Turbulent Times For Sporting Goods Exporters

By: Tom Ritter Issue: Global Trade Section: Collaborator Profile The sporting goods industry consists of a wide array of soft goods and hard goods manufacturers, brand sourcing companies and service companies. The products range from electronic score boards used at sporting competitions to the track suits worn by Olympic athletes. The outdoor sports market is comprised of camping equipment, hunting goods, skiing equipment and lifestyle sports activities. Many sporting goods manufacturers and suppliers are classified as small to medium sized businesses.

These companies and the sporting goods market as a whole have been severely affected by the economic downturn and are finding themselves altering their business models as a result. Bankruptcies have been seen in the retail sector as well as at the manufacturing level. The industry remains over supplied and is extremely competitive. Survival in today’s sporting goods market requires a well founded yet flexible business strategy.

Global trade is moving through its most challenging time since the 1930s and the sporting goods industry is not escaping the challenges. Global GDP is declining and may or may not have reached bottom at the time of this writing. Governments are spending unprecedented amounts of money, taking their countries into newly charted debt territory. The banking industry is under great stress. While government loans or guarantees may have stabilized the larger banks, many sporting goods suppliers and dealers are still experiencing a reduction in credit limits and more stringent loan requirements. Meanwhile, most companies continue to experience the same level of competition they encountered before the economic downturn began last fall.

While there are many varying economic forecasts, it is apparent that global GDP will likely decline in 2009 by between 2.0% to 2.75%, assuming the world economy reaches its bottom in the third quarter. Germany has reported a first quarter 2009 decline of 14.4% while Japan reported a 15.2% decline in the first quarter. At the same time, the U.S. reported a decline of 6.3% for the same period. The European Union has reported an overall decline of 4.4% for the first quarter in the Eurozone countries. Given the first quarter 2009 number for Germany, the overall number for the Eurozone may be revised downward.

The vast majority of sporting goods companies supply products for leisure time activities. As unemployment rises around the world and those who remain employed become reluctant to spend on leisure activities, it is expected that the global market for sporting goods sales will decrease by between 3% to 4% in 2009. Some regions and countries will see much steeper declines.

Many sporting goods importers hedge the currency risk by adding as much as 10% to their landed costs, retarding further a product’s price competitiveness. Uncertainty in exchange rates is also exacerbating turbulence in the sporting goods market and affecting the market dynamics. We have seen the dollar move from a low against the Euro of $1.54 in June 2008 to a recent high of $1.24 in February 2009 and presently is approaching $1.39. Distributors and retailers are having to hedge their pricing and those who guess incorrectly will either suffer from uncompetitive prices or, conversely, financial strains on their profit margins.

Alternatively, some U.S. companies quote their prices in foreign currencies, taking on the exchange risk, thereby hedging the risk over greater sales. The most common currencies used other than the dollar are the Euro and the Yen. These exporters are presently gaining a margin advantage against their European or Japanese competitors when the currencies are exchanged back into dollars. A significant amount of sporting goods are made in China and sold by international companies under their respective brands. These companies are able to hedge their market pricing since the Chinese government has loosely pegged its currency to the dollar. Many companies in the sporting goods market find their main competitors are either other U.S. companies or brands which source products in China. In these cases, the decline in the dollar is not offering a significant impact on their sales.

The economic effect on sales is wide and varied when specific countries are considered. Certain countries are still showing economic growth such as China and Brazil. Likewise, certain segments of the sporting goods industry are seeing an increase in sales such as the sport shooting market in the U.S. The dramatic increase in handgun sales in the U.S. is also enhancing the sales of shooting sports accessories.

Consumers are shopping for the lowest prices possible and expect many goods to be marked down. The internet is being used more frequently by consumers to establish the best “street price”. Likewise, more and more consumers are visiting discount or “value” stores. Independent specialty retailers are suffering and find it difficult to institute the cost cutting techniques to keep pace with their larger competitors.

Price is not the only consideration, however. A strong brand image is helping many companies maintain their price level and keeping their products on the store shelves as retailers look to consolidate their suppliers and offerings.

Inventory levels grew quickly as the consumer suddenly became reluctant to purchase and focused their attention on increasing their savings levels. Many economists now believe that the inventories are beginning to return to levels consummate with the shopping patterns of consumers. However, distributor and retail buyers have installed strict buying programs where they will only buy what is absolutely needed when it is needed.

Deep discounting is occurring where inventories are high at the retail, trade and supplier levels. The speed of the economic decline last fall caught many in the trade off guard. The international banking crisis is also having an effect on the market as a whole. Liquidity is essential to a competitive market. Given the nature of the sporting goods industry, this is especially true. Credit at the manufacturing, distribution, retail and consumer levels are the lifeblood of the industry. In October, 86% of senior loan officers surveyed by the Federal Reserve saw their lines of credit requirements and loan balance levels tighten significantly. As of April this year, 40% on average are still seeing tight credit markets. As a result, trade terms have taken on an even higher importance but slow payment and default risks are increased.

The following tables show the total U.S. exports and imports of sporting goods products through 2008. The figures for 2008 are erratic and do not fully show the affects of the dramatic slow down that occurred in the 4th quarter. It is expected that most of the countries listed will show weaker results for the first half of 2009.

The goal of most sporting goods companies has historically been to increase sales, profits and market share while elevating their brand recognition and image. In today’s troubling times and declining markets, maintaining sales and market share while holding the line on margins have become the watchwords.

Some have increased their marketing efforts to support their brand and pull sales through.

Deflation is still working its way through the market. Downward prices are putting great pressure on all businesses. Cost reduction and productivity gains are essential in order to survive in today’s global environment. Those companies that have in depth real time market intelligence and understand the market dynamics, their customers and marketplace will survive the current economic environment and become well positioned for the upturn when it begins.

A keen emphasis on cutting costs in manufacturing, sourcing and supply chain management have helped many companies improve their delivery times, offer “hot” pricing programs and improve their overall supplier performance. In summary, the head winds facing sporting goods companies are significant. Innovations in product design, sourcing, supply chain management and channel segmentation will be the ongoing focus of successful companies. Retailers will continue demanding even faster deliveries, revamped product mix and fewer suppliers. Consumers will continue to hunt for reputable brands offering the best prices and expect the product to be on the shelf when they want it.

Tom Ritter is President of Inter-Continental Business Associates Inc., a 30-year old international sales and marketing company based in Greenwood Village Colorado with offices in Lyon, France and Budapest, Hungary. They sell their products in over 75 countries and supply products to the sporting goods, public safety and military markets.

The Salt Lake City Foreign Trade Zone

By: Brandi Hanback Issue: Global Trade Section: Collaborator Profile

The FTZ Provides Cost Savings Opportunities and Supports Global Businesses

In a public-private partnership between Salt Lake City and The Rockefeller Group, Utah is poised to attract and expand global business in the state.

“We are pleased to be working with the Rockefeller Group to reorganize the Salt Lake City Foreign Trade Zone.

The Trade Zone is a great location for businesses dealing in international trade and is one of the lynchpins in our plan to fortify Salt Lake City as the leading international city in the Rocky Mountain region. is one of the lynchpins in our plan to fortify Salt Lake City as the leading international city in the Rocky Mountain region.

The Zone dovetails nicely with our international airport expansion, global business and cultural relationships, and many other connections that still come into play as a result of Salt Lake City’s role as host city for the Winter Olympics in 2002,” commented Salt Lake City Mayor Ralph Becker.

In 2006 Salt Lake City partnered with The Rockefeller Group, a leader in foreign-trade zone FTZ and real estate development nationally, to evaluate and revitalize Utah’s foreign-trade zone. A three-year effort was undertaken to identify a site, obtain federal approval, begin to educate local companies about the benefits of FTZs, and identify potential beneficiaries.

The FTZ reorganization application was filed with the U.S. Foreign-Trade Zones Board in May 2008 and was approved February 2009. As a result, the zone project is now comprised of 55 acres adjacent to the Union Pacific Intermodal Terminal and in close proximity to the city’s international airport and major interstate transportation arteries.

“The Rockefeller Group firmly believes that Salt Lake City is primed for industrial growth and that Utah offers one of the most vibrant business climates in the country,” said Tom McCormick, SIOR, Senior Vice President Development for Rockefeller Group Development Corporation. “We are confident that our Foreign Trade Zone is going to fill the needs of companies looking at the area.”

Development plans for the site currently include eight buildings ranging in size from 40,000 square feet to 360,000 square feet. Construction will commence as tenants are secured. The Rockefeller Group will then work with individual tenants as needed to activate the zone and realize FTZ savings. Individual subzones for existing importers/exporters in the region may also be applied for on a case-by-case basis as circumstances warrant where it is not feasible to move operations to the general-purpose zone.

The U.S. Foreign-Trade Zones Program has existed since 1934. In times of global expansion and cost cutting strategies to support U.S.-based manufacturing and distribution, interest in the program has intensified. Combined with a relatively weak dollar and renewed interest by foreign investment in the U.S.,economic developers can also leverage the benefits of FTZs to attract jobs and investment and encourage maintenance and expansion of their existing industrial base.

“We are excited about the reorganization and revitalization of the Salt Lake City Foreign Trade Zone,” says Jeff Edwards, President and CEO of Economic Development Corporation of Utah. “As U.S. companies look to expand their efforts internationally, foreign trade zones are an important part of the puzzle. With Salt Lake City’s Foreign Trade Zone, Utah gains another critical asset as it reinforces its position as a global player. This will be a key decision point for many of our international clients as we help them implement their expansion, relocation and consolidation strategies, and will help existing Utah companies expand their global reach.”

Financial savings from U.S. FTZs are derived from a combination of benefits including traditional savings from duty deferral, reduction and/or elimination along with logistics and supply chain facilitation. Fundamentally, instead of filing a Customs entry and paying U.S. duty (import tax) when a shipment arrives at a U.S. port, duty payment is deferred until the goods are actually withdrawn from the zone for consumption in the U.S., providing valuable cash flow benefits.

Multimodal transport at portIn a pure distribution FTZ environment, merchandise from abroad can be deconsolidated and inspected and in some cases repairs, repackaging, labeling and marking may be performed to prepare the goods for final sale. For those products exported out of the FTZ, U.S. duty is eliminated entirely upon export of the goods from the FTZ. Returns to vendors or destruction of product in the zone may also supplement duty elimination benefits in FTZs.

For manufacturing, assembly and processing operations, FTZs can mean reduction of U.S. duties in addition to deferral. With permission from the U.S. Foreign-Trade Zones Board, a federal agency housed in the U.S. Department of Commerce, applicants may seek permission to classify their goods for duty purposes in their condition after manufacturing and processing in the U.S. FTZ. Many finished goods have a lower duty rate than components and only the foreign value of the inputs is taxable so U.S. value added in the zone is exempt from duty.

A transport truck getting loaded at a loading dock.As an example, a part is imported into a U.S. FTZ at a duty rate of 5% and valued at $100. The Finished Good is made in the FTZ and carries an import duty of 2.5% with a total value of $1,000.

The FTZ program provides importers the ability to apply for permission to withdraw the finished goods from the U.S. FTZ for sale in the U.S. at a duty cost of 2.5% x $100 or $2.50. This is the same duty rate that would apply if finished goods were imported from overseas.

Compare this outcome to the $5.00 in duty due if the Part was Customs cleared upon arrival into the U.S.

This represents a 50% reduction in the amount of duty owed in this example and encourages U.S. based production and value added activities.

Over time and volume, the savings can be significant. Value added activity is encouraged in the U.S. while equalizing the duty treatment with products finished abroad and imported into the U.S. without the addition of U.S. labor or inputs.

If finished goods are exported from the FTZ, no U.S. duty is owed except for exports to Canada and Mexico based on an exception provision under the North American Free Trade Agreement that applies to manufactured goods in U.S. FTZs.

In addition to duty savings, FTZ usage as part of an integrated supply chain strategy can result in lower inventory levels and expedited movement of goods to and from the zone. FTZ usage as part of an integrated supply chain strategy can result in lower inventory levels and expedited movement of goods to and from the zone.

Direct delivery provides for imported shipments to move directly from the port of unloading to a U.S. manufacturing or distribution facility in-bond, eliminating certain types of delays that can be associated with Customs entry at the port.

Full security reviews are still in place at the port, based on manifest and advance trade data information, and are supplemented by additional security at the FTZ to complement government efforts to secure international cargo.

Outbound from the FTZ, users may qualify for weekly entry procedures allowing for one weekly entry summary for all goods shipped from the FTZ over a seven-day period. For high volume, 24/7 operations, weekly entry equates to flexible and just-in-time delivery schedules to customers, as well as fewer Customs entries. Fewer Customs entries equates to administrative savings in the form of reduced Customs broker filing fees and merchandise processing fees.

From an import compliance perspective, by filing Customs entries after goods have been physically received, verified and shipped, high volume importers find that FTZs support their Customs compliance efforts by allowing for more accurate Customs reporting and reduced post entry adjustments and amendments.

Companies can also position themselves to realize FTZ benefits throughout the supply chain for inventory moves between facilities using zone-to-zone transfers. Transfer of title can be performed in an FTZ, providing flexibility in support of vendor managed inventory strategies. For new or expanded capital investments in the U.S., certain FTZ benefits also apply to imported production equipment for use in the zone. Given the high value and extended timeframe for shipping, assembly and testing of production equipment can realize significant duty benefits.

While FTZs are flexible in terms of operational set up, for example allowing commingling of foreign and domestic status merchandise, FTZs are secure areas requiring physical security as well as access and inventory controls. As such, FTZs complement and support secure supply chains. Participants in the Customs Trade Partnership Against Terrorism (C-TPAT) should know that U.S. Customs and Border Protection recognizes use of U.S. FTZs as a C-TPAT best practice.

U.S. Customs and Border Protection recognizes use of U.S. FTZs as a C-TPAT best practice.

Over $500 billion in value of merchandise is received at U.S. FTZs annually and that number is growing. This represents approximately 7% of the value of imports generally. At the same time, many designated FTZs across the country remain dormant as companies lack understanding of how to realize the program’s benefits. In some instances public and private interests have sought FTZ designation without an integrated plan of how to market the program, attract potential beneficiaries and assist FTZ users in realizing the benefits.

FTZs are not a panacea for marketing an undesirable location. However, combined with the right mix of incentives, attractions and education, FTZs do support many companies’ global initiatives to successfully compete internationally from a U.S. base of operations while streamlining their critical transitions from suppliers to customers.

For Salt Lake City and Utah, this is where distinct advantages exist. The geographic location of the region as the “Crossroads of the West” for national distribution activities, combined with Rockefeller Group’s private investment and 30+ year history of extensive FTZ development experience and FTZ implementation expertise create the ideal synergy to drive success.

Brandi Hanback is Managing Director at the Rockefeller Group Foreign Trade Zones Services. Contact her at 410.897.4858.

