexico. President Trump even went as far as to call NAFTA “the worst trade deal the U.S. ever signed.”

Trump’s primary opposition to free trade deals is that he believes American workers are losing too many jobs to cheap outsourced labor. In other words, he wants to keep more jobs inside the U.S. Trump has also accused China of currency manipulation, and has stated that the U.S. needs to be reimbursed more for the security it provides around the world.

A combination of all of these things means that the world of international trade could see some major shifts. The U.S., the nation with the world’s largest economy, looks likely to take a much more protectionist stance on trade in the near future.

Perhaps because many jobs flow there due to cheap labor, China appears to be very open to free trade. China has the world’s second largest economy, with a GDP of $15.26 trillion (2016). Considering that Japan has the third largest, and India has the seventh largest, a trade deal involving all three of these nations could be very powerful.

What does this mean for the future of international trade?

The RCEP has not yet been formally signed, but there is a good chance it will go through. In fact, Ganeshan Wignaraja, an advisor with the Asian Development Bank, said “An RCEP agreement seems probable in 2017 due to intensified negotiations.”

So, in the near future, the Pacific region could be dominated by a free trade haven that connects India and Australia with China and many other Asian nations, while the United States adopts increasingly protectionist measures on the other side of the Atlantic.

Countries who wish to trade with the United States in this new era could find themselves facing a new barrage of tariffs, taxes, and duties. It may also be significantly more difficult for American companies to outsource jobs to Asian countries, as the Trump administration looks for continued ways to protect American jobs at the expense of new multilateral trade deals, which would have the potential to create new jobs both in the U.S. and in other countries.

Whether or not other Pacific nations such as Mexico and Canada will ever join the RCEP is yet to be determined. However, if Trump also pulls the United States out of NAFTA, then these two nations may be eager to seek new free trade deals and look to the RCEP in its place.

By pulling out of the TPP, President Trump claims to be doing what he believes is in America’s best interest. However, it was estimated that the TPP could have brought the country an extra $77 billion in revenue per year. So, in order for America to make up this lost revenue, it will have to bring in a substantial amount of money from tariffs, and keep a   jobs in the country.

The tectonic plates of the international trade world are shifting. Once key decisions are made about the RCEP and NAFTA, the trade landscape could be entirely redefined, creating a whole new set of parameters for companies to consider as they do business internationally.

The post What is the RCEP and how could it affect global trade? appeared first on Trade Ready.

Global trade is not your great-grandfather’s trading post anymore. Sure, we’ve always had trade. In fact, we’ve been trading for as long as we’ve been civilized. But up until more recently, there were a lot more of what I call “gentlemen’s agreements” (informal agreements between countries) than formal FTAs like CETA and NAFTA.

In today’s global trade environment there are also government policies to grapple with; and if that’s not enough to navigate, there are the near-constant changes in government that also affect trade agreements.

Changes in government, such as the outcome of the recent U.S. election, can also bring major shifts in policy, like President Trump’s rejection of the TPP free-trade deal.  Now, we know change isn’t always a negative thing, as sometimes it can bring opportunity. But sometimes it can also bring uncertainty, which is not a good scenario for those engaged in expanding their markets.

Imagine, people running around aimlessly making ill-informed decisions, decisions made out of fear and panic. DON’T PANIC.

So, what does this mean for North American businesses?

U.S. companies are looking for clients in their own domestic market, because of the uptake in the “buy local” movement and uncertainty elsewhere. Conversely, companies in other markets, such as Canada, are looking to diversify their markets, and quickly, in order to protect their revenue stream.  After all, at $350 billion in exports, the U.S. is Canada’s biggest trading partner by a landslide (Canada’s second biggest trade partner is the EU at a distant $40 billion). If they’re not buying, we must quickly find who is, to sustain our economy.

Take Atlantic Canada, for example. If the U.S. steers sharply to the “buy local” movement, who is going to buy our steady demand of seafood, lumber, agri-food, oil/energy, metal ore, and manufactured goods?  If we can’t export across a land border, because of new duties or restrictions being imposed, what does that do to the cost of exporting across an entire ocean?

Even for agreements that have not been squashed, such as CETA (between Canada and the European Union), the phasing out of tariffs will take several years. Our major industries will have to figure out how to restructure themselves quickly to rely less on the movement of exports across U.S. borders.  And it’s not just the movement of exports that is affected, but also the movement of people and labour.

