Great Groups Guru

GREAT GROUPS GURU: Warren Bennis

Warren G. Bennis believes that very few great accomplishments are the work of a single person – but are a compilation of personalities and skill sets of the collective group. As one of the world’s foremost authorities on positive change, powerful partnerships and group leadership, he shares great insights into how to harness the power of Great Groups.

In fact, to identify common traits of Great Groups, Bennis studied legendary groups including Lockheed’s Skunkworks, the Xerox PARC research center, and Apple’s original Macintosh team. He found that every Great Group is extraordinary in its own way, and that there are common principles that apply to them. In my opinion, these principles apply to many of the organizations that we have featured in ICOSA.

Principle #1

Every Great Group has a superb leader

According to Bennis, Great Groups all have strong leaders, but the groups made the leaders great - that’s the paradox of group leadership. I believe the epitome of this principle is Ed Rust and State Farm Insurance. This organization is a leader in the insurance business, but serves as a role model for social development and support through education and community development. Rust is the leader who keeps his eye on the horizon, and not just on the bottom line.

Principle #2

Great Groups think they are on a mission from God.

Dr. James Jackson and Dr. Douglas Jackson of Project C.U.R.E. are on that shared mission - securing and delivering donated medical supplies and equipment to the most desperately ill and needy people in more than 100 countries around the world. They are on a fervent quest to create a better life for the poorest of the poor.

Principle #3

Great Groups manage conflict by abandoning individual egos to the pursuit of the dream.

This principle is difficult for most of us. However, the collaborative efforts of Regis University and Beth Parish have taught us to not only reach out to the whole community, but to work humbly behind the scenes to pull engaging and sometimes challenging, people to the collaboration effort.

Principle #4

Great Groups view themselves as winning underdogs

The story of Greyston Bakeries demonstrates this principle. Having created a social enterprise defined by creating profits to advance a social mission, Greyston has employed the “unemployable.” Greyston has built relationships with the best in the industry. Greyston has built a model filled with purpose - one that recognizes that, “We all have equal value, just different skill sets.”

Principle #5

Great Groups are protected from the “suits.”

Boeing’s story in our inaugural issue exemplifies this principle. In order to survive, the A&T group took drastic measures and made sweeping organizational changes in order to make their partnership with the U.S. Airforce and McDonnell Douglas succeed. Instead of another top down “initiative du jour” or “random acts of improvement,” the Great Group at Boeing worked tactically and quietly to cultivate an environment built on integration, alignment, coordination, and communication while avoiding unreasonable expectations, secrets, and static documents.

Principle #6

Great Groups pay a personal price.

Bringing hope to Yetebon, Ethiopia is the passion of Noel and Tammy Cunningham and their work with Project Mercy. Working tirelessly, with a team of devoted volunteers, the Cunningham Foundation and Project Mercy work hard to build and sustain better healthcare, feeding centers, and scholarships for children in the region. The mission: “Dream big! Maybe big things will happen.”

Principle #7

Great Groups are the product of meticulous recruiting.

John Brackney of the South Denver Metro Chamber of Commerce understands that connecting the best leaders and organizations brings in more great groups and leaders, which creates a powerful interconnected web. Common sense dictates, if you want to have a great group, surround yourself with great people.

Principle #8

Great Groups are usually young or think young.

Peter Yarrow of Peter, Paul, and Mary and founder of Operation Respect has had one of the longest successful musical careers (that all the baby boomers appreciate), but his current message appeals to the young. Recently, Peter authored a best selling children’s book Puff the Magic Dragon - and a song that almost any ten-year-old child can sing.

Principle #9

Great Groups have a real or invented enemy.

Groups do better when there is a real or invented enemy - such as the ongoing battle against disease and sickness. In our inaugural issue we highlighted the efforts of Poudre Valley Health Systems and their ongoing continuous improvement journey to save lives. Since that issue, the organization has received the highest quality recognition in the U.S. - the 2008 Malcolm Baldrige National Quality Award. Proof of just one of PVHS’ Great Groups is the community case management program that pairs advance practice nurses and social workers with high-risk, chronically ill patients. Over the past three years, this group has decreased emergency visits annually by 50 percent, which has resulted in more than $850,000 in savings.

Principle #10

Real Artists Ship.

Producing a tangible outcome external to self is central to this principle. Cheryl Jensen and the efforts of SWAG and the Vail Veterans Program are prime examples. These Great Groups come together annually to make the world better – either by sending a warm coat or showing a wounded veteran that someone cares - and that is the point.

Bennis inspires my work as a CEO, publisher, Great Group leader and participant. “It is the power of the mission,” reflects Bennis, “where all great teams – and all great organizations – are built around a shared dream or motivating purpose”

In fact, Great Groups remind us how much we can accomplish working toward a shared purpose. Great Groups rely on many long-established practices of good management – effective communication, good recruitment, genuine empowerment, and personal commitment.

Bennis reminds us of the author Luciano de Crescanzo’s observation that “we are all angels with only one wing; we can only fly while embracing one another.” And, then Bennis reiterates that, “in the end, Great Groups can not be managed, only led in flight.”

U.S. Meat Export Federation

By: Philip Seng with Joe Schuele Issue: Global Trade Section: Jewel Of Collaboration

Building Global Markets for U.S. Pork and Beef

It began with a team of livestock producers visiting Osaka, Japan, for a food exhibition in 1970. Today, the U.S. Meat Export Federation (USMEF) is a well-established, non-profit trade association with offices in Seoul, Tokyo, Beijing, Hong Kong, Shanghai, Singapore, Taipei, Moscow, St. Petersburg, Brussels, Mexico City and Monterrey, in addition to its global headquarters in Denver, Colo. USMEF also has marketing representatives covering the Middle East, Central and South America and the Caribbean.

“What these producers found was that beef prices were astronomically higher in Japan than in the United States, and they felt this market could hold great potential for U.S. agriculture,” said USMEF President and CEO Philip Seng. “So shortly thereafter, leadership from the beef and pork industries, as well as the meat processing sector, decided to form an association that was totally focused on international markets and would be steeped in the language, customs and food culture of these foreign countries.”

Seng said U.S. grain farmers were already finding success in global markets, exporting bulk commodities in growing quantities. That gave farmers and ranchers confidence that value-added products like pork and beef could also deliver positive returns in overseas markets.

Officially formed in 1976, USMEF is now well into its fourth decade of developing international markets for U.S. pork, beef, lamb and veal, adding value to a diverse range of U.S. agricultural products. USMEF receives funding and support from the beef, pork, corn and soybean producers through their commodity checkoff programs, as well as from meat processors, exporters and distributors, and the U.S. Department of Agriculture.

After working in Tokyo for a leading Japanese company, Seng joined the organization as director of USMEF-Japan in 1982. At that time, Europe was the primary target of USMEF’s marketing efforts.

“Back then, USEMF had offices in London and Hamburg, in addition to the one in Tokyo,” he said. “It was my role to expand the Asian operation beyond Japan, and I learned early on that if you are going to be a factor in these markets, you need to have a presence there. We took that step by opening offices in Singapore, Hong Kong, Taiwan, Korea and China.”

USMEF’s Asian expansion was well-timed, receiving assistance from the Targeted Export Assistance (TEA) program passed by Congress in 1985. The Beef Checkoff and Pork Checkoff programs were also established as part of the 1985 Farm Bill, giving the nation’s livestock producers an avenue by which they could promote beef and pork in both domestic and international markets.

“At a time when most livestock producers were concerned about imports making their way into the United States, we were working aggressively to open new markets and build international demand for U.S. meat,” Seng said.

“Thanks to that foresight, those markets are now paying excellent dividends for U.S. agriculture.” At a time when most livestock producers were concerned about imports making their way into the United States, we were working aggressively to open new markets and build international demand for U.S. meat,”

After augmenting the presence of USMEF in Asia, Seng was promoted to president and CEO in 1990. As his responsibilities grew beyond Asia to cover the entire globe, he quickly saw that the next great opportunity for expanding U.S. meat exports was right in America’s backyard.

“We opened an office in Mexico City several years before the NAFTA accord, doing the preparatory work so that once this market became more favorable, we would be able to take advantage of those opportunities,” he explained.

To say that Mexico has helped expand international opportunities for beef and pork would be a vast understatement. Mexico is consistently the largest market for U.S. beef exports, importing a record $1.4 billion last year. It was the third-largest market for U.S. pork last year, totaling $691 million.

In the first quarter of 2009, Mexico has the distinction of being the No. 1 volume destination for both U.S. beef and pork.

“Mexico was the first market to reopen to U.S. beef following the discovery of BSE (bovine spongiform encephalopathy) in 2003,” Seng said. “Since that time it has been the pacesetter for our beef exports, and has been an outstanding market for pork as well. We export a tremendous volume of variety meats and underutilized muscle cuts - such as hams and beef rounds - to Mexico that would be very hard to absorb in the domestic market. So this is an extremely valuable market, and NAFTA helped pave the way for that success by making our products more accessible and affordable.”

Canada also represents an important market for U.S. beef and pork, ranking second last year in imports of U.S. beef ($716 million) and fourth in pork ($558 million). Seng explained that while Canada produces more than enough beef and pork for its 33 million residents, many U.S. products are still in demand north of the border.

“What we find in Canada is that distributors and suppliers have certain product needs that cannot be fulfilled on a year-round basis with domestic beef and pork,” he said. “So they turn to the U.S. to meet this demand. This is especially true when the Canadian dollar is relatively strong – as was the case in 2007 and for much of 2008.”

USMEF is also finding success in other Western Hemisphere markets. The Caribbean region increased its imports of U.S. pork by 58 percent last year (to $71 million) and its imports of U.S. beef by 14 percent (to $69 million). The region is also the largest value destination for U.S. lamb, with about half of last year’s $25 million in U.S. lamb exports being shipped there. Central and South America also registered solid increases in imports of U.S. meat last year.

‘These are markets in which trade conditions are becoming more favorable, and many of these countries are growing in both population and discretionary income,” Seng said. “So they hold excellent potential for U.S. products.”

While large, mainstay markets command most of USMEF’s marketing resources, the federation is constantly working to expand and diversify the global presence of U.S. meat. This has proven to be extremely important this year, as some large markets have pulled back on their level of activity. China and Russia, for example, were two of the top four markets for U.S. pork last year. But both countries have been making a concerted effort to bolster their domestic pork production and reduce their reliance on imports. This has caused them to slash imports of U.S. pork by about 75 percent compared to the first quarter of 2008. Yet U.S. pork has still managed to grow its total exports by expanding in emerging markets such as Taiwan, the Philippines, the Dominican Republic and Australia.

“As a pork producer, it is very gratifying to see that U.S. pork has established such a strong global presence,” said Jon Caspers, an Iowa hog producer who currently chairs the USMEF board of directors.

“We know that interruptions will occur in certain markets – that’s the nature of international trade. But we are able to weather those obstacles by reaching such a wide range of markets across the world.”

Caspers is one of the volunteer leaders who chart the course for USMEF. He is joined on this year’s USMEF officer team by Chairman-Elect Jim Peterson, a Montana cattle producer; Vice Chairman Keith Miller, a farmer-stockman from Kansas; and Secretary-Treasurer Danita Rodibaugh, a pork and purebred hog producer from Indiana.

Grain farmers are also an important constituency for USMEF, and they are well-represented among the organization’s leadership. Mark Jagels, a farmer and livestock feeder from Nebraska, represents corn producers on the USMEF Executive Committee.

“As a corn and soybean producer, pork and beef exports are very important to me,” he said. “I want to add value to every bushel I grow, and one of the best ways to do that is to export red meat. USMEF’s efforts in solidifying markets and opening new markets for pork and beef are very much appreciated, and the market intelligence we receive is just tremendous.”

“Farmers and ranchers understand that exports have become central to the viability of their industry, whether they produce livestock directly or the grain that supports the livestock industries,” Seng said. “We’re exporting nearly 25 percent of our pork production and 12 percent of our beef production, and there just aren’t many industries in the United States that can say that. Producers appreciate this success, but they know that we have to keep working to maintain it and take it to new heights.”

The pork industry shattered its annual record in 2008 by reaching 4.5 billion pounds in global pork exports, valued at $4.88 billion. It was the 17th consecutive year of export growth for the industry, so breaking the 2007 record came as no great surprise. The 57 percent growth in volume and 55 percent growth in value, however, allowed the new mark to be achieved before Labor Day. Export value per hog processed equated to $42.30.

The beef industry has been steadily climbing back from its BSE-related market closures, which even today severely limit the products allowed in certain markets. South Korea reopened to U.S. beef just last year, and still limits its imports to beef from cattle 30 months of age and younger. Japan is even stricter, allowing only beef from cattle 20 months of age and younger. Other countries such as Taiwan do not allow bone-in cuts or variety meat – items that represent much of the potential business in these markets.

Still, the beef industry achieved $3.6 billion in exports for only the third time in history, and 94 percent of its pre-BSE record ($3.85 billion) set in 2003, with export value per steer or heifer processed totaling $133.44. Seng sees plenty of room for beef export growth, if the United States can continue to make progress on market access.

“We have a very safe product and, obviously, want to be able to export all beef cuts of any age to all markets - that is our ultimate goal,” he said. “But trade doesn’t always work that way, and sometimes an incremental approach can help achieve progress. That’s what we are hoping to see soon as we work for a higher age limit in Japan, access for bone-in cuts and variety meat in Taiwan, and removal of other trade restrictions that are hampering export growth.”

Seng says advancements in technology and product quality are also an important attribute of the U.S. meat industry, and those traits will continue to drive the industry’s competitive presence.

“One of the industry’s biggest technological achievements has been to develop the ability to send chilled product around the world,” he explained. “When I first started, everything we exported was frozen. I can remember going to Singapore, Hong Kong and other places where if you wanted to buy U.S. meat, you had to look for it in the ice cream section.”

“We did a lot of work with university researchers to develop chilled technology, and then worked to negotiate greater market access for chilled beef and pork back in the 1980s,” Seng continued. “Today, most of the meat we sell in North Asia and many other markets is chilled, which gives us a tremendous advantage in comparison to some of our competitors.”

Seng said the industry has also invested in developing cuts that are appropriate for the local cuisine, which is critical to success in foreign markets.

“We’ve always been focused on developing and marketing cuts of meat that are going to appeal to overseas consumers,” he said. “And I think that has really led the way for the tremendous volumes we have been able to move and the sustained success we have achieved.”

Philip Seng is President and CEO of the U.S. Meat Export Federation. Joe Schuele is the organization’s communications director.

Trusting Photosynthesis

By: Jan Mazotti Issue: Global Trade Section: Jewel Of Collaboration

Cargill’s Thoughts on the Future of Global Food Production

Cargill has a purpose - nourishing people. The company is family-owned, with the exception of an employee stock ownership where over 25,000 employees own about 7 percent of the company. It is a very diversified organization, with a significant scientific component, primarily in agriculture. There are over 1,100 scientists inside Cargill, working on things as diverse as high intensity, all-natural sweeteners – so you can have a zero-calorie drink that is produced with natural rather than artificial sweeteners. There are people working on uses of plant phytosterols for the treatment of cholesterol problems. There are people working on soluble fibers so that you can get your daily fiber in a beverage. All across the food chain, they have people working in research.

But clearly, Cargill is most involved in fundamental food products – the building blocks of our food system. Whether it’s malt for your beer, flour for your bread, sweeteners for your pastries or chocolate for your confections – those are the things that are at the core of Cargill. They are engaged in globally trading a variety of commodities, something of particular importance in this era of energy. They trade ferrous metals, petroleum and coal, as well as electricity, which is an adjunct to trading natural gas and trading coal. They also trade financial instruments and, increasingly, carbon dioxide credits in nations that participate in the Kyoto Protocol. That linkage to agriculture is key to Cargill’s long-term strategy - the convergence of financial markets, agricultural markets, energy markets and the emerging environmental markets.

In the broadest sense, Cargill is engaged in the commercialization of photosynthesis - the conversion of sunlight and carbon dioxide into the products that we all use to support and sustain ourselves.

“We have to think about food and agriculture in its many, many pieces,” says Cargill CEO Greg Page. “Certainly, it is a world of many conflicting views.”

Page describes the Cargill culture as “the world’s largest debating society.” “Within our ranks we have Europeans, who are opposed to genetically modified organisms. We have voices within our company expressing grave concerns about biofuels. We have active debate about everything, and we each arrive at those discussions with our own set of facts,” he says.

In a wide-ranging speech last summer at the prestigious Chautauqua Institute, Page argued that food production is not a single issue, but an interdependent and interconnected set of issues involving the environment, energy, agriculture and, particularly, food trade. In his opinion, solutions are linked, and those who promote simple solutions imperil the world over the long-term. He says, “We should not oversimplify this.”

H.L. Mencken made a great statement in this regard. He said that there is always a well-known solution to every human problem – neat, plausible and wrong. That has never been more true than in the discussion of something as difficult as nourishing the 6 billion people who are so disparately situated across the world.

In his speech, Page emphasized three key points:

Plowing a FieldFirst, there is a convergence of agriculture, food, energy and the environment that can’t be discussed within just one legislative committee. They are so intertwined that they must be discussed holistically.

Second, the world’s need to double food production between now and 2050 is something that we can do. And we can do it without drawing enormous amounts of additional land into production – provided we take the appropriate signals and make the appropriate investments.

Third, free trade is vital both to manage the cost of food and to limit the environmental impact of doubling its production. That means a food system based on trust, much of which has been damaged by the actions of many governments in response to the global economic downturn.

To demonstrate the interconnectedness of the world food system, Page poses three “quiz” questions - none of which I knew the answer to, but then I’m not alone, especially among America’s city dwellers…

What is the interconnection between the unreliability of the electrical grid in India and the price of palm oil?“For those who drive diesel vehicles, in the many places around the globe, the price of diesel fuel is now 80± cents a gallon over the price of gasoline. As the Indian economy has grown and outstripped their electricity generating capacity, companies, to defend themselves, have installed their own diesel generators. The big database service centers, for example, are all run on diesel. The non-transportation use of diesel fuel in the world has spiked dramatically, much of it driven by India because they can’t trust the electrical grid for power. The relative price of diesel fuel worldwide has shot up. However, since biodiesel is made out of palm oil and soybean oil, the price of palm oil has risen. So, if you track back through the steps, as the Indian electricity grid becomes more reliable, you will pay less for your diesel.”

What is the interconnection between farming practices in the San Joaquin Valley of California and the yields in Zimbabwe?

What is the interconnection between Argentine production of malt and the soybean prices for Chinese consumers? (He answers questions 2 and 3 later).

Is the World Running Out of Food?

When asked if the world was running out of food, Page answered with a strong “No.” He said, “I think humanity has never been further from famine than it is today.” He said, that the sheer amount of knowledge and capital deployed against hunger and in understanding how plants work allows us to grow, store, process and preserve the products of photosynthesis. He went on to argue that there certainly are issues of cost, particularly for the world’s poor, and that there are huge issues of uneven and inequitable distribution of food. But, he said, in terms of the total products of photosynthesis available to nourish humanity, we are as far from famine as we have been in human history.

Recently the USDA determined that in 2007/2008 there were 989 million people who did not have access to 2,100 calories a day, which is the World Health Organization’s requirement for adequate nutrition, and that filling that gap in caloric shortfall would require 38 million tons of additional food.

To put that 38 million tons in context, the world produces – of the 16 major food crops – almost 3 billion tons. So the shortfall, if we had appropriate distribution, is about 1.3 percent of current production. To put that 38 million tons in another context, this year the United States will convert 100 million tons of grain into alcohol. And so, Page says, “In the total scheme of things, how far are we from famine? A long way, if we elect to be. I think that is important to understand.”

“In the total scheme of things, how far are we from famine? A long way, if we elect to be. I think that is important to understand.”

Next, Page addressed the increased use of foodstuffs to feed and power our world and how Cargill and other producers are going to get increased production of photosynthesis to the people who need it most. “Let’s start with an historical context for food production – those 16 big crops that are the building blocks of the global food system,” he said. He described that in the 1950s, there were 2.5 billion people in the world and 20 percent more land under cultivation than there is today. So, over the last 50 years, “We have taken the population of the world from 2.5 billion to over 6 billion, and we have improved the quality of diet in terms of its diversity and grams of protein available to people. We have done this with 20 percent less land. We have done this before, and now we have to set out collectively to do it again.”

In fact, Page would argue that one of the most important ways to address this is through the signal of price. “One of the best things to come from ethanol has been restoring agriculture to profitability, which has encouraged more capital investment. Long-term, that capital investment will protect us all from famine as we grow the world’s population,” said Page.

He went on, “Price is always at the intersection of supply and demand. In the area of fuel and crude oil, we need to conserve, and when high prices reduce demand for oil we see that as a good thing. I think discretionary use of hydrocarbons – the ability of price to make us all be better conservationists – is a good message. That doesn’t work for food. How many people are in favor of destroying demand for food? Not a good thing when you think about the impact on individuals, particularly those 989 million hungry people in the world. So, we really do not have the choice of using demand destruction to lower food prices. Our only choice is to increase supplies as a way to moderate the rapid increases we have seen in the price of food.”

Food Production in Developing Countries

When asked how developing countries would cope with food production challenges, Page said there was not a simple answer. He prefaced his remarks regarding the countries that continuously suffer significant food shortfalls with one commonality - an absence of property rights. “Sustainable, dependable agriculture depends on investment, and investment depends on property rights,” he said. “At the level of individual farmers, uncertainty about the possession of their land limits their willingness to invest to improve their productivity,” he commented, and “as a result, year-after-year they make shortsighted decisions, sentencing their countries to a doom loop of shortfalls. I believe that the number one thing our multilateral institutions can do is to help create property rights in those countries. That is the way to create sustainable agriculture.” Sustainable, dependable agriculture depends on investment, and investment depends on property rights Page described a recent trip to Zimbabwe (…here is the answer to question #2 of his quiz) where they drove to a farm and found, covered in weeds, a sub-soiler machine. He explained that a sub-soiler was a device that is designed to go three feet below the ground and break up the hardpan that forms in certain kinds of soils. That is exactly what happens in California’s San Joaquin Valley – today one of the most productive farming areas in the world. But in Zimbabwe, a place where, “property rights have been destroyed, this sub-soiler obviously had sat for years, unused.” Page described that the amount of soil that they were farming was getting thinner and thinner every year as the hardpan rose toward the surface. Rhetorically, he asked, “But who was going to make the investment in the equipment to restore that land to full productivity?” He went on, “To me, it was a vivid illustration that, when you destroy property rights, you slowly erode your ability to feed yourself.