Slovakia

By: Gregory Fasing, Honorary Consul, Consulate of the Slovak Republic Issue: Global Trade Section: Collaborator Profile

The Slovak Tiger In Central Europe

It has now been nearly 20 years since the Velvet Revolution of the fall of 1989 saw the disintegration of communist domination of Eastern Europe, and over 16 years since the peaceful division of Czechoslovakia into the Slovak Republic and Czech Republic. The Slovak economy was in tough shape in 1993, the first year of independence. Back then, economic growth had shrunk dramatically and Slovakia faced numerous challenges.

Not only has Slovakia met and overcome those challenges, the Slovak economy is now one of the leading economies of the European Union, which Slovakia joined in 2004. Of all of the former communist countries that have joined the European Union, Slovakia has achieved the stringent benchmarks required to enter the Eurozone, and since January 1, 2009, full implementation of the Euro currency in Slovakia has further strengthened currency, trading and investment stability.

In sharp contrast to the early economic difficulties of 1993, Slovakia has emerged as a European leader in growth and economic development.

How was this economic success achieved? The 1998 election was a watershed event. The new government designed and introduced carefully formulated economic changes, restructured the banking sector, and streamlined the tax system with a 19% flat tax in 2004. Foreign direct investment surged. Slovakia, located in the heart of central Europe, was not only in close proximity to traditional European markets, but it also has a highly educated and qualified workforce, particularly in engineering, and relatively low labor costs. Slovakia in the past 10 years has been very attractive for foreign investors. Large financial institutions from Western Europe have invested heavily in Slovakia. In 2000, Slovakia joined the Organization for Economic Cooperation and Development, and it became a full member of the European Union in 2004. Slovakia has also been a full member of NATO since 2004.

The automobile and electronics manufacturing industries have formed the backbone of the Slovak economy.

The year 1992 witnessed the creation of a motor vehicle assembly plant by Volkswagen in Bratislava. Today the Volkswagen plant is the largest business in Slovakia and one of the biggest non-financial companies in Central and Eastern Europe. It produces the Touareg and Audi Q7. Other motor vehicle manufacturers have followed. In 2006 Peugeot Citroën, the French car manufacturer, commenced production of automobiles in Trnava, in western Slovakia, and in 2007 South Korea’s Kia automobile company began operating a brand-new one billion-dollar production plant near the western Slovak town of Žilina. Depending upon the outcome of the current worldwide economic slowdown, Slovakia could produce as many as 850,000 passenger automobiles in 2010. The presence of major motor vehicle manufacturers has led to the development of numerous satellite support industries, including at least 150 vehicle component manufacturers, several of whom also sell components to other car factories throughout Europe.

In 2008 there were five companies from Slovakia that were among the 50 largest companies doing business in Central and Eastern Europe. They included Volkswagen, Slovnaft, a petrochemical company in Bratislava, U.S. Steel, located in the major Eastern Slovak town of Košice, SPP (Slovak Gas Company) in Bratislava and Samsung Electronics Slovakia, located in the Southern Slovak town of Galanta, where it produces televisions with plasma and LCD screens and other electronics. Samsung also recently opened another plant in the western Slovak town of Voderady near Trnava. Samsung has announced intentions to build a European version of Silicon Valley in Slovakia. Samsung also manufactures liquid crystal display panels for Sony, which has been manufacturing televisions in Nitra, Slovakia since 2007.

Slovakia exported products in 2007 which equaled €43.7 billion, which represents an annual growth rate of 15.2% year on year. Exports of automobiles equaled about one third of that figure, with nearly 87% of the exports going to other countries of the European Union.

Gross domestic product has increased an average of 7.5% each year of the 21st Century. However as a result of the current worldwide economic slowdown, gross domestic product is anticipated to decline 2.5% in 2009.

Despite incentives by the Slovak government to spread foreign direct investment throughout all regions of Slovakia, most foreign investments still center around the capital city of Bratislava (35 miles from Vienna, Austria)  and western Slovakia, because of proximity to transportation and markets, and because it is the region with the most experienced and educated personnel.

The Slovak government has developed new services for both Slovak businesses and established foreign investors since early 2008, when Slovakia started to experience the impact of the current financial situation. Despite the current financial downturn, adoption of the Euro currency has enhanced Slovakia’s competitive position, and increased access to additional foreign direct investment. It has improved Slovakia’s position as a sustainable, stable, trustworthy and predictable country with a healthy banking system and working credit system that make further business growth feasible. Slovakia is currently expanding foreign direct investment beyond the manufacturing base. A major emphasis on research and development, the green economy and alternative energy investments is currently underway. Slovakia is well positioned to weather the current economic downturn because of the strong economic policies implemented over the last 11 years.

Gregory Fasing is Honorary Consul for the Consulate of the Slovak Republic.  He can be reached at 303-692-8833 or at [email protected].

No Geography To Passion

By: Dr. Ernesto Sirolli Issue: Global Trade Section: Collaborator Profile

Enterprise, Entrepreneurship and Their Role in The Global Economy

There is a direct link between passion and entrepreneurship and between entrepreneurship and the wealth of nations. Prosperous regions throughout the world exhibit the same patterns of economic development, namely, a vibrant entrepreneurial sector supported by a civic culture that treasures the passion, imagination, energy and intelligence of its people.

Entrepreneurship, however, receives scant attention in most countries of the world, with the exception of the occasional rhetorical accolades at election time. In developing countries entrepreneurs struggle from lack of civic and political infrastructures whereas in some of the most advanced industrial societies they labor under the same inappropriate management advice that has been generating 80% business failure rates for the past 50 years.

Civic leaders can assist in creating an entrepreneurial economy. To do so, they have to address both the macroeconomic aspects affecting their regions, in particular the infrastructures necessary for entrepreneurship to prosper, and the microeconomic factors that pertain to the education, facilitation and nurturing of individual enterprises and entrepreneurs.

THE WEALTH OF NATIONS

The wealth of a country depends more on the intelligence of its people than the abundance of its natural resources; more on its civic structure than the fertility of its soil; more on its freedom to invent and create than on the beauty of its landscape. I believe, in other words, that it is applied intelligence, not natural resources, that separate wealthy countries from poor countries. Historically, only those countries that had evolved social conditions favorable to entrepreneurship prospered no matter the original natural resource base of the country.

Natural resources alone will not make Russia prosperous, nor will oil alone create long term wealth for Saudi Arabia. Something else is needed and that is the topic of this article. CIVIC SOCIETY

When I moved from Australia to the USA in 1995, I was given a copy of Robert Putnam’s book Making Democracy Work – Civic Tradition in Modern Italy. The book is a study of how the 20 new Italian regions, created after WWII, established their regional legislature and built, from scratch, regional governments as mandated by the new, post-war, Italian constitution.

Originally designed to find out in the author’s words “why some democratic governments succeed and others fail”, the research brought Putnam face-to-face with the problem of the “meridione” or the chasm between the north and the south of Italy that is one of the most galling regional development issues plaguing modern Italy and the new, unified, Europe.

In studying how the various regions of Italy had implemented their regional governments over a 20 year period, Putnam could not believe the extraordinary difference in outcomes between the “best and worst” regions of Italy. On all 12 indicators of institutional performance used by Putnam the difference between the best and the worst regions of Italy were of such magnitude that some of these regions appeared to belong in a different country altogether. Some examples given brought to light the difference. From one daycare center every 400 children in the best region of Italy, to one daycare every 12,560 children in the worst. From one family clinic every 15,000 inhabitants in the best region, to one family clinic every 3,850,000 in the worst.

Economically, the divide between the north and the south of Italy was nothing but disturbing, with southern cities registering up to 60% unemployment and northern cities having to constantly import manpower to fill capacity. On every indicator, it seemed to Putnam, the differences could not be explained in terms of recent politics, geography, demographics, or economic development.

The root of the differences had to be found somewhere else, namely in the history of those regions and more precisely in the socio-economic foundations that existed long before the unification of Italy and the creation of regional governments.

One thousand years ago, according to Putnam, Emilia Romagna, the “best” Italian region, and Calabria, the “worst”, were equally wealthy. The difference was in who owned that wealth. In the north, free men owned the land, traded freely and governed their own cities. In the south, the rich timber, agriculture, mining and fishing resources were owned by a succession of feudal lords who ruled over an impoverished peasant population, which was both landless and helpless.

The free men of the north developed skills essential to their economic and political survival. They cooperated, they worked together, and they built their own fortified cities to protect themselves and each other from foreign invaders. Because they had to fend for themselves, they had to develop bonds of solidarity and mutual assistance to survive, and in the process they learned to govern themselves, to form trading and commercial associations, banks and mutual aid societies, laying the historical foundations for the modern region that is Emilia Romagna today - the 8th wealthiest region of Europe.

In Calabria, like in most of the south, impoverished and landless peasantry had neither advantage nor opportunity to work with their neighbours. Their only possibility of advancement came from obtaining more or better land from the feudal lord and that could be only obtained at a neighbors’’ expense. In the absence of horizontal solidarity (neighbor to neighbor) survival depended on vertical dependence (ingratiating oneself to the feudal lord), which in turn led to isolation, hopelessness and constant fear.

Poor, fearful of their neighbors, with no possibility of either economic or political advancement, Italian southerners developed unique ways to cope with their predicament. None brought them wealth, but some gave them the short-term satisfaction of achieving summary justice and revenge. After all, it was those people who created, maintained, and still abet the most notorious criminal organization in the world: the Mafia.

Putnam’s work published in 1993, obliged us to recognize the fundamental truth that “civic infrastructures” matter and that the Italian “meridione” is a metaphor for what is happening right now in many other regions of the world.

FIRST FREEDOM: TO BE AND TO AND TO BECOME

In Putnam’s words “for economic progress (to occur) social capital may be even more important than physical or human capital”. Winning the right to political self expression is therefore the first step towards the creation of an enterprising economy and society.

Once the “political” struggle for freedom and individual self determination has been won, like in the case of modern South Africa, then it is possible to address the true opportunity for economic prosperity that lies within the hearts and minds of its citizens.

It is only when free that men and women become entrepreneurs - not subjects on the totalitarian government’s payroll; not employees of international aid agencies or multinational companies; but owners of their own destinies and of their own wealth-generating activities.

This is because in a truly wealthy nation the economy is entrepreneurial, not based on natural resources. But on a multitude of people doing beautifully what they love doing in an environment that both allows and encourages them.

How do we support a multitude of would-be entrepreneurs that want to transform their own drives and talents into wealth generating activities?

What is the recipe for the creation of the entrepreneurial economy and society?

THE TWO LEGS OF DEVELOPMENT

The role of civic leadership is to recognize that economic development walks on two legs. The first leg of economic development is well understood and universally implemented.

It is done strategically with the assistance of planners and it concerns itself with the creation of the legal and physical infrastructures that make entrepreneurship possible such as roads, communication, transportation, energy, industrial land, credit, and education. But also the freedom to own property; the freedom to associate; and the freedom to trade.

These are some of the ‘essential infrastructures’ in support of entrepreneurs and we recognize that their establishment is the ‘first’, or foundational, ‘leg‘of development.

But if it is true that a wealthy economy is an entrepreneurial economy then civic leaders have to recognize that infrastructure development, even though essential for entrepreneurship to occur, is not sufficient for entrepreneurs to appear and prosper. The infrastructures mentioned above are like oxygen, a precondition for life to appear, but not life itself.

Life itself is the entrepreneurs who will inhabit and colonize this new world of opportunities.

Dealing with entrepreneurs is different from planning for infrastructures. Actually, according to Peter Drucker: “Planning, as the term is commonly understood, is actually incompatible with an entrepreneurial society and economy. Innovation does indeed need to be purposeful and entrepreneurship has to be managed. But innovation, almost by definition, has to be decentralized, ad hoc, autonomous, specific, and microeconomic. It had better start small tentative, flexible. Indeed, the opportunities for innovation are found, on the whole, only way down and close to events. (…) Innovative opportunities do not come with the tempest but with the rustling of the breeze.”

There is a second leg to economic and community development, which balances the strategic one. This is a bottom-up, responsive leg which captures the motivation and imaginative intelligence of local individuals who wish to engage in bona fide economic activities.

If infrastructure development can only be done strategically, by analyzing community trends and projecting its future needs, responding to entrepreneurs can only be done by becoming available to self-motivated individuals on an as-needed, just-in-time basis.

Universal Will to Better Oneself

There is truly no geography to passion. Once the external condition (the oxygen) is in place, a person’s first reaction is to give wings to their personal wish to grow and to become.

There is a school of economic development that says that it is impossible to adopt the same strategy for economic development in different communities because communities are different.

Maybe the way the hospital is built will differ but pneumonia is pneumonia and it is treated the same way the world over. Maybe the way infrastructures are built has to adapt to local conditions but we have discovered that it is possible to develop a profession of “family doctors of business” worldwide who can beautifully and effectively respond to entrepreneurs no matter where they may be.

There is universality to the human condition. The ‘wish to improve oneself’, the ‘élan vitale’, or ‘wish to grow’ of which philosophers talk, is species wide and is as genetically predetermined as our heart beat.

As soon as conditions permit, healthy people surge with ideas to improve themselves, to do beautifully what they love to do, to feed their families, to create a better world for themselves and those surrounding them.

The ‘second leg’ of economic development has to be built to respond to the creativity and “passion” that is characteristic of the entrepreneurial field. And this leg has to be bottom up and responsive. It has to start with entrepreneurs willing to come forward with their ideas and it has to be tailor-made for them.

Such an infrastructure will be:

• Confidential because entrepreneurs jealously guard their ideas
• Convivial because unless the service is free, friendly and companionable they will not use it
• Competent because entrepreneurs want to learn how to be successful from someone who has done what they are attempting to do

Top down and bottom up, the two legs of development complete and complement each other and propel the economy to sustainability and prosperity.

Ernesto Sirolli is Founder and CEO of the Sirolli Institute. Contact him at 1.877.sirolli or at www.sirolli.com.

Hungary

By: Eugene Megysey, Honorary Consul General of Hungary Issue: Global Trade Section: Collaborator Profile

Open for Business

Hungary’s investment promotion and trade development agency, ITD Hungary, has a difficult task in 2009, to maintain and expand foreign direct investment in Hungary, while helping local firms build up their international exports. It is a challenging task at any time.

According to Gyorgy Retfalvi, CEO of ITD Hungary, the promotion of foreign direct investments into Hungary remains focused on the technology-intensive sector, and in particular on those investments producing higher added value using Hungarian research and development capacities, establishing regional trade, finance, service and research and development centers. A customized one-stop shop service is provided by the dedicated teams of ITD Hungary in over 53 trade offices in 45 countries, 4 offices in the U.S., managed from ITD Hungary’s Budapest headquarters. Through its “global network, the agency can offer investors and trading partners a total service package - free of charge and with full confidentiality,” says Retfalvi. “ITD Hungary now participates in some 30% to 40% of all new investment projects realized in Hungary,” he adds.