Yet, as we concern ourselves with our volume of exports, with an aim to increase that volume to create jobs, we also need to think about the volume of imports.

Ideally both will be increasing, because an expansion of two-way trade means that we are nurturing not only our own job-creating industries, but also our consumers, whose standards of living are improved when they have a wealth of affordable imports to choose from.

Protectionism only hurts those it aims to protect

Falling back into a mode of protectionism is a bad idea.  First of all, who pays the cost of any tariffs we impose on imports?  It is our own consumers who are punished with higher costs.  Secondly, if we are depending on making imports pricier (or on making our currency cheaper) to support an increase in export manufacturing, we must remember that we are also increasing the prices that our manufacturers must pay for any imported inputs into their production process.

The interplay of global trade in supply chains has become so important that we should be careful not to shoot ourselves in the foot as we attempt to give ourselves a boost up.

On the other side of the Atlantic, the Brexit disrupted global markets, including currencies, and caused the British pound to fall to its lowest level in decades. On the bright side for Canada, this could create an opportunity for Canadian exporters to fill the void in the EU left by Britain’s exit. Assuming that the EU boycotts Britain’s exports, currently valued at £130 billion (compared to Britain’s exports to non-EU valued at £170 billion), this may also open a door for Canada to grow their exports to the EU.

In times of uncertainty, stay balanced

It seems clear we are entering what may be a difficult era in global trade, perhaps even of trade wars and currency wars, where many economies are convinced they must export their way to prosperity.  But danger lies in the fact that rewarding protected industries and their employees may involve punishing the citizens at large, with higher prices and fewer choices.

It is a complex balancing act, one often oversimplified by politicians and economists alike.  And any balance is subject to dramatic shifts as oil and commodity prices rise and fall, exchange rates shift, potential recessions and financial crises loom, and robotics and technology take their toll on some traditional jobs.

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Despite the huge reception given to Thomas L. Friedman’s The World is Flat, published in 2006, our thinking about trade balances and their measurement remains over 500 years old: globalization has left trade balances behind! Mercantilism ruled from 1500 to about 1750, yet the framework it generated – “imports are bad, exports are good” – to account for and explain trade balances persists today.

The result is that this outdated and erroneous framework threatens the global operations of U.S. multinational corporations, and therefore, the:

• $23 million jobs they create in America;
• $341 billion worth of investments in America; and
• 25% or $3 trillion of America’s GDP they create.

How the “imports kill jobs” myth serves politicians

Politicians want to attain public office and stay in power as long as they can. For that, they need votes. If unemployment among the constituents rises, the incumbents’ votes are threatened. In such a situation, the easy reaction of both politicians and their voters is to blame so-called outside forces for fewer jobs.

Of course, there could be several real reasons for the rise in joblessness. These range from bad education policies that do not create employable (i.e. qualified) workers in sufficient numbers, to burdensome taxation, to lack of policy perseverance and poor corporate strategy. One way to avoid the inconvenient truth and deflect the criticism is to put the blame on “unfair” imports for killing domestic jobs.

What would be the result of carrying the logic of “killer imports” to its absurd conclusion? All imports to the U.S. would have to be banned.

This would also affect U.S. multinational corporations that have proliferated abroad and import their foreign-made products back into the U.S. market.

However, unlikely as such a prospect might be in the real globalized world, let us visualize the effects of a hypothetical ban on imports by the U.S. For starters, most of those imports would have to be substituted by local production, the cost of which would be much higher. This would raise the inflation and in turn, interest rates.

Higher interest rates result in reduced investment. The growth of manufacturing slows; fewer new jobs are created and more jobs are lost. A rise in the cost of capital sinks the housing market as well as adversely affecting stocks, bonds and debt markets, which would be focused on diminishing returns on investment.

The bottom line is – imports create jobs

In fact, imports allow U.S. companies to make more of what they are good at, thus creating jobs in America: supply creates demand. That is why, when imports rise, so does employment. We have developed “The Economic Clock” for many of the world’s economies. Whenever the “economic time” is good in America, there is an excess demand for goods. So, of course imports rise, as does the number of jobs.

How, then, can some U.S. politicians claim that imports kill jobs when the facts support exactly the opposite view?

