SOUNDINGS JUNE-JULY 2016
China’s raw material play in African nations is morphing into a diversified trading scenario. Never mind that they’ve been getting kudos on the world stage for making substantial investments in rail and highways, something they needed to do anyway to get Africa’s raw materials to Chinese ports. They are now picking up additional “attaboys” for expanding traditional trade categories, such as a growing market for Chinese autos and a whole host of affordable Chinese products. And do you think any of these African nations are hassling them for currency manipulation or “dumping” cheap exports onto the scene? Far from it, they are rolling out the red carpet, no pun intended. From a geopolitical perspective, Chinese involvement in Africa will most likely prove to be a stabilizing factor. While they are Communists, at least they’re not radical Muslim extremists. In fact, you could refer to them as “CINOs”—Communist in Name Only—as evidenced by their devotion to entrepreneurism.
Should Great Britain (or are they still calling themselves the UK?) leave the E.U.? That’s up to them to decide. But in general, the E.U. is a breeding ground for more government regulation which can only lead to stalled commerce. Aren’t things slow enough as they are? And don’t forget to factor in national pride. Something is lost when you try to homogenize the colorful nations of western Europe. Britain should pull for Britain, Denmark for Denmark and Germany for Germany. And speaking of E.U. trade, the independent consultant hired to evaluate the ramifications of a U.S.-E.U. trade agreement recently announced in a 400-page report that all member states’ economies would grow as a result of a new trade agreement. I think a more realistic assessment would be that all member states’ economies would grow despite the new trade agreement. It sounds good on paper, but the implementation of it won’t work. With 29 countries involved, nothing will get done. There will be constant violations, constant appeals and constant talk with no action. As we have always maintained in this column, bi-lateral free trade agreements—which are challenging enough to implement—are the way to go. Anything above that is just political rhetoric.
Maybe the folks to ask about the benefit of E.U. free trade are English fishermen. Nutrient rich currents of the North Atlantic collide with the gulf stream to give England a prolific saltwater fishery. English waters are far superior to Spain’s, France’s or Germany’s. But since the creation of the E.U., they’ve lost control of the northern and western fishery inside their 200-mile economic zone, which they now have to share with other E.U. nations. As a result, the waters are being over-fished and English commercial fishermen are finding themselves out of work. Life—and global trade—was better when England had an abundance of fish and could export their catch to the rest of the world. Now other E.U. countries can just come into their territorial waters and take the fish for themselves. That’s not trade—it’s E.U. socialism. A recent New York Times article summed up one English fisherman’s feelings on the Brexit debate like this: “‘I definitely want out,’ said Michael Sharp, an English fisherman, crossing his arms defiantly. ‘All those wars we’ve had with France, Germany—all the rest of them since God knows when, since Jesus was a lad—we’re never going to get on with them, are we?’”
In business—and especially global trade—you vote with you feet, so kudos to Caterpillar Chairman and CEO Doug Oberhelman for leading his company and a local CAT dealer on a trade mission to Cuba. CAT has been beating the drum for 20 years to end the trade embargo with Cuba and knows how to grease the skids. Feel free to take notes here. At a reception with Cuban officials and CAT execs at the former island home of Ernest Hemingway, Oberhelman gifted a new CAT skid-steer loader to a local charity. Nice touch and a generous way to say we are serious about doing business in Cuba.
Most national governments encourage companies to do well in business and some even provide economic assistance to grow business. Not so the Obama Administration, which seems to look for any way possible to fine companies. In the latest example: The Federal Maritime Commission (FMC) announced that it has levied $840,000 in civil penalties with five ocean transportation intermediaries. The intermediaries included both non-vessel-operating common carriers (NVOCCs) and freight forwarders. In a self-aggrandizing statement, FMC Chairman Mario Cordero said, “The agreements and penalties demonstrate our staff’s dedication and continuing commitment to protect the American shipping public.” Really? Tuesday, Nov. 8, cannot come soon enough.
Relax. China Isn’t Taking Over!