An excellent example of providing services and working with the local government is the investment of Daimler AG last year. From 2012, the automotive giant will assemble 100,000 A-Class and B-Class Mercedes cars annually in Kecskemét, Hungary. The total value of the investment is above $1 billion (USD), with the new plant directly responsible for 2,500 new jobs and a further 10,000 through local suppliers. The municipality also worked creatively with the company in providing attractive incentives. Mayor Dr. Gabor Zombor and Deputy Mayor Klaudia Pataky Szemereyné also played a critical positive role in making the investment possible. Not surprisingly, the geographic profile of Hungary’s inward investment reflects both history and new market preferences. Germany accounts for some 30% of inward investment, while approximately 15% of the total comes from the U.S. and Austria. The UK and France account for about 10% each, with Italy and Japan round out the top 7 investing countries. The top inward investors should not be a surprise, acknowledges Retfalvi, as Hungary’s exports make up 70% of GDP of which the largest export segment is automotives.

Hungary’s exports make up 70% of GDP

For now the work of the ITD Hungary is in flux, with “changing priorities under pressure of the current crisis,” explains Retfalvi. However, he maintains that in the medium term, if Hungary and ITD Hungary focus the message that the country can provide cost effective manufacturing facilities, then the country can regain its crown as a prime location for new inward investment. Short term difficulties aside, Retfalvi believes the country is a natural magnet for new investment going forward. “The macro-economic situation will focus everyone on cost issues. Moreover, increased regulation of the global financial markets will have an impact on globalization and the flow of goods and services.” Retfalvi thinks that this will benefit Hungary as investors look closer to home for new opportunities.

Network Guy Nonetheless, he is pragmatic. “In this regard, we also have to note that we face competition from rising markets such as Ukraine and Georgia, which are cheaper. However, Hungarian production remains half the price of Germany and the country offers a highly educated and technologically literate population that is able to leverage growing opportunities in high-value manufacturing, technology and pharmaceuticals, for instance. Added to this is the fact that Hungarian salaries are still at 65% of the EU average, I think it is clear that we remain a competitive investment prospect,” stresses Retfalvi. He went on, “This is also proved by the fact that in the first five months of this year, ITD Hungary-Investment Promotion and Trade Development Agency announced investments worth $272 million (USD) in Hungary, creating 3,099 new jobs. Companies like Vodafone, IBM and Infineon have decided to expand in Hungary and new investors like British Petrol showed confidence in Hungary with an investment creating 1,100 new jobs.”

According to the recent survey of World Bank’s Global Investment Promotion Benchmarking 2009, out of more than 200 investment promotion agencies globally, ITD Hungary ranked 14th. “We are very proud of the result we have achieved. This provides feedback to us on our competitive strengths and competitive position amongst other agencies. This way we can work on the identified action points to improve our promotional strategies. Above all it strengthens our belief in the success and usefulness of our work and gives impetus to our further efforts and development,” said Retfalvi.

Eugene F. Megyesy, Jr. is Honorary Consul General of Hungary and an Attorney at Dufford & Brown, P.C., Denver, Colorado.

Global Piracy

By: Di Freeze Issue: Global Trade Section: Collaborator Profile

Law Firm Launches Initiatives To Combat Piracy

Eighty percent of the world’s commerce travels by ship. That journey is often full of perils, now more so than in the past. In just the first quarter of 2009, 109 incidences of piracy occurred nearly doubling over first quarter 2008, rising from more than 200 pirate attacks in all of 2008, which had doubled over 2007. An accurate account of ransoms paid in 2008 to recover seized ships and crews is difficult to determine, but the United Nations (UN) reports approximately $120 million. Even for vessels avoiding attack, there are added costs of increased insurance premiums, loss of time, loss of cargo, additional crew pay and operating costs of as much as twice the normal amount, and now, lawsuits for negligent failure to adequately protect the vessel. When shipping costs sharply increase, so do the costs of goods we buy.

Those facts alone show that this issue affects a multitude of entities. One person striving to come up with a collaborative resolution to this problem, and getting close, is Emanuel Anton, founder of Anton Law Group, based in Denver. He is not working alone.

One of Anton Law Group’s clients, a large U.S. corporation comprised primarily of retired Special Forces individuals, has traditionally focused on government and defense contracting. When it wanted to expand into aviation, they sought the help of Anton, whose law firm has provided strategic business, regulatory and legal services to leading international trade, aviation, and government contracting companies throughout the United States and abroad. In August 2007, he began serving as general counsel for the Colorado Springs-based company.

The fast-growing company also wanted to expand its maritime operations, desiring to provide port security and maritime security on merchant vessels. When they began discussing the maritime issues involving commercial operations, piracy actually seemed to be at a lull. “The last time you really heard of the issue was in 2003 and early 2004, with what was happening in the Strait of Malacca,” Anton said. “Things died down in the press after several navies stepped up their patrols of the area in July 2004.”

But despite a current increase of various countries’ naval gunboats in the Gulf of Aden, piracy in east Africa is only rising – choking one of the world’s busiest shipping lanes. A confluence of various events in late 2008 and early 2009 created an undercurrent leading towards some resolution in the maritime arena. Last September, Somali pirates seized a Ukrainian vessel in neutral waters near Kenya and Somalia carrying tanks, ammunition and crew. The pirates demanded a ransom of $3.2 million, which they were reportedly paid.

A specialist in the International Traffic in Arms Regulations (ITAR), Anton understood the global national security implications from that piracy event. “Such profound arms in the hands of Islamist militias shocked the globe,” Anton said.

Anton began delving into the practical and legal issues causing the upsurge in piracy, reading any articles, publications and treaties he could get his hands on. He also began working with a maritime law expert in New York, Mark Jaffe, which provided valuable insight to him. That research helped Anton begin to understand the complexities that were preventing the suppression of piracy and armed robbery against ships.

piracy in east Africa is only rising – choking one of the world’s busiest shipping lanes.

When Anton began working with the Colorado Springs group, he was no stranger to the problems in that area. As part of his aviation practice, he has counseled aircraft owners on ways to fully utilize their aircraft including employing planes on long-term leases to support, for example, relief efforts in Africa, Afghanistan, Iraq and Southeast Asia. He has helped pair clients with organizations like the U.S. Departments of State and Defense, UNICEF, the United Nations and Samaritan’s Purse, to fly aid into areas including Sudan and Somalia. His dealings with and increasing knowledge about the various areas, including Kenya and Nigeria, familiarized him further with the huge relief problems, producing his desire to help in any way possible.

Anton’s interest in that area as well as his client’s desire to get into merchant marine security led to the forming of NEK Maritime Security Solutions, Inc. (NEK MSS) earlier this year, which Anton co-founded.

Legal Framework

Anton said that Somalia’s collapse, leaving it lawless for more than 10 years, has been difficult to bring about any sustainable resolution.

“Once the pirates go out and commit their pirate barbary, armed robbery, hijackings or killings, there is always this safe harbor for them to retreat to,” he said. Past failed attempts by the U.S. and other governments to squash Islamist movements and reinstate the Somali government and a land-based solution is keeping the issue alive at sea. U.S. Navy Vice Adm. William Gortney, commander of the Combined Maritime Forces of various militaries’ ships, has indicated that without a procedure to prosecute pirates, anti-piracy measures are severely limited.

The existing international legal framework for dealing with piracy exists primarily in two international conventions and in several International Maritime Organization (IMO) and U.N. resolutions. While these laws cover a broad range of unlawful acts against ships - calling primarily upon international cooperation to assist, extradite and prosecute under universal jurisdiction – states are not offering up their courts as envisioned. The result promotes the laws’ other purpose – establishment of a framework under which ships take their own precautions to protect against piracy.

One of the biggest problems has been the insufficient protection of ships. “There are so many different parties involved,” Anton said. “You might have a German owned ship, flagged in Panama, with a Greek crew, a Liberian operator and cargo from South Korea. With varying opinions of what precautions are necessary, all agree that while helpful to some, the multi-national naval effort cannot patrol and protect all of the highest risk shipping lanes. There is such a large expanse of water that they can not possibly be everywhere all the time.”

Self Help Measures by Vessel Operators

“More and more shipmasters and owners are seeking armed protection of their vessels.” The millions received in ransoms have purchased faster boats, more powerful weapons and the latest technology to assist pirates’ efforts. “Under the laws that we have here in most U.S. states, if somebody enters upon my property, state law authorizes lethal force in defense of my life. By contrast, while international laws do not prevent the use of guns, they do not authorize it either. That is left up to the individual flag states to authorize,” Anton said. “The U.N. Security Council and the IMO are very clear in their resolutions and do not recommend the arming of seafarers - the crew aboard these vessels - because they are not trained professionals. Putting a gun in their hands is as dangerous as in the hands of pirates. Crews are not equipped to deal with that contingency. They do not have the experience, the training or the skill to effect mission success.”

Said Anton, “When you think of the fact that non-lethal anti-piracy measures were used by ships that have been hijacked, but none seized were protected by armed professionals, it’s easy to understand why more are choosing an armed security team.”

Collaboration With Flag States

The way that maritime laws work is that whosever flag is flying on that ship, that is whose laws govern what happens on that boat in international waters,” Anton said. “Any solution would require cooperation from flag states’ registries to authorize the hiring of armed professionals and use of lethal means in defense of that flag’s vessels.” With great interest in seeking an armed response to maritime threats, NEK MSS’s first priority was to meet with stakeholders to talk about concerns. NEK MSS has approached all of the major flags of convenience, including Panama, Liberia, Marshall Islands and Greece to understand their regulatory frameworks. Anton started with the largest meeting with the Panama Maritime Authority (AMP) in January 2009 as well as other individuals within the Panamanian government to understand their concerns and discuss an appropriate resolution. “We found Panama extremely receptive because they sought to understand the concerns of their 8,400+ customers, many of which are traveling through hostile shipping lanes.” The AMP proactively sought NEK MSS’s assistance to understand and address questions their customers had.

Anton Law Group is helping draft Panama’s new regulatory guidance authorizing ship owners in the hiring of armed professionals, and NEK MSS is currently consulting the AMP to better understand the practical, legal and insurance-related issues that face thousands of vessel owners and operators flagged with that state.

Working to Resolve Insurance Issues

Anton said that they sought to incorporate all the players’ concerns, including the insurance providers. Insurance coverage against the risk of pirate attacks traditionally involved protection and indemnity (P&I), marine hull, marine cargo insurance, but increasing pirate attacks began becoming risks covered under war risk insurance.

Anton Law Group initiated a dialog with the largest insurance organizations including Lloyd’s of London and non-London based insurers. They have brought into the discussions underwriters for the various insurance syndicates from Lloyd’s, as well as other syndicates that are willing to write marine policies that would cover these risks. Even AIG, a U.S. company that normally does not underwrite a lot of that risk, is willing to sit at the table and start talking. “A vessel may be $100 million and the cargo might be another $100 to $200 million,” Anton said. “When you factor in the significant risk, it’s no wonder why caution preceded action.” “A vessel may be $100 million and the cargo might be another $100 to $200 million,” Anton said. “When you factor in the significant risk, it’s no wonder why caution preceded action.”

Anton found, however, rumors that armed security guards would invalidate coverage were not the case. Rather, P&I clubs were willing to evaluate the risks on a case-by-case basis. “Confusion and a lack of understanding by ship owners and operators of where or if coverage would exist, especially where different insurers were involved and armed professionals were on board, simply required NEK MSS bring ships and their insurers together,” he said. “I believe having recourses readily available provides NEK MSS the resources they need to help bridge an understanding between insurers and vessel owners of how risks are reduced when traveling hostile shipping lanes with armed professionals aboard.”

Anton said there are three options with risk. “You can assume it, push it off to somebody else or insure around it,” he said. “Shipping companies do not want to assume any risk they can insure, but the insurance companies do not want to insure unknown risks. Both tried to push the risks to the other, so a solution was not there,” Anton said. Thomas Gilhooly, Vice President of NEK Maritime Security Solutions, explained, “Once the stakeholders understand how our Standard Operating Procedures and Rules of Force operate, and how NEK MSS has worked with the Panama Maritime Authority to mitigate risk unlike any other security firm, it’s easy for everyone to come to agreement,” he said.

NEK MSS’s Standard Operating Procedures are based on those that have been implemented in high-risk areas all over the world. “Whether it’s Iraq, Afghanistan or in the Gulf of Aden, they are what reasonable people would anticipate. They define hostile intent and appropriate response measures as that threat escalates which must be followed to ensure lethal means is the last means of defense against hostile acts,” Gilhooly said.

The Solution

Cargo Boat Close up Although he says there is no present-day global solution to piracy in east Africa, he feels NEK MSS’s security offerings are an effective solution, at least in the short term, to help minimize some of the resultant pain.

NEK MSS approach in meeting with all stakeholders is manifesting acceptable solutions where uncertainty prevented them before. “We needed to make sure we first understood everybody’s concerns, and that they had the information upon which to make informed decisions. Once everyone understood the caliber, training and experience of professionals involved with NEK MSS, the procedures by which the company operates, any remaining issues were easily managed when we circled back around. By asking, ‘This is what we’re thinking; do you feel we adequately addressed your concerns in the overall solution?’ The collaborative effort was huge in flushing out remaining concerns, improving NEK MSS’s procedures, and overcoming misunderstandings of the risks involved. When you keep going around and around and around, so long as everyone is participating, eventually it brings that circle so close together that everybody is finally on the same page.”

Di Freeze served as editor-in-chief for a national aviation publication for a decade. Presently, she is an independent writer. Contact Anton Law Group at 720.536.4600 or visit their website at www.antonlaw.com.

Can International Trade Save The Planet?

By: Pietra Rivoli Issue: Global Trade Section: Collaborator Profile

In 1999, extensive and sometimes violent anti-globalization protests brought the meeting of the World Trade Organization (WTO) in Seattle to a halt. The so-called “Battle in Seattle” was a spark that led to a spate of similar protests around the globe. Over the next several years, dozens of similar protests stymied meetings of a variety of multilateral organizations in North America, Europe, and Asia.

Photo: John G. MabangloWhile it was easy to see that the protests were rooted in anger and dissatisfaction, it was more difficult to see clearly what, exactly, the anti-globalization protestors were against.

The anti-globalization movement was not a single movement, but was instead an amalgamation of causes brought under a single umbrella.

One target was clearly the policies of the World Bank, International Monetary Fund (IMF) and WTO, all of which had free trade agendas. But the protests targeted not only the policies, but also the alleged anti-democratic processes with which these organizations operated. Another visible target was the multinational corporations with their far-flung global supply chains. These supply chains encouraged a “race to the bottom” in global labor standards, according to the protestors, and fostered the proliferation of “sweatshops” in poor countries. And the anti-globalization movement also contained a variety of labor constituencies, many of which had suffered from competition with low wage labor in other countries.

