Global Trade: Creating a Vibrant Global Economy

Global Trade: Creating a Vibrant Global Economy

Where Is

U.S.

T rade Policy Going?

An Inside Look at Global Trade

AMBASSADOR

RON KIRK -P O ’ resident

bama s principal trade advisor, negotiator, and spokesperson on U.S.TRADE ISSUES.

KIMBERLY-CLARK CAFTA–DR • RUSSIA USMEF • CARGILL PIERTA RIVOLI GREENBERG TRAURIG

FR Y G EE U TR T I AD E R EP R G.4 E 4 Z

SIROLLI

CASTELLANI

N

KS

& MEXICO

EA

JOHN

PRESIDENT

CR

CANADA

AN UPDATE FROM

SP

BUSINESS ROUNDTABLE

SE

NAFTA AT 15

ET O AR

CUBA

Welcome to Georgetown.

From Washington, DC to the global business centers of the world, the Georgetown name is known and respected. For over 50 years, graduates of the Georgetown University McDonough School of Business have excelled in leading the fields of management, finance, consulting and international trade. Georgetown’s innovative MBA programs are ranked among the highest and its world class faculty is internationally recognized. Wherever the world does business, Georgetown Business is there. To discover more, visit GeorgetownMeansBusiness.com.

Georgetown Means Business.

GeorgetownMeansBusiness.com

Reduce Today, Respect Tomorrow is the KimbeRly-ClaRK PRofessional* approach to sustainability. it begins with the understanding that the way we use resources today shapes the world of tomorrow. and it has led us to focus on reducing consumption at every stage of the product lifecycle - from design and manufacture to distribution and disposal. Reduction is the key to lowering the environmental impact of our activities as well as those of customers. it has also been crucial in achieving our number one position four years in a row on the Dow Jones sustainability index.

To learn more about Kimberly-Clark’s approach to sustainability, visit www.kimberly-clark.com. * Trademarks of Kimberly-Clark Worldwide, inc. marques déposées de Kimberly-Clark Worldwide, inc. © 2009 KCWW. K00332 K2979-09-01

TABLE OF CONTENTS

JUNE - JULY 2009

IN THIS ISSUE 4 Letter From The Editor

8 Inspiration

92 Thank You

6 Letter From The Publisher

10-14 Meet The Board

150 Rethinking Cuba’s Policy

» “ Trade is vital to our competitiveness, and it is critical to our goal to grow a business as great as our products.” « - Bob Lane, Chairman and CEO, Deere and Company

Quote worthy pg.33

Russia and the Global

Economic Crisis

By Deborah A. Palmieri, Ph.D.

R

ussia, 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. Continued on pg.86

U.S. Cuba P olicy A New Direction pg.62 (2)

06.09-07.09

Can International Trade Save the

Planet?

Thoughts from Pietra Rivoli pg.26

16 Where is U.S. Trade Policy Going?

An Inside Look at Trade from U.S. Trade Representative, Ambassador Ron Kirk

20 Trusting Photosynthesis

C argill’s Thoughts on the Future of Global Food Production

26

Can International Trade Save the Planet?

62 U.S.-Cuba Policy A New Direction

66 The Sirolli Institute

No Geography to Passion: Enterprise, Entrepreneurship & Their Role in the Global Economy

70 Salt Lake City Foreign Trade Zone

Thoughts from Pietra Rivoli

Providing Cost Saving Opportunities and Supporting Global Businesses

30 Connecting Internationally

74 Spreading the Educational Wealth

Why the U.S. is Made for Trade

36 Kimberly-Clark Professional

106 Don’t Let Financing Stand in Your Way

Grow Your E xport Business with Help from SBA

110 Creating a Sustainable, Just, & Peaceful World An Interview with John Perkins

114 Supply Chain Risk Management

Global Trade & Collaboration for the New Global Economy

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

Reduce Today, Respect Tomorrow

40

Colorado International Trade Office Opening the Door to E xports and Investors

118 U.S. Commercial Service

44 Secretary Carlos Gutierrez

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

Remarks on the State of Trade in the U.S.

