Topic Category: Economy

Speculation is growing that the U.S. economy may have already slipped into recession. If the past is any guide, politicians on the campaign trail will be tempted to blame trade and globalization for the passing pain of the business cycle.

Rising unemployment and falling output can provide fertile ground for attacks on imports and foreign investment by U.S. multinational companies. But an analysis of previous recessions and expansions shows that international trade and investment are not to blame for downturns in the economy, and may, in fact be moderating the business cycle.

The United States attracted $180 billion in foreign direct investment in 2006. This is extremely important since inbound investment creates millions of high-wage, high-skilled American jobs that support our growing standard of living. But protectionist trends could disrupt this.

Global Funds Are Needed

In 2006, 20 bills were introduced in Congress that, if implemented, would have restricted foreign investment in the United States. What’s more, they could have prevented the Abu Dhabi Investment Authority’s $7.5 billion investment in Citigroup or the China Investment Corporation’s $5 billion injection in Morgan Stanley at the end of last year.

World commodities prices remain high, even as they recover from a recent sell-off due to interest rate concerns. Despite the volatility that goes hand-in-hand with commodities, prices have benefited from sky-high energy markets this year and growth in China that has resulted in an almost insatiable appetite for industrial raw materials.

The Dow Jones AIG Commodity Index has trended upward since January 2002, more than doubling as of mid-May this year. Continuing instability in the Middle East and the onset of the summer travel season pushed oil over $70 a barrel earlier this year, while copper prices hit historic highs, surpassing $6,000 a ton during the first quarter.

Many Americans fear an increasing U.S. deficit and believe it will ultimately lead to economic crisis. The facts, however, may surprise you.

By the most basic measure of economic performance—the change in real gross domestic product (GDP)—the U.S. economy performs best when current account deficits (which largely consist of the trade deficit) are high.

Since the emergence of local, regional and national economies, there has been a constant evolution in the stages of cultural and economic development. Globalization is another step in that evolution. It is not a unique event just bursting onto the scene, but rather, the 21st century version of a predictable age old dynamic. Yet due to the accelerated pace at which change now occurs, a backlash is growing and supported by a variety of groups.

New research and analysis reveal that companies linked to the global marketplace perform better than those that only operate domestically. And the employees and communities of globally-engaged firms prosper more. But the benefits don’t just apply to exporters.

The data reveal that companies that import, invest abroad or are recipients of foreign direct investment (FDI) also prosper more than their domestically focused counterparts. And, the analysis compares apples to apples: companies of the same size in the same industries. This research is likely to persuade many firms to expand their horizons. How will it affect your strategic plan?

On several occasions since World War II, and currently, the U.S. economic locomotive has been instrumental in pulling the rest of the world out of periods of poor economic growth. As this occurs, global markets improve, creating new opportunities for traders and investors. Today, new opportunities are emerging in Europe, Latin America and Asia, as well as risks that may affect your company’s bottom line.

In this extremely competitive global economy, financing is not only a necessary part of the export process, but also a very important tool. Your ability to offer your foreign customers liberal payment terms can provide the necessary edge to sell more goods and services worldwide. But, in doing so, it’s essential to accurately weigh the risks. This could mean the difference between international success and failure.

With amazing, even surprising speed, the economic crisis that impacted many Asia Pacific countries during the late 90’s has begun to fade. To varying degrees, the countries have begun the struggle toward recovery. What does this mean for your business?

The swift improvement in Asian economies is certainly encouraging news for U.S. exporters. And while not all countries are expected to increase demand immediately, the overall growth will surely support the continuing economic expansion in the United States.