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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.