Another example from Page drove his point home. He described that in the former Soviet Union, agriculture was decimated after 1990. It was totally decapitalized. Now, as prices come back, Russia has clarified their property rights and people understand what they own. He said, “Last summer, I drove 2,000 kilometers across Russia. It was a revealing trip. One thing I saw everywhere were truckloads of brand new John Deere tractors, along with new grain storage and drying equipment. The recapitalization of Russian agriculture was taking place right before my eyes. To me, fundamentally, this was because they changed and clarified their property rights. If there is a role for multilateral organizations in something that we can all advocate, it is in helping to create property rights. Almost automatically, you will get capital and infrastructure development.”

Why is the Price of Food Going Up?

when you destroy property rights, you slowly erode your ability to feed yourself In 1975, basic food – the 16 building block crops - as a percentage of GDP was 4 percent globally. Over the years, food expenses as a percentage of the world’s income continued to decline. It eventually fell to less than 8/10ths of 1 percent – an 80 percent reduction since 1975. “We all felt wealthier,” Page said. “Agriculture was delivering, but at the expense of very low profitability and under-investment. As demand began to rise, we paid the price for that under-investment.”

corn grainery pour The second thing, Page described, was how governments around the world, in an effort to support prices for farmers, took land out of production. The U.S. and the European Union both had fairly significant land set-aside programs and the U.S. reduced the supply of food in an effort to restore profitability for the farmers. As a result, it lowered stocks to the point that prices rose.

The third factor in rising food prices, argued Page, was a good one: rising incomes. “The world’s poor and near poor have had the best 10 years in the history of mankind, and we at Cargill can see that in their diets. People in developing countries are consuming more meat, milk and eggs – transitioning from a pure carbohydrate diet to one that is much broader and more diverse. We see it in the statistics of country after country. That demand is putting pressure on our agricultural supplies, but people improving their diets is a good thing!”

Another factor Page mentioned was one that “didn’t need to occur.” He said, “Many governments reacted poorly as they saw prices rise. Last year, 29 countries enacted trade barriers for food. As a result, people panicked, and in panic they made irrational decisions. If you are Hosni Mubarak and you have 80 million people to feed, and you get a phone call announcing that your largest food-trading partner has decided to no longer ship you anything – zero – what is your reaction? To feed their people and avoid civil strife, countries like Egypt went out and paid whatever price necessary to gain the food stocks they needed. This wasn’t because the food wasn’t there. It was a reaction to governments halting trade to try to protect their own domestic food price inflation. As a result of government intervention in markets, you had a lot of emotional buying that drove food prices even higher.”

He listed additional factors for price increases include the rising price of energy, which increased the cost of producing and transporting food. Biofuels, of course, also contributed to the demand for crops and severe weather was also a factor.

Is Globalization of the Food System the Culprit of Current Issues?

“There is a lot of talk about globalization in agriculture. Here are a couple of facts that I’d like you to think about,” Page said.

“First, Cargill arguably is the largest trader of grain in the world. Yet, last year we traded less than 1 percent of the global supply of the 16 major crops. In fact, way less than 1 percent. So, yes, we are an important player, but at a very small level.”

He went on, “Depending on the year,only 14 or 15 percent of the calories in the global diet trade across borders. So, 85 percent of the caloric intake of the world is produced where it is consumed – crops grown in the same political entity where they are consumed. Clearly, for agriculture-deficient countries like Egypt, global trade in food is critical to their survival. But, overall, the global food system already is a highly localized business. We have shortages caused by weather that need to be accommodated by global free trade, and we need to exploit comparative advantage in producing different crops.”

Jumping back to question #3 of the quiz, Page said, “Brazilians are enormous consumers of beer. They could grow their own barley and make their own malt, but they don’t. Their climate and soil is better suited to growing soybeans. The Argentines have the other situation. They have a wonderful climate and great soil in the southern Pampas to grow barley. So, in a world of free trade and free trust, the Argentines grow barley, make malt and send it to the Brazilians. The Brazilians use their land to grow soybeans, the very best crop for their soil and their weather pattern. As a result, Brazil is far more competitive. The Chinese, who need to import 35 million tons a year of soybeans, benefit because the Argentines and the Brazilian allow each other to exploit their own comparative advantages. Grow the right crop on the right soil with the right climate; then trade with each other to the betterment of all parties. This is the message that is getting lost in the debate. Everyone can win when we grow the right crops in the right places, but it does require an enormous amount of trust.”

Page went on to describe how Saudi Arabia had exercised “political bravery” in relation to food production. In fact, Saudi Arabia announced that it would discontinue the production of grain over the next nine or 10 years. Page said, “They looked at the drawdown in their aquifers that has been required to sustain their grain industry and decided it was irresponsible to continue to use a precious, non-renewable resource like water to grow crops they could buy far more cheaply from the Canadians. That is an act of faith in the global food system. The Saudis, for the long-term security of their country, have taken the step of not growing their own food. I think we will see more of that, despite the cost of transporting products.”

“The environmental impact of failing to trade can be dramatic.” Page went on. In terms of transportation costs, the single largest use of hydrocarbons in transporting food is bringing your food home from the grocery store. He said, “It takes only a single gallon of fuel for Cargill, or any other grain company, to transport a ton of food 2,500 miles in an ocean-going vessel. If you brought home 100 pounds of food on every trip to a grocery store four miles from your house, you would burn 10 gallons of gasoline per ton of food. With that amount of fuel, we could send a ton of grain all the way around the world. My point is that focusing solely on food miles can lead us to the wrong decisions. And further, by not planting the right crops in the right soil with the right climate, we end up using more land – therefore, less land for wildlife, less land for recreation.”

Page concluded with a quote from Libanius, a 4th century philosopher… “God did not bestow all products upon all parts of the earth, but distributed gifts over different regions to the end that we might cultivate a social relationship, because one would need the help of another. And so God called commerce into being, that all might have common enjoyment of the fruits of the earth, no matter where produced.”

Greg Page is Chairman and Chief Executive Officer of Cargill Corporation.

Trade Adjustment Assistance

By: Brendan Landry Issue: Global Trade Section: Jewel Of Collaboration

Creating and Saving U.S. Jobs

After I sat down with Edvard Hag, Director of the Rocky Mountain Trade Adjustment Assistance Center (RMTAAC), I ran a bit of an informal experiment. Sitting at my desk, I began thinking about the origin of all the trinkets, office supplies, and various other clutter that surrounded me. To be honest, I’m not certain how all of this stuff got on my desk, let alone where it originally came from, but here are the stats for all the items currently within arms reach:

One spiral-bound day planner - Printed in China

One heavy-duty paper clip - Made in China

One Stevie Wonder-spewing iPod - Assembled in China

One standard keyboard - Product of China

One gigantic, inflatable, St. Patrick’s Day themed cooler (don’t ask) - Made in China

One ceramic bowl - China

Accompanying spoon - China

Two miniature Irish flags - China

One shiny staple remover - Made in China

This list doesn’t include my surprising Swedish stapler or the fortune I have taped to my desk pad, which was given to me by a colleague but I assume came from China, or at the very least, a local Chinese restaurant.

The results of my experiment are a microcosm of the very purpose that RMTAAC exists to serve. Now, fundamentally, is there anything wrong with China…or Sweden for that matter? No, I’ve read up extensively on both countries, and they both have loads of good to contribute to our global community, I assure you. But the issue at hand, as I stare down at my previously uncounted shoes (Made in China), is if all the things around me are manufactured somewhere else, what happens to the shoe manufacturer trying to make a living down the street?

An independent non-profit organization funded by the U.S. Department of Commerce, RMTAAC provides Trade Adjustment Assistance (TAA) to the seven state Rocky Mountain Region, including Colorado, Nebraska, New Mexico, North Dakota, South Dakota, Wyoming, and Utah.

“The goal of our program,” says Hag, “is to increase the competitiveness of U.S. firms.”

TAA offers financial and technical assistance to firms negatively affected by foreign competition. The program, as Hag says, “…aims to make businesses leaner and meaner,” through access to quality outside consultants and federal funding to offset up to 50% of the costs of making the necessary improvements.

Typically, eligible firms have been in business for 2-3 years, have 100 or more employees, and generate annual sales of between $1 and $200 million.

To qualify, firms must be able to show losses in both sales and employment due to the inability to compete with cheaper, faster foreign-based firms.

RMTAAC works directly with the firm to identify problem areas and develop an action plan to address the issues. These projects are designed to streamline or improve processes and procedures that are central to the success of the firm, and commonly target problems in sales and marketing, manufacturing technology, IT, engineering, and financial and general management. The firm is then paired with a qualified, often pre-screened, consultant who works with the firm to implement the action plan. The firm is responsible for covering half of the total cost of the project. The remaining 50% is covered through grant funding from RMTAAC.

When asked about the most common problem seen across RMTAAC’s client base, Hag reported that many of the firms deal with an inability to bring the product to the market. “For some,” Hag says, “simply having a product is enough to get people to buy it. They don’t think they have to market it.” That is simply not the case in this increasingly global economy; many qualifying firms suffer not only from ineffective or non-existent marketing, but also from lagging performance in new product development. RMTAAC combines expertise, discipline, and grant funding to save U.S. jobs and make it possible for firms to survive and thrive in the global economy.

So what are the results of RMTAAC’s work? In a typical year, firms receiving TAA reach employment and revenue growth that exceed industry averages. Among the hundreds of firms in the Rocky Mountain region that have received TAA, average sales growth is nearly 50% and the average increase in employment is 25%. Hag is careful to point out that this is anything but a typical year, and although numbers are down due to our current economic situation, he is still seeing substantial growth in both jobs created and revenue generated.

RMTAAC has a lengthy list of industries, ranging from aerospace to sporting goods, which have benefited from Trade Adjustment Assistance, and they have had plenty of success to boast about. With the help of RMTAAC, an Englewood-based clothing manufacturer successfully implemented a $500,000 Enterprise Resource Planning software system that streamlined several aspects of the company’s operations. The result of the project was a $5.6 million increase in sales and a 20% jump in employment over a two-year period.

Meanwhile in Longmont, a custom electrical cable manufacturer utilized TAA funding to train and certify production workers on standard industry practices. The firm received additional support to implement an inventory software system to ensure that critical components are always readily available. These projects have helped the firm achieve a two-year sales growth of $3.3 million while increasing employment by 50%. And all the way up in West Fargo, ND, a manufacturer of agricultural equipment received $60,000 in assistance to improve the efficiency of its manufacturing process. Since the improvements were put in place nearly five years ago, the firm has doubled both its sales and employment. These are just a few examples of the huge impact that RMTAAC has on employment and business growth in the Rocky Mountain region; and with more funding in the pipeline through the stimulus package and an expansion of the scope of work into service-based firms, such as call centers and software developers, it seems the RMTAAC’s reach will continue to grow.

As evidenced by the random contents of my desk, there is a certain ubiquitous nature to the MADE IN CHINA insignia; and it serves as a clear reminder of the reality faced by small businesses everywhere. Long gone are the days of competing with just your neighboring businesses. Convenience is no longer just a matter of physical location. Business is a global competition, and RMTAAC is putting lean mean U.S.-based firms into the mix.

To learn more about RMTAAC, visit www.rmtaac.org or contact them directly at (800) 677-3791. For more information on the 10 other Regional TAA providers, visit www.taacenters.org.

Supply Chain Risk Management

By: Robert N. Edson Issue: Global Trade Section: Jewel Of Collaboration

Global Trade and Collaboration for the New Global Economy

From the title you may be asking yourself “What in the world does supply chain risk management have to do with the theme of this issue of ICOSA which is global trade? The answer is easier than you might think; and more complex at the same time, just like our global supply chain. Confused yet? Good. Let’s straighten things out a bit; in a circular fashion...

The answer is “Everything.” Global trade at its core is an exercise in the basics of supply chain management. Global trade at its core is an exercise in the basics of supply chain management.

From the treaties that enable (or sometimes embattle) global trade, to the most basic concerns of any individual organization at a very local level, at the core of each issue is the supply chain. While it takes many forms and means vastly different things to different people, the global supply chain is becoming more and more interdependent on an exponential level nearly every day. What impact does that have on your business or your personal life? Well that, my friends, depends on your relationships with key suppliers - and your visibility into your own supply chain - not to mention your willingness to be community-oriented in your approach to your business. In other words, collaborate or evaporate.

Train driving out from tunnel.Let me simplify the concept. Metaphorically speaking, “you” could be you, your business, your family, or whatever entity you would like to place there. “You” are on the train tracks in the dark tunnel. You can hear the whistle blowing. How far down the tunnel can you see? Is the train on the same tracks as you are? How far away is the train? And the million dollar question - is that light at the end of the tunnel the other side, or is it the train?

All of those questions are supply-chain risk management questions. The answers to those questions are examples, albeit simplistic of the data swarming around in your supply chain. How much of it you have access to in order to make good decisions for “you” is supply chain risk management.

At the very core of supply chain risk management is collaboration; manifesting key relationships and understanding what is coming down the tracks based on good information…not guesswork.

And if you think your business isn’t reliant on the global supply chain, think again; since the late 1980’s it’s been clear that keeping U.S. companies competitive and sustainable in the ever-changing global economy is a matter of national security.

“My business is part of the global supply chain?” Yes, in more than one way. The global supply chain is infinitely more complex today than it ever has been; even the smallest of companies is reliant upon, or potentially impacted by, changes in the global supply chain. The areas of impact are vast- from food supply to pandemic influenza which has gained much attention with the recent H1N1 outbreak worldwide. Have you considered your ability to get food from the grocery store if the truck drivers are too sick to drive the trucks? What impact would that have on workplace absenteeism, at your business? What impact does that have on your family? Most American households don’t even have a basic 72-hour kit for survival; does your business? Paranoia is not the solution; prudent planning is and that comes from managing key relationships in your supply chain, and understanding what impact a change there might have. The more aware you are, the better you can adjust to changing market conditions, and connections and collaboration are the global keys that unlock the mystery of sustainability and indeed viability of your business, governmental agency, or non-profit organization at a very local level.

Business Charts These issues come to light more often than not during times of crisis; as do the true nature of our relationships and our ability to leverage them to a successful outcome during a crisis. You find out who your real friends are when it is time to step up don’t you? It’s no different in the way you manage your corporate or other key relationships. Although a “crisis” can be defined in many different ways for any given organization, the way in which you choose to deal with them is dependent more often than not on your access to information; hence the need for collaboration. A crisis for one organization could be changes in upcoming trade legislation or treaties; for another it may be a natural or man-made disaster of some kind.

Again, that doesn’t mean paranoia; it means prudent planning in an aware environment, collaborating with those key relationships essential to your business or personal supply chain and that of the organizations around you.

As you are no doubt aware, the economy in the United States is experiencing a downturn. As you may also know, we are not alone; it’s a global downturn. Do bad things like terrorism, natural disasters or pandemic health crises stop just because we are experiencing an economic downturn? Hardly. In fact the opposite is often true; crime rates often rise, acts of violence and pandemic health concerns can be even more impactful during these challenging times, and all with a growing inter-dependency on global suppliers that your organization has ties to - some obvious, some not so much.

Take the H1N1 flu virus for example. What impact has it had on your business? Have you thought about the impact it could have? Workplace absenteeism is a top potential catastrophic effect on businesses. Your 50-employee widget factory may not have any direct exposure to the flu, but do you have generators backing up your key infrastructure in case the power company loses a significant portion of it’s workforce and isn’t able to make repairs during a blizzard? Do you at least have the relationships established with potential suppliers and have you collaborated with them to clearly understand where your business stands? Have you developed key relationships or do you have access to a platform to collaborate with other organizations for that or any other issues surrounding your sustainability? Have you considered your employees ability to deal with these issues in their own supply chains? There are some very good, battle tested and cost-effective platforms available and they have a proven track record of keeping organizations in business, mitigating the impact of issues beyond their control and making sure that your doors stay open; whether it’s to sell a widget, educate the workforce, or serve the homeless.

The key to mitigating the risk associated with the global supply chain is visibility; being able to see as far into the chain as possible and gain relevant, timely information that allows you to be proactive rather than reactive when a problem arises.

This concept leverages one key element - collaboration based on the key relationships that you see as being critical to your organization. Those key relationships can be nurtured and developed for the benefit of your organization. But they can also be developed for the greater good, thereby impacting the global supply chain in many positive ways – something like the MissionMode solutions platform.

The same need for collaboration in a simple platform across governmental, private sector and non-governmental organizations was clear during the recent Democratic National Convention in Denver. Once again, MissionMode solutions recognized the need, and was able to deliver a seamless collaboration platform that had real impact across the metro area; supply chain risk management at work across sector lines. By seamlessly collaborating between law enforcement and private security during the riot on Tuesday night of the convention, the threat to local business was significantly mitigated, as was the ability to remain focused on the issue at hand for law enforcement. It was even successful in delivering over 60,000 bottles of fresh water to citizens waiting in the hot August sun for 6 to 8 hours before being allowed into Invesco Field for the then democratic nominee Barack Obama’s acceptance speech - another example of the supply chain coming full-circle with private industry stepping up to assist public-sector partners in a time of great need. Collaboration and the leveraging of key relationships made it possible; backed by the power of MissionMode and the dedication of the members of the BEOC.

The Business Emergency Operations Center (BEOC) proved its value time and again during the DNC by allowing disparate organizations to collaborate & communicate effectively for the common good. The Colorado Emergency Preparedness Partnership, using the MissionMode Software, gave private industry the ability to give a network of Law Enforcement agencies, quasi-governmental entities, and other private industries, a real-time way to communicate in a forum that was all about information sharing. During the DNC, Emergency Operations Centers were able to track trends and movement of crowds, as well as events that had an impact on our mass transit systems and ultimately our citizens in Colorado. It also gave us information on activities occurring in Denver that were critical to be on the lookout for in other jurisdictions. Using MissionMode gave members of the BEOC valuable and timely information including eyewitness views of activities occurring outside the city center that could have had significant metro-wide impact. It also allowed organizations to communicate with each other quickly and specifically. It’s obvious that the partnerships and trust developed by this project will have an impact on many events and situations in the future. “This project was meta-leadership at its best,” said one law enforcement official. Pamela Pfeifer, former Executive Director of the CEPP says, “The Business Emergency Operations Center was made possible by the dedication and capabilities of MissionMode. This unprecedented effort to build a public-private partnership communication and information-sharing resource for a national security event benefited not only from the sophisticated technology of MissionMode’s tool, but also the professional team that made the BEOC a success and the inspirational level of corporate responsibility demonstrated to our community by this company. CEPP looks forward to building on this relationship to create a more resilient Colorado.”

Reduce Today, Respect Tomorrow

By: Jan Mazotti Issue: Global Trade Section: Jewel Of Collaboration

Kimberly-Clark Professional Campaign Focuses on Sustainability Throughout Entire Product Lifecycle

As businesses and consumers look for ways to protect the environment, it’s always good to think about recycling. But now it’s time to also think about reducing. That’s the strategy Kimberly-Clark Professional is taking.

One of four global business segments of Kimberly-Clark Corporation, Kimberly-Clark Professional is set to launch an environmentally focused global communications campaign themed Reduce Today, Respect Tomorrow. The campaign takes a big-picture approach to environmental sustainability and is the first-ever truly global communications campaign Kimberly-Clark Professional has developed.

Kimberly-Clark Professional is one of the largest manufacturers of washroom products in the world, serving commercial and institutional facilities such as office buildings, hotels, schools, healthcare facilities, manufacturing plants, and other public buildings. Kimberly-Clark Professional is aligned with the company’s commitment to sustainability at all levels of its business strategy and decision-making processes.

“Our ongoing efforts to achieve superio r environmental performance are not just vital to our success as a business, they are also our responsibility as a corporate citizen,” explains Doug Sutton, global marketing leader, Kimberly-Clark Professional, noting that efforts are guided by global, company-wide objectives for improving operational performance in energy, water, waste, and environmental management systems.

The company has been well recognized for its efforts. For example, in 2008, and for the fourth consecutive year, Kimberly-Clark was ranked number one in the personal products category of the Dow Jones Sustainability World Index, a ranking based on the long-term economic, environmental and social performance of leading global companies. Specific to its environmental performance, Kimberly-Clark ranked highly in the following areas:

Environmental Policy/Management: The company was recognized for its Environmental Vision program, which provides direction, objectives and targets to improve environmental management and performance. The company has made significant progress in this area and is now in its third, five-year phase of the program, called Vision 2010.

Standards for Suppliers: The company was recognized for its Sustainability at K-C: Guide for Suppliers document.

In 2009, Kimberly-Clark was named a 2009 Energy Star Partner of the Year by the EPA, for the company’s ongoing efforts to increase energy efficiency and reduce greenhouse gas emissions across its operations.

“This type of recognition validates both the commitment and good progress we’re making in the area of sustainability,” says Sutton. “Unfortunately, some important and impactful aspects of the sustainability programs of companies like Kimberly-Clark go unnoticed in today’s sound-bite media society.”

100% Recycled Does Not Look at 100% of The Picture

Most people agree that responsible stewardship of the environment is a good thing. As customers increase their desire for green products, the emerging question has been: what defines green?

“In our space, recycled content has become the easiest way for many customers to express their interest in ‘going green’,” Sutton says. “The current thinking is ‘if a product is recycled, then it must be good for the environment.’ And the more recycled content there is, the better. But the truth is, reducing impact on the environment is much broader and more nuanced than measuring the recycled content of a product.”

According to Sutton, recycled fiber isn’t the whole answer. “Focusing on 100 percent recycled alone does not look at 100 percent of the picture,” Sutton explains. “It only looks at the fibers from which the tissue is made. It does not look at the process used to make the product, the water consumed, the electricity required, from where the fiber is sourced, or how the products are packaged and used.”

“Of course, it’s good to recycle and use appropriate amounts of recycled material when manufacturing products. But we believe the more comprehensive approach is to look at the bigger picture to understand the many ways product design can reduce impact on the environment. And that’s what our campaign, Reduce Today, Respect Tomorrow is all about.”

According to Sutton, the strategy starts with product design that strives to reduce how much a user consumes overall – through usage and waste.

“Products made with a combination of virgin and recycled material can reduce consumption when compared to products made simply with 100 percent recycled material,” he says. “The truth is that higher-quality, better-performing products can allow users to use less. Our research clearly shows this.”

Yet, well-designed, quality products that reduce consumption are only part of the solution. Sutton says that Kimberly-Clark Professional considers ways to reduce environmental impact at every stage of a product’s lifecycle. For example, for the manufacturing phase, the company developed UCTAD technology, a patented manufacturing process that reduces by up to 17 percent the amount of fiber needed to make tissue, towel and wiper products versus competitive wet press technology.

Sutton quickly points out, “Kimberly-Clark Professional products are known for quality. Our research and our sales confirm these products satisfy many customer performance expectations.”

Distribution is another phase in the lifecycle where Kimberly-Clark Professional has looked for ways to reduce. Sutton notes, “We have redesigned a lot of our products and packaging to fit more products into each case and more cases into each truck, which means fewer trucks on the road. Ultimately this helps to reduce greenhouse gas emissions.”