122 Global Piracy

L aw Firm L aunches Initiatives To Combat Piracy

78 Guarding Against Corruption in Emerging Markets 82 U.S. Meat Export Federation

48 Canada and Mexico Weigh in on NAFTA Why Open Trade Matters for North America’s Prosperity

54 CAFTA - DR: A Resounding Success

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

58 The Big Move

Highlights and Current Developments for Businesses Considering International E xpansion

126 Are You a Shortcut?

An Interview with Scott Halford

130 Trade Adjustment Assistance

Building Global Markets for U.S. Pork and Beef

Creating and Saving U.S. Jobs

86

132 Trade Stories From

Russia and the Global Economic Crisis 94 USA: Destination Education

98 Trade, Ethics & Communications Public Relations C an Help R aise the Bar

102 Turbulent Times For Sporting Goods Exporters

Japan, Belgium, Hungary, & Slovakia

140 Human Rights Treaties Global Progress Depends on Local Education & Action

146 Professional Dynamic Programs - 2009 Governor's Award for Excellence in Exporting Global Integrated Management Systems Producing Measurable Results

06.09-07.09

(3)

LETTER FROM THE EDITOR

Global Trade J Connecting and Collaborating for Everyone’s Benefit

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

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

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

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

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

- Jan Mazotti

STAFF WRITERS Cos Lindstrom Jan Mazotti

FOUNDER AND PUBLISHER Gayle Dendinger EDITOR Jan Mazotti CONTRIBUTING WRITERS Eduardo Arnal Paul G. Bergman, Jr. John Castellani Louis X. (Kip) Cheroutes Dennis Chrisbaum Jake Colvin Geert Criel Karen deBartolome Dale Eisler Gregory Fasing Di Freeze Alex Furman Brandi Hanback

Kazuaki Kubo Brendan Landry Eugene Megysey Kay Meyer John Murphy Deborah A. Palmieri, Ph.D. Richard Petkun Kimberly D. Reed Pam Reichert Jim Ries Tom Ritter Pietra Rivoli Rebecca Saltman Joe Schuele Phillip Seng Dr. Ernesto Sirolli Robert Stang Gayle Strong Meg Thams, Ph.D.

To view an electronic copy of ICOSA (ISSN1938-209X) or to get your free subscription, go to www.icosamag.com.

(4)

06.09-07.09

ADVERTISING Jan Mazotti Kevin Medina ART DIRECTOR Nick Heckman – EKMN creative EVENTS Luke Wyckoff PHOTOGRAPHY AND DESIGN Cosme Lindstrom Annette Perez BUSINESS ADVISOR John Brackney FOREIGN CORRESPONDENT Ramy Eid SOCIAL NETWORK ARCHITECTS Matt Rosentrater Paul Bauer

ICOSA welcomes editorial submissions from its readers. Whenever possible, submissions should be sent in electronic format. All unsolicited materials should be submitted to the publisher at the address below.

Items not sent electronically will not be returned. The publisher reserves the right to decline use of materials at their discretion and assumes no liability for unsolicited materials.

ICOSA (ISSN1938-2081) is published six times a year. No part of ICOSA may be reproduced without written permission from the publisher. ©2008 ICOSA CORPORATE HEADQUARTERS 4100 Jackson Street Denver, CO 80216 Office: 303.333.3688 Fax: 303.333.4832 Email: jamz@icosamag.com Website: www.icosamag.com All third-class postage paid at Denver, Colorado.

Colorado Opportunities for Business

Highly Educated Workforce Business-Friendly Environment Competitive Incentive and Training Programs

www

.AdvanceColorado.com

Colorado Office of Economic Development & International Trade • 1625 Broadway • Suite 2700 • Denver, CO 80202 • 303.892.3840

LETTER FROM THE PUBLISHER

Icosa Not Just a Magazine But a Mission

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

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

Mother Nature understands interconnected and complex networks.