Interestingly, while the anti-globalization protests on the evening news seemed at the time to be comprised of a variety of “fringe elements,” a decade later many of the demands of the protestors had not only been met, but had become standard operating procedure in corporations and multilateral organizations. By 2009, while some protests continued, the stage had quieted considerably.

A very visible segment of the anti-globalization movement, however, was alive and well in 2009: the environmental movement. Liberal trade, the protestors argued, imperiled not only working conditions but also the environment. A staple of the news in 1999-2005 were protestors dressed as sea turtles or polar bears, signifying the threat to the natural world from rapidly globalizing exchange of goods and services. These concerns continue to dominate debate today.

Which leads to the question: Is international trade a friend or foe of the planet?

A FOE

The arguments that link liberal trade to deterioration in the environment are straightforward. First, international trade increases the overall level of economic activity on the planet. More trade leads to higher incomes, and therefore to more production and more consumption, all of which consumes more energy and generates more waste, while increasing climate-threatening emissions. Further, the transportation involved in getting goods from one country to another carries its own environmental costs.

This argument linking increased trade with environmental harm is known as the scale effect: since trade increases the scale of economic activity it will carry environmental costs.

A second argument that links liberalizing trade with environmental degradation is the “race to the bottom” or “pollution haven” story. In a competitive market, producers operating at the lowest cost structure will have an advantage. What if, however, producers in a given country have low costs because environmental protection standards are weak? In that case firms will seek to locate production where environmental regulations are weakest and costs lowest. The result will be environmental degradation enabled by international trade.

If either or both of these arguments hold, it makes sense that those concerned with the environment might at least be sympathetic to the anti-trade message of globalization’s skeptics. Sea turtles and trade are on opposite sides, and to side with trade is to side against turtles. Perhaps, however, there is hope for the turtles in a liberal trade regime.

A FRIEND

Though the logic linking trade to environmental degradation has an appeal, there are opposing forces at work. Indeed, a careful reading of the research to date suggests that the net effects of international trade on environmental quality are actually positive.

How might this be? First, clean technologies are rapidly evolving today, with innovative products related to wind power, solar power, clean coal, and so forth. Without international trade, many of these technologies would be “trapped” wherever they were produced. Free trade enables the environmental benefits of emerging environmental technologies to spread. It is precisely this reasoning that has led both the World Bank and the World Trade Organization to encourage countries to lower the trade barriers applied to environmental technologies. Perhaps not surprisingly, research suggests that countries with borders more open to trade are quicker to adopt clean technologies.

Second, there is much evidence that suggests that the richer we become, the more environmental quality we demand. While the very poor are more concerned with survival, the wealthy are willing to pay for clean water and air. This dynamic has clearly been at work in Europe and the U.S. in recent decades: the richest countries predictably have the most stringent environmental regulations. Economist Arik Levinson found that for the 30-year period ending in 2002, total pollution emitted by U.S. manufacturers fell by 60 percent, even as manufacturing output rose by 70 percent. Levinson concluded that the drop in emissions was the result of stricter environmental regulations, not from “dirty” industries shifting abroad.

Windmills Of course, trade is one of the primary means of generating economic growth and therefore increasing income. If, as Brian Copeland and Scott Taylor write, “higher real incomes generate a greater ability and willingness to implement and enforce environmental regulations, then the logical trade linking trade liberalization and environmental destruction is broken.”

Third, despite many dozens of empirical tests, researchers have been unable to find convincing evidence that production flows to “pollution havens.” This may be because large corporations “export” their own production methods when manufacturing abroad, either because using a single model is more efficient or because they are concerned about reputation effects. Or, it may be that the “pollution haven” effect is simply dominated by the myriad other factors that enter into the location production decision.

Not long ago I spoke with a former executive of a global textile concern. A story he conveyed illustrated the potential for a “race to the top” in environmental standards, in which multinational corporations might be part of the solution rather than part of the problem. A developing country was seeking to attract investment from the firm, but the firm was reluctant to invest because the environmental standards in the country were too….lax. The company did not wish to compete with local firms who were bound only by the low standards, but it did also not wish to contribute to environmental degradation itself. The firm agreed to invest only when the country’s government agreed to raise the environmental standards to meet those of the company’s home country. At least in this instance, the global corporation was part of the environmental solution rather than the cause of the problem.

A final reason for optimism regarding the link between globalization and environmental quality is the so-called “California effect.” For many years California had the strictest emission regulations for autos in the U.S. Of course, an automobile manufacturer would not reasonably design different cars for different states. Instead, firms design cars for the state with the strictest regulations, in this case California. Here, therefore, we have a “race to the top” story that is at least as compelling as the race to the bottom story. Firms that wish to export to the U.S. have an incentive to produce cars to meet the strictest standards. Without international trade, such firms would have no incentive to “raise the bar” beyond that required by regulations in their home market. To succeed in international trade often means producing for the customer with the strictest requirements. The environmental effect, of course, is a “trickle down” of these standards to producers worldwide.

Will liberalizing trade be enough to save our planet? Of course not. None of the arguments above are meant to minimize our environmental challenges, only to suggest that the forces of trade and globalization can be harnessed for environmental sustainability, rather than assumed to be a part of the problem.Water drop on a leaf with The Earth reflected inside. Earth picture from Nasa at http://earthobservatory.nasa.gov/

One other factor also comes to bear on this debate. Not all political systems are equal when it comes to the relationship between trade and the environment. One of the world’s most successful exporters – Germany – is also one of the cleanest countries. Yet another export powerhouse – China – is an environmental basket case. Why the difference? Surely the income gap between the two countries is part of the explanation. A more important factor, however, may be that German environmental policies reflect the will of its active and sophisticated electorate. In a country such as China, however, where the one party state is not accountable to an electorate, the citizens’ environmental preferences and demands are more difficult to know and to respond to, and are often subjugated to other priorities of the leadership.

I believe that when all of the arguments and evidence are weighed, we may safely conclude that globalization and trade are a net plus for our environmental challenges. If we add democracy to the mix, the future is more promising still. When citizens have an economic livelihood and a democratic choice, they will increasingly demand – and pay for – environmental quality.

Pietra Rivoli is Professor at the McDonough School of Business at Georgetown University. Her recent book, The Travels of a T-shirt in the Global Economy, has been translated into 14 languages and has won numerous awards.

USA

By: Karen de Bartolome Issue: Global Trade Section: Collaborator Profile

Destination Education

When Barack Obama stood before the nation and took the oath of office, the people who couldn’t be there to watch his achievement undoubtedly weighed on his mind as profoundly as those who could. One of them, an international exchange student from Kenya whose background and belief in the United States as a beacon of liberty and hope, profoundly affected the President-elect’s own world view. That person, of course, is his father, Barack Obama, Sr., who died in an automobile accident in 1982.

The Kenyan’s decision to study in the United States back in 1960, where he met Barack’s mother at the University of Hawaii, is but one example, albeit more dramatic than most, of one of our nation’s most powerful strengths – the “soft” power that comes when the rest of the world regards us as a repository for their dreams, and drives them to come here to study in our colleges and universities. That influence comes from winning the hearts as well as the minds of future generations of regional and world leaders.

A personal story illustrates this point. As a new member of the development staff of a non-profit in Colorado, I found myself substituting at the last minute to give the “pitch” to a powerful businessman in Brazil. We wanted his financial backing to sponsor a seminar that would take place in his country. As I began to speak, I could tell he had more interest in what was in his inbox than in what I was selling. Suddenly, he took his eyes off the papers on his desk and asked, “Where did you say you were from?” “Colorado,” I answered. I never had to say another word: the next 45 minutes were spent listening to his vivid, emotion-soaked memories of studying at the Colorado School of Mines and living as a student in Colorado in the ‘40’s. He had become such an evangelist for our state that he sent two sons back to Colorado to study and probably others as well. My sponsorship deal was sealed.

At last count, Colorado had 5,898 international students in the state, an increase of 11% over the previous year, according to the Institute of International Education’s annual Open Doors Report, funded by the U.S. Department of State. The University of Colorado at Boulder hosted 1,264 and Colorado State University had 1,046 international students. The University of Denver, CU-Denver, Colorado School of Mines and the Community College System are also very important magnets for international students. The presence of so many international students, many of whom will return home to positions of leadership in their home countries, enhances and expands Colorado’s influence as a center of business, innovation, culture, education and recreation.

It’s one thing to read about western hospitality and the creativity and inventiveness that go with our open skies, or to hear about Colorado’s natural beauty, renowned recreational opportunities and rich diverse cultures; it’s quite another to experience it all firsthand.

That experience creates a lasting bond and one that is more important today than ever before as the world is increasingly riven by misunderstanding, cultural stereotyping, sectarian and religious conflict, and terrorism.

People who have studied at one of our universities - not to mention learned to ski, listened to a concert at Red Rocks, and perhaps even fallen in love here – are more likely to give our nation a fair shake, make connections that influence their lives and return to do business or bring their families to vacation with us.

The economic benefits of international students in Colorado are substantial, especially during these difficult financial times.

International education is one of the leading service sector exports in the country, making substantial contributions to every state’s economy, as students pay not only tuition, but room and board and cost-of-living expenditures in their local communities.

The record high number of international students in the United States – over 623,000 in the last academic year - contributed over $15.5 billion to the American economy, with $147 million spent in Colorado alone.

Making up the Solution (1) In an era when educators are working hard to build up the interest of U.S. students in STEM fields (Science, Technology, Engineering and Mathematics), international students are a source of strength. Fully 40% of all international students are studying STEM disciplines, contributing strongly to the robustness of research in these fields. Maintaining our research edge is crucial to the businesses that provide an important economic engine for our country, and for Colorado in particular.

The presence of international students in the classroom benefits U.S. students, too. Whether or not students study abroad, having fellow students on campus whose language, culture and nationality are different, presents an easily available opportunity to globalize one’s education. The personal friendships, teambuilding skills and working relationships forged during these years render borders meaningless and frequently last a lifetime.

When President Barack Obama proudly placed his hand on the bible used by Abraham Lincoln and took the oath of office, Americans were not the only ones inspired by his achievement. Millions of young people, the best and brightest from around the world, will continue to make American higher education their choice destination, realizing that a good education makes everything else possible.

Karen de Bartolomé is Executive Director of the Institute of International Education’s Rocky Mountain Regional Center (www.RockyMountainIIE.org). The Institute is an independent, non-profit organization founded in 1919 that administers international scholarship and educational and cultural exchange programs for public and private sponsors and provides resources to the higher education community. IIE has offices around the world, including Denver, Chicago, San Francisco and Houston.

The State Of Trade In The U.S.

An Interview with Secretary of Commerce Carlos Gutierrez

ICOSA: America has historically had competitive advantage in the global markets. How is America’s competitive position right now and how is overall credibility globally?

Gutierrez: It’s getting weaker by the day. Every time the G20 countries have gotten together, they mention that we’re all going to avoid protectionism and the U.S. has been right there. I believe that President Obama made a statement when he went to Canada as well. And little by little our foreign trade partners are seeing that protectionism is creeping in, especially related to the spending on the stimulus package. What this will do is promote retaliation – countries w ill be forced or will be in a position to retaliate – and we’re going to lose the most. It’s not just trade, it’s also foreign investment. We spent decades opening up markets, convincing foreign officials to open their markets to U.S. investment, to U.S. trade, to trade from all over the world. Now, as we backtrack, it is a lot of work that is being undermined because of these protectionist measures.

ICOSA: You mention the stimulus dollars and the stimulus effects on trade. Can you talk about the effects in relation to the big global industries like manufacturing and automotive?

Gutierrez: What happens here is a lack of understanding or a desire to simplify something that has become quite complex. In some cases, companies that buy raw materials from another country to make a product in the U.S. are not being allowed to sell to local or state offices or the federal government for a stimulus project because of that component that comes from overseas. The problem is that we don’t make that component in the U.S.

There is confusion in the interpretation. Some local officials are interpreting it in different ways, some states and localities are interpreting the package as 100% of the components of the product have to be made in the U.S. So, it is very self defeating because you could have a component that is made overseas within a given product but the product is made in the U.S. by U.S. workers, yet is being denied by those administering stimulus projects. It gets very confusing, and the bottom line to our trade partners is that it’s getting more difficult to do business in the U.S. In turn, they are making it more difficult to do business in their countries too.

ICOSA: So what can we do to get things back on track - both short term and long term?

Gutierrez: We need to send positive signals – beyond words.It’s fine to say we’re not protectionists, but we’ve got to back it up with actions and we need something that’s not as passive as simply saying that we’re not going to be protectionists.

One immediate thing the U.S. government can do is to pass the three pending free trade agreements. Colombia’s FTA has been ar ound the longest – probably two years – which is very ironic because Colombian goods come to the U.S. duty free, but our products pay a duty going into Colombia. In spite of that, Congress will not put it up for a vote - so our exporters are paying extra duties every day that goes by. More importantly, Colombia is a good ally and there are just so many good reasons to do this. There’s another pending free trade agreement with Panama.

Panama is about to have a massive expansion of the Panama Canal which will be very good for the hemisphere and good for trade, but we’re sitting on this agreement because there are constituents that don’t like free trade agreements, such as unions, so they are pressuring the administration to stay away. The last pending agreement is with South Korea. Signing this would be a very powerful signal to the world that we’re serious.

ICOSA: Using Colombia as the example, why isn’t Congress addressing these open FTAs?

Gutierrez: The reason Congress is using is that there is labor violence in Colombia. But, it’s a very weak argument – one that unions are using as an excuse for not submitting it to a vote. The reality is that Colombia, over the last 10 years, has made tremendous progress – not just on violence to union members but violence within society at large.

Colombia, 10 years ago, was almost a failed state. Today Colombia is a vibrant economy where the government is back in control of the country as opposed to the Marxist guerillas and drug cartels. A free trade agreement would be a lot of help for Colombia and would help us as well. We should actually use a free trade agreement to continue to promote further opening up of the market and further reform.

ICOSA: Discuss some of the challenges and opportunities going forward for trade.

Gutierrez: Although we export close to $2 trillion if you add goods and services – we are still underdeveloped in terms of exports when compared to other countries – like Germany and Singapore. Exports are very important to us but we can export more. The administration recognizes that as we look forward and say, “how are we going to grow?” it’s going to be tough to grow through more consumer spending, because we know that will most likely be curtailed over the next several years. Business spending will follow consumer spending – so the one part of our GDP where we can grow is exports. That’s the big opportunity.

In order to grow our exports, we have to be willing to be open to imports, because it’s a two-way street. It’s an opportunity that can help us grow our way out of this recession but we have to be aggressive. We have to send signals and we have to take a proactive stance – not just through passive ways of saying we’re not going to be protectionists.

