Law & Entrepreneurship News

Archives: International Trade

Is Trade really a path to peace?

After a few weeks of impressive democratic developments in the Middle East , many are asking if the Iraq invasion validates the theory that war can make peace. If anything, the ‘march of democracy’ will bring a march of trade and a great article in a few international new papers reviews the old theory that free trade is the vanguard to peace. Joi Preciphs writes in his article "Free Trade: A harbinger of peace," questions the old theory that free trade would reduce conflict between nations and promote better standards of living across the globe. Specifically, many are now questioning whether this hypothesis is true and they suggest that current free trade institutions promote a race to the bottom and thus economic conflict among developing nations.

The Russian Question

Long considered a "riddle wrapped in mystery inside an enigma," Russia continues to perplex outsiders (at least me!) with mixed reports today about the country’s progress towards an open economy.

On the one hand, the WTO website highlighted major progress in accession talks with Russia and the Moscow Times reports that Russia firmly believes it will join the trade organization by the end of 2005. After concluding two-day talks in Geneva, Russian officials believe that they could be admitted before December’s summit in Hong Kong. The induction is bolstered by trade accords reached in the past year with the EU, China, South Korea, and others. President Bush also said today in Brussels that he "supports WTO membership for Russia." Last month, Russian officials met with Robert Zoellick in the first of many meetings to establish a trade accord.

On the other hand, in the same Brussels speech, President Bush expressed dissatisfaction with Russia’s progress and called upon Russia to "renew [its] commitment to democracy and the rule of law." Furthermore, the President Vladimir Putin has been greatly critized for rolling back democratic reforms and cracking down on dissent. Most of all, many are angry over what seems to be a government takeover of Russia’s largest oil company, Yukos. The US fears a nationally controlled oil market in Russia could damage the international economy. Bush will meet with Putin next week and should use the trade talk leverage to fix the oil scandal. Check out this fascinating blog on the oft-confusing country.

State ups exports 10% in 2004

Governor Doyle announced this week that Wisconsin’s exports grew over 10% this week spurred by growth in the industrial machinery, medical instruments and electrical machinery industries. Mexico replaced Japan as the second largest exporting market for Wisconsin businesses after recording a 35% increase in exports. The Governor will be leading a trade mission south of the border later this year.

The Canadien vs. The Donald in Downtown Toronto

Much like the race between the Empire State Building and the Chrysler building to build the largest building in the US in the late 1920s, two prominent businessmen are upping the ante to build the largest residential building in Canada. Donald Trump is in the process of constructing a 324-meter Trump International Hotel & Tower in downtown Toronto. A block away, local real estate developer, Harry Stinton is in the planning stages of his 320-meter Sapphire Hotel. Last November, the Donald reapplied for a height adjustment to add some more floors to his tower and outdo Stinton. This week, Stinton hinted at going back to the drawing to raise the height of his current plans. Will the Donald be outdone?? Will these reapplications slow construction? Are they worth it? Should be a fun competition to watch.

Halliburton Decides Iran Just Not Worth It

When existing contracts end, Halliburton will end its operations in Iran. While clearly under fire because of government contracts in Iraq, Halliburton came under more fire earlier this month after it was awarded another giant project to develop the world’s largest gas field, South Pars, in southern Iran. Halliburton has avoided US embargoes by basing its operations with Iran through the Cayman Islands. In addition to public disapproval, the company has been under pressure from its largest investors. The US attorney in Housten convened a grand jury in July last year to investigate Halliburton’s activities in Iran.

For more information click here.

Panitchpakdi Leadership to End this Year.

Sorry for the absence, but I’ve just gotten back from a three-week course in Bangkok on cross-cultural negotiation. Probably the most open trade market in South East Asian, Thailand is a major player in the global trade. Since September 2002, the WTO has been led by Supachai Panitchpakdi, a prominent banker and former Deputy Prime Minister. Panitchpakdi is widely credited with rescuing Thailand’s economy during the Asian Financial Crisis of the late 1990s and with motivating Thailand to ratify the Uruguay Round Agreement in 1993. Panitchpakdi shared the six-year term with Mike Moore after the WTO could not decide between the two in 1999. Moore led during the rockiest term of the WTO as anti-globalization rose and the ministerial conference in Seattle was a complete failure. Panitchpakdi became the first director from a developing nation. Under his watch, China formally joined the WTO, as did Armenia, Cambodia, Taiwan, and Nepal bringing the total membership to 148. This week, Pantichpakdi touted the release of a report by a committee formed two years ago on the "Future of the WTO."

The future, the committee concludes, is bright and free trade will expand. However, there are many threats to the WTO including the erosion of nondiscrimination clauses. Countries are continually signing into Preferential Trade Agreements. Jagdish Bhagwati discusses these agreements and other concerns that he and other members of the committee had about the future of the WTO.

The report also included an analysis of the WTO’s working past. Pantichpakdi’s reign has included a number of successes and failures for the WTO, though the organization seems more relevant today than ever. Some of the more memorable events of the last three years include:

September, 2003 talks in Cancun collapsed after fights over farm subsidies. For the first time developing countries stood up to the more powerful countries against an ‘unfair’ deal.

August, 2004 Geneva talks get the US and EU to reduce farm subsidies and developing countries agree to cut tariffs on manufactured goods.

And of course, the last few years have been highlighted by consistent rulings against US domestic laws such as the steel tariffs, cotton subsidies and the Bryd amendment.

I think Pantichpakdi gave developing countries if not some, a little, confidence to stand up to the developed countries in negotiating trade deals. Whether this is good or not, is a difficult question but despite the failed Cancun talks, the three year term has been a success. The dispute resolution system has matured and gained respected.