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

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

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

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

Gayle Dendinger, Founder and Publisher (6)

06.09-07.09

INSPIRATIONS

BEN FRANKLIN AND DICK FRANKLIN

Ben

Franklin

I

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

The early colonies and subsequent United States were truly blessed to have Benjamin Franklin, as such a leader. With his many different interests and wonderfully diverse careers, Ben Franklin has not only served as an inspiration to many people, but also as a catalyst around which many historical and world changing events have occurred.

Among his legacies is the great wisdom he has imparted, some of which is highlighted below. He said, • “Think of these things, whence you came, where you are going, and to whom you must account.”

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

• “Energy and persistence conquer all things.”

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

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

(8)

06.09-07.09

&

Dick

Franklin

“Think of these things, whence you came…”

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

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

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

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

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

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

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

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

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

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

“Energy and persistence conquer all things.”

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

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

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

Over the years, Franklin has experienced many things that have motivated him to lead change in the world, especially when it comes to the environment. He is a founding member of the Rocky Mountain Clean Tech Open (RMCTO). The RMCTO was founded on the belief that the best way to improve and preserve the environment is through technology.

The goal is to link world-class innovators who will ensure that the best and brightest ideas are developed with the resources and funding to grow into a thriving clean tech company. Ultimately, the goal is to strategically structure and connect the dots between various groups and organizations to achieve measurable goals and make a sustainable difference by collaborating on the most salient issues of the day: deforestation, water, clean energy, pollution, conservation and climate change. It is yet another example of a handful of people - dedicated to a cause changing the world.

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

Uncle Ben would be proud and we are appreciative.

06.09-07.09

(9)

ADVISORY BOARD

KAREN S. DE BARTOLOMÉ

Meet Karen S. de Bartolomé Executive Director Institute of International Education Rocky Mountain Regional Center

K

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

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

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

Prior to moving to Colorado, Karen worked for 14 years in the areas of planning, finance and executive management at the Port Authority of New York/New Jersey. “Starting off as a planner for reclaiming derelict waterfront areas in the New York Harbor was just the kind of

( 10 )

06.09-07.09

CONTACT KAREN S. DE BARTOLOMÉ: 475 17TH STREET, SUITE 800 DENVER, CO 80202 P: 303.837.0788 F: 303.837.1409 E: KDEBARTOLOME@IIE.ORG

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

It was also fantastic training for the role I now have in international education.”

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

Karen is currently a member of the board of the National Council for International Visitors and chairs its Program and Services Committee.

She recently completed two board terms with the World Affairs Councils of America. She is a graduate of the Kennedy School of Government at Harvard University and the School of International Service at American University.

We’re part of something bigger Kennecott Utah Copper is part of the global Rio Tinto company.

It’s big. But what’s really big is the cause that brings us together — a focus on sustainable development practices.

As a result, we have planted more than 135,000 trees and several thousand acres of shrubs and grasses along the Oquirrh Mountains.

This will restore and beautify our land as well as reduce its carbon footprint. We’re proud of that. Caring for our environment is just part of our long-term commitment. To learn more, please visit www.kennecott.com or www.riotinto.com.

Zeb Kenyon, Environmental Engineer, Kennecott Utah Copper, oversees reclamation in the Oquirrh Mountains. Zeb is one of 65,000 Rio Tinto employees committed to sustainable development practices.

ADVISORY BOARD

GOVERNOR SCOTT MCCALLUM

Meet Governor Scott McCallum President & CEO The Aidmatrix Foundation, Inc.

G

overnor Scott McCallum is the President and CEO of The Aidmatrix Foundation, a non-profit headquartered in Dallas, Texas with offices in Wisconsin, Germany and India. Aidmatrix builds and operates powerful technology hubs that work to support diverse stakeholder groups in their effort to work together to solve the world’s most challenging humanitarian crises.

Their solutions enhance participation, amplify contributions, and accelerate results for humanitarian relief. Thirty-five thousand leading corporate, non-profit and government partners leverage Aidmatrix solutions to mobilize $1.5 billion in global aid annually. The donated goods, money and services impact the lives of 65 million people.

