Topic Category: Economy

What is NAFTA really about? This might seem a silly question. NAFTA is about trade, right? It’s the North American Free Trade Agreement after all.

But what if it’s not really mainly about trade at all? Thinking chiefly in terms of trade might actually obscure the real point.

China’s current administration is in a relatively stable position having engineered an apparently successful soft landing of the economy following the global economic crisis. Its main political objectives have been maintained, while increasingly focusing on the economic transformation to ensure sustainable long-term development.

Looking back 30 years, China was only just emerging from a planned economy. Its retail sector was strictly regulated, commodities were scarce, and a ration system was still in place.

Coupons were issued not only for food and fuel, but also for bikes and televisions. Each coupon specified an item, quantity and sometimes a retail outlet as well. Meat in particular was in short supply, rationed at 0.25 kilogram per person per month, and many Chinese had to eat vegetarian diets. Regardless of financial wealth, without coupons Chinese people simply couldn’t purchase goods.

Today’s post-recessionary economic realities combined with dynamic global trends are impacting virtually every aspect of our lives—and certainly the profitability of our businesses. Unless organizations understand the following five realities and adapt, succeeding in the years ahead will be extremely difficult.

As I write this commentary, the Dow Jones Industrial Average is down. But this isn’t really about the stock market; it’s about three recent news items.

First, a special session that prevented our nation’s leaders from their August recess added another $26 billion to government spending. Second, the Federal Reserve formally announced its decision to downgrade its forecasts of coming U.S. economic growth and agreed to a small amount of further monetary stimulus (called QE or quantitative easing), and implied that more might be needed. Third, Laurence Kotlikoff, Boston University professor of Economics and a former member of the President’s Council of Economic Advisors, said the U.S. is financially bankrupt and clearly argued against further fiscal stimulus spending.

What had been a recurring story line buried in the business section has now burst onto the front page: “Economic growth slowed by trade gap,” the Washington Post reports. This headline sets the stage for a story long on generalizations: “A widening U.S. trade deficit has become a substantial drag on economic growth as the country’s exports struggle to keep pace with the swelling sums that Americans are again spending on imported goods.”

China’s unexpectedly strong economic rebound may appear miraculous. In reality, it’s derived from a combination of that government’s huge economic stimulus package and increasingly strong domestic consumer demand. Our firm, InterChina Consulting, views Chinese consumer spending as an increasingly important contributor to the Middle Kingdom’s long-term economic growth. It also is offsetting continued weakness in global demand for China’s exports and will be the foundation for sustainable growth in the future.

The Margaret Thatcher-Ronald Reagan economic model of free market capitalism is under attack. The system, which was responsible for jumpstarting this era of globalization, created the greatest economic growth the world has ever seen. It empowered people to achieve their dreams and unleashed their innovative and creative abilities that paved the way for tremendous gains in efficiency and productivity, not only in the U.S., but around the world.

Unfortunately, this lesson has not always been well understood. In turn, many policymakers now see free market capitalism as suspect and wish to “fix” it.

Small business is the backbone of the U.S. economy. It’s also key to our economic recovery. Unfortunately, we don’t hear much about the large role small business plays in this country’s exporting efforts.

Laying Out the Facts

On June 30th, Senator Mary Landrieu of Louisiana, Chair of the U.S. Senate Committee on Small Business and Entrepreneurship, held a hearing in New Orleans at the Port Authority’s headquarters. The committee hearing was entitled Keeping America Competitive: Federal Programs that Promote Small Business Exporting.