The Mises Economic Blog posted a report last week that Pantichpakdi would take the following 5 books with him to a deserted island: "He lists a book on chess, one by a communist, one by a social democrat, Sophie's Choice, and: the new Bruce Caldwell book Hayek's Challenge."

I will continue to look at the candidates beginning tomorrow.  Thanks for reading!!!

Israel-Egypt-US Sign Historic Trade Agreement

Earlier this week Egypt and Israel completed a long debated trade deal that will bolster economic ties between the two countries. The agreements established special economic zones in Egypt that will have duty free access to the US market if 35% of the product is a produced through Israeli-Egyptian cooperation. The deal has been in the works for years and hit snags because of its unpopularity in the oft coddled US textile industry. Israel hopes that the agreement could bring in $150 million to Israel in 2005 alone. While great in the short run for the countries’ textile industries, it will have an even greater impact towards peace in the region. Robert Zoellick, US Trade Rep, called the deal "the most significant agreement between Israel and Egypt in 20 years."

Visa Headaches Costing US Businesses Billions

Trying to get your overseas customers entry into US? You’re going to have to wait. Congress has been unable to speed up the application process and US businesses will continue to suffer as a result. Kiplinger reports that US companies have suffered $30 billion in financial impact between July 2002 and March 2004 due to visa problems.

Trade shows have lost major support over the past few years from international participants. The Consumer Electronics Association, which sponsors the International Consumer Electronics Show, surveyed international members who missed this year’s show in Las Vegas. Of respondents, 59% indicated that they had encountered problems in the visa application process, and 18% cited these difficulties as the main reason they weren't able to attend.

The Santangelo Group produced a study on the effects of visa delays and came up with some startling results. According to the report, the cumulative cost of delays and denials in processing business visas between July 2002 and March 2004 was $30.7 billion in lost revenues for U.S. companies. The survey also found that 60% of companies surveyed reported they had suffered "material impact as a result of visa delays. Half the respondents reported that the problems had even worsened since 2002.

These statistics cannot factor in the number of foreigners who did not even bother to apply for a visa because of the new hassle involved. Business people from China, the US’ fastest growing export market, have reported the largest number of difficulties.

Companies suggestions for overcoming these losses include: publishing clearer and more concise visa instructions, ensure communication transparency among US agencies, add more resources for security review and extend visa duration to reduce the number of applications. The companies also urged for a "gold card" provision that gives companies with recurring long-established visitors favored status with the visa applications.

Congress has increased the number of business visas available for the 2005 fiscal year by 20,000. Though this will help, the impact will be nominal. Last year’s limit was met by the first day applications were made available.

Milwaukee Firm Close to Deal with Major Banks Down Under

Milwaukee based Fiserv, is closing in on a deal with an alliance of Australia’s largest banks. The Milwaukee Journal Sentinel reports that Fiserv is bidding to provide check clearing services to the alliance in a multi-year deal worth tens of millions of dollars. The Australian alliance will bring together three of the country’s four biggest banks with combined assets of $750 billion. Fiserv provides diverse services in financial institutions, but its strength lies in check processing and image staining that prevents check fraud.

Fiserv provides global financial services to clients in over 60 countries and commands nearly 50% of the US market share. Despite this, Fiserv’s rivals for the Australia deal, Electronic Data Systems Corp and Unisys Corp, have a much stronger global percentage of the market. Leslie Muma, Fiserv’s president and CEO, believes that the Australia deal could open the door to many more international markets such as South Africa, South America, and China. Fiserv just entered the Chinese market this past year and expects major growth in the region. Critics of the Australia deal note, however, that Australians use fewer checks on average than Americans and continually rely on credit cards and other payment methods.

Using DNA to Protect Your Mark

With international counterfeiting costing US companies $200 billion to $250 billion a year, there is an extremely large market for protective technology. A small L.A. startup has developed possibly the best solution yet, using the most basic of materials. The startup, called Applied DNA Sciences, takes strands of DNA from plants and alters them to create unique chemical compounds that will identify a product. The compound acts somewhat like a chemical barcode that will identify whether a product is an authentic or a fraud. For example, a producer of an expensive Japanese sake has been inserting marking DNA into his wine. The consumer can test the bottle’s authenticity with a detection kit sold with the sake.

Just last week, Applied DNA signed a ‘strategic agreement’ with Holomex of Mexico, one of the world’s largest manufacturers of security holograms. The DNA and hologram technology can be inserted into DVDs during production to mark the genuineness of the DVD.

Bush Pushes Security During APEC Trade Talks

This morning, APEC leaders delivered their joing Declaration, entitled "One Community, Our Future," highlighting the priorities of security and trade. The meetings went by without major incident, desit the violent protests filling the streets of Chile opposing APEC and President Bush, the meeting’s most controversial guest.   APEC began 12 years ago in the interest of developing multi-lateral trade and global trade liberalization, however, recently President Bush has primarily used the meetings to address security issues.

Top on Bush’s list this year was his concern with North Korea. Over the weekend, Bush held private meetings with leaders from Russia, China, South Korea and Japan. Bush said that the five countries are approaching the controversy with one voice to remove Kim Jong Il’s nuclear weapons and facilities. He issued a firm warning to Iran that its weapons programs would be also be scrutinized. Bush also pressed on the issue of Iraq asking for APEC members to help in creating an Iraqi democracy and rebuilding the country.