Governor McCallum’s work with Aidmatrix earned him industry respect with the 21st Century Achievement Award for “visionary use of information technology to promote positive social economic and educational change” and he was recognized as a “true hero of the information age.” (Computerworld, June 7, 2005) He recently has been named an Ernst and Young Entrepreneur of the Year® 2009 award finalist in the Southwest Area – North.

McCallum received his Bachelor of Arts degrees in Economics and Political Science in 1972 from Macalester College in St. Paul, MN. From there he went on to graduate from Johns Hopkins University in 1974 with a Masters degree in International Studies.

After school McCallum began dedicating his life to public service.

In 1976, he won a seat in the Wisconsin State Senate. He served in the Wisconsin state senate for 10 years and in 1986 he ran for Lieutenant Governor of Wisconsin and was elected to the first of four consecutive terms.

As the Wisconsin Governor, McCallum was cited by the Wall Street Journal during the economic slowdown in 2001 as being one of the ‘political tough guys’ for balancing the budget without raising taxes. As a Governor he was Commander in Chief of the Wisconsin National Guard, directing emergency operations following the events

( 12 )

06.09-07.09

CONTACT GOVERNOR SCOTT MCCALLUM: THE AIDMATRIX FOUNDATION, INC. 11701 LUNA ROAD DALLAS, TEXAS 75234 P: 1.866.881.8882

of September 11, earning the 2002 U.S. National Guard Award for outstanding work.

The Aidmatrix relief solution systems were recently endorsed by federal branches and inter-state coalitions as “the Network” to be used in preparation for American disaster relief. The disaster network has since expanded to cover 64 countries.

McCallum has served on numerous Presidential Commissions and hosts a quarterly Governor’s Roundtable, where industry leaders gather to discuss global humanitarian aid.

Scott McCallum has taught Public Policy at the University of Wisconsin-Milwaukee and also has been an Executive-in-Residence at Northwestern University in Evanston, IL. McCallum has taught Executive MBA marketing courses at Sun Yat Sen and Harbin Universities in the People’s Republic of China. McCallum also teaches in the School of Health and Medicine at the University of WisconsinMadison. McCallum has numerous publications, most recently a chapter in the recently released book Managing Technology to Meet your Mission.

McCallum serves on the board of directors for Lubbock Gas Gathering, the Aidmatrix Foundation, and TK Paper Industries. He and his wife Laurie, an attorney in Wisconsin, have two sons, Zachary and Rory, and a daughter Cara.

ADVISORY BOARD

KRISTY A. SCHLOSS

Meet Kristy A. Schloss President and CEO Schloss Engineered Equipment

K

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

An engineer, author and environmentalist, small business, international business and education advocate, Ms. Schloss participates in many community activities. She graduated with a B.S. in Civil Engineering from the University of Colorado - Boulder. Ms. Schloss is a Fellow of the Society of Women Engineers, and a member of the Water Environment Federation, the American Society of Civil Engineers, the National Association of Women Business Owners, and National Small Business United. She is a dedicated mentor to several students from numerous engineering schools across the U.S. Nationally, Ms. Schloss serves as Chair of the Board of Directors of the Federal Reserve Bank of Kansas City, Denver Branch (by appointment of the Board of Governors), Chairs the U.S. Department of Commerce Rocky Mountain District Export Council and serves on the U.S. Department of Commerce Environmental Technologies Trade Advisory Committee, (both by appointments of the Secretary of Commerce) as well as the National District Export Council Steering Committee. She serves as a Trustee for the Midwest Research Institute.

Ms. Schloss received the National Entrepreneur Award from the Society of Women Engineers, the General Palmer Award from the American Council of Engineering Companies - Colorado, the Colorado Engineering Council’s Honor Award, and the University of Colorado –

( 14 )

06.09-07.09

CONTACT KRISTY A. SCHLOSS: SCHLOSS ENGINEERED EQUIPMENT 10555 E DARTMOUTH AVE. # 230 AURORA, CO 80014 P: 303.695.4500

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

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

JEWEL OF COLLABORATION

AN INSIDE LOOK AT TRADE

WHERE IS U.S. TRADE

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

By Jan Mazotti

“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,” he said.