Another question worth asking is: When America employs fewer people in manufacturing, how can the trade surplus rise if fewer people are manufacturing goods? The share of America’s manufacturing employment in total employment shrank by two thirds – from 28% in 1960 to 8% in 2016.

As fewer Americans are employed on the manufacturing assembly lines, more goods are imported, and that allows American companies to make more of what they are good at – and in this age, these are services. Over the past several decades there has been a persistent rise in the well-paying service-sector jobs for Americans; in the 1960s one in two Americans worked in the service sector; by now two in three hold service jobs. In the corresponding period, the country’s net balance in services trade has turned into a surplus.

According to the office of the U.S. Trade Representative, the services economy generates the largest services trade in the world, with exports of $606 billion dollars in 2011 and a trade surplus of $179 billion. In Canada, commercial services have now run a surplus for 13 years, all the way back to 2003 and throughout the Great Recession, according to Global Affairs Canada.

To sum up, the idea that imports kill jobs is fallacious for a number of reasons. The fact is that, thanks to the growth in the services sector, the U.S. export surplus in services has risen significantly.

Protectionism defeats everyone

While the immediate aim of this content is to reach decision-makers particularly in Washington and China, the broader objective is to move the thinking away from national or nation-state trade balances and towards multinational trade balances. This needs to be done to avert protectionism based on wrong-headed mercantilism.

Protectionism defeats everyone and the resulting animosity leads to unemployment, followed by social unrest and even wars.

It is always easier to blame the foreigner than to work on one’s own backyard. Most of all, this content is meant to stir some debate in order to solve the problem of protecting American workers from offshoring and, as Prof. Alan Blinder stated in one of his essays: “My main purpose is to get as many smart people as possible thinking creatively about the problem.”

The post Imports do not kill jobs – protectionism does appeared first on Trade Ready.

Trade has become the target of much negative, inflated and even hysterical commentary in several parts of the world. This goes beyond the core constituency of anti-traders, many of whom are thoughtful commentators pointing out serious, dangerous and fundamentally wrong elements of the current global model of cross-border commerce. Others, well, they can stand as an example of free, if not particularly well informed, speech.

Let’s acknowledge that trade has some fundamental flaws. Sometimes it involves terrible life-threatening activities related to the trade in rare earth minerals, diamonds and precious metals. At times it can facilitate unconscionable injustice related to the distribution of wealth across global supply chains, from small producers at one end to global multinationals midstream, and wealthy consumer clients at the other end.

This is not a political statement, nor a comment on the darker side of market economics: it is simply the reality.

Anti-trade activities and anti-globalization advocates focus on these areas. They have clearly gotten to the core of an emerging issue among populations that feel (and are) disenfranchised. These members of the human family have not experienced anything close to proportional benefits from the growth of trade or the expansion of globalization. In fact, rather than “globalization” what we should more accurately call it is “internationalization”, since we are still far from globalized in most areas of endeavour.

If trade is indeed so terrible, why do we engage in it?

Let’s not get into the classical economics discussion about comparative and absolute advantage, or the related example of countries producing and trading in “guns and butter”. We’ll leave that for another time.

Can we agree that humanity has probably engaged in trade since the dawn of our collective existence, and that on an individual level, most of us have done some kind of trading at some stage?

I was never one to trade lunches at school, but there was something innately interesting about trading in hockey cards, stamps or other collectibles. I go back to the peak days of the Canada vs. Russia rivalry and of the Montreal Canadiens’ dynasty years, Cournoyer, Lafleur, the Mahovlich brothers and Larry “The Big Bird” Robinson and spent hours poring over stamp collections and negotiating with long-gone fervour to acquire a particularly interesting addition to either the card or the stamp collection.

Were these the seeds of an eventual career in trade? That might be a stretch, but going from my hockey card trading days to reading a memorable book called “Making Global Deals” by Jaswald Salacuse, it seems, was natural and in perfect alignment.

Anti-globalization sentiments hit home

I’ve been observing, with a combination of reactions I dare not describe, developments over the last few months in Europe, parts of Asia, the United States and elsewhere. This has led me to conclude that anti-globalization and anti-trade commentators have managed to do something exceedingly well that those of us on the other side of the debate have done miserably poorly, and that is to deliver their message with a focus on issues that grab you by the gut, or the heart, or some combination of the two.