Many countries were irked by Bush’s forceful statements and his focus on security issues. In New Zealand, Bush was accused of "hijacking" the APEC agenda by ignoring trade issues. The APEC summit failed to consider a radical new plan for a region-wide free trade agreement that had been proposed by the APEC Business Advisory Council—a group of trade experts. The agreement would have created a Pacific Rim Free Trade area. Rather than creating the trade area, leaders concentrated on pushing the Doha rounds of the WTO and keep WTO countries on track for free trade among all members by 2020. The declaration also urged the WTO to conclude the accessions of the Russian Federation and Vietnam. Small business principles, which had been an important issue on the agenda, were largely overlooked during the meetings.

Trial Date Set in Human Rights Case Against UnoCal

On June 21, 2005, a California court will hear oral arguments in Doe v. Unocal. For the first time, an American company will be put on trial for human rights abuses. Many eyes are on the trial as the economic and social implications of the court’s decision are wide spread. A finding for the Plaintiff could greatly deter international investment and trade in developing nations.

The oil giant is accused of being vicariously liable for the rape, torture, murder, and enslavement of villagers by the Burmese security forces that helped protect Unocal’s pipeline during the 1990s. The case rests on the Alien Tort Claims Act, a 1789 law that lay dormant in the books for the first 200 years of America’s history. The law provides that US district courts shall have original jurisdiction of any civil action by an alien for a tort committed in violation of the law of nations or a treaty of the US. During the 1980s, the law has been increasingly implemented to bring tort suits against foreigners—most famously in the Ferdinand Marcos trial.

The Unocal case is commanding widespread attention from human rights advocates as well as hundreds of corporations fearful that they may be held liable for wrongs committed by governments where they do business. The Plaintiffs accuse Unocal for using forced labor on the pipeline and being responsible for the Burmese destruction of villages done to pave the way for the pipeline. Unocal denies http://www.unocal.com/myanmar/ the allegations and says its investment in the isolated Asian nation is opening the country to the outside world. Other groups have attempted to raise similar cases during the past few years. A group of Nigerians is trying to sue Chevron for murders by the Nigerian government. Meanwhile, a group in Indonesia is suing Exxon Mobil.

It’s APEC Week—a quick look at the agenda

President Bush, and leaders from 20 other countries will head to Santiago, Chile this week to attend the 12^th Asia-Pacific Economic Cooperation (APEC) Leader’s Meeting.The meetings kicked off tonight with ministerial talks scheduled for Wednesday and the key summit meeting next weekend. With a combined population of more than 2.5 billion, the APEC region generates a GDP of $19 trillion, or 47% of all international commerce. While the informal cooperation forum has traditionally focused on economic issues, this year’s agenda may have a broader focus than in the past.

Free Trade

APEC’s primary focus had always been economic issues and this has not changed. Free Trade Agreements (FTAs) will be a focul point for most of the participating countries. The participating countries will discuss a regional free trade area to spur global liberalization of trade. Though such a plan is thought to be premature, APEC is implementing a non-binding tariff-bursting plan to achieve free trade and investment by 2010 for the developed members and 2020 for developing members.

The US has not endorsed the proposal

, but economist Fred Bergsten said such a plan would revitalize the WTO process and integrate the entire region. It is likely a task force will be created to look further into the plan and report back during next year’s APEC meeting in South Korea.

Leaders of the Pacific Rim economies hope to adopt best practices for FTAs to prevent discriminatory tariffs and favoritism in dealing. A number of FTAs has been agreed upon over the past year, but many included preferential trading arrangements that create diversion and discrimination among countries.

Another important issue during the week is the promotion of Small and Medium Enterprises (SMEs). In October, trade representatives and industry ministers from member countries met to draft the Santiago Agenda on Entrepreneurship which is aimed at preventing market failures and removing barriers to SME growth. The joint ministerial statement stressed the future of SMEs is the core to the future of APEC.

Security
Last year, security became a central issue at the APEC meeting. The United States hopes to use this week’s meetings to address its two largest concerns in that pan-pacific region—terrorism and non-proliferation. APEC leaders will compare notes on how to shape commitments made last year to tighten security and border controls. Japan will likely propose reinforcing export controls as part of a measure to prevent proliferation of WMDs.

Other issues on the agenda include measures to control infectious diseases, strengthen financial institutions, crude oil prices, and North Korea. Some worry that the China-Taiwan dispute will come to a head as both countries will be represented during the meetings. President Bush is scheduled to meet with Chinese President Hu Jintao and the two are expected to discuss the Taiwan issue. Taiwan’s envoy to the summit, however, said that he will not be negotiating the issue, though he does hope to gain on a bid to join the WHO.

Notable Absence

It is unclear whether last year’s host, Thai Prime Minister, Thaksin Shinawatra will attend this year’s meeting. Thaksin announced last week that he will skip this year’s meetings as a result of violent uprisings in the south of Thailand. After 87 Muslims protesting unfair treatment were killed, multiple bomb attacks have rocked southern Thailand in the past weeks. Thailand, the host of the 2003 APEC summit, is currently in free-trade negotiations with Japan, New Zealand, the US, and Peru—all APEC members. Missing these meetings will be a lost opportunity in advancing these negotiations. However, in a release today, it seems as though Thaksin has changed his mind and will attend the summit.

APEC comprises Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, the United States and Vietnam.

Milwaukee Entrepreneur Succeeding in International Shipping

Today’s Milwaukee Journal-Sentinel featured a story on Jim Winterle who turned his $10,000 into a $14 million, 40-employee shipping firm in little over five years. Finding a niche in international mail consolidation, Winterle left work at shipping giant DHL to start up International Delivery Solutions in Milwaukee in 1999. The company consolidates small shipments of products to take advantage of inexpensive bulk mail rates. The firm ships to nearly every country and analyzes local shipping options to achieve the lowest shipping cost. IDS has been listed for the past three years in Entrepreneur magazine’s "Hot 100" list of rapidly growing companies.