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

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 rulesbased 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.

» Most people assume that trade equals job loss and that’s not true.

When done correctly, trade can breathe life into our economy. «

( 16 )

06.09-07.09

(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

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.

» Another agenda item will focus on improvements to NAFTA. We will do this in a collaborative spirit and emphasize ways in which this process can benefit the citizens of all three countries. «

(from left) Deputy Secretary of Energy Dan Poneman, U.S. Trade Representative Ron Kirk, Secretary of Labor Hilda Solis, Secretary of Agriculture Tom Vilsack, Vice President Joe Biden, and Secretary of Housing & Urban Development Shaun Donovan at the May 2009 Middle Class Task Force Meeting in Denver.

Ambassador Ron Kirk and Japanese Minister of Economy, Trade and Industry, Toshihiro Nikai at the Organisation for Economic Co-operation and Development Ministerial in Paris.

United States Trade Representative Ron Kirk participated in a roundtable at the U.S.-India Business Council 34th Anniversary "Synergies Summit". Other panelists included Karan Bhatia, former Deputy U.S. Trade Representative, Tarun Das, Chief Mentor of Confederation of Indian Industries.

Ambassador Kirk and the panel discussed the importance of and ways to strengthen U.S.-India bilateral trade relationship.

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

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

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.”

“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 Supporting political transparency, the USTR will engage the public regarding policy relative to the three outstanding Free Trade

06.09-07.09

( 17 )

JEWEL OF COLLABORATION

AN INSIDE LOOK AT TRADE

The U.S. Has Free Trade Agreements With 17 Countries Australia Bahrain Canada Chile Costa Rica Dominican Republic El Salvador Guatemala Honduras Israel Jordan Mexico Morocco Nicaragua Oman Peru Singapore 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

( 18 )

06.09-07.09

» Manufacturing exports supported nearly one in six manufacturing jobs in the U.S. and more than 808,000 jobs in agriculture. « 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 onetwentieth 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.

JEWEL OF COLLABORATION

TRUSTING PHOTOSYNTHESIS

Trusting

Photosynthesis Cargill’s Thoughts on the Future of Global Food Production By Jan Mazotti

C

argill 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 ( 20 )

06.09-07.09

– 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: First, 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

» 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. « 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…

1. 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.”

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

3. 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

06.09-07.09

( 21 )

JEWEL OF COLLABORATION

TRUSTING PHOTOSYNTHESIS

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.”

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

( 22 )

06.09-07.09

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

» When you destroy property rights, you slowly erode your ability to feed yourself. « 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, yearafter-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.”

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.”

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.

Why is the Price of Food Going Up? 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.”

» Sustainable, dependable agriculture depends on investment, and investment depends on property rights. « 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 06.09-07.09

( 23 )

JEWEL OF COLLABORATION

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

TRUSTING PHOTOSYNTHESIS

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.”

» 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. «

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

( 24 )

06.09-07.09

COLLABORATOR PROFILE

INTERNATIONAL TRADE

Can International Trade

Save the Planet?

By Pietra Rivoli

I

n 1999, extensive and sometimes violent anti-globalization protests brought the meeting of the World Trade Organization (WTO) in Seattle to a halt. The so-called “Battle in Seattle” was a spark that led to a spate of similar protests around the globe.

Over the next several years, dozens of similar protests stymied meetings of a variety of multilateral organizations in North America, Europe, and Asia.

some protests continued, the stage had quieted considerably.

A very visible segment of the anti-globalization movement, however, was alive and well in 2009: the environmental movement.

Liberal trade, the protestors argued, imperiled not only working conditions but also the environment. A staple of the news in 1999-2005 were protestors dressed as sea turtles or polar bears, signifying the threat to the natural world from rapidly globalizing exchange of goods and services. These concerns continue to dominate debate today.