These messages hit home so often because they are grounded in realities, some that are in absolute need of description, debate and deliberation. Realities such as the adverse impact of trade on the environment, natural resources, indigenous populations, child labour, animal cruelty, illicit trade in endangered species and a whole range of similar matters, even ‘trade’ in pharmaceuticals, provided to developing markets at costs that are impossible to defend on human terms.

Arguing in favour of trade based on statistics, objective measures of economic value-creation, increases in global wealth, or other similarly dispassionate foundations simply does not work.

These intellectually grounded, academically robust arguments do not bring to life the positive contributions of international commerce. For instance, the reality that trade contributes to international security and safety, that the engagement of developing economies in trade very literally feeds families, saves lives and raises the quality of life for tens of millions of people if not more, across the planet.

Trade is not just about commerce at all costs, it is not just about cost-cutting, or about finding new markets to sell into at attractive margins. Trade is also an engine of growth, a contributor to international development, and an important element of a growing effort to put financial and economic inclusiveness at the heart of international policy priorities.

Making connections with the very real benefits of trade

Many of the very issues raised by anti-trade activists and anti-globalization commentators are being improved, or at least mitigated, as a direct result of international engagement and trade.

Observe health and safety standards being applied in emerging markets, and anti-corruption measures positively impacting the full spectrum of economies from OECD economies to frontier markets because of trade deals and initiatives around corporate social responsibility and good global citizenship. We are also seeing an increase in responsibility from corporations for the actions and standards of their suppliers. All of the  point to improvements that cross borders, with benefits that reach around the globe.

These examples illustrate a few of the ways in which international commerce and engagement can be a channel for transmitting economic value, but also a channel for increasing safety and security, enhancing quality of life and advancing international development and reducing poverty.

Trade and international engagement are credited with pulling one billion people out of poverty.

Yes, the definition of poverty can be debated, and one can argue that more could have been done sooner – no question. However, it can be highly encouraging to observe very real signs of progress in the way nations, companies and people engage together.

Changing the way we do business globally

It is a source of energy and optimism to see that issues once seen to be at the fringes of priority are being brought sharply into focus, and are becoming the subject of serious dialogue, substantive policy and commercially compelling efforts to measure success through more than a set of financial statements.

The advent of the Internet, including the significant use of online trade platforms like eBay, Alibaba and the soon-to-be-developed e-World Trade Platform, have done a great deal to advance international engagement by small, even home-based businesses. These platforms have enabled the commercialization of local arts and crafts to an international market, and have enabled individuals, small businesses and communities to benefit from access to financial resources in order to pursue opportunities in international markets.

The global reach that can be experienced from one’s office or living room opens up unique culinary or cultural experiences, tremendous access to world-class education platforms – all enabling a new level of international engagement – and an interest in accessing and experiencing “things international” to a degree that was once impossible to imagine.

Trade, like most human activity, is imperfect. Happily, we have been making good progress in making trade and international engagement about much more than profitable commerce.

Social enterprise, good citizenship, the importance of inclusiveness are all becoming mainstream, and will contribute to addressing many of the issues we know need to be fixed in the global architecture for international trade, investment and engagement.

I (OK, we!) need to go back and think more about how to tell the story of trade and international engagement (and eventually, of finance) that will grab people by the gut or by the heart.

For now, I’ve got to go contribute to some planning for the 2017 edition of the World Trade Symposium to take place in London next June. This marks the second year of an event for which I am honoured to serve as a Board Member. We think a great deal about trade, finance, technology and inclusiveness, and ways we can put these things together to improve the lives of people around the world.  It is through such events and initiatives, and the important work for FITT and our community of members and CITP®|FIBP® designation holders, that the story of trade will ultimately be told in a balanced, thoughtful manner, to the continued benefit of many nations, businesses, families and individuals – even some of its most vocal opponents!

The post Trade is terrible – why do we do it? appeared first on Trade Ready.

Currently, free trade is a divisive hot button issue. Some people believe that free trade is often harmful to national economies and has clear winners and losers. Others believe that free trade is ideal for national economies and can benefit every nation, company, and individual who participates in it.

To examine this issue, it is helpful to understand exactly what free trade is. When people in different countries can conduct trade with each other without quotas, tariffs, duties, subsidies, or prohibitions from governments on the goods or services that are being bought or sold, that is considered ‘free trade’.

If trade isn’t free, then governments make money on the duties and tariffs, and domestic companies face less competition. Many argue that this benefits nations.