Outsourcing Industry Pleased with Bush Victory

The New York Times published an interesting piece highlighting India’s outsourcing industry’s satisfaction with the re-election of George W. Bush. "Outsourcing" certainly had become a dirty word during the presidential campaign with Kerry accusing Bush of promoting "Benedict Arnold companies and CEO’s" to send jobs overseas. India’s software and back-office services industry posted $12.5 billion in export revenues from March 2003 to March 2004. Global demand for their services has continued to rise.

Canada to Relax Drug Law, Could Hurt Cross Border Trade

Congressman Mark Souder (Republican, IN) told Canadian Television that pending bills to decriminalize marijuana possession could slow down cross border trade. The Canadian federal government intends to reintroduce legislation that would decriminalize possession of 15 grams or less of marijuana. Souder stressed that this law would lead to increased searches at the border which damages trade. He worries that looser drug laws will also have an impact on security because he says illegal drug trade funds terrorists.

Korea To Be Pressured to Open Up During Bush's Second Term

The Korea Herald reported today that the Bush re-election will likely bring added pressure on South Korea to open its markets to free trade. 

The Bush administration has been successful in bringing about trade agreements with many countries in Asia, but they remain at odds with the Koreans on some issues. US has urged Korea to allow more foreign competition but Korea has been reluctant to sign any free trade agreements—an agreement reached in Chile is Korea’s only free trade agreement.

The week prior to the election, Japan and South Korea held free trade talks amid labor protests in Tokyo. Japanese Prime Minister, Junichiro Koizumi and Korean President Roh Moo-hyn agreed last July to reach a free trade agreement by the end of 2005. The agreement is rather unpopular in South Korea and it may be difficult to achieve this goal.

The administration has also been at odds with South Korea over the North Korean nuclear crisis which will likely be a dominant issue during this term. While Bush has strained the relationship with South Korea by cutting off dialogue with Kim Jong Il, South Korea has contributed the third-largest contingency of troops to Iraq and current President Roh Moo-hyun has stated he expects the US-Korea relationship to improve under the Bush.

The Financial Times, however, reports

that most major US trade partners are relieved that George W. Bush won re-election. The Democratic resistance in Congress that had postponed recent free trade deals in Central America and Asia is largely gone and the President will have a much easier time pursuing his trade agenda. Environmentalists, Labor Unions, and Rights activists who typically lobby hard against many of Mr. Bush’s trade agreements will have far weaker of a voice with such a small democratic opposition. Stocks in Japan, New Zealand, Australia and most other countries rose after Tuesday’s election

Small Business Exporting States Go to Kerry

With the election now over and the victor (shockingly!) already declared I wanted to quickly look at where the electoral votes for the states with the highest percentage of small business exporters. With most analysts predicting more free trade under Bush than under Senator Kerry, it is interesting to see that the states with perhaps the most interest in free trade agreements overwhelmingly sided with Senator Kerry. Clearly there are many factors at play here (such as geographic logation, major commerce centers, etc), but it was nonetheless interesting to see the trend. Only five ( TX, FL, AZ, CO & OH) of the top 20 small business exporting states sided with the President. The trade statistics came from the Small Business Administration Office of Advocacy.

Rank State Electoral Votes To:
1 California Kerry
2 Florida Bush
3 New York Kerry
4 Texas Bush
5 New Jersey Kerry
6 Massachusetts Kerry
7 Illinois Kerry
8 Hawaii Kerry
9 Oregon Kerry
10 Washington Kerry
11 Connecticut Kerry
12 Rhode Island Kerry
13 Michigan Kerry
14 Ohio Bush
15 Pennslyvania Kerry
16 Minnesota Kerry
17 Colorado Bush
18 Arizona Bush
19 New Hampshire Kerry
20 Wisconsin Kerry

* statistics are a from 1998, but rankings remain relatively similar.

American Failing in Bid to Take Over Manchester United

Malcom Glazer, owner of Tampa Bay Buccaneers, failed in his bid to takeover British Soccer giants Manchester United. It is unclear whether he will continue to pursue a takeover, but fans of the club bitterly oppose the American’s attempt to control the club and the club’s board does not approve of the level of debt supporting Glazer’s offer. JP Morgan, the bank backing Glazer’s offer, would only fund the takeover if it received backing from the board.

It is likely that a fully financed proposal would be supported by the board, though the fans would undoubtedly fight the purchase. Fans protested outside the club’s infamous Old Trafford Stadium on Sunday and even stormed the field after a reserve game last week. Many carried “not for sale” signs to the previous matches and are determined to unite against Glazer’s takeover.

Today’s New York Times questions whether anti-Americanism in the United Kingdom has fueled the fans opposition to Glazer. Last year, fans of Chelsea (one of Man U’s most formidable rivals) fully supported a takeover by Russian oil tycoon Roman Abramovich. Franklin Foer, author of “How Soccer Explains the World: An Unlikely Theory of Globalization,” said that if the purchase of the club hadn’t coincided with George Bush’s reelection and the war in Iraq, “it probably would have gone through.” Others have noted that they have never known “militancy like this” coming from the fans (which is saying a lot considering the reputation of the country’s hooligans).

Many predict Glazer will continue is bid to takeover the club, which is valued at $1.3 billion with a fan base estimated at up to 75 million supporters. He may buy shares from other major holders or he may come back to the board with a better financed purchase offer. As long as Glazer’s stake remains below 30% (its currently at 28.1%), he is not required to make a takeover bid.

Glazer failed last year in an attempt to buy the Los Angeles Dodgers.