ICOSA: Is there any way to do that with a Democratic congress?

Gutierrez: I think there are a lot of Democrats that would like to do trade and I believe the votes are available for the agreement with Colombia and for the agreement with Panama, but the leadership is where the problem lies. This is where the White House is going to have to exert some leadership because this is what’s good for the country, it’s good for our economy, and I’ve heard the administration say that we shouldn’t let the political interests get in the way of the country. Well here is a great opportunity to prove it.

ICOSA: There is not much national attention on global trade from the new administration and it took a very long time to place the new Secretary. Is global trade a “back burner” issue for the new administration?

Gutierrez:I don’t believe it’s in the top priorities. On the White House website, of the top 20 priorities, you won’t find trade – so it doesn’t appear to be a priority for them. They haven’t recognized it as being important, and that’s the problem. If it isn’t important for the administration then nothing will really happen. The President doesn’t have trade promotion authority so therefore we can’t really negotiate with countries for new agreements. It needs to start with the White House. It needs to start with the President and he needs to say this is important for our growth and our future.

ICOSA: In your opinion, what are some of the challenges facing Secretary Locke right now?

Gutierrez: I believe his primary challenge will be to get trade on the agenda. I’m sure that he will be meeting with government officials from different countries around the world and the subject of trade will come up. For the first time that I can ever remember, it will most likely be other countries pushing us to be more aggressive about trade and opening up, whereas for the last 50 years it’s been the U.S. that’s been pushing. But, Secretary Locke was formerly the Governor of Washington which is a state that relies heavily on exports and trade – everything from Boeing airplanes to apples - so he knows the value of trade.

ICOSA: So with businesses running the way they are in the U.S., especially it seems in the near term, how does trade get on the President’s radar? It seems that people are focused on the “day-to-day - how are we going to stay in business” mentality instead of looking at that bigger picture. Is that accurate?

Gutierrez: I think it’s a combination. It has to be pressure from the business community, pressure from members of Congress, even pressure from the foreign policy establishment that these are agreements with allies and these are important for our allies. For example, the President of Colombia has been tremendously supportive of the U.S., he’s been a close ally and close friend of the U.S. – he has said that this is the most important thing that the U.S. can do for Colombia is pass this free trade agreement. So, we’re basically letting that slip away. The President of South Korea has almost lost his Presidency as a result of this free trade agreement. He took a very big risk to have a free trade agreement with the U.S. and we’re basically turning our back on him. There are a lot of very good reasons. Another thing that I’ve heard that gives me a bit of optimism is when administration officials, Larry Summers for example, say, that he considers exports to be an important component of growth. If that is true, then that leads us to an active trade agenda.

ICOSA: What role, if any, does a collaborative effort play in global trade across the private and government sectors?

Gutierrez: Well it’s absolutely critical, because if there is one thing that we’ve learned from this recession is that there is no such thing as decoupling. There is no such thing as a country that can say this doesn’t affect me – this isn’t my problem.

I suppose the countries that aren’t affected are North Korea and Cuba because they don’t take part in world trade, so therefore they’re not affected. But every other country, whether it’s China, the European Union, Latin America, we’re all in this together. There is no question that we need to be committed to globalization because it hurts us all and when the recovery comes, it will help us all so in that respect collaboration across countries and companies is absolutely necessary.

ICOSA: So how do you build or put in place a structured collaborative network whereby the strategic information and the leaders are linked together for engagement opportunities so that they can work together?

Gutierrez: Right now we have the WTO, which is essentially where trade issues get resolved and where countries get together to talk trade. There is the G20 as well. I suppose what can be done is to make sure that the private sector has a stronger role when you have government officials getting together to talk global economic issues. But, the mechanisms are there. It’s a matter of using them and a matter of recognizing that this is all slipping away. Everyone is winking, and nodding, and smiling and saying no protectionism but we know that behind the scenes everyone is practicing some sort of protectionism.

ICOSA: In your opinion, who is America’s toughest competitor in the global environment?

Gutierrez: Companies have competitors, and it’s not so much that the country competes with another country but U.S. companies compete, in some cases, with Chinese companies, and European companies, so it really depends on the industry. Generally speaking, competition will come from countries like China, Japan, Korea, the big markets that are developing their own industries and of course the European Union – where there are not only small manufacturers and exporters, but there are big multi-national firms that compete with our firms – like Mercedes Benz, and the Swiss food companies. But I would say the biggest competition comes primarily from the European Union, China, Korea, and Japan.

ICOSA: Talk a bit about the role of human rights and social justice in global trade.

Gutierrez: Human rights, and especially the term social justice, is one that has been used by the radical left of center governments, especially in Latin America and Cuba, Ecuador, Bolivia, Nicaragua, and it’s very ironic because in many of those countries people don’t have the opportunity to get by. They don’t have the opportunity to start a business. They don’t have the opportunity to grow as far as their desire and their skills will take them. So real social justice, I believe, is giving people the opportunity to grow on their own and not to be dependent on their government for everything they have and everything they do. Trade allows people to work in different areas. It allows people to open up a business and do more business. It allows people to follow their own personal dream as opposed to being a dependant of their government. Some people call that social justice, but I believe that is an absolute misnomer because social justice is the opportunity to grow. And when you’re dependent on a government there is no growth. You’re just relying on what the government decides to give you and that is happening in many of these countries.

ICOSA: You’ve said, “The danger of going forward is not understanding history.” Are we headed down that path as a country with the current administration – are we in danger of not understanding where we are going?

Gutierrez: We often forget about the lessons of history. In 1930 Congress passed the Smoot-Hawley Tariff which was designed to keep imports out of the U.S. so that they wouldn’t take away jobs. We passed the Tariff and we cut imports by half. But, what we didn’t foresee is that exports would be cut by half too because countries retaliated, and that was the beginning of a big trade war. Many economists believe that this was what really dug us into the Great Depression - that global trade war and that global protectionism. If we are not careful, we could find ourselves making this recession worse, in fact I believe we already are making it worse, by starting protectionist measures. We just need to look back in history and realize that this just doesn’t work.

ICOSA: You’ve said, “Government does not employ most Americans, nor should it. The innovative and entrepreneurial engine of America resides primarily in the private sector.” Then, you talk about three key elements, encouraging entrepreneurship, lowering trade barriers, and learning from the experience of others – especially regional and state-level officials. Can you expand on that thought and describe if the elements are still the same and how?

Gutierrez: Those elements are even more important today because we’re actually going in the opposite direction today. There is almost a sense that government can provide the jobs and fill the vacuum that isn’t getting filled by the private sector – and it’s a big trap because our economy is only as good as the return we get on every single investment we make. And the private sector has to get a return on their investment – otherwise they go out of business. The government doesn’t . And, a lot of what the government spends is not profitable so it’s not money that makes our economy stronger over the long term – it’s kind of a one-time investment. So, we are falling into the trap of making the government a bigger component of the economy and having more jobs in the hands of government. There will most likely be a tax increase on businesses making over $250,000 a year, which includes a lot of businesses. That flies in the face of entrepreneurship – it becomes an obstacle for entrepreneurs and small business creation and growth. In fact, 50% of all new jobs in our country are created by businesses that are less than 5 years old. And, small businesses employ over 50% of all Americans. A lot of people think this is about multi-national firms, it really isn’t. It’s about small entrepreneurial companies that grow, provide jobs, and support economic vitality.

Secretary Carlos Gutierrez became the 35th Secretary of Commerce in February 2005 where he managed 38,000 worldwide employees and managed a budget of more than $6.5 billion. Prior to joining the U.S. Department of Commerce, he was the CEO of Kellogg Corporation.

Spreading The Educational Wealth

Fundraising Effort at Morey Middle School Provides Lessons in Fair-Trade, Sustainability, and Social Enterprise

Social and micro-enterprise, sustainability, and micro-lending are certainly popular topics today in the not-for-profit environment. These concepts are gaining more widespread awareness and popularity; however, they are far from household words. While models of business benevolence and corporate responsibility can be readily found, the concept of social enterprise has not made its way into mainstream business teaching at any level of education. Hence, simple models of domestic social enterprise, i.e. for-profit companies specifically designed to address social, economic, or environmental issues, are not so easily found.

One such model was developed in response to a Denver Public Middle School’s need for supplemental funds. Schools, both public and private, face increasing budget shortfalls and turn to fundraising projects to support extracurricular events, special academic programs, and in some cases, books and materials not covered by tuition allotments. Existing commercially-organized fundraising packages, such as sale of pastries and cookies, oranges, chocolate, and wrapping paper, among others, do not individually yield a sufficient return to the school (generally less than 10% of the goods sold), to support the many funding needs. Consequently, schools end up running multiple fundraising efforts.

The substantial effort required to run and implement all these separate fundraisers has led to “fundraising fatigue” among administrators, volunteers, students and parents who are asked to participate in the myriad door-to-door selling events, and by neighbors and co-workers too frequently approached for money. While many of the commercial fundraising packages provide quality products and assistance, the products tend to be overpriced, in many cases perishable, and are not always something one would purchase for any other reason than a willingness to help students and schools.

This was the situation facing my son’s middle school when I was asked to co-chair the school’s fundraising committee. The sheer number of fundraisers was staggering. We needed a fundraising project that would raise the necessary funds, not require the students to sell to neighbors, co-workers, and extended family, and entailed minimal administrative involvement. Being a teacher myself, the ideal project would allow students to be involved in the effort, and could be linked in some way to business education.

One potential solution came in the form of fair-trade coffee grown and sold by a Honduran farmer-direct cooperative. The Fair Trade initiative is becoming an increasingly important topic in developing countries trying to combat poverty. As governmental and non-governmental organizations (NGOs) recognize the importance of Fair Trade, consumers are becoming aware of products that are labeled Fair Trade and are beginning to put increased pressure on the corporate world to be fair by providing proper treatment and a livable wage to their workers. That said, independent farmers have great difficulty exporting their product to larger foreign markets because they must operate outside of traditional distribution channels. These small farmers cannot make a sustainable living selling their coffee crops for the low prices commanded in the commodities environment, where the majority of coffee is bought and sold. This is due to a number of factors including limited crop capacity and the relative power of the traditional retail sector that purchases in huge quantities, and tightly protects costly product shelf space. Under these conditions, farmers often give up their coffee production in favor of more profitable crops (in some cases to drug crops), or leave farming altogether, abandoning their homes, and in many cases their countries, in order to provide for their families.

So began the sale of Morey Honduran Coffee, a fundraising project that would bring hand-picked, sun-dried, and pesticide-free specialty coffee directly from Honduran farmers and sell it on an ongoing basis during the school year to parents and staff who ordinarily and routinely bought coffee.

Because the beans were not traded on the commodities exchange, and because much of the marketing costs were minimized by the collaborative effort of the cooperative, the transfer price to Morey Middle School allowed the school to sell gourmet specialty coffee for a very competitive price, and make a 35% profit on each pound sold.

Additionally, the farmer-direct cooperative was able to return $1.65-$2.00/lb to the farmers, allowing them the means to be self-sufficient, to educate their children, and to build communities around their farms. Fair Trade, non-government organizations, such as Transfair, fight to keep the floor price of coffee around $1.10 per pound, to allow farmers to earn a “living wage”.

In addition to raising funds, the effort provided a wealth of educational returns. To administer the project, we formed an after-school business club for Morey Middle School students. Participants learned about the social conditions of the farmers, the environmental issues that plague the industry, and they learned first hand about how business works, coming to understand the merits of a social business. While operating the fundraiser, students in turn educated their parents through presentations at parent meetings, posters, and emails about the coffee.

It was “viral marketing” at its finest with parents paying a fair price for a gourmet product, the school receiving a fair return for their efforts, students and parents connecting with the global community, and the farmers making a living wage from their hard work. All this occurred with very little financial investment in packaging, advertising, and logistics.

Morey Middle School’s Community Liaison, Karen Duell commented, “Our after- school Business Club gave our students hands-on business experience while giving to their school at the same time. The students were able to apply a range of business skills that contributed to our school in a meaningful way. The students learned about marketing, money management, public relations, bookkeeping and many other business related skills. The skills they learned for their future career goals kept them motivated and eager to learn more as they knew they were contributing to a worthy cause and raising funds for their school. The funds they raised through this club went to assist our students and teachers with much needed supplies and awards. It was a great social enterprise experience for everyone!”

College students also participated in the project. Undergraduate marketing students from Regis University in Denver, Colorado developed a strategic marketing plan for the sale of the coffee. As part of a class project these Regis students presented to Morey school officials and administrators strategies around the 4P’s of marketing coffee: product, price, promotion and place. In turn, Regis students learned of the broader fair-trade effort, and the practical application of business models to start and run a sustainable social enterprise.

Three Regis College students, Keith Wood, Lauren DeRosier, and Chelsea Coalwell, interested in social business applications, then joined the effort by developing a business plan that would extend the coffee fundraising and business club curriculum to other Denver area middle schools. Working on their own time, and without college credit, these students submitted the social business idea, which required full start-up plans and financial projections, to a business plan competition sponsored by two Denver-area non-profit organizations - Friends of Micro Credit, and Micro Business Development. The students were selected as finalists in the competition and were given scholarships to the Social Business and Microeconomic Opportunities for Youth Conference held in Denver in March, 2008. The conference featured sessions with Nobel Peace Prize recipient Muhammad Yunus, who founded the Grameen Bank, the world’s largest micro-lending operation. The Regis students were given the opportunity to present their work at the conference, and met personally with Yunus regarding their project.

The concept of social enterprise is gaining steam as one possible means of addressing chronic unemployment, and poverty in general. The Honduran farmer-direct cooperative, whose product we supported in the fundraising effort, is itself a micro-enterprise. The cooperative employs not only Honduran workers, but also offers employment for workers here in the U.S. at a time of rising unemployment. The farmer-direct cooperative demonstrates how collaboration in the supply chain can reduce costs and provide a not-easily-replicated competitive advantage for products. This type of effort allows micro enterprises to compete on a very small scale with the giants in the industry by providing access to markets not readily available to small merchants. Finally, the entire effort brought together global players who shared profits, experience and risk in a fair manner, across the different distribution levels. With this fair trade coffee fundraiser, we created a model of social enterprise at a micro level, the whole of which was truly greater than the sum of its parts.

Meg Thams, Ph.D., is an assistant Professor of Business at Regis University.

Professional Dynamic Programs

By: Cos Lindstrom Issue: Global Trade Section: Collaborator Profile

Integrated Management Systems Producing Measurable Results

Imagine that you have been put in charge of overseeing four people at a table while they piece together a puzzle. The people bounce around randomly and interfere with each other’s areas trying to fit the pieces together. Arms and hands cross as parts of the puzzle get knocked off the table onto the floor. You tell them to slow down and work together as a team; however, they all have their own agenda of how they will go about working on the puzzle. It takes twice as long as it should to piece together than it would if they all took a section and concentrated just solely on that section.