Kimberly-Clark’s environmental stewardship in this area has been recognized by the Environmental Protection Agency. In 2008, the EPA honored Kimberly-Clark for the second year in a row with its Environmental Excellence Award within the agency’s SmartWay Transportation Partnership.

The EPA recognized Kimberly-Clark for its leadership in conserving energy and lowering greenhouse gas emissions through a program that included investing in a strategy to locate distribution centers near large cities, implementing a new transportation management system, and collaborating with internal and external supply chain partners. As a result, Kimberly-Clark reduced its usage of diesel fuel by 1.7 million gallons and decreased carbon dioxide emissions by 113,728 tons – the equivalent of removing more than 15,000 cars from the road.

Sutton also points to several examples of how Kimberly-Clark Professional has reduced packaging waste for some of its popular products:

With Scott Roll Towels, Kimberly-Clark Professional can fit 25 percent more product into the same case, which in turn reduces packaging waste by a similar amount. UCTAD technology creates a fiber structure that essentially ‘springs back,’ so the company is able to compress many of its towels to fit more into the same size case, without compromising attributes that make these products appealing to customers.

Scott Coreless Standard Roll Bath Tissue reduces packaging waste by nearly 55 percent compared with standard roll bath tissue, including 100 percent core and paper wrap elimination. In fact, a major hotel chain in the U.S. expects to eliminate two million cores and 21 tons of packaging waste annually after adopting this product later this year.

Many cases have been re-sized to optimize how they fit onto a standard pallet, so truck space can be used more effectively, reducing the total number of deliveries needed to fill orders.

In addition to evaluating how products are made and packaged, Kimberly-Clark Professional looks at how its products are used – and often wasted. Sutton points to the example of janitors throwing away toilet tissue stub rolls just to be totally sure that paper wouldn’t run out before their next check. This often led to significant product waste.

Kimberly-Clark Professional addressed this problem by re-designing its dispensing system so that the stub roll can be completely used up – potentially reducing waste to zero.

“While some customers focus on recycled content alone, others are becoming aware that there’s more to the story,” says Sutton. “They are coming to understand that a product simply made with a high percentage of recycled content isn’t necessarily the best solution for the environment.”

Sutton notes that some of Kimberly-Clark Professional’s customers mandate the use of 100 percent recycled fiber hand towels and bath tissue. For these customers, the company offers a range of Scott brand tissue and towel products that contain 100 percent recycled fiber and are processed chlorine free, meaning no chlorine derivatives are used in the bleaching and de-inking process. Some of its products are also Green Seal certified.

“We offer these products because of demand,” says Sutton. “But we don’t necessarily recommend them as the best option. We have developed some simple web-based tools that help customers compare environmental impacts between different alternatives, and we recommend the solutions with the lowest total impact, not just with the most recycled fiber content.”

Sustainable Forestry

Regarding questions raised by some environmental campaigners, Sutton acknowledges that, because Kimberly-Clark Professional products include some virgin fiber, customers sometimes inquire about the company’s forestry practices.

“We clearly believe that trees are a renewable resource and that they can be managed in an environmentally responsible and sustainable way,” says Sutton.

Kimberly-Clark does not own any forest land itself. Rather, 98 percent of its fiber comes from suppliers that have certified their woodlands or procurement activities through one of five internationally recognized certification systems (i.e., FSC, SFI, CSA, PEFC and CERFLOR).

While Kimberly-Clark prefers FSC-certified fiber because of its strong environmental standards, all certified suppliers commit to following rules that protect wildlife and sensitive ecosystems through the use of sustainable forestry best practices and management of timberlands for sustainable renewal and growth.

Sutton notes that there is clearly growing interest in the environment and in understanding the practices of companies like Kimberly-Clark. “This is a very good trend,” he confirms. “After all, the environment affects all of us, so we have to take care of it. We all have a role to play, both as individuals and as businesses. We’re very proud of our track record – and our approach at KCP is fundamentally about reducing environmental impact.”

Reduce Today, Respect Tomorrow

After all, the environment affects all of us, so we have to take care of it. We all have a role to play, both as individuals and as businesses

Recycled fiber. Reduced packaging. Manufacturing technologies that reduce the amount of raw material used. Superior product performance that allows customers to use less and waste less. These are all components of Kimberly-Clark Professional’s business strategy for a more sustainable future.

Concludes Sutton, “Consumers and businesses today are suffering from an over-simplified understanding of what is good for the environment. Instead, we need to focus on the bigger picture – at what we believe will result in the most sustainable conditions long-term. By reducing today, we can all respect tomorrow.”

Guarding Against Corruption In Emerging Markets

By: Kimberly Reed Issue: Global Trade Section: Jewel Of Collaboration

Why the U.S. is Made for Trade

As American businesses routinely expand into emerging markets abroad through mergers, acquisitions, joint ventures, partnerships and greenfield investments, they invariably face traditions and cultures of corruption that are unfamiliar and highly frustrating to those accustomed to doing business under strict rule of law. For American companies and entrepreneurs, demands for bribes or other corrupt practices present a catch-22 -- if they succumb to the demands, they place themselves at risk for hefty fines and criminal penalties under the Foreign Corrupt Practices Act (FCPA) and other U.S. anti-corruption laws, as well as loss of financing and insurance, debarment from public contracts, and reputational damage. However, if they do not play along with demands of government officials in the foreign country, they could find themselves at distinct and perhaps fatal disadvantages in that market. How can U.S. businesses successfully navigate these dichotomies in such markets?

What kinds of corruption are illegal for US businesses?

“Corruption” is usually defined as the abuse of entrusted power for personal benefit or the benefit of those connected or related to the person in power. It is important to distinguish between two kinds of corruption: (1) “grease,” or facilitation, payments, which are bribes paid in order to motivate an official to accelerate a routine government action that s/he is required to perform, e.g., hasten a registration, ruling or approval that would eventually be granted anyway, or process a visa request; and (2) payments made to influence an official to do something that s/he is prohibited by law from doing (such as awarding a project without a required bidding process), or to obtain an improper advantage (such as bribing a judge to obtain a favorable ruling).

This distinction is very important because the FCPA allows (1) under certain circumstances, but prohibits (2) Virtually all emerging markets have specific laws against such illegal payments to officials, though these laws are frequently and even flagrantly ignored.

Where is corruption worst?

Despite the fact that corruption clearly discourages foreign investment and trade in a country, inhibits economic growth, warps meritocratic employment and promotion systems, causes domestic populations and companies to lose confidence in free markets, and undermines fragile democracies, countries classified as “emerging markets” have approached corruption with varying levels of seriousness.

According to Transparency International (TI), public officials in today’s emerging economic giants, Russia, India and China, are perceived to routinely demand and accept illegal bribes (as well as grease payments), with China ranking 72nd among 180 countries on the 2008 TI Corruption Perception Index, India ranking 85th, and Russia a dismal 147th. Other emerging markets showing poor scores are Vietnam (121st), Ukraine (134th), and Kazakhstan (145th), while faring considerably better are Singapore (4th), Hong Kong (12th), Chile and Uruguay (tied for 23rd), Slovenia (26th) and Estonia (27th). (By way of comparison, Denmark ranked first, Germany was 14th, the UK 16th, and the U.S. 18th).

Handshake and teamworkin Africa, Central and South America, and the giants of the East (Russia, China, India). In many of these countries, public officials are paid very low wages, and are therefore tempted to take bribes to supplement their incomes. For example, in Russia and many former Soviet states, it is virtually impossible for a traffic policeman to support his family on his meager official salary, so the populace has resigned itself to a police force that demands bribes to ignore violations of law (some of which are completely imaginary). This is true of low-level government officials in many countries as well.

However, wherever bribery exists at low levels of the bureaucracy, it is virtually certain to exist at high levels also, so that it is not unusual for a company seeking to begin operations in such a country to have bribes demanded at many different levels for each registration or approval necessary for their corporate, real estate, labor, import/export, and other necessary components of business.

TI also publishes a Bribe Perception Survey, which measures the likelihood of companies in 19 specific sectors to engage in bribery. In 2008, the Survey found that companies in the fields of public works contracts and construction; real estate and property development; oil and gas; heavy manufacturing; and mining bribed government officials most often, while those in information technology, fisheries, and banking and finance did so the least frequently. A separate ranking found that, again, companies in public works contracts and construction; real estate and property development; oil and gas; and mining were the most likely to attempt to wield undue influence on government rules, regulations and decision-making through private payments to public officials. TI noted that “[t]he banking and finance sector is seen to perform considerably worse in terms of state capture than in willingness to bribe public officials, meaning that its companies may exert considerable undue influence on regulators, a significant finding in light of the ongoing global financial crisis.”

How to guard against corruption in your expanding international organization

Of course, governments must play a key role in ensuring that corruption is eradicated in their countries. However, it is incumbent on U.S. businesses to ensure that they are compliant with U.S. laws such as the FCPA when they are operating abroad. Indeed, it is important to note that the FCPA can hold a company, its executives and directors responsible for bribes or other illegal behavior committed abroad by their employees, business partners, intermediaries or other agents even if they did not have direct knowledge of the illegal acts but “consciously disregarded” evidence of such acts.

Pay-Off This broad potential liability mandates that companies engage in aggressive risk management and compliance programs all the way down the corporate chain, including subsidiaries, joint ventures, intermediaries and agents. It is necessary to involve in this process legal counsel with excellent working knowledge not only of U.S. anti-corruption laws but also of doing business in the relevant country or region.

A compliance program must fit a company’s needs and circumstances, such as the size of the company and foreign operation, the type of management structure, and the extent of the company’s reliance on intermediaries and agents. In creating compliance programs, however, the following should be kept in mind:

Clear and detailed company ethics policies and procedures (often termed “codes of corporate conduct”) must be adopted, and should include not merely platitudes about operating ethically, but also specific examples of acceptable and unacceptable conduct. Each employee should be required to sign an acknowledgement of having read the code. In addition to a code for the entire company (translated into local languages as necessary), it is often deemed necessary and desirable to have additional “chapters” written for operations in other countries that address particular situations common in those countries or warnings about specific corrupt agencies or processes and how to handle them. Although codes of conduct are often met with skepticism by employees, the presence of such a code and a demonstrated commitment to its enforcement does make a difference in conduct and helps prove to a court of law or the U.S. Justice Department that the company takes this subject seriously and took steps to prevent corrupt practices.

Regular education and training must be implemented to ensure that changes in the law and in local practice are covered, that new employees are brought up to speed, and that employees have an opportunity to share experiences. Employees in a foreign country, along with agents and intermediaries of the company there, should be required to attend periodic seminars wherein the code and specific examples are discussed. This is particularly important in high-risk countries such as Russia, China, India, Nigeria, Vietnam and others. Management must be highly engaged and committed to anti-corruption measures and must communicate this value effectively and often to all employees and agents, especially those in foreign countries. Strict punishments must be enforced for any non-compliance and for executives and managers who turn a blind eye to violations or risky behavior.

Clear and well-publicized policies on confidentiality and non-retaliation are crucial. All employees should know who the corporate compliance chief is and should feel free to consult that person with any questions or concerns; indeed, whistle-blowing should be encouraged with respect to bribery and corruption, given the very high stakes. Issue 5 Guarding Against Corruption In Emerging Markets pic003 It is key that corporate compliance officers have open access to senior management and influence over conduct policies and procedures. However, it is also necessary that the compliance officer be someone that employees feel comfortable approaching with sensitive information. In this regard, periodic “360 degree” anonymous reviews of the compliance officer should be done to ensure that s/he is trusted and viewed as effective by individuals in the organization.

In addition to direct discussions with the compliance officer, employees should have access to suggestion boxes and/or “help lines” to report questionable conduct or offer suggestions anonymously.

Internal accounting and audit professionals should receive ongoing training in early detection of suspicious payments or expenses. Companies should enact clear accounting policies that prohibit off-the-books accounts and payments. Use of “Big Four” accounting and audit firms in foreign countries is very useful in this regard, as they are highly experienced in the local market’s potential for hiding bribes and other corrupt payments (such as hidden commissions and “bonuses” paid to local intermediaries or excessive hospitality or gifts). It should be noted that the FCPA requires compliance with various accounting and record-keeping provisions.

Acknowledge that gift-giving is an important part of some local cultures and is necessary for relationship building in some parts of the world. Corporate in-house and local legal counsel should speak frankly and extensively with each other in order to ascertain what the company can and cannot do, thus enabling it to follow local customs on gift-giving while also complying with U.S. and local law. American lawyers experienced with the FCPA can clearly explain what types of “grease” payments are allowable under U.S. law – in many cases, these kinds of payments will constitute the majority of bribes needed to do business effectively abroad.

When choosing intermediaries, joint venture partners, agents or suppliers (together “Partners”) in a foreign country, it is key to involve legal counsel and other professionals who can legally investigate the reputation and experience of the Partner-candidates. Require references from each potential Partner, and follow up with all such references, asking specific questions that address honesty and integrity. Document fully all findings and decisions with regard to chosen Partners. Be wary of any requests they make for urgent or cash payments, vague explanations of how an approval or business relationship will be accomplished, or other potential red flags. Additionally, maintain a system of ongoing monitoring of foreign Partners.

When starting business in a new country, be proactive by setting up meetings with the local U.S. Embassy’s Economics and Commerce Officers and the local branch of the U.S. Chamber of Commerce (if there is one) to learn where the potential corruption trouble spots are and how U.S. companies have best dealt with local corruption. Then, meet with local governmental officials (see #7 on gift-giving to local officials, which may be appropriate at this meeting) and explain your company’s business and how it will contribute to the local economy, and ask them how best to comply with local laws and to American anti-bribery and anti-corruption laws (which may have to be explained). In many cases, a commitment to a community project or to corporate social responsibility programs that will benefit local people can go a long way to demonstrating to local officials that a U.S. company will be a good corporate citizen so long as it finds the business environment favorable.

When performing due diligence on potential joint venture partners or acquisitions in a foreign country, engage legal counsel and accountants who are highly experienced in the local market. A lawyer who has practiced in the country will know what to look for. For example, when performing due diligence in Russia, we commonly look for and inquire about “gray tax schemes”; vaguely described monthly or quarterly payments (or missing funds) that might be bribes to ministry officials; lack of corporate approvals or decisions for corporate actions such as stock issuance or other capitalizations; loans to directors or employees; unpaid or miscalculated taxes, and many other features that are common to Russian businesses. Representations, warranties and covenants are highly important in acquisition and joint venture agreements, but cannot replace careful and thorough due diligence.

Even if all of these strategies are implemented, there is no guarantee that your company’s employees or representatives will not be approached for a bribe or that a corrupt official will not try to ensnare you into a scheme of some sort. However, accepting that corruption is almost a “normal” way of doing business in some emerging markets, and not naively turning a blind eye to it, is the first step toward protecting your business.

Taking proactive steps to increase internal transparency, train employees and representatives in acceptable and unacceptable business behavior, diligently investigate all business partners, and enact the practices detailed above, are excellent defenses, and will help to demonstrate to U.S. law enforcement as well as governmental officials and potential partners and customers in emerging markets that your company takes seriously its responsibility to do “clean business.”

Kimberly Reed is a International Business Lawyer and Consultant in Washington, DC and Moscow, Russia.

Connecting Internationally

By: John Castellani Issue: Global Trade Section: Jewel Of Collaboration

Why the U.S. is Made for Trade

In today’s international economy, working together with countries has become a necessity, especially during challenging times. No one country is alone in the problems it faces or the solutions needed to address them; our world is a complex ecosystem with all nations interconnected. More than ever, we are seeing the benefits of such collaboration. Countries are joining forces to promote environmental sustainability, for example, as well as facilitating public health and prosperity around the world.

One particular area where these connections play a key role is the economy. Global interdependence is a reality in our rapidly changing international marketplace. Although the United States is still the largest financial market in the world, U.S. workers, businesses and communities have much to gain from international engagement.

Exports and foreign investment earnings are important drivers of U.S. economic growth and job creation – two areas that remain critically important for preserving America’s position as a global financial leader. American companies are bringing money back home by selling their goods and services abroad; Caterpillar Inc., for example, attributes 67 percent of its sales to customers outside the United States, allowing it to reinvest that money back at home.

At the same time, it’s crucial to recognize that the temptation to close our borders and focus inward in light of our current economic challenges is an extreme risk we can’t afford to take.

Disentangling ourselves from our international web of connections would be impossible, but even more importantly, it would be dangerous and hurt us in the long run.

Truth be told, we need each other. “Connection” and “Collaboration”– the key themes of this publication – are what keep our nation healthy. Economically speaking, international trade and investment is a requirement for America’s own prosperity. If we participate actively in foreign markets, we can promote expansion at home, increase exports from the United States, and create more and better-paying jobs for American workers.

Earlier this year, President Obama noted that “America’s success depends on whether other nations have the ability to buy what we sell,” and I could not agree more. We must oppose isolationism and take swift action to reverse the current decline in international engagement if we are to breathe new life into the U.S. and international economies.

Trade and the Economy

Trade is an inherent part of our economy. Nearly one in five U.S. jobs are linked to trade, and a growing number of American companies have joined Caterpillar in generating significant revenue by selling goods and services abroad. Today, 95 percent of the world’s population and three-quarters of the world’s purchasing power is outside the United States.

As we invest billions of dollars in our domestic economic recovery and competitiveness initiatives, we need to balance these internal policies with international trade and investment approaches that will help our workers and companies compete around the globe. If we don’t, even our best economic recovery efforts will not deliver their full potential, and our workers and communities will suffer.

This risk is surprisingly on its way toward becoming reality. International trade is expected to decline by 11 percent in 2009, following years of growth. It is dropping at a rate far faster than the projected decline in global economic growth. To reverse this decline, America must devise improved policies that enable us to export our goods and services from the United States to foreign markets, market these goods and services in those markets through foreign operations, and import goods and services so that we can offer the best prices and quality to people here at home. It’s easy to get slowed down in the details of how to make this happen; it’s not a simple undertaking.

Blueprint for Change

Addressing this challenge is the subject of a plan released in April by Business Roundtable, an association of chief executive officers of leading U.S. companies. The plan is aimed at revitalizing U.S. trade and investment policy. The plan, Regaining the Initiative: A Blueprint for U.S. Trade and Investment, lays out four key strategies for accelerating our economic recovery by promoting America’s competitiveness in the global marketplace.

At the plan’s core is its first pillar, opposing protectionist and isolationist trade and investment policies. We cannot afford to turn inward; the Great Depression taught us that closing borders will exacerbate an economic crisis, not grow us out of it. The more we export or sell U.S. products through American companies’ foreign affiliates, the more we can create U.S. jobs and drive our own economic growth. One important next step will be for the G-20 to live up to its pledge to condemn protectionist and isolationist policies around the world.

The plan also calls for finalizing our pending trade negotiations, such as the World Trade Organization’s stalled “Doha Round” negotiations and outstanding free trade agreements with Colombia, Panama and Korea. We are already partway there and just need to take these negotiations to the finish line. Protecting our investments from unfair government action abroad is also important; we must complete the treaties we have in progress with China and India to ensure that American companies have the same investment protection as their foreign competitors.

It is also time for America to take center stage in the world economy by introducing new approaches to make international trade and investment work better – for us and for our international partners. Our new approaches should enhance the enforcement of existing international trade and investment agreements and U.S. trade laws. They should end regulatory discrimination on U.S. exports and modernize the free trade agreement system, which would make it easier for workers and companies to respond to new economic developments and issues such as labor and the environment.

We also should take advantage of a wealth of new, more flexible trade and investment negotiating strategies – such as rolling or plurilateral negotiations and non-binding “best practices” negotiations – to create the foundation for lasting, enforceable agreements. At the same time, we must address adjustment programs so that American workers have the knowledge, skills and support they need to benefit from expanded economic opportunities. Lastly, we must extend our leading role in helping the least developed economies successfully integrate into the global economy.

If we do not establish America’s leadership through strong policies, we will be left behind, and our competitors will shape the economy without us. We are a nation of smart people and innovative ideas; in the spirit of connection and collaboration, let’s share those innovations and, in the process, create a level playing field for American companies and workers that encourages domestic economic growth.

In the end, it comes back to collaboration. The blueprint’s final core theme is bipartisan support; our political parties and the different branches of our government must work together on a comprehensive trade and investment strategy that preserves America’s position as the world’s economic leader.

U.S. Multinationals’ Role

Implementing these strategies will take time, but the benefits of international engagement will be felt by our nation’s employees, businesses and ultimately our communities. To see why, let’s look at the role that U.S. multinational businesses – ones in which a U.S. parent company holds at least a 10 percent direct ownership stake in a foreign enterprise – truly play in maintaining America’s economic leadership and strengthening our domestic economy.

Some critics have voiced concerns that such businesses have “abandoned” our nation by shipping their operations overseas. But research shows that through their innovation, research and productivity, U.S.-based multinational businesses lead the nation’s economy and employ nearly 22 million Americans. A study commissioned by Business Roundtable released earlier this year, in fact, found that U.S. parent companies account for nearly 25 percent of all private-sector output (measured in terms of GDP), or more than $2.5 trillion.

According to the study’s author, Matthew J. Slaughter, Associate Dean of the MBA program and professor of International Economics at the Tuck School of Business at Dartmouth, “U.S. multinational companies are, first and foremost, American companies. These companies strengthen the American economy through a combination of their domestic activity and their international engagement, which together stimulate capital investment, research and development, and trade. These productivity-enhancing activities, in turn, lead to more job opportunities and to larger average paychecks for millions of American workers.”

The study found that in reality, the worldwide operations of U.S. multinational companies are highly concentrated in America, not abroad in foreign affiliates. Specifically, domestic parent companies accounted for nearly 70 percent of the employment of U.S multinationals worldwide – amounting to almost 22 million U.S. workers. In contrast, there were only 9.5 million workers at foreign affiliates, which is a ratio of nearly 2.3 U.S. employees for every one affiliate employee. U.S. parent companies represent about 19 percent of total private-sector payroll employment.

What do these numbers really mean? In short, U.S. multinational companies are truly rooted in America. Their global connections benefit our domestic economy, and in turn, our local communities. These connections have enabled companies to tap into diverse international markets that have experienced faster growth throughout the past generation than the United States has. Through their foreign-affiliate activities, U.S. parent companies have helped drive increased domestic employment, worker compensation and capital investments.

We all stand to benefit from them, but to do so, we need these companies to continue their international engagement as our country seeks to address our current economic challenges. The ability of U.S. multinational companies to stem job losses in the United States and eventually return to hiring more American workers depends on the health, vitality and competitiveness of their worldwide operations.