World Trade up 8.5% in 2004

The WTO reports that global trade will grow by 8.5% during 2004 bolstered by strong output expansion in China, Latin America and Africa. Though high oil prices may restrict production and output in 2005, over the past year, vigorous expansion of markets and a strong recovery in Japan have improved overall trade numbers. Today, the WTO website posted parts of an annual report on International Trade Statistics on its website. The entire report will be available in November.

Japan Still has a Beef With US Cows

Weekend talks between Japanese and American diplomats have ended without a compromise on the issue of beef imports. Colin Powell had met with Japanese PM, Junichiro Koizumi, and other high level officials in the hope that Japan would remove the 10 month old ban of beef. Worried after discovery of bovine spongiform encephalopathy in a handful of cows in Washington state, Japan closed its markets to US beef exports—which had been a 1.7 billion dollar market. Japan agreed to allow limited imports of cows younger that 20 months though the government is unsure whether age testing is ‘scientific’ enough. Powell remained optimistic, however, that a settlement would be reached shortly and the age limit would be removed by next summer.

K9 Treat Exporter Wins Small Business Exporter Award

S&M Nutec, LLC has been awarded the first ever “Small Business Exporter of the Year Award” by The National District Export Council. The Missouri-based company makes America’s #1 retailing dog treat—Greenies®. Greenies® are the only dog treat that decreases tarter and plaque, freshens breath, improves digestion and taste great. The company has benefited from a handful of export-related grants, counseling and trade events. Started in 1996, the treats are exported to 44 different countries, which accounts for about 12% of the company’s total sales.

Yamaha Must Honor Current Contract with Fond du Lac’s Mercury Motors

The Milwaukee Journal Sentinel reports that a District Court judge in Green Bay has ruled against Yamaha Marine Group’s plan to increase prices on its outboard engines. The Japanese engine manufacturer currently provides Fond du Lac’s Mercury Marine Inc. with 75-, 90-, and 115-horsepower engines. Judge William Griesbach ordered Yamaha to honor its current contract agreement, opposing a 92% price increase that would have gone into effect on November 1st. Yamaha had planned to the increase to counter an August US Department of Commerce ruling that imposed a 22% import tax on Japanese-made outboards. Yamaha must honor the current contract at least until an International Court of Arbitration panel rules on the decision. By the time the Paris based panel hears the case, Mercury hopes to become self-sufficient so as not to depend on Yamaha.

Ebay v. Yahoo: Still Competing Abroad

While eBay seems to have conquered the market in the US accounting for nearly all of US online auctions, Yahoo continues to dominate in Japan, Taiwan, and is making moves in China. Bloomberg reports that eBay’s continued growth has been led by overseas markets where revenue has climbed 82% to $ 328 million during the second quarter. However, the giant’s dominance in China has not yet been solidified.

EBay, as its done in markets across the globe, became the first overseas auctioneer to enter China’s booming market in March of 2002. EBay invested $30 million into EachNet, an eBay-like website started in 1999 by two Harvard MBA grads. A year later eBay acquired EachNet for $150 million and during the second quarter of 2004, $250 million worth of merchandise was sold on EachNet.

But Yahoo is unwilling to allow eBay to conquer yet another market—especially the world’s second-largest market as far as internet users. In January, Yahoo formed 1Pai.com with Sina Corp, which operates China’s largest Internet portal. In addition to the extraordinary traffic driven to 1Pai.com through Sina, Yahoo draws users by not charging sellers for listing their products. Revenue is generated primarily through advertisements.

Internet auctions tend to favor the early bird and Yahoo beat eBay to Japan and Taiwan. EBay failed to garner enough traffic in Japan and the auction site has a large hole in its market due to its ‘nonexistence’ in the world’s third largest online marketplace. Bill Cobb, senior vice president of Ebay’s international businss, says that the company plans to reenter Japan at some point.

EBay does not charge for product listing in Taiwan, Hong Kong, and Singapore—three countries where Yahoo remains a challenger.

In China, eBay is also fighting challenges from other young auction sites such as taobao.com. Taoboa also offers its services for free and offers other features such as instant messaging. The site’s founder says “ebay doesn’t understand the market.”

Despite these challenges, eBay holds a major advantage in the international market which equals more buyers looking at listed products. If any Chinese seller wants to attract buyers in the US or Europe, he is unlikely to find such a buyer on any site other than eBay.

August Trade Numbers Worse than Expected

Yesterday, the US Department of Commerce released discouraging trade deficit numbers from August. With oil imports reaching their highest level ever, the US trade deficit grew to $54 billion in August. Exports of goods and services in August rose only 0.1 percent, down from a 3 percent growth in July. In a Bloomberg News survey, forecasters had predicted a deficit of $51.4 billion.

The trade deficit with China alone grew to $15.4 billion in August and pressure continues to mount on the Bush administration to convince China to depeg its currency. Many had hoped for China to depeg after its invitation to the G7 meeting in September. At the current fixed rate, Chinese producers have an immense unfair advantage over American producers.

Illegal Export Subsidies to End--US Hopes EU lifts Tariffs

Congress’ $145 billion tax bill passed this week sets out a schedule to eliminate the Foreign Sales Corporation rule tax break that the WTO called illegal nearly four years ago. Last year, the WTO authorized the EU to impose sanctions on a wide range of US goods. These tariffs started at 5 percent in March have now reached 11% after monthly hikes. This month’s bill will phase out the export subsidy over the next three years. Pascal Lamy, the EU trade commissioner, has yet to lift the tariffs and the Financial Times reports that Lamy has tied removal of the tariffs to other conditions namely settlement of the Boeing-Airbus dispute.