The Solution

The success of PDP has been attributed to the accurate surveys of more than 4,000,000 people in thousands of organizations.

Employees are hard to find and are valuable when you find the right ones to fit well in their positions. For the owners of an organization, the task of training, retraining and motivating their employees can be an ongoing battle. Like the four people and the puzzle, an organization must work as one and fit together like a puzzle to solve everyday tasks as one.

Professional Dynamic Programs (PDP) was founded in 1978 by Bruce M. Hubby, current Chairman, to solve these challenging issues, increasing performance and profitability by selecting, leading, managing, keeping and growing the right people within an organization. Today his son Bruce is the president and CEO. Over the past 30 years, PDP has developed and applied researched-based management tools that have the capability to analyze human behavior within the work environment. Using data gathered about current or potential employees, PDP helps companies manage them in a more effective manner.

PDP offers five integrated network applications that help organizations including: defining specific human characteristics for a new position with selection assistance to find someone with select experience and working style attributes with 90% accuracy; applying employee profiles and PDP licensed technology to more effectively manage staff - individually and in teams - by understanding their natural abilities, needs and motivation; building effective, balanced teams, while anticipating potential problem areas; and learning the most effective ways to understand and manage employees.

Scanning For the Future

To better understand employees and how each one works and thinks, PDP’s Integrated Management System contains four applications that assess an employee’s strengths, limitations, natural work styles, and stress factors. The results of these applications allow managers to direct the staff of the company more effectively.

ProScan® uses a non-threatening, quick and accurate word-response survey instrument to measure individual strengths in employees, applicants, or both.

TeamScan® compiles organizational statistics from individual profiles to show the human skills and personal styles that predominate in a group. This tool suggests how to apply this information to drive the group toward its goals.

JobScan® measures the job rather than the person to indicate what personal characteristics would be most desirable in the position. Using JobScan® in tandem with administering ProScan® Surveys to applicants substantially increases the likelihood of job success.

Strat-Map® Programs are custom applications of PDP, targeted to accomplish specific goals in individuals, teams, and managers, in a non-threatening and cooperative way.

Real-Time and Measurable Results

PDP produces measurable, bottom-line results with people at every level within an organization. There isn’t an industry, culture, or challenge that PDP won’t help. With over 30 years of success, the company has proven its ability to produce desired results both quantitatively and qualitatively. In fact, research indicates that PDP can predict people’s patterns of strength and stress with 96% accuracy.

Quantitative results:

Increased productivity

Greater retention

Reduced turnover

Increased sales

Decreased costs

Qualitative results:

Clear, effective interpersonal communication

High-performance teams

Healthy company morale

Loyal customers

A vibrant workplace where the business of your business gets accomplished

The company works in various industries including: banks, government, hospitals, hotels, insurance companies, law firms, manufacturers, newspapers, military, real estate, restaurants, retailers and transportation. Clients come in all and from anywhere in the world. Select clients include, GE Capital, Harris Teeter, Henry Schein Inc., Hong Kong University Business School, Focus on the Family, The Lion Group, Hughes Christensen, UPS, Watsons Personal Care Stores, and Tata Power Company.

Today more than 2,500 global companies large and small, entrepreneurial and mature, use the services of the PDP integrated management system.

So, with insightful understanding of personnel, both domestically and globally, PDP is completing the human resource puzzle for organizations and helping people find their “fit” in the workplace.

Contact PDP, Inc. at 13710 Struthers Road Suite 215, Colorado Springs, CO 80921 or at 719-785-7300 or at www.pdpnet.com.

The Proof is in the Pudding

PDP’s work, both nationally and globally, earned them the 2009 Colorado Governor’s Award for Excellence in Exporting.

PDP’s work, both nationally and globally, earned them the 2009 Colorado Governor’s Award for Excellence in Exporting.

Here is what some of their clients have to say:

“To me, the greatest use is in providing a vehicle for understanding people. With this understanding has come a better functioning department.”- Director, Knoxville News Sentinel Co., Knoxville, Tennessee

“PDP will help managers fully understand their employees. Are they happy, are they satisfied, are they feeling stress? This helps reduce turnover and enables managers to uncover previously hidden emotions which may be affecting performance.” - Vice President Sales, Broadwing Communications, Cincinnati, Ohio

“PDP helps us better match the person to the task by identifying and utilizing their inherent talents. We have found that our associates who are naturally inclined to their jobs usually enjoy their work more, are more productive, and have greater longevity. It’s a great management tool!” - Chairman of the Board, Vista Host, Inc., Houston, Texas

Regarding downturn in the economy: “It wasn’t even a thought to cut [PDP], because to keep our people is the least expensive thing we can do.” - President, Pikes Peak National Bank, Colorado Springs, Colorado

“I learned that besides hiring right, another real benefit to PDP in my region has been a dramatic decrease in stress and profound increase in mutual respect.” - Regional Manager, Penhall, U.S. Southern Region

Japan

By: Kazuaki Kubo, Consul General of Japan Issue: Global Trade Section: Collaborator Profile

Experience and Expertise in Energy-Saving Technologies

It has been said that Japan is a nation that lives by trade. With limited natural resources and a large population, over 120 million people in a country roughly the size of California, it is not realistically possible for Japan to hope for a self sufficient economy. Even the rate of self-sufficiency in food production is less than 40% in Japan.

Following World War II, Japan developed and expanded its economy by importing raw materials and resources and then exporting value-added manufactured products. This basic model continues today, and trade with foreign countries and the free-trade systems that support it are crucial for Japan’s economy and its security in general. trade with foreign countries and the free-trade systems that support it are crucial for Japan’s economy and its security in general.

The currently depressed world economy, originating from the so-called sub-prime loan and credit problems in the United States last year, has resulted in a worldwide trade slowdown which has seriously impacted the overall Japanese economy. Exports from Japan that had been increasing through September of 2008 suddenly decreased by 7.8% in October of 2008, compared with the same month from the prior year. Since then, the decline in exports has continued and steepened, showing a record decrease of 49.4% in February of 2009, compared with February 2008. This environment casts a very long shadow on a Japanese economy led by exports, exacerbated by a prolonged exchange rate tendency toward a weak dollar and stronger yen.

Under these conditions, Japan is reaching for new directions. One part of a solution is to reduce excessive dependence on the American market by diversifying into other overseas markets, especially in newly developing areas such as Asia. In relation to this, on May 21, Japanese Prime Minister Aso outlined a plan to help double the GDP of countries in Asia by 2020. The goal is to achieve mid and long-term growth in the Asian region, by helping to stimulate the expansion of domestic demand in each country with financial support from Japan totaling about $67 billion in aid to the region. Issue 5 Japan pic005 Another route for Japan is to utilize its experience and expertise in energy-saving technologies. With recent increases in world population and economic growth in many newly-developing countries, effective use of limited resources and the reduction of negative environmental impact have become a near universal preoccupation. During the era of rapid economic growth, Japan cultivated technologies and “green” engineering to address its global struggle against environmental pollution and during the oil shock of the 1970’s.

As a result, Japan ranks high in comparisons of energy consumption rates in relation to GDP. For instance, if the consumption of primary energy for each unit of GDP in Japan is assumed to be 1, the rate of consumption in the EU is 1.9, the United States is 2, China is 8.7, and India is 9.1, according to statistics from 2004.

Further, the Japanese auto industry is in a leading position in the development of eco-friendly vehicles such as hybrid gas and electric-powered cars.

Contributing to worldwide energy-conservation and reductions in environmental impact, through the transfer of such technology and experience to other countries, would help serve to stabilize the global community both politically and economically. This would likely be more beneficial for Japan than immediate profits from simply exporting such technologies. Therefore, the Japanese Government works in close cooperation with the Japanese private sector toward realizing the transfer of its energy-saving technology and green engineering knowledge outside Japan.

Japan also participated strongly in the formation of the “Kyoto Protocol” concerning the reduction of worldwide greenhouse gas emissions, and has created the “Cool Earth Partnership” by contributing a total of $10 billion to proactively help increase the implementation of measures against global warming in developing countries.

Lastly, for the international society to deal with such global issues effectively, the maintenance of world peace and stability is essential. From this standpoint, Japan will continue its longstanding diplomatic posture based on pacifism.

Contact the Consulate-General of Japan at Denver at 1225 17th Street, Suite 3000, Denver, CO 80202 or at 303-534-1151.

Human Rights Treaties

By: Kay Meyer Issue: Global Trade Section: Collaborator Profile

Global Progress Depends on Local Education & Action

“Where, after all, do universal human rights begin? In small places, close to home - so close and so small that they cannot be seen on any maps of the world. Yet they are the world of the individual person; the neighborhood he lives in; the school or college he attends; the factory, farm, or office where he works. Such are the places where every man, woman, and child seeks equal justice, equal opportunity, equal dignity without discrimination. Unless these rights have meaning there, they have little meaning anywhere. Without concerted citizen action to uphold them close to home, we shall look in vain for progress in the larger world.”

Human rights treaties - those noblest agreements protecting the dignity of human beings…irrefutable, right? Well, yes.



Eleanor Roosevelt reminds us of something she clearly understood over 60 years ago…

But, crafting them and making them work requires what one diplomat, Elise Boulding, termed ‘waging peace’. Unless you are a diplomat or a human rights worker, you may not know much about these prime examples of collaboration. So, here it is in a nutshell: The Universal Declaration of Human Rights, adopted by the United Nations in 1948, is the trunk of the ‘family tree’ of human rights treaties. Eight primary branches (treaties) have grown out of this core understanding. All have similar implementation strategies, yet each is unique to the needs of particular populations.









Do these treaties really make a difference? Do countries comply with the requirements of the human rights treaties that they join? Are these treaties effective in changing a nation’s behavior for the better? Do human rights agreements have any effect on international trade or vice versa? The efficacy of human rights treaties has been the subject of many a debate and numerous studies.

The general conclusion of the studies has been that the record is mixed but leans toward the positive. Because human rights treaties tend to be weakly monitored and enforced, the countries that ratify may enjoy the benefits of ratification - including, perhaps reduced pressure for improvements in practices - without bearing the costs associated with actually doing something. So, the treaties’ positive effects may sometimes be offset or even outweighed by less beneficial effects. (Yale Law Journal, 2002)

Improvement in human rights is typically more likely if the country is more democratic or its citizens participate in more international non-governmental organizations (NGOs). Conversely, in very autocratic regimes with weak civil societies, ratification can be expected to have no effect and is sometimes even associated with more rights violations. (Journal of Conflict Resolution, Neumayer, 2005) One of the most significant challenges facing the international community is maintaining a fair and predictable international trade regime, while at the same time, making progress toward addressing global social ills. A linkage between human rights and trade policies is perhaps necessary to achieve progress on human rights goals because of the lack of effective enforcement mechanisms within the human rights treaties. (Virginia Journal of International Law, Karbowski, 2009)

However, because of commitments they have made to the World Trade Organization (WTO), many nations are unable to actively address human rights policies.

Policies intended to improve areas such as human rights or environmental conservation are judged as ‘limiting market access’ and so have been abandoned to avoid WTO economic sanctions.

And, because WTO dispute settlement is costly and attracts international attention, nations often want to avoid it. This creates a chilling effect on the formation and implementation of policies that could otherwise benefit international human rights. (Ibid)

Creative solutions that do not interfere with the WTO rules are being found in private and voluntary labeling systems. Examples of these labels are ENERGY STAR, ‘Fair Trade’, and ‘No Sweat’. However, there are myriad examples of the failure to come to accord when private stakeholders on opposite sides of the debate deadlock who are unable to reach a mutually acceptable solution. (Ibid)

Is it the ‘fault’ of a human rights treaty itself that there should be such diverse handling? Should these accords of how people should be treated not exist? Should they be derided, as some are, as signs of weakness and naivety? Should governments become more or less involved?

From a more philosophical point of view, perhaps a nation’s handling of these treaties could be considered a good descriptive measure of where that particular society is in its development as a civilization at that point in time. For example, a totalitarian regime may ratify a human rights treaty to curry favor with the world community without any intent of pursuing reform of its repressive practices. A democratic society may debate the nuances of a particular provision for decades without committing to the spirit of the treaty. Another country may express its position by ratifying the treaty with numerous reservations, declarations, and understandings. And, as found by at least one research study, how a treaty is implemented and monitored depends to a large extent on the informed and engaged citizenry of the nation that ratified it.

In the United States, CEDAW, the Convention on the Elimination of All Forms of Discrimination Against Women, is a good example of prolonged deliberation. In fact, CEDAW has undergone 30 years of deliberation in the U.S. Although CEDAW is endorsed by over 200 major civic organizations, the U.S. Senate has failed to ratify this treaty for numerous reasons stemming from constituent concerns and criticisms. Today, only eight countries have refused to ratify CEDAW: the United States, Iran, Sudan, Somalia, Qatar, Nauru, Palau and Tonga.

CEDAW defines discrimination against women as any distinction, exclusion or restriction made on the basis of sex which has the effect or purpose of impairing or nullifying the recognition, enjoyment or exercise by women, irrespective of marital status, on the basis of equality between men & women, of human rights or fundamental freedoms in the political, economic, social, cultural, civil, or any other field.

Major concerns of CEDAW include speculation that the U.S. would lose its national sovereignty upon signing, that the “laws of nature” or the Shariat are violated, and probably most timely – it is either too weak or too strong regarding abortion and family planning.

Behind the bars - trafficking concept Of the 200± endorsing organizations, one loud voice is that of Zonta International. Because of its international scope, having clubs in 67 countries, Zonta’s involvement with CEDAW is a good example of the kind of interest and involvement mentioned as necessary to make a human rights treaty work. Zonta International has consultative status as an NGO with several deliberative councils of the United Nations and has been a party to the reports and testimony there for many years. However, engagement in such matters by Zontians at the local club level is a fairly new development.

When Zontians in the United States were educated regarding the provisions of CEDAW, they began to search for ways to express their support for U.S. ratification. Dialogue with chapters of the American Association of University Women and Business & Professional Women led to learning that some State Legislatures had passed resolutions of support, which were sent to the U.S. Senate. This also led to panel discussions and interactions with State Legislators. The result… resolutions passed by the State Legislatures of Colorado and Washington urging CEDAW ratification. The Treaty is currently under review by the Obama Administration and is once again on the agenda of the Senate Foreign Relations Committee.

Zontians in nations that are already a party to CEDAW are examining their role as members of the larger NGO to determine how best to assist in monitoring the treaty’s implementation in accordance to their local laws & civic structures. In addition to the regular reports required by countries that are party to the Treaty, there are ‘shadow reports’ where NGOs and civil society prepare a separate report that the CEDAW Committee considers alongside the formal report. Like other human rights treaties, CEDAW makes very general, sometimes ambiguous points. This means that at the national and local levels, the wording must be reinterpreted, negotiated, contested, and locally owned. Zontians are learning about how to do this with CEDAW.