Trading for our Future

Ultimately, we all seek the same goals. We want to grow our economy, find ways to enhance America’s presence on the international stage, create jobs at home and improve Americans’ standard of living. We cannot accomplish this in a vacuum; some connections are required. There may be some hurdles along the way, but that is to be expected. We now have a blueprint to help us get where we need to be. If we can unite around our common goal, we can collaborate with policymakers and other leaders to ensure economic recovery for American citizens, communities and companies.

John Castellani is President of Business Roundtable, an association of chief executive officers of leading U.S. companies with more than $5 trillion in annual revenues and nearly 10 million employees. Member companies comprise nearly a third of the total value of the U.S. stock markets and pay nearly half of all corporate income taxes paid to the federal government. Annually, they return $133 billion in dividends to shareholders and the economy.

CAFTA-DR: A Resounding Success

By: John Murphy Issue: Global Trade Section: Jewel Of Collaboration

Accord is a “Win-Win” for Workers, Farmers, and Companies

Last January 1, Costa Rica became the last of seven signatory countries to implement the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR). CAFTA-DR entered into force over the first six months of 2006 between the United States and four Central American countries (El Salvador in March, Honduras and Nicaragua in April, and Guatemala in July). It entered into force with the Dominican Republic in March 2007.

While the agreement was only narrowly approved by Congress, it has proven to be a resounding success. It is creating new opportunities in Central America and the Dominican Republic for U.S. exporters, and its benefits are flowing directly to U.S. small businesses, manufacturers, farmers and ranchers, and textile and apparel workers, among others. It has also brought substantial benefits to Central America and the Dominican Republic in the form of major new investments, faster economic growth, and opportunities for small businesses.

Benefits for U.S. Workers, Farmers, and Companies

CAFTA-DR is a clear success in achieving its basic goal of boosting trade and, in turn, economic growth. Total trade between the United States and the other six CAFTA-DR countries is on track to surpass $46 billion in 2008, representing an expansion of more than 30% in just three years. U.S. exports to Central America and the Dominican Republic have risen by an even more impressive 55% between 2005 and 2008 and are projected to surpass $26 billion in 2008.

Some key U.S. export sectors saw even stronger growth over the 2005-2008 period. U.S. machinery exports to the region rose by 50% from $3.9 billion to $5.9 billion. The Chamber estimates that machinery exports to Central America and the Dominican Republic sustain more than 100,000 American jobs.

For American farmers and ranchers, the increase in sales has been dramatic. U.S. exports of agricultural products rose by an impressive 127% to $2.7 billion. Exports of cereals (grains), the largest component of U.S. farm sales to the region, doubled to $1.7 billion.

Belying criticism that the CAFTA-DR market is insignificant, U.S. exports to Central America and the Dominican Republic in 2007 exceeded U.S. exports to Italy, a G7 economy that is one of the largest, richest, and most sophisticated in the world.

While most economists reject the contention that trade deficits are by definition harmful to the U.S. economy, the prediction made by some opponents of CAFTA-DR that it would increase the U.S. trade deficit has not been borne out in practice. In fact,Beyond the statistics, the most impressive results under CAFTA-DR may be for smaller companies. Today, a quarter million small or medium-sized U.S. companies export. These smaller firms make up 97% of all exporters, and their overseas sales represent nearly a third of all U.S. merchandise exports.2 By 2006, nearly 20,000 U.S. companies were exporting to Central America and the Dominican Republic, and small businesses represented about 90% of all exporters.

For small exporters, a tariff of 20%, 10%, or even 5% can be enough to shut them out of foreign markets, and non-tariff barriers can be deal breakers. Consequently, trade agreements such as CAFTA-DR can provide outsized benefits for these smaller companies.

Before Congress approved CAFTA-DR in 2005, the U.S. Chamber and the Association of American Chambers of Commerce in Latin America (AACCLA) released a book entitled Faces of Trade with Central America and the Dominican Republic to highlight some 50 U.S. companies that were already benefiting from trade with these countries but that stood to do even better with a free trade agreement. The U.S. Chamber of Commerce recently revisited these firms and confirmed that many are drawing impressive benefits from the agreement.

One example is Mamá Lycha, of Houston, Texas, a food products firm. Since 2004, when the Chamber first interviewed the firm’s President Luis Padilla, the company has expanded its number of employees by 50%, from 12 to 18, and CAFTA-DR is one reason why the firm has achieved this growth. Mr. Padilla says, “We are just beginning to see the impacts of the CAFTA-DR agreement, but we hope that its provisions will continue to fuel our growth.”

the U.S. trade balance with these countries went from a $1.2 billion deficit in 2005 to a $3.7 billion surplus in 2007 and a projected $5 billion surplus in 2008

Another example is International Export Sales, of St. Rose, Louisiana, which sells supermarket equipment and light industrial refrigeration equipment. The number of jobs at this firm has grown at an even faster clip: the firm has gone from four employees to eight since the firm’s executives were first interviewed. Wilma Castro, Sales Manager with the company, reports: “Our business with Central America has increased 100% since CAFTA-DR took effect. I have found that when I explain to clients that they can now purchase my products without the tariffs they paid before CAFTA-DR, they buy more. I have won many new clients this year just by explaining to them the impact of CAFTA-DR on their purchase.”

CAFTA-DR also represents a lifeline for the U.S. textile industries. With the end of the global quota system covering trade in textiles in 2005, international competition for the textile and apparel sector has become much more intense. In this context, CAFTA-DR is proving to be an indispensable tool to ensure the continued competitiveness of the textile and apparel industry in the Western Hemisphere.

Between 2005 and 2008, U.S. exports to Central America and the Dominican Republic of inputs for the apparel industry — cotton and manmade fibers, filaments, and fabrics — rose by 20% to $2.7 billion. At a time when America’s textile and apparel sectors face unprecedented global competition, Central America and the Dominican Republic have proven to be excellent customers for these inputs. Calculating that the agreement would bring just such an outcome, nearly the entire U.S. textile and apparel supply chain supported Congressional approval of CAFTA-DR. This included farm and industry representatives ranging from cotton growers and yarn spinners to textile and apparel manufacturers.

By selling their inputs to apparel manufacturers in Central America and the Dominican Republic — where fabric and other inputs are cut and sewn into garments for export — all parties have been better able to cut costs, stay competitive, and hold onto customers.

Benefits for Central America and the Dominican Republic

Similarly, CAFTA-DR is delivering benefits for Central America and the Dominican Republic in the form of economic growth and expanding trade and investment. According to the International Monetary Fund, the Central American countries enjoyed average economic growth rates above 5% in 2006 and 2007, their highest since the early 1990s. The Dominican Republic achieved growth rates in this period approaching 10%. These improvements are not due to any one factor, but growing trade and investment are clearly paying benefits for the region.

Central American and Dominican exports to the United States rose by about 10% between 2005 and 2008 and are projected to approach $20 billion in 2008 (up from $18 billion in 2005). This is less vigorous growth than seen in U.S. exports to Central America and the Dominican Republic, but the six countries have succeeded in one key trade goal they envisioned under CAFTA-DR, namely, diversifying their exports. For example, El Salvador’s exports to the United States of non-traditional exports (i.e., all exports other than textiles, apparel, and coffee) rose at an annual rate of 33% over the first two years after CAFTA-DR’s entry into force. These nontraditional exports today account for twice the share of total exports they did in 2005. Similar export diversification is evident in the other Central American countries and the Dominican Republic, with value-added agricultural and agribusiness products playing a prominent role in this success story.

During the negotiations for CAFTA-DR, most political leaders in Central America and the Dominican Republic cited the prospect of attracting more foreign direct investment (FDI) as the key development opportunity presented by the accord. In this area, the six countries are reaping remarkable benefits.

According to the United National Economic Commission for Latin America and the Caribbean (ECLAC), Costa Rica and Honduras attracted FDI in 2006 and 2007 at triple the annual average rate they did in 1998-2002 (years that offer a reasonable benchmark for comparison). El Salvador attracted FDI at twice the rate it did in 1998-2002, and the other three countries attracted 31-58% more FDI annually than they did in the same reference period. While CAFTA-DR has only now entered into force for Costa Rica, the expectation that it would do so soon is widely viewed as an important factor in its success in attracting more FDI.

This is a remarkable performance for Central America and the Dominican Republic, and it strongly suggests that the trade agreement and the region’s integration have allowed it to attract investor attention at a new level.

According to ECLAC, these countries have recently attracted far more FDI relative to the size of their economies than the Latin American average. In fact, they outperformed the Latin American giants, Brazil and Mexico, by a wide margin, and were bested only by Panama and Chile. The Latin American countries with the worst performance by this measure were Ecuador, Bolivia, and Venezuela.

As in the United States, many small companies in Central America and the Dominican Republic are benefiting from trade under the agreement. For example, Muebles Guayacán, a small company located near Antigua, Guatemala, makes furniture, doors, and other wood products. With the help of the Trade Capacity Building Institute in New Orleans, which was created as part of the CAFTA-DR process, the owner of Muebles Guayacán was introduced to some construction companies, including a woman who was in the market for doors for post-Katrina reconstruction in Louisiana. So far a deal worth $135,000 is in the offing, an astronomical sum for a small manufacturer in semi-rural Guatemala.

In El Salvador, Pahnas, a tamale and pupusa exporting company, has quadrupled its sales from $200,000 in 2004 to $800,000 in 2006 by taking advantage of new duty-free access to U.S. markets. The company’s Rodolfo Papini says, “We are currently selling to 17 supermarkets in Miami, and CAFTA-DR made this possible.” In addition, companies from around the world are looking at Central America and the Dominican Republic in a new light thanks to CAFTA-DR, and they are directing investment to the region and creating jobs. For example, Nina Simone, a Brazilian shoe manufacturer, is investing $3.5 million in El Salvador and will create 400 jobs during the first year of operations. The firm reports it would not have invested in El Salvador had it not been for CAFTA-DR.

Benefits for All

CAFTA-DR has proven to be a resounding success. By giving U.S. workers, farmers and companies a level playing field in Central America and the Dominican Republic, the agreement has brought real benefits to the United States. It has also brought benefits to Central America and the Dominican Republic in the form of new investment, faster economic growth, and opportunities for small businesses. With such a strong “early harvest” from the agreement, its long-term benefits are likely to be even more impressive — a clear “win-win” for the United States, Central America, and the Dominican Republic.

John Murphy is Vice President for International Affairs at the U.S. Chamber of Commerce.

1 The trade statistics in this document are from the Foreign Trade Division of the U.S. Census Bureau, U.S. Department of Commerce. Figures for 2008 are based on data through September 2008 and projections for the final quarter of the year. 2 The small business export statistics in this document are from the International Trade Administration, U.S. Department of Commerce. 3 Export diversification statistics provided by the Embassy of El Salvador, Washington, D.C. 4 Foreign Investment in Latin America and the Caribbean 2007, United National Economic Commission for Latin America and the Caribbean (ECLAC).

Where Is U.S. Trade Policy Going?

By: Jan Mazotti Issue: Global Trade Section: Jewel Of Collaboration

An Inside Look At Trade From U.S. Trade Representative, Ambassador Ron Kirk

“The jobs of American families depend on our success,” proclaims United States Trade Representative (USTR) Ambassador Ron Kirk. “Most people assume that trade equals job loss and that’s not true. When done correctly, trade can breathe life into our economy,”

Trade can be a pillar of America’s economic recovery. In fact, trade is already a major element of our economy: exports accounted for a record 13 percent of our GDP (Gross Domestic Product) last year. In the three years leading up to the global recession, export expansion accounted for almost half – 47 percent – of America’s overall GDP growth. And while some may think that if we just stop trading, everything will be okay, we need trade to grow our economy. U.S. unemployment has risen as exports have fallen. An aggressive effort to keep trade flowing and open more markets to American goods and services absolutely must be a big part of our economic recovery here at home. To get our economy back on track, we need to increase exports, which means the U.S. needs access to growing economies abroad.

The U.S. is already the most open, major economy in the world. Until the recent global recession, real export expansion had been a support to U.S. economic growth for several years. On an annual basis, exports increased by 26% between 2005 and 2008. Current dollar exports exceeded 13% of U.S. Gross Domestic Product (GDP) for the first time ever in 2008. Export expansion accounted for nearly half (47%) of the moderate 2% average annual GDP growth over the last three years. In fact, manufacturing exports increased 141% since the end of the last multilateral round more than a decade ago (through 2008, based on current dollars) and the U.S. services industry experienced a $144 billion surplus in 2008 on exports totaling $550 billion with these exports more than doubling since 1994 (up 174%).

President Obama's trade agenda, as detailed in the 2009 Trade Policy Agenda Report, reflects respect for entrepreneurship and market competition, the environment, an opportunity for all, and rights of workers. The agenda is designed to benefit American workers and their families, along with increasing the well-being of those living in the poorest regions of the world. And, because trade is a significant and increasingly important factor in the U.S. and global economies, the jobs influenced by trade are significant and well-paying.

That’s why Ambassador Kirk is so motivated to stabilize the six priorities of the new Administration’s trade policy agenda. The strategy is to combine the best elements of previous trade policies, especially a rules-based system of global trade, with a determination to make trade a powerful contributor to the national economic agenda for revival of the global economy and renewal of growth that benefits all people. It’s really nothing radical – just common sense.

Priority #1 - Support a rules-based system

At USTR, there is a commitment to rules-based trading systems and a belief that these systems will advance the well-being of the citizens of the United States, as well as our trading partners. Says Kirk, “we all win from building on the foundations for peaceful commercial exchange.”

Continued commitment to the World Trade Organization’s (WTO) system of multilateral trading rules and dispute settlement will be an ongoing focus too. Explains Kirk, “the WTO is both a venue for multilateral liberalization and serves as a defense against protectionism. It is a place to defend our rights and benefits under the rules-based trading system and is in the interest of all Americans.”

According to the Administration, a contributing factor to restore trade’s role in leading economic growth and development would be a strong, market-opening agreement for both goods and services in the WTO’s Doha Round negotiations. However, it will be necessary to correct the imbalance in the current negotiations whereby the value of what the United States would be expected to give is well-known and easily calculable. But, broad flexibilities available to others leaves unclear the value of new opportunities for U.S. workers, farmers, ranchers, and businesses.

Priority #2 - Advance the social accountability and political transparency of trade policy

As the scope of trade policy expands to address non-tariff and other barriers to trade, the USTR recognizes that trade policy must meet strong standards of social accountability and political transparency.

Social accountability, for example, could include tackling adjustment issues for the work force that are created by changes in global trade. In the 2009 stimulus package, Congress expanded eligibility for Trade Adjustment Assistance (TAA) by adjusting the criteria for receiving benefits and broadening the sectors of the workforce (i.e., services workers) eligible for TAA. Or, social accountability could mean collaborating with our trading partners to improve the status, conditions, and protections of workers. “We need to ensure that expanded trade is not at the expense of workers’ welfare and that competitiveness is not based on the exploitation of workers. Building on the labor provisions in some of our FTAs is a way forward,” said Kirk.

Because stakeholders are frustrated with the lack of consultation involved in the development and implementation of trade policy, transparency measures will be instituted to include public participation in U.S. trade negotiations. In fact, interactive websites and additional public consultation will occur going forward.

Priority #3 - Make trade an important policy tool for achieving progress on national energy and environmental goals

Since early in his campaign, the President has called for new policies to advance a cleaner environment, a stronger response to the challenge of climate change and more sustainable natural resources and energy supplies. Trade policy makers will be working to examine how trade can advance these goals.

Commented Kirk, “We will build on the environmental goods and services negotiations that began during the Doha Round. We will assure that the frameworks for trade policy and for tackling global climate complement each other so as to reinforce sustainable economic growth. We will ensure that climate policies are consistent with our trade obligations, but we also will be creative and firm in assuring that trade rules do not block us from tackling this critical environmental task.”

Priority #4 - Make sure that trade agreements are addressing the major unresolved issues that are responsible for trade friction

“Behind the border” measures and other non-tariff barriers are major impediments to trade. The USTR will negotiate for improved transparency and due process in trade and will work to open markets and secure fair treatment for American service abroad. Strong intellectual property protections and enforcement on behalf of American innovations is also high on the priority list.

Priority #5 - Build on existing Free Trade Agreements and Bilateral Investment Treaties in a responsible and transparent manner

We will do this in a collaborative spirit and emphasize ways in which this process can benefit the citizens of all three countries

Supporting political transparency, the USTR will engage the public regarding policy relative to the three outstanding Free Trade Agreements (FTAs) with Colombia, South Korea and Panama, and their relevance to advancing the interests of the U.S. and our current trading partners. Another agenda item will focus on improvements to NAFTA and ways in which trade between the U.S., Canada, and Mexico might be improved without adversely effecting trade. “We will do this in a collaborative spirit and emphasize ways in which this process can benefit the citizens of all three countries,” said Kirk.

Priority #6 - Uphold our commitment to be a strong partner to developing countries, especially the poorest developing countries

Typically, expanded trade can make an important contribution to boosting growth in developing countries and economic growth in developing countries benefits the U.S. economy by expanding markets for American exporters. Going forward, the USTR will promote trade policies, including technical assistance for capacity building, which will help these developing countries, engage successfully with the world economy.

Historically, trade preference programs help entrepreneurs in developing countries compete effectively in the world trading system. In the near term, the USTR will work with Congress and public stakeholders on the renewal and reform of preference programs, giving careful consideration to proposals that concentrate benefits more effectively on the poorest countries and those that need the margin of preference to compete.

In addition to preferences, building trade capacity in developing countries will help them to reap the benefits of the global economy. Says Kirk, “The United States is already the largest bilateral provider of trade capacity building assistance, and we will continue to support these efforts.”

And finally, during this international financial crisis, credit for trade financing is critical. The USTR will work with international financial institutions and export credit facilities to ensure that there is adequate trade financing available, especially for small and medium-sized exporters. In fact, some credit financing programs have been expanded through the SBA.

What’s On The Horizon?

The U.S. is the world's largest trading nation. Exports of goods and services accounted for more than $1.8 trillion in 2008. Manufacturing exports supported nearly one in six manufacturing jobs in the U.S. and more than 808,000 jobs in agriculture.

Going forward, Ambassador Kirk is committed to addressing U.S. trade related issues because Americans generate and earn more than one-fifth of the world's total income even though we have only one-twentieth of the world's population. America is the world's largest national economy and leading global trader.

Trade is critical to America's prosperity - fueling economic growth, supporting good jobs at home, raising living standards and helping Americans provide for their families with affordable goods and services. Trade keeps our economy open, dynamic, and competitive, and helps ensure that America continues to be the best place in the world to do business.

United States Trade Representative (USTR), Ambassador Ron Kirk is a member of President Obama's Cabinet and serves as the President's principal trade advisor, negotiator and spokesperson on trade issues. The office of USTR is responsible for the development and oversight of U.S. trade policy, including strategy, negotiation, implementation and enforcement of multilateral, regional/bilateral and sector-specific trade agreements. These include the ongoing Doha Development Agenda multilateral trade negotiations, as well as seventeen countries with which the United States has Free Trade Agreements (FTAs). As well, Ambassador Kirk is responsible for U.S. trade policy involving agriculture; industry; services and investment; intellectual property; environment; labor; development and preference programs. Ambassador Kirk has more than 25 years of diverse legislative and economic experience on local, state and federal levels.

U.S. Commercial Service

By: Paul G. Bergman, Jr. & Jan Mazotti Issue: Global Trade Section: Jewel Of Collaboration

The Collaborative “Jewel” of the U.S. Department of Commerce

Need a “secret tool” to help expand your business? Would you like to join the thousands of small business owners who are exporting goods and services overseas? Could you use help in negotiating the sometimes-difficult dealings with foreign countries that could use your products?

Under the huge umbrella of the Department of Commerce is a “jewel” called the U.S. Commercial Service. The governing mission is to increase U.S. exports. It offers a variety of free and fee-based services, such as counseling, market research, advertising tools, trade events and introduction of companies to qualified buyers, all to help U.S. companies increase overseas sales.

It’s also one of the best examples we’ve seen of how collaboration works.

Collaboration, when two or more people interact and exchange knowledge in pursuit of a shared goal with benefit for both parties, is the new way of the world.

As borders blur and trade ignites, working collaboratively will benefit international businesses. We believe collaborative efforts are the key to competitiveness in a global economy.

Small businesses create 70 percent of the new jobs in the United States, so it’s in everyone’s interest to help these firms increase their exporting possibilities. In fiscal year 2008, the Commercial Service helped facilitate $70 billion in U.S. export sales.

Most small and mid-size companies do not have the expertise or resources to tap into foreign markets. Enter the Commercial Service, which has over 250 U.S. and foreign offices with and more than 1,800 worldwide trade specialists.

Here are some examples of the help this network has given:

A Florida Hispanic-owned business called Pharmed Group is the largest independent full-line distributor of medical, surgical and pharmaceutical supplies. Pharmed manufactures vitamins and nutritional supplements under the labels PMG and PAL. The Commercial Service has given them help with export counseling, market research, and trade events. In 2003, the Commercial Service helped the firm participate in a Gold Key Service program that provides for pre-arranged business appointments abroad, all of which are pre-screened by the Service.

The Commercial Service in Brazil pre-selected appointments with high-potential drugstore chains in the Sao Paulo area to offer Pharmed products, and the Service then helped Pharmed with information on the product registration process in Brazil.

As a result, Pharmed signed a distributor agreement in Brazil as well as a deal with a major drug store chain. Export sales are up, adding to Pharmed’s continued growth and enabling it to add ten new employees at its PAL laboratories last year.

It also works in reverse. Foreign buyers also contact the Commercial Service to find U.S.-based products or service suppliers.

Last year, the U.S. Commercial Service in Argentina asked for assistance in finding a buyer of titanium products and contacted Vulcanium Metals International, based in Illinois. Within months, Vulcanium Corporation had sold $10,000 worth of titanium to the Argentine company.

The Commercial Service has entered into several public-private partnerships to better leverage its services. An example of this is Commercial News USA (CNUSA), an advertising vehicle for U.S. companies to showcase their products globally. CNUSA, published by ThinkGlobal Incorporated, is distributed by the Commercial Service network in more than 145 countries, with a worldwide readership approaching 400,000. Each bi-monthly edition focuses on different industries, with many U.S. companies advertising on a regular basis.

One of those companies, Cevan International, a Colorado manufacturer of nutritional supplements and a recipient of CNUSA’s Exporter of the Year Award, claims that advertising in CNUSA is central to its success. Mike Baum, Cevan’s International Sales Specialist expounds: “As a small business, we have a limited marketing budget, and CNUSA allows us to market effectively worldwide. The majority of our qualified leads are a direct result of advertising in CNUSA.”