However, there are often negative consequences from protectionism. For example, if a country places too many tariffs on the goods coming in, then other nations may not do as much business there. This can drive up costs for consumers, who are left with fewer options, as well as limit the availability of certain goods.

Here are the top ways that more free trade around the world helps everybody.

1. Higher trade volumes

The fewer tariffs and other taxes or restrictions there are on goods coming in and out of countries, the easier it is to conduct trade. The easier it is to conduct trade, the higher trade volumes are likely to be.

For example, in 2004, the United States signed a free trade agreement with Chile. By 2013, American exports to Chile were 545% higher than they had been before the agreement. That represents $17.5 billion. Chilean exports to America also increased 180% to $10.3 billion by 2011.

These increases in trade volumes are incredibly significant and perfectly displays how trade volumes can strengthen substantially when free trade exists between two nations.

The higher trade volumes are, the more profits companies can make. The increased export totals represent major profits for American and Chilean businesses, who are now able to sell more easily to millions of new customers.

This means that many business owners stand to gain increased profits from free trade.

The better businesses engaged in international trade do, the more people they can employ. This means higher trade volumes can help create jobs as well, which has positive benefits on a nation’s entire economy.

2. Greater opportunities to capitalize on comparative advantages

Comparative advantages exist when nations focus on producing goods that they have a competitive advantage in producing due to lower opportunity costs. For example, some countries may have an advantage in producing wine, such as ideal climate and soil conditions, while others may be able to produce clothing more efficiently, due to lower labor and material costs.

With free trade, it is much easier for nations to focus on producing the goods for which they have a comparative advantage, and import other goods from countries who have advantages in those areas through trade.

However, without free trade, nations have to spend more time producing goods that do not yield optimum profits because it is much more difficult to get them through trade. This means consumers are left choosing between inferior or overpriced goods, and cannot purchase the best goods for the best prices.

3. More efficient use of raw materials

Some nations have extremely high quantities of raw materials, which they are unable to use domestically in their entirety. For example, Australia has the most iron ore reserves out of any nation in the world, at 35 billion metric tons.  Venezuela has the largest oil reserves, with 297.6 billion barrels.

With freer trade, Australia can more easily sell excess iron ore and oil to other nations, and take advantage of their material surplus to benefit their economy. Raw materials can easily be bought and sold between freely trading countries, preventing the wasting of crucial materials.

It also allows materials to be used to produce consumer products in other countries where manufacturing costs are cheaper, therefore lowering the overall cost of many goods for consumers.

4. Stronger economic growth

Free trade simply makes it easier to buy and sell goods and services between nations. This often leads to increased economic growth. For example, the U.S. Trade Representative Office estimates that U.S. economic growth increased by an additional 0.5 % annually over the past several years because of NAFTA.

As with higher trade volumes, stronger economic growth can also help create jobs. After all, larger, growing economies are successful because more businesses are doing well. These bigger economies can provide more jobs than struggling businesses in economies that are smaller or shrinking.

Stronger economic growth also means that more goods can be purchased internationally, which can help many people around the world access affordable and higher quality products.

5. Promotes peace and cooperation between nations

The more nations trade with one another, the more they can benefit from each other and help each other grow. This promotes peace and cooperation between nations, in the interest of continued growth and economic prosperity.

In fact, one fascinating study from Stanford University proved that the more trading partners a nation has, the less likely it is to go to war. Additionally, this study showed that nations tend to not go to war with their trading partners.

This makes sense. After all, why would nations want to attack countries that can either help provide them with goods, or serve as a market to export to? It would be counter-intuitive from an economic standpoint.

Give peace, trade and greater economic opportunity a chance

Though many people remain skeptical of free trade, it has several clear benefits for the nations who take advantage of it. Higher trade volumes, greater comparative advantage opportunities, more efficient use of raw materials, stronger economic growth, and increased cooperation amongst nations are all positive results created by more free trade.

The fact that trading partners are less likely to go to war with one another is also incredibly significant for the entire world.

If free trade can decrease the number of wars that take place in the world, then policymakers should consider that when they are deciding whether or not to reduce trade restrictions.

Ultimately, it is up to individual nations to decide whether or not free trade is in their best interest. However, with so many compelling benefits of the practice, it is easy to see why many nations have free trade agreements, and more are still to come.

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