EC Annoyed by UK’s Crackdown on Booze Cruisers

The BBC reported that ferry companies and the European Commission are annoyed with UK customs officers who are seizing a large number of cars coming into the UK. Last week, a British High Court found that Customs and Excise had been too heavy handed in searching cars. In the case, brought by ferry company Hoverspeed and four vacationers, the court ruled that passengers canot be lawfully stopped by Customs unless the officers have ‘reasonable grounds’ for suspecting that the travelers have committed a crime. Under UK law, an individual can only bring back enough alcohol and cigarettes for his own consumption—even resale to friends and family is forbidden. Hoverspeed accused customs of driving people away from travelling across the channel.

Chirac and French Business Leaders Visit China for Commercial & Political Purposes

Flanked by a delegation of businesspeople and entrepreneurs, Jacques Chirac concluded a five-day visit the EU’s fourth largest trading partner. Though a joint communiqué issued before he left hailed the trip as very important, others have termed the trip as ‘disappointing.’ Chirac did net about $5 billion in contracts between French and Chinese businesseses. Despite this, Chirac avoided the issue of Chinese human rights abuses, and he also failed to seal anticipated contracts for French high-speed rail technology and the sale of new Airbus jumbo jets. The Epoch Times sees the failed closure of these deals as major political losses for the French Prime Minister.

China has said in the past that it expects the EU to become its largest trading partner. Doing so, many believe, would change US policies. China, which like France holds veto power in the UN Security Council, would like to see the US act more through the UN rather than unilaterally. Furthermore, the US is the primary guarantor of the security of Taiwan, which the Chinese hope to bring into the Chinese fold.

The joint communiqué also proposed a meeting of the Group of 20 nations—including China, India, Russia, and developed countries. China will become the president of the G20 next year and would like to see the G20 overtake the G7’s importance in global economic issues.

“BUY MEXICAN” Campaign in Mexico to Counter Chinese Dominance

More and more manufacturing jobs are shifting from Mexico to China as the Asian giant has taken advantage of cheaper gas, electricity, water, and employment wages. In 2002, China overtook Mexico as the second-largest importer of goods to the US trailing only Canada.

The increased competition has hit home in Mexico as the media highlighted the prominence of Chinese made fireworks and Mexican flags during this year’s Independence Day celebration. Having lost thousands of jobs to China, local companies and politicians are pushing a “Buy Mexican” campaign. Last month, President Vicente Fox’s governement signed agreements with China to fight piracy, aid small business relations, and ease travel between the two countries. This month, they will begin negotiating a pact to promote and protect investment in each other’s territory.

With exports to the US rising only 12 percent over the past 4 years (compared to 90 percent increase of Chinese exports to the US), Mexico needs to widen its export base. They have recently signed a free-trade pact with Japan.

UPS Chief to Business Leaders: Promote Free Trade!

UPS transports about 2 percent of the world’s GDP each day, and 7 percent of all US Economic output. But, in a speech that “transcends self-interest," UPS Chairman Mike Eskew urged US business leaders to do their part to improve the image of international trade in the United States.

“[International Trade] should be heralded as one of the greatest success stories of our country and our era,” Eskew told the business community in a speech at the US Chamber of Commerce; quoting former Secretary of State Cordell Hung, Eskew underlined the importance trade can have on increasing global peace and stability saying “when trade crosses borders, armies don’t.” He added that the business community has failed to promote the benefits of free trade, complaining that a vocal minority of anti-globalization protesters has dominated the debate over free trade.

Growing fears over losses of manufacturing jobs and US trade deficits have helped spread the fear that free trade hurts the economy and especially the American middle-class. Several politicians have harped on these fears promising to end unfair trade agreements, and outsourcing of jobs. In a recent poll, 48 percent of Americans had favorable opinions on globalization and 29 percent endorsed international competition.

To combat these negative numbers, Eskew urged leaders to change the educational system in an effort to product more engineers, technicians and manufacturing experts. He argued that 97 percent of US exporters are small businesses and the US companies that export are 20 percent more productive, are growing 20 percent quicker and provide wages and benefits that are 15 percent higher than purely domestic firms.

"But we can recite trade facts until we're blue in the face," Eskew continued, "facts like many, many more jobs have been lost to 'countries' called 'productivity' and 'technology' than to India and China. Facts like lower costs create more goods attainable by more people, improving lifestyles and creating better economic opportunities."

As such, he said “economic isolation would be disatrous for American business, for American workers and for the American economy.”

Trade Agreement Signed for Microbusinesses

Representatives from the US and Mexico signed a “mini-NAFTA” agreement on Monday designed to benefit microbusinesses—companies that employ five workers of less. Tuesday’s issue of the Tuscon Citizen reports that the deal will reduce the barriers to trade for the smallest of businesses. The goal of the project is to establish a strong support system for companies of both countries. It will also aid in education of trade laws and usage of the internet to sell across borders. 52% of all US businesses are microbusiness.

US-Bahrain Free Trade Agreement Signed, Many More Free-Trade Pacts on the Way.

Business executives and government officials from the US and Bahrain celebrated the new US-Bahrain Free Trade Agreement at the New York Palace Hotel on September 22. The Department of State reports that nearly 200 guests attended the luncheon including Bahrain’s Deputy Prime Minister Sheikh Mohammed Bin Mubarak AL-Khalifa. The move comes just weeks after Congress approved free trade accords with Australia and Morocco. Israel, Canada, Mexico, Jordan, Chile and Singapore already have Congressionally approved free-trade pacts with Congress and the number is likely to rise after the November election.

In May of 2004, the Bush administration signed CAFTA—Central American Free Trade Agreement—which includes Costa Rica, Honduras, Guatemala, El Salvador and Nicaragua. Congress will likely pass the agreement after the November elections. More pacts are likely on their way, as the administration is negotiating pacts with ten other countries: Colombia, Ecuador, Peru, Panama, Thailand, and the Southern African Customs Union (made up of Botswana, South Africa, Lesotho, Swaziland and Namibia).