Furthermore, trade show organizers have teamed with the Commercial Service to deliver the International Buyer Program (IBP), a service that matches foreign buyers with U.S. suppliers. Commercial Service industry specialists from around the world recruit buyers to participate in these IBP trade shows. The Commercial Specialists accompanying the buying delegations take part in “Showtime” programs, individually counseling U.S. companies interested in entering their respective foreign markets, while Senior Commercial Officers present their views on market entry in “Country Roundtable” seminars.

The Commercial Service IBP coordinator and the Commercial Specialists also facilitate meetings between U.S. suppliers and potential foreign buyers at the show, reinforcing the fact that you don’t always need to leave the country to meet the perfect overseas business partner.

The Collaborative “Jewel” of the U.S. Department of Commerce

For instance, when the Venezuelan government changed its foreign currency exchange law, making it extremely difficult and very costly for Venezuelan companies to pay for their imports, the Commercial Service stepped in. In fact, two Colorado companies that had long-term relationships with their Venezuelan buyers found themselves caught in non-payment situations and turned to the Denver Commercial Service office for solutions.

The Commercial Service network in Denver and Caracas counseled the Colorado companies on payment alternatives. By completing tedious paperwork and through tremendous patience on the part of both Colorado companies, the companies were paid in full, with one of the companies recently resuming trade with its Venezuelan partner.

Another collaborative success was with PICS Telecom Corporation, a buyer and seller of overstocked and used/refurbished telecommunications equipment, which became a new client of the Rochester, N.Y. Commercial Service office in September 2004.

PICS had explored the idea of entering the Mexican market, but needed more information to make a final business decision. They contacted the Rochester Commercial Service office to obtain clarification on the Mexican tariff rate for telephonic switching equipment, which was extremely hard to understand. Although the company had been told that the tariff rate on the equipment was 13 percent, Commerce maneuvered through Mexican Customs and found that the import of the equipment was actually duty free. Because of this collaborative network and partnership between local and foreign offices, PICS was successful in securing a $250,000 plus contract in Mexico.

Yet another example: Adam Grosser, Director of International Engineering Sales at Lightning Eliminators & Consultants, Inc. (LEC), has used the Commercial Service’s programs to find business partners in some of the world’s most difficult environments. LEC manufactures lightning strike protection systems that shield everything from oil rigs to telecommunications towers.

“We use the services to augment our business development strategy. We take advantage of U.S. government contacts and relationships to leapfrog the partner development process. There is a certain comfort in knowing that the U.S. Commercial Specialist in Algeria or the Russian Far East has known our potential partners there for 10 years or more.” Grosser emphasized that the Commercial Service does not only reduce the time-to-market, but also provides a safety net in politically turbulent nations. “Nothing decreases my stress more quickly than knowing that I am going to be met at the airport by a taxi that I’ve ordered through the U.S. Consulate,” says Grosser.

It’s especially important for business owners to know that 95 percent of the world’s consumers live outside the United States. So if your company is only selling domestically, you’re reaching just a small share of potential customers. And, small and medium-sized companies account for almost 97 percent of U.S. exporters.

Exporting lets companies diversify their portfolios and weather changes in the domestic economy. Why not choose the collaborative route to export success?

To connect with your local Commercial Service office, visit the website at www.buyusa.gov. For more information on resources and individual assistance, call 1-800-USA-TRADE or visit www.export.gov. To access the Commercial Service public/private partnership’s international advertising vehicle, Commercial News USA, visit www.thinkglobal.us.

Paul G. Bergman, Jr. is the Denver Director for the U.S. Export Assistance Center. He can be contacted by visiting www.buyusa.gov/colorado or by phone at 303-844-6623.

Trade, Ethics and Communications

By: Louis X. (Kip) Cheroutes Issue: Global Trade Section: Jewel Of Collaboration

Public Relations Can Help Raise the Bar

Trade between people of different cultures began approximately 67,000 years ago, archeologists guess. That puts it somewhere between the time man fished with a spear and man fished with a pole. No doubt those earliest traders had to overcome communications obstacles to gain mutual trust for trade to occur. In the end, both sides were rewarded accordingly.

The internet may have replaced sign language but interpersonal and institutional trust still remains a big part of trade. This trust is based on ethics law and trade practice facilitated by communication. And the global communication profession can help foster ethical trade, using its own codes, by facilitating only ethical communications.

What drives ethical communications now? What can be a next driver?

Ethical Communications Based in Law

Most, not all, economists agree that the world has benefited from free trade agreements. These enforceable agreements drive transparency, open records and legitimize conflict resolution. What set the modern stage was the U.S. Foreign Corrupt Practices Act (FCPA), passed in 1977 in response to a Securities and Exchange Commission investigation. Four hundred U.S. companies admitted making questionable or illegal payments to foreign government officials or political parties to secure business. Congress reacted with shock.

Congress reacted with shock yes but not clarity. The new law was a cauldron of uncertainty, questionable implementation and loose definitions. Aside from bribes for business, what of normal business activity, where a so-called “grease payment” gets your phones installed faster? What of differing local laws? What of companies in other countries without similar laws?

Twenty years later the Paris-based Organisation for Economic Cooperation and Development (OECD) leveled the playing field. It convened among member countries a convention on bribery of foreign public officials. The U.S. amended the FCPA to harmonize with OECD convention documents and Canada followed suit in passing its’ own Corruption of Foreign Public Officials Act.

The body of law called bi-lateral or multi-lateral free trade agreements also build trust, promote trade and promote higher ethical communication standards.

Most, not all, economists agree that the world has benefited from free trade agreements. These enforceable agreements drive transparency, open records and legitimize conflict resolution. They keep people talking, build trust and raise the ethics bar even further. Without future agreements, the global marketplace loses opportunities to advance ethics and advance business.

Another body of law authorizes educational and cultural exchange programs, trade’s next door neighbor. In the U.S. it’s the Department of State’s Bureau of Educational and Cultural Affairs that administers the Fulbright scholarship and more. Under the Obama administration this soft diplomacy is one way to start fresh with friend and foe alike. Exchanges here result in sustainable communications built on trust.

Ethical Communications by NGO Seal of Approval

Aside from law are accepted standards for international business practices. Drafted and codified by NGOs, these standards seek to mitigate against health and environmental risks, prevent deceptive practices, and provide common definition for quality, worker rights and safety, authenticity, good practices, and sustainability.

But many worry about the overabundance of standards and standard-making organizations. Which seal of approval does a company seek? Used discriminately or arbitrarily, they can be used as tools for protectionism. And compliance costs may marginalize small countries, small enterprises and small scale farmers.

The answer may be prioritized standards but definitely is the ability for business and non-profits to meet the highest possible standards. The World Bank, for example, recognized these concerns and now gears programs to increase country capacity, diversification and marketing communications (marcom) support programs.

The Next Driver: Ethical Communications Based on Professional Code

Exporters export and legislatures legislate. Meanwhile there is a global cadre of public relations professionals to help both exporters and governments succeed. Facilitating ethical communications, using a growing number of methods, helps clients comply with law and positions them competitively in the marketplace. But one must guide oneself first.

The Public Relations Society of America (PRSA), a prominent professional association, has had a code of ethics for over 30 years. This early code, though, was a self policing tool, full of warning of what not to do. Lack of enforcement made it largely irrelevant.

In 2000, PRSA created a new code on what ethical communication should look like. It’s a guide for a wide range of client services. That guide, though, can apply as well to a larger global market of trading partners, stakeholders, consumers, and media - in short anyone who talks to each other.

Jeff Julin, President of MGA Communications and immediate past chairman of PRSA calls the new code of ethics a statement about ethical values and principles that defines ethical business behavior. It is based on values that respect differing cultures and that upholds freedom in all forms of business and personal communications. “The PRSA code can embrace all ideas and opinions and promotes transparency as a guide for the world’s marketplace,” Julin said.

PRSA Code of Ethics

The preamble emphasizes honesty, expertise, loyalty and fairness. Expertise is included to recognize the role of professional development, research and education.

Code provisions include:

The free flow of information stands first. Protecting and advancing the accurate and truthful information, it says, is essential to serving the public interest and contributing to informed decision making in a democratic society.

The provision’s intent is to maintain the integrity of relationships with the media, government officials and the public. PRSA members pledge to be honest, act properly, investigate truthfulness, disclose financial interest and avoid deception.

Competition. Promoting healthy and fair competition preserves an ethical climate while fostering a robust business environment. The intent is to promote respect. Members pledge to follow ethical hiring practices and preserve intellectual property rights.

Preserving, much less recognizing, intellectual property rights are tough to do. Part of the solution is the ability for an indigenous economy to develop its own intellectual property, when suddenly the notion of property rights takes hold.

The Socialist Republic of Vietnam is a good example. Vietnam, like other Asian cultures, has a long history of economic progress benefiting the group, not the individual. Now comes individuals like Vietnam’s own jazz sax recording star Tran Manh Tuan and suddenly the concept of music piracy hits home.

Disclosure of information. Open communications, the code says, fosters informed decision making in a democratic society. The intent is to build trust with the public by revealing all information needed for responsible decision making. Members pledge to be honest, act promptly, investigate truthfulness, reveal sponsors, and disclose financial information.

The recent episode of tainted milk products from China and earlier episodes of mad cow disease should easily convince exporters about the need for disclosure.

Safeguarding confidence. Client trust requires appropriate protection of information. The intent here is to protect the privacy rights of clients, organizations, and individuals by safeguarding confidential information. PRSA members pledge to safeguard confidences, protect privileged information and immediately notify clients if breaches are discovered. Conflicts of interest. Avoiding real or perceived conflicts of interest, the code concludes, builds trust by clients, employers and the public. The intent is to earn trust by avoiding or ending situations that puts personal or professional interests in conflict with society’s interests. Members pledge to act in the best interest of the client, to avoid actions or circumstances that appear to compromise good business judgment and to encourage clients and customers to do the same.

Not Just for Democracies

But what of markets where democratic society is a relative term? Some markets are emerging democracies, some receding. Can lofty principles in a public relations code of ethics stand a chance of succeeding? They’re starting to.

Vietnam is a transitional global economy but not widely seen as a democratic society. Detractors point to recent arrest of journalist with scorn. But Vietnam is becoming a global trading partner and, as such, is adopting ethical principles and the ways to communicate them.

In 2001 the U.S. and Vietnam Free Trade Agreement took effect. In exchange for lower or no import duties, Vietnam revamped their body of law in trade, banking, uniform commercial code, IPP and more. Those ethical reforms are taking irretrievable hold. And what of communications?

Tran Ngoc Chau is editor of the Saigon Times and director of the Finance and Business News Channel. He has his Ph.D. in Journalism and Mass Communications. He points to the clash between Confucius-based codes of ethics and modern time and says conferences on ethical business practices appear frequently but only to expose bad behavior internally and externally - like the early PRSA code.

What’s needed next, Chau says, is the way to make it prescriptive. “In order to have a code of business ethics first, government and business associations must sit down together to reach an agreement and then use it to educate everyone.”

Collaborations Are Key

There is a seemingly endless network of collaborations that push ethical dialogue forward. Scientists, academicians, schools, researchers, engineers, doctors, diplomats and yes, even joint military training all strengthen dialogue and the global trade glue.

The public relations profession has its own global collaborations. For example, the 40-year old Public Relations Organisation International (PROI) is a European born network of firms that represent indigenous business cultures in over 90 cities and cross fertilizes cultural and ethical business practices on behalf of global clients.

Professional collaborations are good but personal, active collaborations are best. It’s one thing for thought leaders to understand the integrations of economies, cultures, ethnic tribes, religious beliefs and national boundaries. It’s another thing to help guide and shape those collaborations for mutual benefit.

Why now? The world economy has experienced a seismic shift, a shift with damage caused in part by the lack of ethical communications and behavior. The U.S. takes some blame here. But how quickly global markets rebuild depends on confidence based on a higher level of ethical behavior, by law or practice. Julin sees a communication-based global code of ethics leading the way. “How well the world does business in all cultures depends on a better set of principles. A PRSA code can be an extremely helpful guide of how we act as people, in trade and in diplomacy.”

Louis X. (Kip) Cheroutes serves on the U.S. Department of Commerce District Export Council, a trade advisory group. He is Vice President of Public Affairs for MGA Communications, a Denver Colorado-based communications and public relations firm. Cheroutes can be reached at [email protected].

The Big Move

By: Alex Furman, Gayle Strong, Robert Stang and Richard Petkun Issue: Global Trade Section: Jewel Of Collaboration

Highlights and Current Developments for Businesses Considering International Expansion

Expanding internationally can be a huge benefit for a company whose business has traditionally been entirely domestic. An expanding business can seek new markets, labor sources, raw materials and efficiencies. Additional trade partners and channels are available internationally, and expansion can generally offer a business greater flexibility. However, businesses that are expanding internationally also face greater challenges and a host of new legal considerations when entering the international sphere. Keeping updated on these considerations is a challenge for any international business.

There are at least three major areas where a business will face increased legal pressures in its international business: tax, trade regulation, and intellectual property.

While one article cannot apprise a business of every consideration or solve all of the issues for expanding internationally, this article provides a taste of the important areas to consider. For example, a business must deal with trade regulations for importation and will interact with U.S. Customs and Border Protection (CBP), the governmental agency that enforces those regulations on its own behalf and on behalf of other government agencies. Related agencies such as the International Trade Commission may also become involved, especially for any enforcement of intellectual property rights. Each of these areas of concern, and compliance with the respective agencies’ regulatory requirements require careful consideration by a business expanding internationally. The rest of the article provides a primer for some of those considerations.

Patent Yoga: The Flexible and Changing Strengths of U.S. Patent Protection to Protect a Global Competitive Edge.

For many years now, due in large part to the volume of business conducted using electronic means, intellectual property is an important aspect of most successful domestic and international businesses. Intellectual property can be effectively designed to protect every aspect of a business’s unique or valuable concepts: a flagship product, a business plan, a secret recipe, or a marketing campaign. Patents can cover a product itself, how it is made or used, or even how a service is performed. Other types of common intellectual property are trademarks, which protect the brand associated with the product or service, and can protect in some instances packaging or product shape, and copyrights, which provide protection for the creative and expressive elements of products or services, including marketing materials, ad copy, or how a website is displayed.

As a background, an important aspect of all intellectual property rights including patent rights is that they are rights to exclude. Intellectual property rights are the right to exclude others from copying, mimicking, or creating “knock-offs” and they almost never include the right for a business to actually make a certain product or sell a certain service under a certain brand. Intellectual property rights may be enforced when they are infringed, meaning that a company may be stopped from copying a product or using a brand name when that product or brand name is protected by intellectual property rights.

U.S. intellectual property rights can be enforced in the U.S. through preventing infringing actions, such as making or selling “knock-off” products, imitating brands or styles, or copying names of services and any of these infringements may also be stopped at the U.S. border. Enforcement inside the U.S. is often accomplished through federal lawsuits at U.S. District Courts, and through Federal Trade Commission actions to stop products at the U.S. border when they are imported. Each of these actions affect infringement inside the U.S. and each action can certainly send ripple effects upstream for an infringing company that is manufacturing abroad. For example, a Crocs subsidiary, Jibbitz, recently won a $56 million judgment against a Chinese manufacturer that was imitating the Jibbitz-branded shoe charms that contained copyrighted elements like famous characters. These types of enforcements can routinely send would-be competitors running and warn others to steer clear.

Intellectual property protection in the U.S. and abroad is important for a business with international plans, and the limits of protection provided by only U.S. intellectual property rights should be understood by any business with intellectual property that is expanding internationally. Intellectual property in the U.S. is generally limited to protecting trade within the U.S. and trade that crosses U.S. borders. However, there are exceptions to these rules that businesses must consider, whether the businesses have rights they want to enforce, or they may have rights enforced against them. These exceptions can be particularly significant to businesses expanding internationally or facing international competition. For businesses with international expansion opportunities or competitive pressures, these exceptions and the enforcement of U.S. intellectual property can be critical either to operating successfully or to stopping a competitor’s infringement. Patents provide some of the best examples where U.S. intellectual property can extend its reach beyond U.S. borders. Indeed, some recent notable patent infringement battles have centered around the territorial limits of patent protection.

Businesses with significant international trade such as Microsoft, AT&T, and Research In Motion (RIM), the maker of the ubiquitous Blackberry® smartphones and devices, have heavily litigated the issue of whether U.S. patent rights can be enforced abroad. The underlying law that they have litigated comes from a relatively smaller case that made it to the U.S. Supreme Court based on the alleged infringement of shrimp processing equipment that was made and shipped out of the U.S. in parts for assembly by international customers. The basic rule coming from that case was that companies could not perform an “end run” around U.S. patents by shipping unassembled portions of a protected product for assembly overseas. The subsequent litigations determined whether several specific situations fit the rule. First of all, shipping software and hardware separately to be installed later was found to infringe. By contrast, making copies of software abroad and then installing the software to create a patented combination was not found to infringe. Finally, shipping a product into the U.S. while the patented service was performed later internationally was found not to infringe.

Through all of these findings, a significant question has been touched upon but has remained an open question: can the extension of patent rights outside of U.S. borders be used to protect patented methods or services outside the U.S.? In March 2009, the reigning U.S. court for patents, the Federal Circuit, has agreed to look at the issue and decide whether a company performing parts of a patented method or service in the U.S. while performing other parts of the method or service in another country can infringe a U.S. patent.

Trademark Land Grab: Strict Territorial Limits on Trademark Rights Require Coordinated International Registration Efforts.

Unlike U.S. patent rights that may have some international enforcement, a U.S. trademark registration does not provide for international trademark protection, although the same protections at the U.S. border are still available. For trademarks, international registrations are required in countries where protection is desired. If seeking trademark protection in multiple countries seems daunting, there are two primary international trademark conventions that permit a U.S. trademark owner to seek and obtain multi-country protection through a consolidated trademark application filing: the Community Trade Mark (CTM) and the Madrid Protocol. The CTM convention provides for registration of marks in the European Union. The CTM fees have recently been significantly reduced 40%, which makes the CTM an attractive alternative for obtaining foreign trademark rights. The Madrid Protocol is an international treaty that allows a trademark owner to seek registration in any of the almost 50 member countries by filing a single application, called an “international application,” through the U.S. Trademark Office and based on a U.S. trademark application or registration.

Regulations Obstacle Course: The Multi-Faceted Trade Regulations Governing Imported Products.

For companies expanding internationally, particularly for those involved in importing goods or international manufacturing, there are numerous issues that arise from trade regulations.

Compliance with trade regulations can be complicated and costly, but the alternatives are certainly worse. Fines, Customs delays and redelivery notices can strangle international business that does not pay attention to these Agency regulations and requirements. However, companies successfully importing products into the United States must be aware of their responsibility to follow all rules and regulations enforced by CBP.

No matter how difficult or costly the task of complying with trade regulations may be for a business, there may also be cost saving opportunities to minimize duties and fees owed on imported products. These compliance and cost saving opportunities are often specific to the products being imported, but there are three issues to be considered by all importers of products into the U.S.:

Proper tariff classification of the goods under the U.S. Harmonized Tariff Schedule. Proper valuation of the imported products. Declaring the correct country of origin for the products.

Although these issues sound simple, in reality they can be complex determinations. Tariff classification, for example, can require choosing among multiple line items in the tariff with similar descriptions of the products. Each tariff classification might correspond to a different rate of duty, and misclassification of products (even inadvertently) opens the door to penalties.

Customs Building (XL)Valuation relates to the value of the products that is declared to U.S. Customs. The methodologies for appraisement can differ significantly depending on whether the products were imported pursuant to a sale, related party issues, identification of the actual buyer and seller, the existence of royalties or licensing fees, and whether the seller received anything free of charge or at reduced value in order to manufacture the products. Obviously, there are numerous variations in how contracts and production processes are structured and each variation raises its own special needs.

Determining the country of origin seems straightforward, but in fact may also be a complex determination, especially for products manufactured in one country with components or materials from a different country. The rules of origin can also change depending on the country of manufacture. For example, products manufactured in China follow one rule, products manufactured in Mexico or Canada (NAFTA countries) may follow a different rule, and goods manufactured in Israel are subject to a third rule of origin.

In addition to the above issues, all importers must be aware of recordkeeping responsibilities and the possibility of their goods being subject to more selective trade enforcement actions (for example, the imposition of antidumping duties or countervailing duties).

In the event of a question as to any of the above issues, companies often seek guidance from an outside expert (customs broker, customs attorney, etc.). They may also have the opportunity to request a binding ruling from CBP to clarify any outstanding issues. Changing the Rules of Tax: The Current Shifting Landscape of International Business Tax.

Changing tax rules affect all businesses and international expansion adds another layer of complexity to the tax position of any business.

With the recent emphasis on tax system reform by the Obama administration, the tax positions of businesses will again change, particularly in terms of international taxation.

The Obama administration has recently increased the tax burden on companies that shift jobs internationally. The revenue-increasing measures proposed are targeted mainly at (1) the deferral of U.S. tax on foreign-source income, and (2) certain provisions allowing U.S. businesses, in the Treasury’s view, “to artificially inflate or accelerate” their use of U.S. tax credits for taxes paid to foreign countries. The administration’s plan would earmark a large portion of the expected revenue gain from these measures to extend the existing tax credit for certain “research and experimentation” expenditures.

While only the broad outlines of these proposals were announced in early May, revenue-raising provisions would include the following:

A new statutory mechanism would be enacted to limit the benefit of most deductions associated with overseas income. The announcement declares an intention to prevent U.S. taxpayers from obtaining any U.S. tax benefit by deducting expenses “supporting their offshore investments until they pay taxes on their offshore profits.” Additional restrictions on a U.S. taxpayer’s use of double tax relief (“foreign tax credits”) would be enacted. The use of “disregarded entity” elections under the existing check-the-box rules would be restricted or prohibited in situations where disregarded entity treatment has facilitated deferral of U.S. tax on overseas earnings. Since this provision would take effect in 2011, taxpayers would be given some time to restructure their operations.

International trade regulations are complicated, but an awareness of and conformance with the regulations may provide an opportunity to save substantial costs and to avoid expensive delays by planning a clear route through complex international trade classifications. An additional proposal included in the announcement may increase audit resources and add to the procedural tools available to the IRS to identify and deal with undisclosed offshore bank accounts held by individual taxpayers.

Successful international expansion requires preparation. Specifically, it requires attention to various considerations in the areas of intellectual property, trade regulation and tax. While domestic issues in these areas may be commonly understood, expanding internationally raises new concerns that must be considered to ensure a successful expansion. Intellectual property rights and protection should be analyzed and may need to be retooled for the foreign marketplace. In some cases, current U.S. or other national intellectual property rights may be ineffectual in supporting international expansion, requiring development of new strategies.

The international tax landscape is changing and promises to continue to change with a political focus on the economy. However, even in spite of these new issues, a business can, through careful planning, minimize the potential risks of international expansion while taking full advantage of its benefits, from new markets to greater flexibility and a realization of lower costs of doing business.