Kay Meyer is the Zonta International Lieutenant Governor for District 12. Contact Zonta International at www.zonta.org or the Rocky Mountain District at www.zontadistrict12.org. For further information on CEDAW, link to www.womenstreaty.org or www.ohchr.org/english/bodies/cedaw/index.htm.

Don't Let Financing Stand In Your Way

By: Dennis Chrisbaum Issue: Global Trade Section: Collaborator Profile

Grow Your Export Business with Help from SBA

In February, the U.S. had a trade deficit of only $26 billion, the lowest in nine years, as imports plunged while exports stabilized — even growing slightly. This was in stark contrast to 2008, which saw an average monthly trade deficit of $57 billion. As imports continue to plummet, primarily due to the drop-off in U.S. retail sales and the decline in oil prices, the U.S. trade deficit with the rest of the world has finally begun to narrow. Clearly, we are in new territory, both for our struggling domestic economy and for emerging global trade patterns.

In fact, the World Trade Organization expects the volume of world trade to decline by 9% this year, the largest decline since World War II, while the International Monetary Fund now projects that world GDP [Gross Domestic Product] will decline for the first time in 60 years. These forecasts break with past decades when global economies experienced steady growth and world trade increased even more rapidly, typically at double the world’s growth rate in GDP.

Nevertheless, just as the U.S. economy will recover in the coming months, so too will the economies of our trading partners around the world. And, in the short term, the stimulus programs adopted by various governments also will create new opportunities for U.S. products and services. Consequently, 2009 is an excellent time for companies to review its business plan, to evaluate opportunities in other markets, and possibly to diversifying away from a position that might have been too heavily dependent on the U.S. economy alone.

Entering New Markets

For help in beginning that process, a U.S. Export Assistance Center (USEAC) is a great place to start. Located in major cities through the country, USEACs are staffed by U.S. Department of Commerce trade specialists and, in some locations, trade financing specialists from the U.S. Small Business Administration (SBA) and the Export-Import Bank (Ex-Im Bank), who can provide the market research, training, and technical support needed to enter and successfully sell in overseas markets. (To find the USEAC near you, visit: http://www.buyusa.gov/home/export.html). Most companies are amazed at the amount of market research and technical support that is available from these U.S. Export Assistance Centers--much of it free of charge. For a detailed description of the programs and services available to U.S. companies to help with their export expansion plans, please visit the U.S. Department of Commerce’s export portal at http://www.export.gov, or download a free publication, Breaking Into the Trade Game: A Small Business Guide to Exporting, at: http://www.sba.gov/international.

Upon making the decision to pursue global opportunities and develop an international business plan, the U.S. Small Business Administration (SBA) is a logical next stop for discussing payment and financing options. The SBA staff, assigned to 19 U.S. Export Assistance Centers across the country, can assist in sorting through international payment conventions and explain working capital options to support export expansion plans and international sales.

Financing Market Expansion

Major changes to SBA’s loan programs have been put in place for this year in order to help jumpstart the economy and to encourage banks to make more small business loans, including loans to small business exporters.

The American Recovery and Reinvestment Act of 2009, signed into law on February 17, 2009, created some short-term relief and incentives by providing $375 million to temporarily waive the guaranty fees on SBA-backed loans, while also raising the SBA’s guarantee percentage on most loans to 90 percent. In addition, the SBA temporarily is allowing the use of alternative size standards, matching those used for the Certified Development Program, which will make more small businesses eligible for SBA support. This alternative size standard will be in effect until September 30, 2010, and will allow companies (and any affiliates) with a net worth of $8.5 million or less and an average net income, after federal income taxes for the preceding two fiscal years, of no more than $3 million to qualify. For a complete listing of historic size standards by industry classification, please see: http://www.sba.gov/sizestandards.

Since 97% of all U.S. exporters are small businesses by SBA’s size standards (and account for one-third of all U.S. exports, or more than $500 billion annually), the vast majority of U.S. exporters should qualify for one of SBA’s several financing programs, ranging from working capital loans to loans for export expansion to loans for equipment and buildings. While any of SBA’s loans programs can be used by small business exporters, three programs are specifically targeted for use by the exporting community.

1. The SBA Export Express Program provides guarantees on loans up to $250,000. Typically, these loans are for 5-7 years, but they can extend to 25 years based on the use of proceeds. Under this lender-expedited program, SBA currently provides a loan guarantee of 90% and, if the term of the loan exceeds 12 months, the guaranty fee currently is being waived. Proceeds can be used for equipment, other fixed assets, transaction costs, foreign trade show participation, translation services or other working capital needs. SBA typically approves these loans in 2-3 days after receiving them electronically from a bank. However, in order to qualify for this program, the applicant must have been in business for a least one year and must demonstrate that the loan will help the firm enter a new export market or expand in an existing export market.

2. For companies that would like to expand their business because of growing export sales, or for those businesses that have been adversely affected by imports and need to re-tool to be competitive, the SBA’s International Trade Loan can help, by providing (currently, under the American Recovery and Reinvestment Act of 2009) up to a 90% guaranty to the lender on commercial loans of up to $2.0 million. The SBA guaranty can go as high as $1.75 million per borrower, unlike other SBA loans which generally are capped at $1.5 million. Terms can go out as long as 25 years, while loan proceeds can be used for both fixed assets and working capital. Refinancing is possible under this loan program.

3. The Export Working Capital Program (EWCP) provides a 90% guaranty to the lender and can be set-up to finance a single export transaction--one that might be larger than the firm’s normal order--or set-up on a revolving, line-of-credit basis to finance multiple transactions. For loans of 12 months or less, the guaranty fee is only 1/4 of 1%; for loans over 12 months, the guaranty fee has been temporarily waived under the American Recovery and Reinvestment Act of 2009. The collateral required for these loans is what is in the transaction: inventory, accounts receivable, work-in-process, and an assignment of proceeds for letters of credit and/or an assignment of proceeds under a credit insurance policy. Loans can go as high as $2 million, under a co-guaranty agreement between the U.S. Small Business Administration and the Export-Import Bank (Ex-Im Bank). Applicants must have at least one year of business operating history to qualify. Unlike the Ex-Im Bank, the SBA does not have a U.S.-content requirement (the Ex-Im Bank will only finance exports with at least 51% U.S. content), nor does it have a prohibition against financing sales to foreign military establishments in friendly countries.

Insuring Global Transactions

Given the recent global financial crisis, foreign buyers might be struggling with having enough working capital, so it would not be uncommon for them to ask for open account terms.

Given the recent global financial crisis, foreign buyers might be struggling with having enough working capital, so it would not be uncommon for them to ask for open account terms. To mitigate that risk, many SBA borrowers work with the Ex-Im Bank to obtain export credit insurance on their open account sales, insuring those overseas accounts receivable against commercial and political risk. Such policies may pay up to 95% of the invoiced amount on claims for default. The same credit insurance policies also can be written to cover unconfirmed letters of credit and documentary collection sales.

Especially priced for small business exporters (as defined by the SBA), the Ex-Im Bank’s small business, multi-buyer credit insurance policy will insure a company’s worldwide open account sales against political and commercial risk. To qualify, the company’s open account, annual export sales must have been less than $5 million on average over the past three years. The cost for this insurance coverage is only 55 cents per $100 invoiced amount, after a 15% discount that is being offered this year. As an added incentive, any small business exporter with an SBA EWCP loan would qualify for an additional 25% discount which would lower the premium to approximately 42 cents per $100 invoiced amount, in most cases. And, having credit insurance offers one other benefit when it comes to financing: a higher borrowing limit. Since a U.S. government agency is insuring the accounts receivable against commercial and political risk, banks typically will add them back into the borrowing base, making them “bankable.” Under the SBA’s export working capital program, advance rates against insured accounts receivable of 85-90% are commonly allowed.

It is less well known that exporters can use a combination of federal loan guarantees to make a deal feasible. For example, an SBA pre-export working capital loan [EWCP], supporting the U.S. exporter, could be paired with an overseas buyer using the Ex-Im Bank’s medium-term, buyer financing program. Under this program, the Ex-Im Bank will provide 5-7 year financing to foreign buyers of U.S. products or services. The importer has to come up with a 15% down payment and the Ex-Im Bank will provide a 100% guaranty on a loan covering 85% of the transaction amount. Under this scenario, the SBA’s Export Working Capital loan program would provide the necessary working capital for the exporter to produce the order, which would then be fully repaid upon shipment by the importer’s medium-term loan guaranteed by the Ex-Im Bank.

For more information on all of the Export-Import Bank programs, please visit: http://www.exim.gov.

To learn more about how these export finance programs might be structured to meet your needs, please contact one of the SBA trade finance specialists in any of the 19 U.S. Export Assistance Centers around the country. First established in 1994, the U.S. Export Assistance Center network combines the international marketing expertise of the U.S. Department of Commerce’s Commercial Service staff and the international trade finance expertise of the SBA staff, knowledgeable about both international methods of payments and export financing options under SBA and the Ex-Im Bank programs. These centers create an easy access point for exporters to all federal government export programs. To locate an SBA international trade finance specialist near you, or to learn more about the SBA’s loans for exporters, go to: http://www.sba.gov/international.

Don’t let financing needs stand in your way of international business success. Contact SBA and your local U.S. Export Assistance Center today!

Dennis R. Chrisbaum has worked in international trade for almost 30 years. He currently serves as the Regional Manager of International Trade Programs for the U.S. Small Business Administration, in the U.S. Export Assistance Center in Denver. In that capacity, he covers the states of Arizona, Colorado, New Mexico, Utah and Wyoming for the SBA’s Export Working Capital program. He can be reached at 303.844.6623 x 218 or at [email protected] .

Belgium

By: Geert Criel, Consul General, Consulate General of Belgium Issue: Global Trade Section: Collaborator Profile

At the Heart of Europe

Belgium is well known in the U.S. for its excellent cuisine, and its chocolate, waffles, and beer in particular. Others know the small country for its diamond industry or the role of Brussels as the host to the EU institutions and NATO.

But Belgium also has a broader story to tell of economic success.

WTO data show that the country is the 20th economy in the world, and the 10th exporter of goods globally.

It attracted $40 billion in foreign investment in 2007, according to the latest World Investment Report by the UN, making a country the size of Maryland, the 11th destination for foreign investment. The Financial Times recently ranked two of its regions, Flanders and Wallonia, among the top five of Europe’s most important destinations for foreign investment.

The U.S. is the main foreign investor in Belgium, measured in number of investment projects as well as in capital investment. The total value of U.S. investment in Belgium topped $55 billion in 2008. Most of the investment has been in the finance and insurance sector, and in chemical manufacturing. But investment in the service industry, including law firms, accounting firms, advertising agencies, and computer and management services, has more than tripled since 2000.

Belgium’s major appeal for foreign companies is its central location in Europe. Within a radius of 300 miles, 140 million European consumers can be reached. Eighty percent of the country’s GDP is exported, mostly to neighboring Germany, France, the Netherlands and the UK. And as host of the EU, Belgium is a popular spot for companies with a special interest in access to European decision-making.

Other factors contribute to Belgium’s economic successes. Belgium’s status as the top car exporter per capita in the world, for example, is also the result of its excellent business infrastructure and the second most productive workforce per hour worldwide. Low real estate costs contribute to Belgium’s appeal for distribution and logistical activities. Belgium attracts more than 10% of all logistical foreign investments in Europe, according to Ernst & Young’s latest Barometer of Belgian Attractiveness.

Belgium is also a major player in the life sciences. Over 140 biotech companies in Belgium employ over 10,000 people, predominantly focused on healthcare applications. Belgium is the second exporter of pharmaceutical products per capita in Europe. As a matter of fact, the country hosts one of Pfizer’s largest non-U.S. production sites. Belgium holds more clinical trials per capita than any other country in the world. And GlaxoSmithKline has located almost its entire production of vaccines in Belgium.

In a globalized world, Belgium is of course confronted with a fierce competition for its share of foreign investment. Over the last 5 years, the Belgian government has taken an increasingly proactive approach in creating a business friendly environment.

Over the last 5 years, the Belgian government has taken an increasingly proactive approach in creating a business friendly environment.They are summarized on the investment website of the Belgian government, www.invest.belgium.be.

In an effort to reduce red tape, it has become possible to set up a company in Belgium via a single office in three days. The government has especially focused on reducing the tax burden for companies. Two years after a reduction of corporate tax rates in 2003, the government launched the Notional Interest Deduction, which allows Belgian tax-resident companies and Belgian branches of non-resident companies to deduct in their corporate income tax return a deemed interest cost for the equity invested in the Belgian company of branch. Estimates are that the NID has reduced the effective corporate tax rate in many cases to less than 25%.

Belgium has also implemented a series of tax incentives for locating R&D activities in Belgium. One of the most recent ones is the Patent Income Deduction, allowing Belgian companies and branches engaged in patent development - in a research center in Belgium or abroad - a special reduction of 80% in taxation of royalties. Belgium is also targeting the niche market of pension funds with a new tax regime for locating cross border pension funds in Belgium in a tax-neutral manner.

The U.S. business community in Belgium very much welcomed the recent reforms. “We are proud that Belgium has become more attractive for U.S. investment”, Denise Rutherford, president of AMCHAM Belgium said during the release of the organization’s 2007 Investment report.

For additional information, please contact:

Consulate General of Belgium in Los Angeles - www.diplomatie.be/losangeles/

Brussels Export – Flanders Investment and Trade

Stephen Esbin, Director Investment

Barbara Bruneel, Director Trade

c/o Consulate General of Belgium

6100 Wilshire Blvd., Suite 1200,

Los Angeles, CA 90048

Tel: +1-323-857 0842

Fax: +1-323-938 4024

[email protected]

www.flandersinvestmentandtrade.com

www.brussels-export.be

Wallonia Export and Investment Office

Frederic Delbart, Trade and Investment Commissioner

155 Montgomery Street - suite 207

San Francisco, 94104 CA - USA

Tel:  1-415-546.5255

Fax: 1-415-546.3144

[email protected]

[email protected]

www.belgiantrade.com

Global Trade

By: Jan Mazotti Issue: Global Trade Section: Letter From The Editor

Connecting and Collaborating for Everyone’s Benefit

Just the facts…Japan has lost nearly half of its export market over the first quarter of this year compared to the first quarter of 2008. In China, exports fell 17% from a year ago with an estimated 26 million jobs lost. Exports from the United States declined 30% and imports 34% in the first quarter of this year compared to the last quarter of 2008. And in Germany, the biggest European exporter, first quarter exports fell by more than a fifth compared to the first quarter of 2008. The WTO has forecast overall global trade activities to fall by 9% in 2009.