While it was easy to see that the protests were rooted in anger and dissatisfaction, it was more difficult to see clearly what, exactly, the antiglobalization protestors were against. The anti-globalization movement was not a single movement, but was instead an amalgamation of causes brought under a single umbrella.

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

( 26 )

06.09-07.09

» The anti-globalization

Photo: John G. Mabanglo

One target was clearly the policies of the World Bank, International Monetary Fund (IMF) and WTO, all of which had free trade agendas.

But the protests targeted not only the policies, but also the alleged anti-democratic processes with which these organizations operated. Another visible target was the multinational corporations with their far-flung global supply chains. These supply chains encouraged a “race to the bottom” in global labor standards, according to the protestors, and fostered the proliferation of “sweatshops” in poor countries. And the antiglobalization movement also contained a variety of labor constituencies, many of which had suffered from competition with low wage labor in other countries.

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

movement was not a single movement, but was instead an amalgamation of causes brought under a single umbrella. «

A Foe… The arguments that link liberal trade to deterioration in the environment are straightforward. First, international trade increases the overall level of economic activity on the planet. More trade leads to higher incomes, and therefore to more production and more consumption, all of which consumes more energy and generates more waste, while increasing climate-threatening emissions. Further, the transportation

» This argument linking increased trade

with environmental harm is known as the scale effect: since trade increases the scale of economic activity it will carry environmental costs. « involved in getting goods from one country to another carries its own environmental costs. This argument linking increased trade with environmental harm is known as the scale effect: since trade increases the scale of economic activity it will carry environmental costs.

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

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

Perhaps, however, there is hope for the turtles in a liberal trade regime.

A Friend…

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

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

Second, there is much evidence that suggests that the richer we become, the more environmental quality we demand. While the very poor are more concerned with survival, the wealthy are willing to pay

for clean water and air. This dynamic has clearly been at work in Europe and the U.S. in recent decades: the richest countries predictably have the most stringent environmental regulations. Economist Arik Levinson found that for the 30-year period ending in 2002, total pollution emitted by U.S. manufacturers fell by 60 percent, even as manufacturing output rose by 70 percent. Levinson concluded that the drop in emissions was the result of stricter environmental regulations, not from “dirty” industries shifting abroad.

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

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

06.09-07.09

( 27 )

COLLABORATOR PROFILE

INTERNATIONAL TRADE

Not long ago I spoke with a former executive of a global textile concern.

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

» For the 30-year period ending in 2002, total pollution emitted

by U.S. manufacturers fell by 60 percent, even as manufacturing output rose by 70 percent. «

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

Will liberalizing trade be enough to save our planet? Of course not. None of the arguments above are meant to minimize our environmental challenges, only to suggest that the forces of trade and globalization can be harnessed for environmental sustainability, rather than assumed to be a part of the problem.

One other factor also comes to bear on this debate. Not all political systems are equal when it comes to the relationship between trade and the environment.

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

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

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

( 28 )

06.09-07.09

SAVE THE DATE U.S. Chamber of Commerce TradeRoots

NE VOICE FOR TRADE O c t o b e r 8 – 9 , 2 0 0 9 | Wa s h i n g t o n , D. C.

A WORLDWIDE FORUM TO: Unite Leaders Expand Partnerships Promote Business

Program agenda will be re releasedd in the ccoming ming w weeks. ee For 202-463-5511 For additional information, in o ation, contact TradeRoots at 202-463 3-55511 or vvisit isit www.traderoots.org. w .traderoot

To register: www.regonline.com/onevoice

JEWEL OF COLLABORATION

CONNECTING INTERNATIONALLY

Connecting

Internationally Why the U.S. is Made for Trade By John Castellani

I

n today’s international economy, working together with other 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

( 30 )

06.09-07.09

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

» Disentangling

ourselves from our international web of connections would be impossible. «

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.