Alex Furman and Gayle Strong (Intellectual Property), Robert Stang (Global Trade and Regulatory Matters), and Richard Petkun (Tax) are attorneys with the law firm of Greenberg Traurig, LLP. Greenberg Traurig is an international, full-service law firm with more than 1,800 attorneys and governmental affairs professionals in the U.S., Europe and Asia. Contact Greenberg Traurig at www.gtlaw.com.

Russia And The Global Economic Crisis

By: Deborah A. Palmieri, Ph.D. Issue: Global Trade Section: Jewel Of Collaboration

Russia, as most countries in the global economy, faces its own set of woes coping with the financial downturn. It was a bitter pill to swallow for Russia, whose economy had taken off under the leadership of Vladimir Putin with a reform minded economic growth strategy. The Russian economy had grown at an average of 7% annually for at least 5 years, and rising oil and commodity prices allowed Russia to accumulate one of the largest stockpiles of currency reserves in the world and a budget surplus of almost $400 billion. But, by early 2009, Russia confronted the perfect storm, and the economy and financial system went into a tailspin.

Crisis, Russian Style

Many factors converged to deepen Russia’s crisis. The ready cash flow into the national treasury from sales of oil and natural gas began to dry up, and export earnings plunged, thus negatively impacting and shrinking the national budget. Credit availability virtually disappeared, creating what many refer to as the “one-two punch”- a decline in export earnings coupled with a decrease in credit access. Russia’s oligarchs, many of them reflecting the values of “new money” seriously over-leveraged themselves, only to find themselves highly over-extended as the crisis hit, and having to sell off assets at low prices to finance other obligations, or simply to default on them.

Starting in fall 2008, major Russian stock exchanges including MICEX and RTS lost 70% of their value. Trading was suspended many times during various bouts of market turmoil. Losses were especially severe in finance and energy. Add to all of this bank failures, plummeting real estate values, the devaluation of the ruble and capital flight, and the depth and severity of Russia’s crisis mirrored that of countries across the globe.

The onset of the financial crisis coincided with Russia’s conflict with Georgia in South Ossetia in August 2008. In response to Georgian ground attacks on South Ossetia, Russia began a military campaign against Georgia. This move was widely interpreted in the West as Russian aggression and risky Russian behavior, and as a result, capital outflows only a month after the invasion were estimated as high as $40 billion. Investors were spooked in a tough break for Russia. Many rating agencies such as UBS AG reduced prices of Russian assets due to the perception of increased political risk.

Russia continues to experience a sharp decline in GDP, industrial production and household consumption. GDP is expected to shrink in 2009, and while analysts differ by how much, anywhere from 1%-6%, for Russians it’s disappointing after the economic boom whereby nominal GDP soared from $200 billion in 1999 to $1.7 trillion in 2008. The national unemployment level now stands between 10% - 11%. The Ministry of Economic Development reported that almost 2 million people lost their jobs in the first quarter of 2009 alone. Industrial production declined nearly 14% year over year in March 2009 and over 14% in the first quarter of 2009. There has been an increase in inflation, which is now running at approximately 14% annually, not out of control, but several percentage points higher year-on-year.

While Russia ran a budget surplus for years, as high as $121 billion, many Western counterparts were mired in debt. Now, that surplus is dwindling as the government cuts into the Stabilization Fund (where the surplus was stored), there are some projections that the Fund could be depleted by 2010 or 2011.

Some experts project that Russia’s budget deficit could total 10% of GDP by the end of 2009. In early 2009, Russia’s trade surplus had decreased 62% from the same period in 2008. Both export and import activity has declined significantly in 2009 over 2008 - exports were 48% lower and imports, 36%. Said one government official, “It’s bad everywhere in the world and Russia’s feeling it, too.”

Government Response

The response to the crisis by President Medvedev and Prime Minister Vladimir Putin has been swift and impressive. Many of these initiatives were laid out in a March 2009 report issued by the government which highlighted the official anti-crisis program for 2009.

Like other Western governments, they initiated an aggressive bailout and stimulus plan beginning in the fall of 2008, which included bailing out failing banks and enterprises. The government poured money into major backs including OAO Sberbank, VTB Group and OAO Gazprombank. A ruble devaluation strategy was put into place to try and revive export dependent industries. The Medvedev administration substantially increased social welfare spending, to try and ease the burden on Russian citizens. They took measures such as delaying tax increases on companies, such as the Unified Social Tax, and postponed other planned tax increases. The personal income tax was maintained at its flat rate of 13%. Tariffs on many imports were increased. They bought out the foreign loan obligations of select companies to avoid the collateralization of their assets abroad. They pledged further assets to expand Russia’s oil and gas expansion in Europe and Asia, planning for future growth and recovery. They began to pay more attention to the long-term modernization of the economy.

Central Bank Chairman Sergei Ignatiev and the Ministry of Finance undertook measures to loosen lending markets including cutting the reserve requirement on liabilities, injecting billions of rubles into state controlled banks, compensating certain banks for loan losses, broadening the definition of eligible securities available for collateral and providing for funding through new instruments such as unsecured loan auctions.

Tax stimulus was another element of Medvedev’s strategy. In November 2008, a tax stimulus package was initiated. Corporate tax profits were cut by 4%; advance payment rules were eliminated and various tax deferral measures were put into place.

In the midst of all this, President Medvedev has undertaken a firm anti-corruption campaign and has emphasized strengthening the judicial system.

Comparison with 1998 Financial Crisis

It is worth looking back in history to view the current crisis in relation to the 1998 financial collapse. While it is different from the crisis faced by Russia just 11 years ago, there are lessons to be learned and perspectives to be gained.

Beginning in the summer of 1998, Russia experienced a financial crisis that spilled over into all realms of the society and economy. A $22.6 billion rescue package from the IMF barely made a dent. Just before the August 17 devaluation of the ruble, George Soros aptly expressed the pessimism of the times, “The meltdown in Russian financial markets has reached the terminal phase.” Another market trader was equally gloomy: “If you had to sum up the mood of investors in one word it would be despair. Investors have completely lost faith in the government.” Yet another said, “It’s all going horribly wrong.” There were concerns about Russia defaulting on its $135 billion in foreign currency obligations. Ratings of Russia from Moody’s and other international agencies plunged to the bottom. In a rating of world banks, Russia stood right at the bottom of 73 countries, worse off than countries like Puerto Rico, Estonia, Panama, Kuwait, Malta, Croatia and Slovakia, and only a notch above Kazakhstan, Tunisia, Thailand and Pakistan. The problem of wage arrears had become so severe in the military and the prospects so dim for payment that the Defense Ministry had advised soldiers to fish, hunt and gather mushrooms until the Government could afford payments. One ministry official said, “People really need this to survive somehow.”

The teetering democracy under the leadership of Boris Yeltsin was strained to capacity. He had strived mightily to overcome 76 years of communist legacy and had fought for survival since 1991, pleading for assistance from the West, and received very little. The Russian people braced to survive another crisis in their history. Sighed one weary citizen, “Crises in Russia are permanent. They only change qualifiers - political, governmental, market, financial, economic.” Through the course of the crisis, many Russians lost everything they had - any money they put in the bank, real estate and more. There were panicked bank runs, people tried to convert rubles to dollars, and others hoarded food, fearful of higher prices and even shortages.

By comparison with today’s crisis, there are no alarm bells about the fundamental solvency of the Russian economy and state. There is no fear about the collapse of the Russian state, or a return to communism as there was in 1998.

It is clear that Russia is taking proactive measures to try and contain the depth and severity of the crisis. In this instance, it is likely that if the global downturn is prolonged, Russia will suffer, along with everyone else, no better, no worse.

Trade and Investment with Russia

In 2008, total foreign capital in the Russian economy equaled more than $264 billion, including more than $103 billion in foreign direct investment. In terms of foreign investors by country, the largest investors in Russia in 2008 included Cyprus ($60 billion), Netherlands ($46 billion), Luxemburg ($34 billion), Britain ($31 billion), Germany ($17 billion), Iceland and France (each at $10 billion). The U.S. lagged behind all of these countries at a mere $8.8 billion. In terms of foreign investment by sector in 2008, most foreign investment dollars were sunk into manufacturing ($34 billion), wholesale and retails trade and household goods ($24 billion), real estate transactions ($15 billion), oil and gas extraction and mining ($12 billion), and several billion each in finance, transport, communication, electric power, and construction. While foreigners are investing in Russia, the Russian’s are investing abroad, and in 2008, they invested $114 billion, an increase of 53% over 2007.

In 2009, foreign direct investment dropped 43% in the first quarter compared to the same period in 2008. Foreign investment overall declined as a function of the global economic crisis, along with the perception of Russia as a high risk market. The Russian economy contracted 9.5% in the first quarter of the year, and forced analysts to revise their forecasts downward for the rest of the year.

The structure of foreign trade has remained consistent over the past several decades. The chart detailing the structure of Russia’s foreign trade displays a pattern long evidenced in Russia: heavy exports in the area of mineral products and metals, and imports heavy in food products, machinery and equipment and chemicals. Russia’s foreign reserves are heavily dependent on the price of oil, which has fluctuated wildly, from a high of $146/barrel last year, to lows of under $40/barrel. With a shrinking global economy, there is less need for Russia’s exports. But as the crisis subsides and economics begin to recover, the demand will return. Russia’s import demand will fall, but they are still buying, just less.

Russia and the WTO

A key issue for Russia is accession into the World Trade Organization (WTO). It is important to belong to this organization to take advantage of reduced tariffs and benefits among member countries.

Russia has applied since 1993 (it was then the General Agreement on Tariffs and Trade or GATT). Until early June 2009, Russia was part of a number of bilateral and multilateral commitments and has cooperated with the WTO’s Working Party on Russia. But it has still not been approved by the WTO General Council for accession (see www.wto.ru, Russia’s official website on the issue for more details.)

In a surprise move announced by Prime Minister Putin on June 9, Russia abruptly abandoned its separate talks with the WTO, and announced it would be forming a customs union with Kazakhstan and Belarus. The three countries are aiming to launch their customs union on January 1, 2010, and to complete all formalities in forming the customs space by July 1, 2011. This would be the first application to the WTO as a customs union. Itar-Tass quoted Mr. Putin as stating, “Entry into the WTO is our common priority, but we want to do it as a common customs space.”

There are many opinions as to why Russia, the largest economy not belonging to the WTO, has chosen this path. Some speculate that Russia tired of endless delays and stipulations by the WTO process over the last 16 years. Many Russians believe the delays were deliberate. Others believe Russia hopes to bring on board other countries of the former Soviet Union into the union to strengthen its bargaining position. Some argue that there is really not much benefit for Russia to belong to the WTO anyway. Its main exports, oil and gas are already open, and other industries such as agriculture would be placed at a disadvantage through membership. Right now it is too early to tell. Kazakhstan and Belarus had also faced delays in the process and there may be motives that are yet unclear. It is not clear also how the WTO will react to an admissions bid by a customs union. Meanwhile, the move is not expected to have much of an effect on the current pattern and trend of Russia’s trading behavior.

Political Relations

After a relatively frosty period in U.S.-Russian relations during the Bush Administration, despite strong personal ties between Mr. Bush and Mr. Putin, relations are slowly experiencing a thaw between the new presidential administrations of President Obama and President Medvedev. Both nations are focused on pressing domestic issues, and both face serious consequences from the global economic crisis. The Bush initiative to set up a missile defense system in Poland, the European Interceptor Site (EIS) and set up a radar tracking system in the Czech Republic deeply angered the Russians. This plan is under evaluation by Secretary of State Hillary Clinton and other top officials, and it is currently not clear which direction they will take on the issue. But for now, there is agreement on a key issue, the renegotiation of START, the Strategic Arms Reduction Treaty, which expires in December of this year. This is the most complex arms treaty in history to limit the arms race. Both sides are committed to signing a new agreement by the end of the year.

Vice President Joseph Biden signaled a new era in U.S.-Russian relations when he called for “resetting the button”, implying that both sides needed to move beyond old disagreements and forge a new agenda for the future. Cooperative political and diplomatic ties are always good for business relations, and both sides are above all pragmatic. This will serve to create a more positive environment to incentivize the growth of U.S.-Russian business relations in the years ahead.

Concluding Remarks

Despite historical problems and structural barriers, the future is promising for the growth of U.S.-Russian trade. Russia, as the world’s largest country, offers a wealth of natural resources in demand by the requirements of American industry, including oil and gas and strategic minerals. Russia needs processed food and agricultural products, meat, manufactured goods, chemicals, high-tech electronics and other products produced by the U.S. As politics become more pragmatic and the Cold War fades into the distant past, the forging of a new relationship will allow Russia and the U.S. to realize the enormous economic potential to benefit both nations. The current low numbers of U.S. foreign investment into Russia, and trade turnover suggest there is potential and opportunity for growth.

Deborah A. Palmieri, Ph.D. is the Honorary Consul General of Russia in Colorado and is the President and Founder of Deb Palmieri Russia LLC. Contact Dr. Palmieri at 1552 Pennsylvania Street, Denver, CO 80203, 720-980-4829 or at [email protected].

New Direction For U.S.-Cuba Policy

By: Jake Colvin Issue: Global Trade Section: Jewel Of Collaboration For the first time in years, the United States is moving to engage Cuba. In early April, the Obama Administration announced that it would lift restrictions on travel and remittances on Cuban Americans, as well as lift restrictions to allow U.S. companies to provide certain telecommunications services to Cuba. President Obama also appears to be pursuing a diplomatic opening with Cuba.

Congress also tinkered around the edges of U.S.-Cuba policy. Earlier this year, opponents of the embargo inserted provisions into a spending bill which made it easier for American farmers and businesses to travel to Cuba to market and sell agricultural and medical products to Cuba which are permitted under an exception to U.S. sanctions.

These are encouraging first steps for those who believe that trade, travel and diplomacy are better ways to advance America’s interests and support the Cuban people than sanctions and isolation. Yet initial steps have been small and largely symbolic. Bolder changes are necessary.

Comprehensive Sanctions

Despite the recent changes to policy, the United States still places more comprehensive sanctions on Cuba than on any other country in the world, including North Korea and Iran. Cuba is the only country in the world to which the United States restricts its citizens from traveling. The U.S. Government places no restriction on its citizens who wish to participate in highly-controlled, propaganda-filled package tours arranged by the government of North Korea, but outlaws tourist travel to Cuba altogether.

Cuba also remains subject to an antiquated U.S. sanctions regime known as the Trading with the Enemy Act (TWEA). In 2008, the Bush Administration graduated North Korea from the act, leaving Cuba as the only country to which TWEA still applies. U.S. sanctions on Cuba continue to apply outside of the United States to companies incorporated in third countries such as Canada and to Cuban nationals living abroad in places like Spain and Mexico.

As a result, U.S. sanctions have not only failed to achieve their aims in Cuba, but they have also created serious friction with U.S. allies. A number of countries, including Canada and the European Union, have enacted laws known as blocking statutes to prevent foreign companies from complying with U.S. sanctions. An attempt by the Treasury Department to enforce U.S. sanctions on a Sheraton hotel in Mexico City in 2007 led to a minor international incident, prompting a response from the Mexican president’s office, an investigation by the mayor of Mexico City, and a fine and brief closure of the hotel for supposedly unrelated building code violations. Engaging Cuba Through Trade

Congress has opened up one significant hole in the embargo. In 2000, Congress passed a sanctions reform law which exempts exports of food, medicine, medical products, and agricultural products from U.S. sanctions. Today, U.S. farmers can sell grain, meat, fish, and other products to Cuba as well as to other countries subject to U.S. sanctions such as Sudan and Iran.

Cuba is required to pre-pay for U.S.-origin products with cash and under highly structured rules.

There is additional room to engage Cuba under current policy. U.S. law allows the sale of a broad range of goods to Cuba under the exception for agricultural and medical goods. The definition of agricultural products includes fish, beer, soft drinks, cotton, wood, fertilizers and vitamins. Derivatives of agricultural products, such as paper products, wooden picture frames, chewing gum, and building materials, are also eligible.

As interest in Cuba grows, companies are likely to become increasingly aware of these opportunities, which could expand trade further.

The Benefits of a New Cuba Policy

There is no shortage of good reasons for allowing Americans to travel to Cuba. By far the best is that the United States should not be in the business of restricting the right of its citizens to choose where they want to travel. We undermine the cause of freedom abroad when we restrict it here at home.

Americans are extraordinary ambassadors to the world. Restricting travel to Cuba severely limits the positive impact Americans can have abroad through everyday activities and interactions. Travel promotes understanding, respect and shared values, which is good for Cubans and Americans alike. “Travel,” observed Mark Twain, “is fatal to prejudice, bigotry and narrow-mindedness, and many of our people need it sorely on those accounts.”

Travel by American citizens would directly benefit the Cuban people. American travelers would help put more money in the hands of ordinary Cubans who work in the hospitality industry in Cuba. While some tourist dollars would undoubtedly benefit the Castro regime, many more would help ordinary Cuban citizens provide for themselves and their families.

From a business perspective, restoring tourist travel to Cuba would benefit U.S. airlines, cruise ships and tour operators and could create thousands of jobs in the travel industry. Estimates suggest up to a million travelers could visit Cuba annually from the United States once restrictions are removed. Resuming travel to Cuba could potentially boost demand for certain American products like beef, soft drinks, wine and potato chips, which are permitted to be exported to Cuba under the exemption to U.S. sanctions.

Current travel restrictions also place a tremendous burden on the same taxpayer dollars that are allocated to investigate al Qaeda and keep international terrorists and criminals out of the United States. A 2007 U.S. Government report concluded that inspections of travelers arriving from Cuba may strain efforts to keep out terrorists and criminals from entering the country. Eliminating the travel ban would allow the U.S. Government to redeploy its resources to tackle more urgent pursuits.

Finally, changing course on U.S. Cuba policy would boost America’s image in the world, particularly in Latin America. Leaders of Argentina, Brazil and other nations have made clear to President Obama that a new U.S. approach to Cuba is a priority for the hemisphere. Removing travel restrictions is an easy way to send a positive signal internationally.

The Changing Politics of Cuba Policy

For the first time, politics should also encourage sweeping changes to Cuba policy. Shifting demographics among the broader Hispanic population in Florida help make a new approach to Cuba politically feasible. Florida is younger, more diverse, and more progressive than it was just a few years ago, as an influx of immigrants from Central and South America have changed the voter profile. Statewide, non-Cuban Hispanics – who tend to disagree with U.S. policy towards Cuba – now out number Cuban Americans. In November, Obama received 57 percent of the Hispanic vote in Florida.

At the same time, more Cuban Americans voted for President Obama in November – 47 percent according to one poll – than for Clinton in 1996, even though Obama advocated for direct negotiations with the Castro regime.

In the wake of the election, support for dramatic changes to U.S. Cuba policy from Cuban Americans has skyrocketed. Sixty-seven percent of Cuban Americans support removing all restrictions on the ability of U.S. citizens to travel to Cuba according to an April poll by Bendixen and Associates. An equal percentage holds favorable or somewhat favorable views of President Obama -- notwithstanding his support for diplomatic overtures and new approaches to Cuba. An earlier poll by Florida International University and Brookings found that 55 percent of Cuban Americans favor an end to the entire embargo.

President Obama has managed to influence polling numbers by demonstrating political leadership. Additional leadership is likely to continue to drive poll numbers in favorable directions.

Bolder Actions are Needed

While small changes to policy are welcome, large shifts are long overdue.

The Obama Administration and Congress should rip off the band-aid that the United States has applied to Cuba all at once rather than tugging around the edges of policy or in response to gestures from Castro’s government.

As former Assistant Secretary of State for Western Hemisphere Affairs and current advisor to President Obama, Jeffrey Davidow suggested to me last year, “Whether we do it for Cuba or the other rogues of the world, we need more contact and we need to be doing more without demanding some sort of political return.”

The President and Congress can take bold action. For one, President Obama should work with Congress to end all restrictions on the ability of U.S. citizens to travel to Cuba.

Ironically, the piece of legislation that was designed to loosen the trade embargo restricts the ability of the President to end the ban on travel by U.S. citizens to Cuba. The 2000 law which exempts exports of agricultural and medical products from U.S. sanctions includes a provision, which was championed by pro-embargo members of Congress, which prohibits the executive branch from licensing “travel to, from, or within Cuba for tourist activities.” As a result, the President must work with Congress, which could either restore his authority to resume travel or lift the ban outright. Legislators in the House and Senate have introduced bills to restore travel to Cuba, including H.R. 874 and S. 428, the Freedom to Travel to Cuba Act.

In addition, the Obama Administration can use its licensing authority to begin dismantling the Cuba embargo. President Obama retains wide discretion to make significant changes to U.S. Cuba policy, despite legislation by Congress, which wrote regulations governing the Cuba embargo into law. As a Clinton Administration official noted, Congress “codified a process by which there was an embargo to which exceptions could be granted on a case-by-case basis by the president.”

President Obama has already announced that he will use this authority to exempt certain U.S. telecommunication services from sanctions. He could – and should – use this authority to exempt more American products like tractors and construction equipment from the embargo, to establish regular banking relationships so that travelers can use their Visa and American Express cards, and to permit private financing for exports to Cuba.

President Obama has also moved to engage diplomatically with the Cuban government and make clear that everything is on the table. Encouraging regular diplomatic contact between U.S. and Cuban counterparts on common interests like migration and counternarcotics is one way to help to develop relationships and lay the groundwork for discussions of other issues. President Obama should also test recent statements from Cuban President Castro, who indicated a willingness “to discuss everything -- human rights, freedom of press, political prisoners, everything.” If Cuba is willing to make clear reforms on the issues that Castro identified, the United States ought to be prepared to discuss property claims, trademark issues, Cuba’s inclusion on the State Departments list of countries that sponsor terrorism and the entire embargo. Ultimately, normalizing U.S.-Cuba relations will require diplomatic negotiations.

President Obama has rightly suggested that, “a relationship that effectively has been frozen for 50 years is not going to thaw overnight.” At the same time, the United States can start chipping away large chunks of ice.

Jake Colvin is Vice President for Global Trade Issues with the National Foreign Trade Council (www.nftc.org), a business association in Washington, DC. He is also a fellow with the New Ideas Fund, for which he has written a policy paper on “The Case for a New Cuba Policy.”

Creating A Sustainable, Just, & Peaceful World

By: Jan Mazotti Issue: Global Trade Section: Jewel Of Collaboration

An Interview with John Perkins

In June 1971, John Perkins began his career as an “economist” and economic hit man (EHM). Naïve to the EHM culture, Perkins learned that as an EHM he would be a, “highly paid professional who cheats countries around the globe out of trillions of dollars. He would funnel money from the World Bank, the U.S. Agency for international Development (USAID), and other foreign “aid” organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet’s natural resources.” He would use tools such as, “fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder” to accomplish his goals.