Global trade is one of those topics that either makes you excited or wince when you hear the words. There is the perception that trade is a global economic driver - even though there have been significant declines during these tough economic times. Or, there is the perception that global trade is just outsourcing in disguise - killing U.S. jobs and causing economic and personal havoc worldwide.

Americans have historically believed that free trade destroys American jobs, rather than creating them, and that it lowers wages, rather than raising them. However, in an April 2009 study released by the Pew Research Center, “public support for free trade agreements has recovered after declining a year ago. Currently, 44% say that free trade agreements like NAFTA and the policies of the World Trade Organization are good for the country, up from 35% a year ago.”

In this issue, U.S. Trade Representative Ambassador Ron Kirk defines the key elements of President Obama’s trade policy agenda and discusses some of the current challenges facing our nation. Former Secretary of Commerce Carlos M. Gutierrez addresses why we need to reaffirm our commitment to resist protectionism, especially when rising unemployment increases the pressure and temptation to put up trade barriers. Business Roundtable’s John Castellani makes the case for why trade is so important to the U.S. economy and how we must better collaborate to move forward as a nation. Several foreign Consular representatives have weighed in on the issues surrounding foreign trade, and they are surprisingly positive. And finally, specific companies and government entities are highlighted to show collaborative efforts that are being used to create and sustain global development efforts.

This issue, I believe, illustrates the importance of connecting and collaborating since global trade affects us all. We must work together to solve problems and create a vibrant global economy once again. No matter your position, I hope that you enjoy this issue. Now, turn the page.

ICOSA

By: Gayle Dendinger Issue: Global Trade Section: Letter From The Publisher

Not Just a Magazine But a Mission

Earth is home to four massive ecosystems consisting of the atmosphere (air), hydrosphere (water) lithosphere (minerals) and biosphere (plants, animals, humans). Everything that hails from these “Great Groups” is interconnected.

The awesome potential of these connections is a reality, whether or not we acknowledge this power, understand it or choose to ignore it. The fact that everything is connected can be good news or devastating depending upon what is connected and how well it is managed.

Mother Nature understands interconnected and complex networks. Starting with atoms, she eventually created cells with complex DNA strands that evolved into slime, moss, and plants. From this same slime, animals evolved into frogs, dinosaurs, birds, monkeys, and people. Within all life forms are interconnected organs, like the brain, which consist of billions of interconnected neurons acting simultaneously to enable incredible functions – such as talking, walking, and thinking.

When systems fail, or produce the wrong results, big problems can result. Misunderstanding, overusing, or abusing interconnected systems can lead to regression in relationships such as drought, pollution, global warming, disease and the extinction of many species. When connected networks work well, great productivity is possible.

The rings and radii in the background represent the ICOSA network that we are building. It is filling up with leaders in business, politics, education and social entrepreneurs. We are collaborating and connecting with these organizations because we recognize that they are the ones who can and are making a real difference in the world. For me, the concentric rings in the model represent geographies – families are represented by that inner ring and global connections are represented by the outside ring. Businesses/social organizations, cities, states, regions, and national organizations represent the rings in between.

I firmly believe that by working together, we can address key issues through a “connected and collaborative” network which enables the creation of a shared vision and the alignment of human and other resources. By working together entrepreneurially, we can put these assets to work with leveraged and sustainable results by working proactively and positively on the front side instead of panic and dread after it is too late. By being collaborative we can connect our social networks and truly leave this world a “better place for our children.”

Ben Franklin & Dick Franklin

By: Gayle Dendinger Issue: Global Trade Section: Inspirations

Why do they do it?

Inspirational leaders put forth tremendous energy, display unstoppable determination and pay a high price, to bring shared vision, collective genius, and collaborative creativity to fruition.

The early colonies and subsequent United States were truly blessed to have Benjamin Franklin, as such a leader. With his many different interests and wonderfully diverse careers, Ben Franklin has not only served as an inspiration to many people, but also as a catalyst around which many historical and world changing events have occurred. Among his legacies is the great wisdom he has imparted, some of which is highlighted below. He said,

“Think of these things, whence you came, where you are going, and to whom you must account.”

“It isn’t what you know that counts; it’s what you think of in time.”

Fast forward about two and a half centuries, to a lunch with this Founding Father’s great, great, great, great, great, great, great, nephew (I am assuming), Richard Franklin. Richard personifies Uncle Ben’s sage wisdom and has put his great words into action.

“Think of these things, whence you came…”

Richard was born and raised in Toronto. He earned a Bachelor of Science degree in Marketing from St. Mary’s University, Halifax, Nova Scotia; a Master of Business Administration from Dalhousie University, Halifax; and was awarded an Honorary Doctorate of Commerce degree from SMU, Nova Scotia in 1999.

Dr. Franklin related that he has 25 years of CEO, COO, CSO, and SVP level experience with corporations such as Reebok, Coors, Head, Seven-Up, and TCI. He has leadership experience on three continents, in multiple industries and for companies ranging from multi-billion dollar businesses to I.T. start-ups. He has dealt with competitive business challenges from icons such as Coke, Budweiser, and Nike; to global launches, re-branding, and product line extensions.

Richard explained that his expertise is in strategic planning, futuristic visioning and creative positioning for optimal competitive advantage and long-term growth; he founded Envirobrand for which he serves as CEO.

“Think of things…where you are going, and to whom you must Account.

Richard’s passion is creating eco-strategies and envirobranding in a carbon-constrained world. He assists corporations and non-profits in transformational, cultural and process change, which brings about more profitable, competitive and sustainable business strategies for the future.

His goal is to create a harmonious relationship between the environment and the daily realities of living. Using a concentric circle model, Franklin illustrates a central hub representing the environment, ecology, and quality of life while the outer ring represents jobs, housing, food, and other basic needs. He is concerned that small businesses are so preoccupied with the daily business that it will be difficult for them to add social responsibility and ecology-friendly solutions to their business strategy and execution. As a result, he is challenged to encourage and assist with transformational change in small businesses going forward.

As we progressed through lunch, Dr. Franklin reiterated that he is greatly interested in the environment because the future of his children, their children and generations of all living things depend upon on what we are doing today.

“We must hang together, or we will assuredly hang separately.”

Over dessert, he explained that he grew up appreciating the sea. He recounted his grandfather’s tales about the massive amount of fish in the Grand Banks - where you could simply drop a baitless hook and reel in a cod. An avid diver, Franklin has amassed over 1,000 dives in the Atlantic, Pacific and Indian Oceans, not to mention countless islands, archipelagos and fresh water lakes around the world.

Over the last 40 years, he has watched the reefs, coral, and marine-life slowly dwindle, until they are only a shadow of their former selves. In fact, the populations of fish and sea creatures have been greatly reduced - in some cases by as much as 90%. His diving experience has been a visual time capsule of the oceans being besieged on all fronts by overuse, misuse and abuse. The problems, however, are not just in our oceans, but in every ecosystem. They are declining, and the rate of decline is accelerating.

“Energy and persistence conquer all things.”

True to Franklin form, Richard is doing something about it. He has done sustainability work, Corporate Social Responsibility (CSR) projects, built Environmental Management Systems (EMS), eco-strategies and envirobranding for organizations such as Merrick, KUSA - Channel 9, Douglas County Schools, St. Mary’s University, Accuwater, and Texas Business for Clean Air.

His many community activities include United Way - Denver, Denver Children’s Museum, Renewable Energy Task Force, Audubon Society, The South Denver Metro Chamber of Commerce, CORE, Cenikor, Clean Tech 2010 Incubator, and the Rocky Mountain Clean Tech Open.

“It isn’t what you know that counts; it’s what you think of in time.”

Over the years, Franklin has experienced many things that have motivated him to lead change in the world, especially when it comes to the environment. He is a founding member of the Rocky Mountain Clean Tech Open (RMCTO). The RMCTO was founded on the belief that the best way to improve and preserve the environment is through technology. The goal is to link world-class innovators who will ensure that the best and brightest ideas are developed with the resources and funding to grow into a thriving clean tech company. Ultimately, the goal is to strategically structure and connect the dots between various groups and organizations to achieve measurable goals and make a sustainable difference by collaborating on the most salient issues of the day: deforestation, water, clean energy, pollution, conservation and climate change. It is yet another example of a handful of people - dedicated to a cause - changing the world.

It is encouraging that the experience, professionalism, commitment, and passion of the present day Franklin can again serve as a catalyst around which a multitude of caring people can work together - to restore the earth and improve the lives of it citizens. We look forward to his new book entitled “Ecogeddon 2050” which is slated for a spring 2010 launch.

Uncle Ben would be proud and we are appreciative.

Meet Karen S. De Bartolome

By:Adam Cohen Issue: Global Trade Section: Advisory Board

Executive Director, Institute of International Education, Rocky Mountain Regional Center

Contact Karen S. de Bartolomé

475 17th Street, Suite 800 Denver, CO 80202

p: 303.837.0788 F: 303.837.1409 E: [email protected]

Karen directs the activities of the Rocky Mountain Regional Center of the Institute of International Education, an independent, non-profit organization founded in 1919 that administers international scholarships and educational and cultural exchange programs for public and private sponsors. The Institute also provides resources to the higher education community. The Rocky Mountain Regional Center is one of twenty Institute centers creating change around the world.

With a budget of $1.3 million and a staff of 10, the Rocky Mountain Regional Center’s varied portfolio includes the Denver World Affairs Council, the Denver International Visitor Leadership Program, privately sponsored teacher and professional exchanges, Young Professionals Organization and GlobaLiteracy, an international education outreach to middle and high schools. The Center’s largest activity is administering international educational and leadership exchange programs--notably Fulbright, the National Security Exchange Program, and teacher exchanges--in 16 states from Minnesota to Texas and from Montana to Arizona. “Sixty former participants in the Institute’s programs have received the Nobel prize in their respective fields. The work we do here at the Institute, while quiet and rarely publicized, is changing the world as we know it, one handshake at a time,” said de Bartolomé.

Prior to joining the Institute, Karen had a consulting business in leadership development and marketing. She also directed the International Center for Administration and Policy at the Graduate School of Public Affairs, University of Colorado at Denver where she organized policy discussions with Mexican and Brazilian officials on infrastructure privatization and published studies on financing international infrastructure projects.

Prior to moving to Colorado, Karen worked for 14 years in the areas of planning, finance and executive management at the Port Authority of New York/New Jersey. “Starting off as a planner for reclaiming derelict waterfront areas in the New York Harbor was just the kind of challenge I needed out of graduate school,” de Bartolomé said, “And working for an organization as professional and well-respected as the Port Authority gave my career a great start.” She participated in the executive leadership development program at the Authority, and moved quickly through a variety of posts. “One day they caught me with a calculator, and off I went to work for several years for our very talented CFO.” In her final position as Director of the Office of International Business, she managed a global marketing network for metropolitan New York and New Jersey’s seaports, airports and the twin towers. In this role, she also directed an in-house export trading company and the World Trade Institute. “This was my chance to get back to work on my life-long interest, international relations. It was also fantastic training for the role I now have in international education.”

Karen was a White House Fellow in 1987-88 (Reagan Administration), and served as Special Assistant to U.S. Trade Representative Clayton Yeutter. She returned to the White House briefly in 1992 to lead the transition team for the Office of the U.S. Trade Representative (Clinton Administration). She actively encourages rising young leaders to apply for this prestigious yet humbling opportunity to serve and learn at the highest levels of our government.

Karen is currently a member of the board of the National Council for International Visitors and chairs its Program and Services Committee. She recently completed two board terms with the World Affairs Councils of America. She is a graduate of the Kennedy School of Government at Harvard University and the School of International Service at American University.

Meet Kristy A. Schloss

By:Adam Cohen Issue: Global Trade Section: Advisory Board

President and CEO, Schloss Engineered Equipment

Contact Kristy A. Schloss

Schloss Engineered Equipment 10555 E Dartmouth Ave. # 230 Aurora, CO 80014

p: 303.695.4500

Kristy Schloss is President and CEO of Schloss Engineered Equipment, Inc., a 111-year old, Colorado-based environmental equipment design and manufacturing firm. It is the only woman engineer owned manufacturing firm in its industry in the U.S., and serves national and international clients due to its reputation for quality water, wastewater, hazardous waste, and bulk-material handling equipment. Schloss Engineered Equipment received an Export Achievement Certificate from the U.S. Department of Commerce, the National Exporter of the Year Award from the Small Business Administration and the Governor’s Award for Excellence in Exporting. Her textbook, Keys to Engineering Success, is in publication by Pearson/Prentice Hall.

An engineer, author and environmentalist, small business, international business and education advocate, Ms. Schloss participates in many community activities. She graduated with a B.S. in Civil Engineering from the University of Colorado - Boulder. Ms. Schloss is a Fellow of the Society of Women Engineers, and a member of the Water Environment Federation, the American Society of Civil Engineers, the National Association of Women Business Owners, and National Small Business United. She is a dedicated mentor to several students from numerous engineering schools across the U.S.

Nationally, Ms. Schloss serves as Chair of the Board of Directors of the Federal Reserve Bank of Kansas City, Denver Branch (by appointment of the Board of Governors), Chairs the U.S. Department of Commerce Rocky Mountain District Export Council and serves on the U.S. Department of Commerce Environmental Technologies Trade Advisory Committee, (both by appointments of the Secretary of Commerce) as well as the National District Export Council Steering Committee. She serves as a Trustee for the Midwest Research Institute.

Ms. Schloss received the National Entrepreneur Award from the Society of Women Engineers, the General Palmer Award from the American Council of Engineering Companies - Colorado, the Colorado Engineering Council’s Honor Award, and the University of Colorado – Boulder Distinguished Engineering Alumni Award. She was inducted to the SBA “Wall of Fame”, received the Technology Driven Woman of the Year Award from News 4, Subaru and the Women’s Foundation, and the Jean Yancey Outstanding Woman in Business Award from the National Association for Women Business Owners and the Denver Business Journal. She was named a Woman of Distinction by the Mile Hi Girl Scout Council and was the recipient of the Denver Business Journal’s Entrepreneur Award, the Colorado Women’s Leadership Coalition’s Woman Leader of Excellence Award, and the National Woman of Worth Award. A graduate of Leadership Denver, Ms. Schloss serves on several local boards including the World Trade Center – Denver. At the University of Colorado, she serves on the Engineering Advisory Council and Executive Committee.

Ms. Schloss formerly served on the National Advisory Council of the Small Business Administration (by appointment of the SBA Administrator), and received gubernatorial appointment and senate confirmation to serve on the Colorado State Board for Community Colleges and Occupational Education System. She was also appointed to the Colorado Statehouse Conference on Small Business and the Disparity Resolution Task Force. She was elected Co-Chair of the Colorado Delegation to the White House Conference on Small Business and was also elected Region VIII White House Conference Implementation Co-Chair. Ms. Schloss is listed in Who’s Who Worldwide, Who’s Who in Science and Engineering, and Who’s Who in Denver Business.