Doyle and Wisconsin Companies to Japan to Strengthen Already Strong Ties

Wisconsin Govenor Jim Doyle is in Japan this week with a delegation of Wisconsin business leaders in an effort to increase Wisconsin Exports and Japanese investment in the state.

Japan and Wisconsin have historically had close economic ties and this trip hopes to increase these business connections. Last year Japan was the #2 importer of Wisconsin goods.

The Kikkoman Corporation, the Soy Sauce giant, opened up the first wholly Japanese-owned manufacturing facility in the United States in Wisconsin in 1972. In May of last year, Yuzaburo Mogi, president and CEO of Kikkoman, announced a $13 million expansion of the company’s Walworth, WI headquarters. The company has also made a significant pledge to the development of the UW-Madison Microbial Sciences Building.

Brits propose 3rd World debt relief, plan to push issue at G7

In an address today to the Trade Justice Movement, a trade advocacy group, Gordon Brown, the chancellor of the Exchequer, stated that the British Government would pay 10% of third world countries’ debts to international organizations. The New York Times reports that Brown also plans to push the proposal that the International Monetary Fund should revalue its gold reserves and use the proceeds to cancel some of the third world debt. Mr. Brown is likely to champion these two proposals this week during the G7 meetings in Washington and pressure others to follow suit.

Britain intends to lead by example by setting aside the equivalent of $180 million a year to pay off 10% of the money owed by 32 countries to international lenders, most notably the World Bank and the African Development Bank. The British move “throws down a challenge to the rest of the world” according to Hilary Benn, the minister responsible for British overseas aid.

A previous mechanism for debt relief arranged by the World Bank and the IMF in 1996 is up for renewal in December. This mechanism, the Heavily Indebted Poor Countries Initiative (HIPC), has already reduced numerous countries’ debt payments in half. Before HIPC, many of the targeted countries were spending more on debt service than on health and education combined. Now, such spending is four times that of the amount of debt service payments.

Both democratic and republican presidential campaigns have stated that they promise to lead efforts to cancel the debts of these countries. Unlike the British, however, concrete plans have not been released.

European Tariffs Growing Larger

The Detroit Free Press reports that over 400 companies have written Congress during the past week urging the lawmakers to change the corporate tax laws that threaten their sales in Europe. For every month that the US fails to repeal the tax breaks, the EU is increasing tariffs on US goods by 1 percent. Four years ago, the WTO declared the tax breaks as illegal and approved the EU’s penalties in March of this year.

Now at 11%, companies are really beginning to feel the bite of the tariffs. The American Farm Bureau Federation estimated that US Farmers will lost $150 million in sales over the first year the tariffs are in place. In addition to farm products, steel, clothing, jewelry and toys are among goods facing the tariff hike. As the tariffs grow larger, small businesses are looking to other markets than the US’ largest foreign market.

At the moment, the bill is stalled with both houses disagreeing on how the matter should be handled. It is likely that the tariffs will continue to increase well into next year

China Invited to the Party—will they ‘depeg’ their currency???

Representatives from China will participate in next week’s Group of Seven (G7) meetings in Washington, marking the first time the most populous country will join the G7 meetings of finance ministers and bankers. Many have argued that the G7 has become ineffective in coordinating global economic policies without China. John Taylor, US Treasury Under Secretary for International Affairs, called the visit “historic” and a “natural occurrence.” He also believes that the visit is another sign of China’s movement away from the fixed currency rate which is presently hurting many US companies.

The Treasure Department asserts that the Bush administration has taken unprecedented steps toward rapidly moving China to a flexible market-based exchange rate. According to Rob Nichols, the Treasury Assistant Secretary for Public Affairs, the Chinese are “actively taking important measures to modernize their financial infrastructure to prepare for a flexible exchange rate regime.” Despite these improvements, the treasury is still demanding a more intense push by the Chinese to improve the situation. John Kerry has been critical of Bush, saying he has failed to aggressively change China’s policy and that there is no reason that China cannot ‘de-peg’ the currency immediately.

American manufacturers have been severely affected by the fixed rate and Bush has been pressured by some to challenge the currency peg as an unfair subsidy under international law. The Bush administration has preferred negotiations over bringing the case to the WTO.

Gerald O’Driscoll, a senior fellow at the Cato Institute, makes a good case that it is doubtful that a flexible yuan will significantly help American manufacturers.

Small Firms jump into international accounting

Friday’s edition of the Long Island Business News highlighted the expansion of global accounting that has brought even small local accounting firms into the world market. Large multinational accounting firms had dominated the global market but the internet and expanded ease of doing business abroad has encouraged small firms to enter the market. Complex cross border audits and especially foreign tax filings has raised the demand for firms for accountants with understanding of the foreign codes and laws. Meanwhile, an interantionally accepted set of accounting standards still does not exist.

Many countries have local GAAP [generally acepted accounting principles] and companies must maintain records on both the local GAAP and the U.S. GAAP. The good news is that accounting standards are becoming more similar across the world and calling for some to call for what would amount to a global GAAP.

In October of 1997, the SEC put forth a Report on Promoting Global Preeminence of American Securities Markets. The report discusses the International Organization of Securities Commission’s 1990 pledge to develop an internationally acceptable accounting standards that would facilitate evolution of a single disclosure document for cross-border offerings and listings. This project remains in motion.