Now, some 30+ years later, Perkins has shared his EHM story in Confessions of an Economic Hit Man and The Secret History of the American Empire: The Truth About Economic Hit Men, Jackals, and How to Change the World, and is now passionately engaging with Americans to work to create a more peaceful and just world for future generations. With the presidential elections recently completed, questions of America’s military status, environmental impact, and foreign policy are on everyone’s mind. He shared his insights of the current geopolitical crisis and offers interesting responses to the world’s environmental and trade-related status. I had the distinct pleasure of interviewing Mr. Perkins and learning about why he is so passionate now about changing the world for the better.

You say in Confessions, “Saudi Arabia was a planner’s dream come true, and also a fantasy realized for anyone associated with the engineering and construction business.” What countries are the current planner’s “dream” like Saudi was for you? Why and how?

Certainly Iraq is - and, to a certain degree it’s working. One of the greatest things you can do if you are a big corporate executive is have a company that destroys a country and then rebuilds it. That’s certainly happened in Iraq, where we’ve destroyed the country and are attempting to rebuild it. The problem has been that we haven’t been able to get enough control to really go in there and do the things we’d like to do – like we did in Saudi Arabia. But, I think that’s been the plan. However, I think because of the failure of the whole Iraq process, perhaps that plan is one that we won’t try to implement in the future. Although, I can see that we are trying to do aspects of that plan in Afghanistan too.

In your list of “what you can do,” you say to “protest against ‘free’ trade agreements…” Why no free trade agreements?

Because free trade agreements as they’ve been implemented in the past are not about free trade at all – they’re about exploitation. I think free trade is a great concept, but the kinds of agreements that we have today for example don’t allow countries in Latin America to have any subsidies for any of their agricultural goods, yet we have huge subsidies in our country. The free trade agreements practically drove the small Mexican cotton farmer out of existence – and yet he can produce cotton much more cheaply than our cotton growers can. But our cotton growers are heavily subsidized, so in fact, our heavily subsidized cotton growers can sell cotton in Mexico much more cheaply than Mexican cotton growers can – even though it costs a lot more to produce it here. Because of the subsidies, you get this very unfair situation. It is not free trade at all. We call it free trade but the free trade agreements are not. If we had true free trade, I’d probably support it.

So, based on what you just said, is fair trade real or is it an illusion?

Fair trade can very much be real – and I support those efforts. I used to own a small coffee farm in Columbia and one of the reasons that I bought this farm is because I wanted to make it a model for campesínos in Columbia – to grow coffee organically and to sell it in fair trade markets. You have to be really careful, as with all of these things that it’s true and that people who claim that they’re selling things that are fair trade, really are. One of the issues here – in everything you buy, whether it’s fair trade or not - is how do we know what we’re really buying? Consumers have tremendous power. The marketplace is democratic – if we choose to make it democratic. We decide which companies will succeed or fail by the way we shop – if we shop consciously.

We decide which companies will succeed or fail by the way we shop – if we shop consciously. Part of what I am advocating is that we use that power to change the general goal of corporations – because right now the goal that every corporation seems to share is to maximize profits regardless of social and environmental costs. We need to convince these corporations that they can make profits, but only within the context of creating a sustainable, just, and peaceful world. And, if a critical mass of us, refuses to buy from any company that is not committed to creating a sustainable, just, and peaceful world then eventually all companies will have to make that commitment. It’s that simple and it’s democratic.

Part of the problem with that is knowing which ones are really doing it and which ones are not. So, how do we certify things? There are a number of organizations that are working on a scannable barcode for every product whereby you would be able to hold your cell phone up and tell you exactly where that product was made, whether the people who made it were treated fairly, or whether the products were grown organically. It would enable us to “vote” in the marketplace consciously.

You say that China’s “hit men” and jackals are potentially better – what do you mean? What does that mean in a global economy going forward?

Hit men aren’t better or worse, but when I travel in Latin America, one of the things I hear is that they would much rather take loans from China than from the U.S. or the World Bank or the organizations that are associated with us. The reason is that China doesn’t impose the same restrictions – they do not insist that these loans be used to hire Chinese corporations. They do not insist that these countries privatize their public sectors like water, sewer, and electricity, and sell it to Chinese companies. And, so the restrictions aren’t there.

The other thing is that the Chinese are not looked at as militaristic, as we are. They have never had a military presence in Latin America or Africa or the Middle East, and for that matter most of Asia – except for those areas that they consider to be their territory – which unfortunately includes Taiwan and Tibet. But, we on the other hand, have had a military presence in over 130 countries. We’ve been known to overthrow the governments of Chile and Guatemala and recently attempted it in Venezuela. We’ve done it in Iran. We’ve gone on record admitting that we’ve done this in many places. The Chinese don’t have that same history and so leaders in Latin America look to the Chinese very differently. It’s a shame that we are seen as a bully that uses loans to get its way and that forces scient nations to open their doors for us to build military bases and have a military presence. The Chinese are not looked at that way at all.

It seems that the corporatocracy (corporations, banks, and governments) are facing severe backlash, however only in two pillars: government and banking. Why are we not seeing the backlash against the major corporations who participate?

The financial and banking sectors really blew it – and we all blew it to a certain degree – because our government, and we as voters, accepted the Chicago school, Milton Friedman’s idea that if you give executives free reign they’ll do the right thing and that it’ll be best for the market. Forgetting that CEOs are human beings and that they too can be very greedy and they can be dishonest. People need to be regulated to a certain degree. We have rules and police forces to make sure that there aren’t muggers, and burglars, and rapists walking around our communities. And, we have to assume that in corporations you have pathological personalities and we need to protect ourselves against those people too. This became very clear in the financial community - Wall Street and the investment business - as we’re all seeing now. There was a huge backlash against that because it became so obvious, but it hasn’t become so obvious in other businesses.

What we need to understand that many of the executives that run our biggest corporations are people that do not have our best interests in mind. Having said that, I also want to say that most of the executives that I’ve ever known in my life are very decent people and they are driven by our demands that they give us the cheapest goods possible even if that means destroying the rainforest to bring out cheap oil or using slave labor in sweatshops to give us our tennis shoes. We’ve said, “We really don’t care – we’ll look the other way” when they do this. And so they’ve done it. And we’ve also said to them we want to have the highest rate of return on our investment. So, we’ve sent a message to these executives that we want them to maximize profits regardless of social and environmental effects. I think most of them would much rather do a better job. Most of the ones I know have children or grandchildren and they don’t want to see Florida sink into the ocean. They want to see a better world. We need to let them know that we are going to reward them if they give us goods and services that meet better standards – that are dedicated to a sustainable, just and peaceful world. If they can’t do that, we’re not going to buy their goods and services.

Considering America’s recent elections and all the news around the economic meltdown, do you believe that people are beginning to shift their views to challenge the status quo of the historical corporatocracy? How and why?

There has been a revolution around the world. I think we are at a time in history that is similar to the agricultural revolution and the industrial revolution in the ways that we’re changing – with the new technologies – it allows everybody on the planet to communicate with each other and it allows us to understand what really goes into products.

At the same time we’re having a revolution in geopolitics – so we’re in a similar time in history when the nation states became cities. But today the nations are becoming somewhat irrelevant. It is the big corporations that are running the planet today. They know no national borders, they don’t listen to any particular set of laws, and they’ll strike deals with the Chinese and the Taiwanese and the Tibetans. They’ll strike deals with the Israelis and the Arab nations - anyone that has resources that they covet.

Not very long ago the big powers of the world were the U.S., the British Empire, and the Soviet Union, but today the true rulers are the big corporations. I think we can see that as being an advantage because these corporations are dependent upon us to buy their goods and services. For the first time in history we essentially have an empire that’s a corporate empire and it hasn’t been built by military force – it’s been built through commerce – and we are the buyers.

For the first time in history we essentially have an empire that’s a corporate empire and it hasn’t been built by military force – it’s been built through commerce – and we are the buyers.

So, we have tremendous power over these corporations. We can get them to change the world.

In The Secret History of the American Empire, you argue that the situation we are in today is similar to that of the days of the Revolution – that there is a, “gathering storm of conviction toward changing the corporatocracy.” Are we affecting our own “American Revolution” by changing the governmental figureheads, or is that an illusion?

There is a revolution in the world. We have to be careful not to expect too much from Obama and the government. Ten countries, representing more than 80% of the population in South America have voted in leaders who are saying no more exploitation of our resources. We want to develop our resources, we want to partner with big corporations who can help us develop our resources, but we want our people to get a larger share of the profit. Every one of these countries, during most of my lifetime, was run by brutal dictators who were under the thumb of the big corporations. That’s all changed. It’s a huge revolution. And, it’s swept north now.

We have had a revolution in this country no doubt. Symbolically, the election and the taking of the White House by Obama is huge. We went from the conservative, Republican oilman from Texas to the most liberal Senator in the Senate, who happens to be African American and is from Illinois. Huge, huge change. And it was a peaceful transition of power – that’s almost unheard of in the world. It’s remarkable. But now we’ve got this new President and we’ve got to be careful that we don’t expect miracles of him.

We have to do it. He keeps telling us that. We have to remember that slavery did not end in this country because Abraham Lincoln found himself in the White House. Abraham Lincoln went into the White House, because “we the people” wanted to end slavery. We didn’t get out of Vietnam because Richard Nixon was anti-war - he was not anti-war. Nixon understood that “we the people” were demanding that we get out of Vietnam – so that’s what got us out. The change always comes from us. And then our Presidents, if they’re enlightened enough, go along with that change The change always comes from us. And then our Presidents, if they’re enlightened enough, go along with that change.

It has to come from us – just like it did with Lincoln and just like it did with Vietnam. We must remember that now. The worst thing anyone can do is sit back thinking,”Thank God Obama won,” and wait for him to change everything. He says he can’t do that – he tells us we have to do it.

Throughout your work you say that corporations are the, “opposite of good citizens.” What are your perceptions of Corporate Social Responsibility in multi-national companies?

That’s hard to generalize – it’s usually a green wash. I think companies are attempting to look responsible. I recently spoke at an event sponsored by Wharton Business School with 2,200 business students there from all over the country. The other presenters included the President of Coca-Cola and the head of sustainability for Wal-Mart. It was interesting to me, for example, that the head of sustainability for Wal-Mart was speaking – he was very smooth, very cool and seemed to have all the right answers - about how Wal-Mart was moving forward to do the right thing. But the students weren’t buying it and during the question period they stood up and hit him pretty hard with some very tough questions. He answered them smoothly, he was a good salesman. But I had to think that when this guy goes back to his executive committee or whoever he reports that he’s going to say, “You know this is Wharton, these are MBA students, these are not radicals. These are the guys that are going to be running our company one day and who are also going to be our best clients and we’ve got to start listening to them.” So, it seems to me that all these corporations today have to be listening even though some of them try to whitewash or green wash the issues. But if we all keep up enough pressure, they will change.

If we keep the pressure on they will come around eventually or they will go out of existence. The marketplace is a polling booth. If we just simply recognize it, if none of us ever again buys from Nike, and we send an email to Nike and say we’re not buying because you still have sweatshops and instead we buy from Patagonia and send an email to them and tell them we’re buying from them because they don’t have sweatshops, then Nike will eventually have to change its sweatshops into true factories that pay fair wages and give healthcare or Nike’s going out of existence – it’s that simple.

Why is energy such a big topic right now – is it because it is the most important thing in maintaining our global dominance? What is the new economic vision?

Economies run on energy. You can’t have economic growth without energy and you can’t breathe without energy. Energy is everything – when you come right down to it. Unfortunately the world has gotten itself in a situation where were extremely dependent on petroleum for all of our energy – that just cannot continue. There is a finite amount of petroleum out there and besides that, increasingly, getting petroleum is causing huge environmental and social disruptions. So we must move away from that.

The bigger issue is that we need to move into a whole new vision about what is economic growth. We don’t want to recover – we want to move forward into something new because the old world was where 5% of the world population living in the United States consumed 25% of its resources and you cannot repeat that – statistically there is no way you can do it. We can’t do that – it’s a failed model. We need to move into a new economic vision.

We need to focus instead on developing an economy that truly produces and sells to itself things that we need and things that will make a better world. I often wonder, “what if we took a percentage of our military budget and paid the same companies – Lockheed Martin, Raytheon, General Dynamics – to instead of building missiles and tanks – build equipment that will clean up the polluted lands of the world, and the polluted waters, and the polluted air? What if we took a percentage of our military budget and paid these same companies to come up with means to help starving people around the world feed themselves? That’s creating a whole new economy. And, also to come up with new energy methods using solar, wind, and the other things that Obama is promoting.

For the first time in history we live on a very, very tiny planet. We are all interconnected. We’re all buying from each other. We’re all selling to each other. We must recognize this. That was the vision of our founding fathers: a government of, for, and by the people, was never intended to end with the 13 colonies. It was intended to include Colorado, and California, and Texas, even though they didn’t exist as entities at the time. It was never intended to end at the Rio Grande or the Canadian border – those principles are for the whole world and we must recognize that we are truly one community and that the way to create better lives for ourselves and our progeny is to create better lives for all the children on this planet. And, part of that is creating this new economy that has a totally different approach to providing energy for itself.

What has been the biggest lesson you have learned, what was it, and who was it from?

Spending time with Omar Torrijos, President of Panama was an amazing experience for me because he was a man who really enjoyed life, he was anything but what you’d call a saint, and yet he was a man who was dedicated to making life better for his people, and for people throughout Latin America. I couldn’t corrupt him. He one time said to me, “Juanito I don’t need your money – I’ve got a good house, I’ve got cars that take me places, I’ve got everything that I need – I don’t need any more money. What I need is for my people to live dignified lives. I need to get the canal back into Panamanian hands. It’s a terrible insult to our people to have this slice of the United States running through our country. I need to get my people to feel proud that we no longer owe your country – that your country is actually going to pay reparations. Beyond that, I need to spread that word and that spirit throughout South America.”

So this was a man who, despite the fact that he loved his cigars and his rum and having a good time, he was anything but selfish. He was totally directed toward helping others. He had this amazing sense of responsibility to helping others. It greatly impacted me at a very impressionable time in my life. Here I was, an EHM, not enjoying my life at all. I was travelling first class around the world, staying at the best hotels, eating at the best restaurants, hanging out with gorgeous women and heads of states and presidents of corporations and I was miserable because I was leading this very selfish life. My life was directed at carrying out plans that ultimately led to exploiting other people and I hated it. Omar helped me understand that. Because of him, I was only an Economic Hit Man for 10 years and then I got out and have essentially spent the rest of my life trying to make this a better world. And, I have been very, very happy doing that. I feel very blessed to be able to talk to universities and business conferences all over this planet. We’re going through a revolution and feel honored and blessed to be a part of it. I might not have ever taken this route if it wasn’t for Omar Torrijos. I think I owe him a great deal.

Colorado's International Trade Office

By: Pam Reichert Issue: Global Trade Section: Jewel Of Collaboration

Opening the Door to Exports and Investors

In these challenging economic times it can be difficult to retain a global outlook. Nonetheless, the ripple effect, or more appropriately the tidal wave effect of the U.S. financial crisis globally demonstrates how intertwined our world has become and the importance of retaining a global vision at the government policy and company level to emerge from the worldwide recession together. Exporting is a strategy that can be employed to diversify sales and risk.

Consul General Dale Eisler from the Canadian Consulate in Denver, Colorado Governor Bill Ritter and US. Consul General Tom Huffaker in Toronto Canada meet prior to the Colorado reception at the US Consul General’s residence during the Governor-led Economic Development Mission to Canada in November 2007.

The Colorado International Trade Office (ITO) is just one of the many resources available to Colorado companies that can assist with export training, market research, strategy and execution.

Here are the facts about Colorado exports and what they contribute to our economy. In 2008, Colorado exported $7.7 billion in manufactured, agricultural and mineral products, to 199 countries, an increase of 4.3% relative to 2007

In 2008, Colorado exported $7.7 billion in manufactured, agricultural and mineral products, to 199 countries, an increase of 4.3% relative to 2007. A total of 4,133 companies exported from Colorado in 2006 (latest data available from the U.S. Bureau of Economic Analysis). Of those, 3,618 (88%) were small and medium-sized enterprises with fewer than 500 employees, according to the U.S. Department of Commerce, International Trade Administration.

Exporting can be the easiest, and is certainly the most popular form of international business for small companies to enter and is one strategy for growing company sales. The world is smaller than ever, and many products and services can be easily integrated to suit the needs of overseas businesses or the tastes and preferences of those from a different culture. International markets are more accessible than ever with the internet. Does your company have a website? If so, you are already global and can grow your business outside of Colorado and the United States strategically with knowledge of basic export fundamentals and an active marketing plan.

Exporting can increase your overall sales and profits, enhance competitiveness, utilize excess capacity, and diversify market risk. It may also extend the life-cycle of your products, stabilize market fluctuations in demand, enhance the image and trademark of your company, and, most importantly to ITO’s mission, create domestic jobs. With every new business proposition, there are risks to be weighed. On a macro level, there are the inherent challenges in crossing a national border to do business. Country risk - the political and currency risk inherent in doing business overseas - needs to be assessed. The stability of a country, the availability and free movement of currencies, policies and attitudes toward trade should all be considered. Trading with a country with which the United States has a free trade agreement might be a consideration as these agreements can give Colorado (U.S.) products an advantage over competitors from other foreign markets.

Many other challenges to be considered are similar to issues that companies analyze as they consider any market, but some are unique to foreign markets. There will be costs involved in developing promotional materials, modifying products, or re-packaging. Furthermore, there will be added administrative costs, added travel expenses to the given market, and political cost in locating a local distributor, agent or buyer. The payment cycle is likely to be longer, and additional paperwork is involved. A Road Map to Success

While the ITO may be better known for its high-profile Governor-led missions, the main focus of the office is to provide export counseling services to companies, in particular small and medium size enterprises. The office can assist companies to:

Evaluate readiness to export. Advise on how to conduct market research and develop an export plan. Identify market opportunities and provide market intelligence. Determine export requirements and provide information on shipping and tariffs. Identify potential distributors, agents, buyers and other partners. Counsel on foreign business and cultural practices.

ITO PROGRAMS

Export counseling is the primary activity of the ITO, but trade promotion activities in foreign markets are equally important to introducing companies to new markets and getting them one step closer to executing an export strategy. Programs that ITO has organized and supported with partners over the past two years include Governor led economic development and investment missions to Canada, Spain, and Japan and China. These missions have helped to put Colorado on the map, in particular as a leader in renewable energy.

ITO has also supported Colorado companies with trade show booths at the Chinese International Environmental Protection Exhibition and Conference in Beijing, China (June 2009) and at Expomin in Santiago, Chile (April 2008), the largest mining show in Latin America. ITO led a trade mission to Taiwan in June 2007, and organized a Colorado Forum at GLOBE 2008 in Vancouver, where ITO provided assistance for one-on-one appointment setting through the Foreign Commercial Service. These trade show efforts have equaled over $30 million in immediate export sales, with much more expected over the long term. trade show efforts have equaled over $30 million in immediate export sales, with much more expected over the long term.

This year, ITO initiated a new program to assist exporting companies this past year - the Colorado Export Development Grant. Seventeen companies from around the state were awarded $1,000 grants to facilitate their travel, attendance at trade shows, or business-matching services in order to assist them in entering a new export market. This program will continue going forward on a bi-annual basis to reach existing and new potential exporting companies.

ITO also co-hosts business and investor groups that come through Colorado. Visitors have included larger delegations, such as a 22-member Spanish Renewable Energy group, a 12-member French high-tech delegation, and numerous individual companies looking to site headquarters or manufacturing in Colorado. Our role is to introduce them to the state, provide platforms for exchanges on public policy, Colorado’s business climate and potential business opportunities. ITO assists with business matching services with potential partners and suppliers or provides them with information on locating facilities in Colorado.

Foreign Investment: Welcome to COLORADO

State trade organizations nation-wide are taking a more proactive role in investment attraction. Colorado is no exception. ITO’s statute calls for this, and the office has taken it a step further over the past two years by tasking each regional director with a mandate to proactively market Colorado to potential foreign investors. As the data demonstrates, there is a strong case for promoting foreign direct investment in the state. Foreign majority-owned companies in Colorado employ close to 76,000 people and pay 15 percent higher wages on average. Colorado’s largest foreign investors include the United Kingdom, Canada, The Netherlands, France and Switzerland.

Partners are the Key

The ITO does not work alone - key to the success of our export assistance activities are our partners co-located in the World Trade Center in Denver who are also engaged in promoting and supporting global trade. The U.S. Export Assistance Center in Denver, part of the U.S. Department of Commerce’s International Trade Administration, utilizes its global network of trade specialists to connect U.S. companies with international buyers worldwide, with offices in more than 80 countries. The World Trade Center is the focal point for export training, networking, non-partisan trade policy advocacy, and serves as a platform for seminars on doing business in foreign markets.

The World Trade Center is the focal point for export training, networking, non-partisan trade policy advocacy, and serves as a platform for seminars on doing business in foreign markets.

Within the State government, the Department of Agriculture provides export services for the agricultural community. In addition to our core partners, the ITO works with the local consulate offices of foreign governments, other economic development groups, and business and industry chambers to support the global activities of Colorado businesses.

Despite already strong ties to the region, Colorado’s current economic development strategy was not well known, and the Governor-led Asia Economic Development Mission set out to change that. This multi-faceted mission put Colorado back on the map in Asia through official meetings, seminars on Colorado’s bioscience and renewable energy sectors, press conferences and interviews, and a number of networking events. It was a comprehensive state-wide community approach to growing the relationships and introducing Japanese and Chinese government and businesses to Colorado. “Colorado is a blank page to us,” noted one Chinese official in his introductory meeting with Governor Ritter.

The mission promoted direct air service between Narita Airport, Japan and Denver International Airport. It also provided a platform for Colorado’s bioscience and renewable energy sectors - private businesses and research institutions - to discuss current research, highlight existing businesses and the collaborations bringing technology to commercialization. A side trip to Yamagata Prefecture in Japan explored new business and exchange opportunities with our sister state of more than 20 years. The mission planted the seeds to advance research, education and business relationships for years to come.

The mission created some immediate interest from companies interested in joining the Colorado Renewable Energy Collaboratory. Officials from the Japanese Ministry of Economy, Trade and Industry and from the Japanese National Institute for Advanced Industry, Science and Technology have met with NREL to discuss research collaboration, Colorado State University has been working with two Japanese companies about collaborating with the CSU engine conversions lab, and other foreign investors have expressed interest in investing in Colorado companies or setting up operations in our state. ITO maintained momentum from the mission by leading 14 Colorado companies and research institutions to the China International Environmental Protection Exhibition and Conference June 3-6 in Beijing., where ITO organized a Colorado booth to cultivate business relationships and begin exporting to China.

