Author Article List

Crafting Your Message To Achieve Understanding, Acceptance and Support

Published on Thursday, March 01, 2007

Whether you are explaining your corporate response to globalization or defending it, your ability to effectively communicate your position is paramount. Why? Your ability to do so can help achieve greater understanding, acceptance and support. Your failure to do so, however, can result in bad press, policymakers running for cover, low employee morale and decreased investor confidence.

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What the 110th Congress Will Mean for Free Trade

Published on Monday, January 01, 2007

In an upbeat speech to the U.S. Chamber of Commerce in December 2006, U.S. Trade Representative Susan Schwab predicted that President Bush and a new Democratic Congress would work together in the next two years on a range of trade legislation. Supporters of trade expansion can only hope she is right, but political winds point toward rough waters ahead.

More Trade Skeptics in Congress

Democratic control of the 110th Congress will mean a chilly reception for the Bush administration’s agenda of promoting free trade agreements. According to post-election analysis by The Wall Street Journal, skeptics of trade gained about 16 votes in the House and five in the Senate. Core Democratic constituencies, such as organized labor and environmentalists, will demand opposition to new trade agreements as a reward for their support.

Trade Casualties Will Mount

The first casualty of the new Congress will be trade promotion authority (TPA), due to expire at the end of June 2007. Approved in 2002, TPA authorizes the president to negotiate free trade agreements and present them to Congress for an up-or-down vote without amendment.

Under TPA, Congress approved such deals as the Chile and Singapore free trade agreements in 2003, the Australia agreement in 2004, and the Central American Free Trade Agreement in 2005. Renewal of TPA was doubtful even before the election, given the narrow margin by which it passed in 2002, but the 110th Congress has sealed its fate for at least the next two years.

Anti-trade politicians also have staked out a skeptical line against free-trade agreements still in the pipeline with the United States’ Latin American neighbors Colombia and Peru. The mantra of the party and its organized-labor backers is that these agreements fail to protect the environment and labor rights. Those demands are based on the misguided belief that developing countries will only raise their workplace standards under threat of trade sanctions, when in reality, expanding trade has been a powerful engine to that end.

And Democrats keep raising their own standards for trade agreements. During the last Democratic-controlled Congress in 1993-94, 40 percent of House Democrats voted in favor of the North American Free Trade Agreement, even though it contained few references to labor and environmental standards. A dozen years later in 2005, a mere 15 Democrats voted for the Central American Free Trade Agreement, even though it affected much less trade and contained whole chapters devoted to labor and environmental standards.

The incoming chairman of the Senate Finance Committee, Max Baucus of Montana, consistently supports trade liberalization, but his counterpart on the House Ways and Means Committee, Charles Rangel of New York, has compiled a checkered record. Rangel voted in favor of permanent normal trade relations with China in 2000 and for a few smaller FTAs. Yet he opposed major trade legislation that forms the cornerstone of US trade policy — NAFTA and CAFTA, trade promotion authority, and even the Uruguay Round Agreements Act of 1994 that secured America’s membership in the World Trade Organization. And Rangel is considered a pro-trade policymaker.

Trade Legislation on Cuba May Get Support

The one area where the new Congress may be more pro-trade than the old will be on Cuba. Large majorities of Democrats have voted against the trade embargo and travel restrictions. Rep. Rangel himself has sponsored amendments that would have denied funding for enforcement of the embargo. Unfortunately, President Bush is wedded to defending the failed, four-decade-old policy of trying to change Cuba through economic isolation. The new Congress may chip at the edges but probably will not be able to repeal the embargo.

Protectionist Legislation Unlikely

Thanks to the American system of checks and balances, the 110th Congress will find it difficult to enact outright protectionist legislation, such as sweeping tariffs against goods from China. President Bush does (in theory, anyway) wield the veto pen. In the Senate, Democrats will need to muster a 60-vote supermajority for any trade bills, a real barrier against protectionism in a chamber that is normally more pro-trade than the House. Thus the most likely outcome for the next two years will be a rise in anti-trade rhetoric and proposals coming out of Washington — but no bold changes in actual policy.

Meanwhile, the American people will go on voting with their dollars for more engagement in the global economy. Americans have never earned or spent a higher share of their income in the global economy than they do today. Imports, exports and foreign investment are setting records.

Despite their campaign rhetoric on trade, the Democrats would be wise not to disrupt those positive trends.

Beware of Traditional Assumptions in Constantly Shifting Currency Markets

Published on Monday, January 01, 2007

When market participants attempt to predict currency shifts, they must be wary of applying outmoded assumptions. Projecting currency moves has become increasing challenging in globalized markets. A misinterpretation of trends can lead to poor business decisions.

Fading Currency Assumptions

It is also increasingly difficult to predict the impact currency shifts may have. For example, it used to be thought that as the U.S. dollar fell against other currencies, American exports benefited. That’s because U.S. goods became less expensive when prices were translated into foreign currencies. As a result, American manufacturers became more competitive abroad. At the same time, a relatively weaker U.S. dollar was expected to lead to increased prices in imported goods. For a variety of reasons, these assumptions may be outdated.

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The New UCP 600: Better Rules to Better Facilitate International Trade

Published on Monday, January 01, 2007

As trade between nations rapidly increased in the early part of the 20th Century, a major barrier to expansion were conflicting laws governing letters of credit among countries. In 1933, members of the International Chamber of Commerce (ICC) created the first Uniform Customs and Practice for Documentary Credits (UCP), a set of rules that brought uniformity to letters of credit.

Since its inception, the UCP has become the most successful private set of rules for trade ever developed. Now firmly established, the UCP continues to remain an essential component in international trade. It establishes the conditions under which the majority of banks operate in documentary commercial credit transactions in more than 160 countries.

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