Doyle: US Scrutiny of Chinese Imports Won't Hurt Wisconsin Exports

Wisconsin Governor Jim Doyle thinks that the expected increased scrutiny on Chinese imports by the U.S. will not hurt export relationships Wisconsin government and business officials developed in China during a March trade expedition, according to wisbusiness.com. Since the trip, some businesses have already secured deals in China, while others have made follow-up contacts or are planning return trips. Wisconsin exports to China grew 50% over the last year, making it one of Wisconsin's fastest growing markets.

US Considering Limiting Chinese Apparel Imports

Citing old pre-WTO trade agreements, American trade officials are considering putting limitations on Chinese apparel and textile importers. The Committee for the Implementation of Textile Agreements has solicited public comments as to whether or not it should implement safegaurd actions to protect the American apparal industry. An implementation of these old trade laws, that contradict pledges made in 1993, would probably be challenged by China in the WTO.

In 1993, the US and other industrialized nations agreed to remove quotas on textile and apparel imports from developing countries by December 31, 2004 in the Agreement on Textiles and Clothing. At the same time, the US also negotiated bilaterally with China and others to preserve some of its old trade laws such as the “safeguard limits.” These limits can be imposed when an American industry requests protection after surges in imports. The legitimacy of these agreements is a matter of controversy.

Grant Aldonas, the under secretary of commerce for international trade, said that he expected American manufacturers to start filing requests for import restrictions at the beginning of this week. Quoted in Sunday’s New York Times, Aldonas said “if (the apparel manufacturers) can justify it and have the evidence, we’re going to enforce the trade laws.” According to Aldonas, in textile and apparel categories where limits on importation have been removed, Chinese imports have increased up to 24,000%.

In a letter to the Committee, the American Apparel & Footwear Association, disagreed with the potential safegaurds. The association, the national trade association of the apparel and footwear industries, argued that insufficient information has been presented to support the claim that the Chinese imports are causing market disruption. Proceeding without stronger data, the association argues, would undermine the safeguard process. The association argued that data shows that there has not been a surge of imports coming from China. The major growth of imports from China is coming more at the expense of other countries than the American manufacturers. Even more, the market share of imports of all US companies has in fact risen over the past few years.

Yet others firmly believe that after the quotas are lifted, the cost advantage of Chinese products will be realized and the exports to the US will increase greatly. This issue could turn into a divisive election topic. Many feel that if Bush fails to limit the importing of these goods, it will play into Kerry’s argument that Bush has failed to protect the American workers.

Papa Java--Fair trade success story

In Spring of this year, The Fair Trade Coffee House opened upon on an already coffee laden State Street near the University of Wisconsin campus. Every time I have been to the coffee shop, it has been booming with as much or more traffic as any of the shops on campus. After reading a September 3, 2004 article from the Papua New Guinea Daily Post-Courier, it seems as that the success here in America has in fact translated to wealth among the farmers and traders in the tiny country just east of Indonesia. Ravaged by war until 1997, the country has struggled to develop, but an innovative Fair Trade Coffee trade has provided a profitable outlet for coffee growers located in regions that roads can’t even reach.

The Fair Trade concept has grown significantly across America over the past decade and has given many local small businesses an exciting innovative method of getting started. New businesses subscribe through the Fair Trade Federation to become involved in importing and selling fair trade products in the US. The federation certifies that the workers producing the imported good are paid In Papua New Guinea, The Kway Organic Coffee Farmers is a company arranged to provide coffee farmers of some isolated regions of the country export their goods. The majority stock holder in the company, Kaimi Warina, buy the coffee from the 1000+ farmers he deals with at anywhere between $1.50-$2.00 per pound. After transporting it across the many islands of Papua New Guinea to Lae, one of the country’s largest ports, Warina sells the coffee for about $3 per pound. The profits are shared amongst the shareholders and the farmers are garaunteed to earn wages above normal living standards.

The company was granted Fair Trade status by the Fair Trade Federation admission back in 2003. When they began operations, Mr. Warina bought the coffee on credit and promtly paid them back after selling the first shipments. Transactions where a purchaser stays true to his work is very rare in the struggling nation. Mr. Warina’s fair dealings and popularity have led him to promotion as t

Warina’s operation has since grown smoothly, though he is still unable to secure regular air charters to ship the coffee because of the country’s terrible roads and runways. He hopes to eventually include all 10,000 of the isolated regions’ coffee farmers in the profit sharing concept. In a classic example of business leading the way for the government, Warina plans to charge a small tax on each shipment in order to construct roads to and from the coffee regions. Nominated to represent the Asia/Pacific region at the Fair Trade Federation London Confrence in 2006 and appreciated by all the farmers working for him, Warina is amazingly more popular than the new coffee shop in downtown Madison where will will soon see Papua New Guinea coffee.

Chile a Hot Place for American Small Businesses

New Hampshire is one of six states taking advantage of the recent U.S./Chile Free Trade Agreement. The six states were chosen by the US Chamber of Commerce’s TradeRoot Initiative to expand trade to one of South America’s most open economies. Unlike most its neighbors, Chile has avoided major recessions and government corruption over the past decade.

The state’s government has kicked off a seminar this week to promote the two year program with Chile and New Hampshire will be showcased as a national model for future trade agreements. The federal funding will go primarily to facilitating contact between Chilean and New Hampshire businesses. Chile accounted for about 2.5 billion dollars in exports in 2003, but that number is expected to grow significantly over the next few years as the countries build a closer trade relationship.

Perhaps the most important function of trade agreements such as these is the increased simplicity. Many, especially small businesses, complain of the confusion involved in exporting their goods. It hardly seems worth the hassle. In the case of this initiative, organizing shipments to Chile is especially easy, thereby targeting small businesses.

eBay Off the Coast—Abroad and In the Hurricane

Anita Campbell of Small Business Trends pointed out a great article in a recent eCommerce Times