The Asia Mission is just one example of ITO’s strategy to support the objectives of the administration of Colorado Governor Bill Ritter, Jr. to support the development of a 21st Century Economy in Colorado through the development of a New Energy Economy, the Bioscience Sector and Colorado Tourism.

Whether it is large collaborative economic development missions, international trade shows or one-on-one export counseling, the ITO and its partners are here to assist.

Pam Reichert is the Colorado International Trade Director at The Colorado International Trade Office. The ITO was created by state legislative statute in 1983 to assist Colorado companies in developing their business overseas and to promote Colorado to potential foreign investors. The ITO is a division within the Office of Economic Development and International Trade, tasked with the creation and retention of jobs to support Colorado’s economic development and growth. Regional directors have responsibility for specific regions: The Americas, Asia-Pacific, and Europe, the Middle East and Africa. A trade specialist handles general inquiries and supports the directors. The office director is the state point of contact for the US Trade Representatives Office to provide input and to analyze the impact of US trade policy on Colorado. For more information on ITO’s services, visit www.colorado.gov/trade or call (303)-892-3850.

Are You A Shortcut?

By: Rebecca Saltman Issue: Global Trade Section: Jewel Of Collaboration Imagine not having to do all of the things that you are terrible at, take enormous amounts of time, effort and make you miserable. If I added up all of the time, money and energy it took for me to maintain my books, let alone the opportunity and emotional costs, I probably wouldn’t get out of bed in the morning. It is a good thing I have chosen to use a Shortcut – a terrific bookkeeper for entrepreneurs (A shout out here to Johnson Bookkeeping) - and not pretend to do this work myself.

Welcome to the world of Scott Halford, the author of the newly released book Be a Shortcut: The Secret Fast Track to Business Success. This book provides tactics to help individuals become the professionals people can’t live without.

I am so grateful for Scott, because reading Be a Shortcut described a trend that I have observed and worked within, while never fully understanding how best to utilize or leverage it. He describes how systems, people, and organizations can be Shortcuts. The book even made me realize that my two degrees in Theatre were actually Shortcuts. They taught me life skills, mental agility, trust and collaboration, all having served as the most significant shortcuts in my life.

I have had the great pleasure of listening to Scott speak several times, but none have been more compelling than listening to his recent talks about this new book. I so enjoyed reading it that I have been using its concepts in my daily work and “shaming” people if they haven’t heard about the theories. Utilizing Shortcuts and collaboration are so inter-related I felt the ICOSA audience needed to hear about it from the author himself.

1. In your book, Be a Shortcut: The Secret Fast Track to Business Success, you have re-framed the term “shortcut” what exactly is a Shortcut and what are their main attributes? A Shortcut is a person, product or organization that effectively provides something we need, when we need it, with less aggravation and more precision than we could do ourselves.

A Shortcut is a person, product or organization that effectively provides something we need, when we need it, with less aggravation and more precision than we could do ourselves. They do it with high quality, grace and intelligence, and they are typically paid very well for it. It’s a combination of high mastery and high emotional intelligence – good smarts and appropriate attitude and interaction skills. In this world, if you or your organization is not a Shortcut to something it’s going to be a rough ride. They are the reliable lawn service; the Grease Monkey down the street; the administrator who predicts her boss’s needs and then exceeds them; the vice president who mentors a team by teaching individuals what she knows and then encourages them to go beyond that point. They are who others instantly think of when they need a particular skill or service or to find a specific piece of valid information in the sea of data. They are there as a resource and sometimes a reassurance as they wade through the piles of things that you need to be effective. They are the expert we rely upon.

These people create the lives they want because they’ve done something the average professional isn’t willing to do: They commit themselves deeply and with fierce focus in a very specialized area. They essentially become the Google of their business. The first step is to find what you love to do and then research it and practice it so you’re the “household” name where you work.

Expertise is only a part of the equation; Shortcuts also have high emotional intelligence (EI). EI is the set of attributes that predict a person’s workplace and life success better than IQ and technical expertise, and like IQ, your EI can be measured. But, unlike IQ, you can grow your EI through practice and coaching. Don’t misunderstand; IQ and expertise are necessary to get you in the door, but think about it - the people you work with are about as smart as the next person, so intelligence isn’t the differentiator.

Research in human performance conclusively shows the big difference is in being able to deal well with the day-to-day hassles and adverse events that come your way. Those who don’t cope well usually have bad attitudes and inappropriate approaches to even the simplest requests. There’s nothing worse than a really smart person who makes you feel like an idiot. Shortcuts understand their purpose in life isn’t to show off their knowledge and expertise, but rather to use them to teach others and to create simplicity in other’s lives. In doing so, they use excellent common sense and the social graces that make them magnetic.

All things equal, most people will use a subject matter expert who exhibits excellent emotional intelligence in difficult situations over the creepy expert who blows his top over a simple request for services.

2. We’ve always heard that taking Shortcuts is not necessarily a good thing to do, why would we want to be one?

It’s true. We always heard growing up that we shouldn’t take or use shortcuts. I’m here to resoundingly refute that! If you were stuck in rush hour traffic and knew a way to get home that might be more miles but quicker in terms of time, you probably wouldn’t say, “I better not. That’s a shortcut, and I’m not supposed to take those.” You would take the shortcut. And so it goes with people who are Shortcuts for us as well. Use them if you want to be successful. It’s collaboration. Be a Shortcut yourself and your value goes up exponentially.

Finally, we’re not talking about shortcuts of the easy-way-out variety, shoddy quality or questionable ethics, but rather Shortcuts with a capital “S”: Individuals who are the professionals their organizations can’t live without.

3. Why are Shortcuts so important right now?

There is an enormous need for Shortcuts for a few reasons. First, employees are being asked to do the added work of those laid-off in this recession. Shortcuts are the ones called upon because they were willing, during better times, to work at a few things very passionately and personably. We need Shortcuts in the organization of this new era so that the lean machines can operate efficiently and effectively. My prediction is that they will operate much better with fewer people with the higher dose of Shortcut behavior in the organization.

Second, consider that more people have access to more information than any other time in history. The astonishing level of information overload coupled with still needing to act and react with speed, brings about intense worldwide competition and more constantly stressed-out lives as a by-product. It’s more difficult to even be an average competitor. We need people who become intense subject matter experts – the go-to resource that can hone in on what we need quickly and then deliver it.

4. At ICOSA we believe that collaboration is often the key to success, describe how Shortcuts use collaboration as a tactic to succeed?

Remember the discussion on emotional intelligence? One of the factors that is not directly measured in emotional intelligence, but is usually a by-product of it, is likeability. Likeability has been shown to be one of the most powerful influencers. We enjoy being around people we like. They make us like ourselves better. One attribute of likeability is collaboration. People who work together on a goal and do it in a positive fashion are engaged in likeability. Another piece of research that shows why collaboration is so critical to success is the data on negative and positive emotional contagion in groups. Negative emotions narrow abilities, and positive ones broaden them. When people collaborate appropriately, they grow their collective abilities to solve problems and create new ideas. Thus, Shortcuts instinctively collaborate. They have learned that the input of many will always outperform the brilliant idea of one.

5. Can a company or an organization be a Shortcut?

This Darwinian-like business climate is mandating the kind of organizational culture that focuses on leanness, expertise-precision and sticky client relationships. The Shortcut Culture in companies rarely finds its place by default. Organizations that do it by design utilize their human resources more effectively to add stakeholder value more rapidly. As leadership scrambles to clarify directives in these very unclear times, the one concrete concept that is redefining the organization for the post-Darwinian business climate is the creation of the Shortcut Culture. It’s a top down proposition.

The Shortcut Culture is not the next wave of flavor-of-the-month corporate psycho-babble. It’s what companies and individuals do to survive tough conditions, and more importantly to thrive in them.

It is a way of operating that is measured and maintained. It’s about your company and its employees working toward indispensability – an “I-can’t-live-without” entity by your customer’s and constituent’s standards.

6. How does being a Shortcut assist organizations in developing systems like free trade or fair trade?

To be a Shortcut is to embrace the altruistic behaviors that Abraham Maslow described as highly evolved individuals. Things like corporate social responsibility, fair trade and free trade require the evolved behavior of the Shortcut individual and Shortcut Culture. Organizations that embrace the Shortcut Culture have more bandwidth and resources to get involved in business savvy activities like the ones I just mentioned. Corporate social responsibility is one I’m very familiar with. Research shows that organizations that are involved in community support, outside of the purview of their product or services, have higher retention rates, they are more productive and they attract top talent. They attract Shortcuts!

7. Is there a formula to being a Shortcut?

There are a few simple things to consider in terms of being an invaluable Shortcut. Here’s the first part of the formula. People use Shortcuts most when:

They don’t have enough time.

They are lacking talent or skill in a needed area.

Their desire to do something is low.

Lack of time, talent and/or desire indicates a good opportunity for a Shortcut. Ask if your service or job falls into one of these areas. The other part of the formula is when, as a Shortcut, you make other’s lives:

Easier, because they don’t have to do the legwork.

Better, because the quality of their life goes up, or they look good to those they wish to impress.

More money, because they make more money.

Frame your job, service or product in a way that it addresses this part of the formula and your influence and value go up. Of course, you have to add a big dose of positive attitude and emotional intelligence that make dealing with you such a pleasure.

Rebecca Saltman is a social entrepreneur and the President and Founder of an independent collaboration building firm designed to bridge business, government, non-profits and education. Contact Rebecca at [email protected].

Why Open Trade Matters For North America's Prosperity: The Mexican Perspective

By: Eduardo Arnal, Cónsul General of Mexico in Denver Issue: Global Trade Section: Building Bridges

NAFTA at fifteen: The Mexican Perspective

Fifteen years after the creation of the North American Free Trade Agreement (NAFTA), Mexico, Canada and the United States trade relationship has become one of the most dynamic and important partnerships worldwide.

Since NAFTA came into effect, its members have managed to reduce barriers to trilateral trade, create new opportunities for business growth and higher-paying export-related jobs in all three countries and generate confidence among companies through clearer rules and mechanisms to assure its compliance. In the last 15 years, trade between Mexico, Canada and the U.S. has tripled, reaching exchanges for more than $894.3 billion dollars in 2008 and laying the foundations for a strong economic growth and higher levels of prosperity for the population of the region.

NAFTA gave Mexico access to a market of 335 million consumers that constitute 31 percent of world income. Since NAFTAs inception, Mexico’s trade with the United States has quadrupled, reaching $367 billion in 2008 with partners exchanging over $1 billion a day. This has made Mexico the United States’ third-largest trade partner, right after Canada and China.

During this period, Mexico’s exports to the United States grew 444 percent, making Mexico one of the largest suppliers of goods to the U.S. market. Within just a few years, Mexico’s exports have diversified from primarily oil to include an array of manufactured products. In 2008, 9 percent of total U.S. beverage imports came from Mexico, as well as 30 percent of auto parts, 16 percent of vehicles, 37 percent of audio and video equipment, 19 percent of communications equipment, 24 percent of electrical equipment, 21 percent of household appliances and 14 percent of agricultural products, livestock and manufactured food goods.

background - organic vegetablesSimultaneously, NAFTA connected the United States with two of its largest trading markets. Since it implementation, U.S. exports to Mexico have grown 264 percent. In 2008, Mexico purchased $152 billion worth of U.S. goods, representing 11.7 percent of all U.S. exports worldwide. This is more than the United Kingdom, France, Netherlands and Belgium combined procured from the U.S. in the same period, making Mexico the second largest market for U.S. products worldwide. In the case of Colorado, Mexico was the second largest market for Colorado-based goods in 2007, up from the seventh position in 1993, which shows the impact of NAFTA for Colorado’s economy.

This two-way trade relationship illustrates the impact of NAFTA as it encourages U.S. business growth and continues to clearly indicate Mexico’s valuable relationship to U.S. businesses. Mexico has played an important role in several key sectors of the U.S. economy after NAFTA took hold. In fact, Mexico imports approximately 13 percent of total U.S. agricultural, livestock and manufactured food products, as well as 24 percent of U.S. auto parts, 13 percent of fabricated metal products, nearly 20 percent of audio and video equipment, 16 percent of computer equipment and 21 percent of electrical equipment and components.

Talking about investment, in 2006 Canada and the United States’ foreign direct investment holdings in NAFTA reached $400.2 billion dollars. Meanwhile, between 1999 and 2008 Mexico received $212 billion in long-term investment, making it one of the largest recipients of foreign direct investment among emerging markets. This reflects the confidence of foreign investors in Mexico, not to mention that the government has developed comprehensive and legally-binding disciplines to protect investors and intellectual property rights. As a result of NAFTA, investors from all around the world are now seeing Mexico’s strengths - such as its young and highly-skilled labor force and its ideal geographic location. These attributes attract potential investors and businesses considering Mexico as an integral part of the North American market when investment decisions are being made. Job growth has also been strong in all three partner countries since NAFTA came into effect, reaching almost 40 million new jobs since 1993 in the entire region - 10.1 million jobs in Mexico, 25.8 million jobs in the U.S., and 4.1 million jobs in Canada.

NAFTA has perpetuated a highly integrated trade relationship among its partners – Mexico, the U.S., and Canada. Many Mexican companies are now exporting their products successfully in an increasingly competitive global market, making Mexico’s export sector a major part of the country’s economy. In 2008, Mexico exported more than $294 billion globally and was ranked as the 10th largest exporting country in the world. Several factors have reinforced Mexico’s solid foundation for growth such as the further integration of Mexican firms into international markets, the transitional programs to facilitate this process, the reforms of the legal and fiscal systems in Mexico and the advancement of democracy.

Eduardo Arnal was appointed Consul General of Mexico in Denver by President Felipe Calderon and ratified by the Mexican Congress August 15, 2007. Consul Arnal holds a degree in law from the Universidad del Pedregal in Mexico City.

He was part of Mexican President Felipe Calderon’s transition team when he took the top office from former President Vicente Fox in 2006. In 2003, Consul Arnal was City Manager of the City of Atizapan de Zaragoza, State of Mexico. From 2000 to 2003, Consul Arnal served as a federal congressman for the National Action Party (PAN) in the Chamber of Deputies, Mexico’s House of Representatives, in the 58th Legislature. During his tenure, he was a member of the Commission on International Relations and the Commission on Strengthening Federalism. He also served as President of the Mexico-Argentina Friendship Group. In 2002, he was a participant in the National Democratic Institute’s Political Leadership Program in Washington, D.C.

In 1997, he was Executive Secretary to the Mayor of Atizapan de Zaragoza, State of Mexico. In 1996, he was Legal Parliamentary Advisor to the Commission of Governance and Constitutional Affairs at Mexico’s House of Representatives. In 1994 he also served as Legal Parliamentary Advisor to the Miguel Estrada Iturbide Foundation, a think-tank for the National Action Party (PAN).

Why Open Trade Matters For North America's Prosperity: The Canadian Perspective

By: Dale Eisler, Consul General of Canada Issue: Global Trade Section: Building Bridges

NAFTA at fifteen: The Canadian Perspective

“Trade has brought vast benefits to most Americans. Jobs in exporting companies, on average, pay considerably higher wages than jobs in companies that sell only within the U.S.”

– U.S. President Bill Clinton

If economic history has taught us anything, it’s that open borders and free trade create economic opportunity, growth and higher standards of living. They promote efficient specialization and foster economies of scale. The result is increased production and profits through new export opportunities, which also creates higher-paying jobs. Simply put, free trade is essential to prosperity.

The other thing we have learned from economic history is that in difficult economic times, during periods of recession and shrinking economic growth, we sometimes forget the lessons of the past. When times get tough, we often retreat inward and begin taking protectionist measures to shield us from “foreign” competition. By putting up walls around our economy, we foolishly think the road back to prosperity and economic growth is by not trading - that is buying and selling - with others beyond our borders. That somehow, if we just buy and sell from ourselves, we’ll be able to return to a strong and growing economy. You might call it the “taking in our own laundry” approach to economic growth.

The problem with that approach is not only does it not work, it can actually cause a stagnant or shrinking economy to deteriorate even further. And it can easily lead others to take similar protectionist measures in what amounts to a slippery slope of beggar-thy-neighbor policies. As markets shrink, opportunities vanish and jobs disappear. In other words, protectionism makes the economic problems worse, not better.

The fact is that free and open trade provides access to larger markets, which keep us competitive and productive - essential ingredients of a dynamic and growing economy.

Think of it in terms of a local economy. For example, if in Metro Denver there were protectionist regulations that prevented a company in Denver from selling its product to someone in Lakewood, or vice-versa, we’d all agree that would be crazy. Then if Lakewood companies could only sell to Lakewood residents or other Lakewood-based companies, and the same was true in Aurora, imagine how economic growth would be stunted and jobs lost. Well the same thing between nations would produce the same negative economic results, only on a much larger scale. To find evidence that free trade is good for national economies, you have to look no further than the North American Free Trade Agreement (NAFTA). The facts show that since the implementation of NAFTA more than 15 years ago, the United States, Canada and Mexico have all benefited from increased trade and commerce. In fact, from 1993 to 2008, trade among these three nations has more than tripled—rising from $297 billion to $964 billion. And business investment in the United States rose by 117 percent compared to a 45 percent increase during the previous 15 years. In addition, trade between Canada and the United States alone has grown dramatically since NAFTA. In 2008 this bilateral trading relationship - the largest between any two countries in the world - reached $696 billion. That’s more than $1.9 billion in goods and services that crossed our shared border every day, well in excess of $1.3 million dollars per minute. That translates into 7.1 million U.S. jobs dependent on trade with Canada.

Yet despite the overwhelming evidence supporting free trade, our tendency to guard what’s close to home during periods of hardship has already emerged with the current economic recession. The recent economic stimulus bill before Congress included a “Buy American” provision that many feared could lead to a series of protectionist measures and thus further weaken the world economy.

Ultimately, the U.S. stimulus legislation was amended to include assurances that any “Buy American” provision would be consistent with international trade obligations. But those provisions do not apply to state and local governments, which means protectionist measures have emerged at the sub-national level. Faced with this reality as the United States and Canada deal with the economic slowdown, it is important to remind ourselves continually that protectionist reactions will ultimately only hurt our joint efforts to get North America’s economy back on track.

But don’t take my word for it however. The key facts and figures speak for themselves. They illustrate why open trade among neighbors matters so much to our shared economic prosperity.

U.S. Trade: The Big Picture

The chart to the left from the Bureau of Economic Analysis shows what’s happened to U.S. trade since 1992, with the inception of NAFTA in 1994. It shows the growth (in billions of dollars) of exports and imports, and it also shows the U.S. trade deficit. As you may note, the trade deficit has been growing during this period, particularly since about 1998. But it’s important to put this in its full context. This is not U.S. trade within NAFTA, it is total U.S. trade with the world. That’s an important distinction, because in assessing the effects of NAFTA on the United States, one must not confuse NAFTA with what might be other trade patterns the United States has with other countries, such as China.

U.S. Trade Benefits under NAFTA

Now, having put U.S. trade in its global context - particularly as it relates to bilateral trade with China - let’s turn the focus to NAFTA and its impact on the United States. The graph above, from the International Trade Administration, U.S. Department of Commerce, shows growth in Issue 5 Why Open Trade Matters for North Americas Prosperity The Canadian Perspective graph002 exports, in other words growth in the “stuff” the United States sells to other countries. As you can see by the graph, the United States’ biggest customers are its NAFTA partners - Canada and Mexico. By a factor of roughly 15 percent, the United States exports more to Canada and Mexico than it does to the rest of the world.

Looking at the U.S.-Canada trade relationship, this pie chart shows that Canada is the largest export market for the United States. According to the World Trade Atlas, in 2008 more than 20 percent of U.S. exports headed north of the border. Nothing comes close to Canada as a destination for U.S. goods and services. In fact, the United States sells more to Canada than U.K., Germany, Japan and China combined.

Turning to imports, until last year the United States was also the largest market for Canadian goods and services. According to the World Trade Atlas, in 2008 nearly 16 percent of all U.S. imports came from Canada, falling slightly behind China. Prior to 2007, the United States imported more from Canada than it did from China. One-third of those imports were in the energy and mineral resource sectors, and today Canada continues to be the United States’ single biggest energy supplier, providing more oil to the United States than Saudi Arabia and Kuwait combined, accounting for 22 percent of total U.S. oil imports. Now let’s get a view from the boardroom. In a Deloitte Research survey of 321 executives from leading North American manufacturing companies, which was published in 2008, 49 percent said that NAFTA has had a positive impact on their business and only 10 percent a negative impact. The remainder of the respondents said NAFTA had a neutral impact.

NAFTA: More Important than Ever

So by making an analysis of NAFTA based on evidence, I hope you will draw the same conclusion as I do. During these difficult economic times protectionist thinking and actions will harm, not help, North America’s economic recovery. Thus, in order for our continent to maintain its competitive edge in an increasingly complex and interconnected global marketplace, a strong, modern and flexible NAFTA is required.

Trade is as old as humanity… (it) allows everyone to play to his or her own strengths while benefiting from the productive skills of the whole community.

“Trade is as old as humanity… (it) allows everyone to play to his or her own strengths while benefiting from the productive skills of the whole community.” – U.S. Federal Reserve Chairman Ben Bernanke

The Government of Canada has made the development of a more competitive North American platform the cornerstone of its commerce strategy. We must adopt a forward-looking NAFTA approach for the next decade that builds on our collective strengths, synergies and our close ties - an approach which stimulates continental trade flows, and accelerates the removal of trade barriers. This is especially important considering that Canada and the United States share a deeply integrated marketplace and supply chains, where we not only buy and sell things to each other, but we also make things together too.

NAFTA has helped lay a strong foundation for North America’s economy as a whole, and has increased global competitiveness for all three of its partners—the United States, Canada and Mexico. So, let’s continue to work together to ensure this remarkable success story keeps moving forward on the right track towards greater prosperity for all North Americans.

Dale Eisler is Consul General of Canada for Colorado, Montana, Utah and Wyoming.

In September 2004, the Government of Canada opened a Consulate General office in Denver as part of its continuing efforts to increase Canada’s presence and to expand bilateral trade and economic relations in the United States. This office is part of a network of Canadian Government representation throughout the United States, including the Canadian Embassy in Washington D.C., 13 Consulates General and seven Consulate offices.

While the Canadian Embassy is responsible for overall bilateral relations between our two countries, the mission of each Consulate is to build stronger bilateral ties within a specific U.S. region. The Consulate General of Canada in Denver represents the Government of Canada in the four-state Rocky Mountain region of Colorado, Montana, Utah and Wyoming. Areas of operation include Trade and Investment; Political, Economic Relations and Public Affairs; and Management and Consular Services. For more information, visit the website at www.denver.gc.ca or call (303) 626-0640.