» Truth be told, we need each other. “Connection” and “Collaboration”– the key themes of this publication – are what keep our nation healthy. « 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. 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.

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

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.

06.09-07.09

( 31 )

JEWEL OF COLLABORATION

» If

CONNECTING INTERNATIONALLY

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. « ( 32 )

06.09-07.09

economic developments and issues such as labor and the environment.

We also should take advantage of a wealth of new, more f lexible 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.

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

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.

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,

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.

“ Trade is vital to our competitiveness, and it is critical to our goal to grow a business as great as our products.”

- Bob Lane, Chairman and CEO, Deere and Company

John Deere Is an International Company • John Deere’s business is integrally involved in the international economy. Today, Deere manufactures in 28 countries, including the United States, and serves customers in 130 countries.

• John Deere works directly and indirectly with 30,000 suppliers worldwide and spends more than $12.6 billion per year obtaining high-quality parts and components for its factories and on to its dealers.

• In the United States, John Deere employs more than 32,000 people and overall employs nearly 58,000 people.

• Optimization of production, marketing and sales activity on an international scale is critical to the overall viability of the enterprise. Deere is a strong proponent of open economies and economic integration.

International Markets Offer Significant Potential for Growth • Export markets are critical to Deere’s U.S. manufacturing operations. Last year, export sales of U.S.-made Deere equipment exceeded 16 percent of total new equipment sales. Today, roughly one of every three tractors produced at Deere’s Waterloo, IA, plant are exported to customers across six continents. One in four combines manufactured in East Moline, IL, are exported.

• Operating internationally expands employment opportunities for employees who work on products marketed overseas. An example is the company’s recent announcement of a multimillion dollar investment to expand manufacturing capacity some 30 percent at Harvester Works in Moline and Waterloo Works (25 percent) to meet growing worldwide demand for large combines and agricultural equipment. Participating in a growing international market allows the company to sustain and expand jobs here at home.

DuPont - America’s Oldest International Corporation ... and Its Most Innovative • DuPont was founded in 1802 and is presently a world leader in science and technology in a range of disciplines, including biotechnology, electronics, materials science, safety and security, and high-performance synthetic fibers. In 2007, its worldwide net sales were almost $30 billion, and it employed 60,000 people worldwide, with about half of them in the United States.

• DuPont operates internationally, manufacturing a wide range of products for distribution and sale to many different markets, including transportation, safety and protection, construction, motor vehicle, agriculture, home furnishings, medical, electronics, communications, protective apparel, and the nutrition and health markets.

International Operations Are Critical to DuPont’s Third Century and Beyond • Sales outside the United States now constitute 62 percent of all DuPont sales. In 2007, DuPont achieved 18 percent of its growth outside the United States, and in the same year, DuPont exported more than $1.6 billion worth of goods and services manufactured or created in the United States. This represented an increase of 20 percent of DuPont’s exports from the United States over the previous year.

• These numbers illustrate a fact too often ignored by politicians and some portions of the American public: Liberalized international trade, particularly the ability to enter overseas markets, supports DuPont’s American workers and ensures their future prosperity.

• DuPont presently has manufacturing, technology or service center sites in more than 40 countries and does significant business in more than 70 nations in all regions of the world.

Excerpt from International Engagement: How American Workers & Business Succeed in the Worldwide Economy. By Business Roundtable, September 2008.

06.09-07.09

( 33 )

JEWEL OF COLLABORATION

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

CONNECTING INTERNATIONALLY

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

» 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. « 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

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.

( 34 )

06.09-07.09

LET’S RETHINK THE BOUNDARIES OF BUSINESS SCHOOL.

Join Us. Maybe it’s time to redraw the map.

Change the lens. Change perspective.

And replace the frames of regionally predicated education with a new global looking glass.

Join us as we create a new form of business school uniquely relevant to the 21st century.

After all, the world’s most pressing business issues have no boundaries.

So why should a business school?

London St. Petersburg Shanghai Dubai New Delhi Durham

Learn more about the Duke MBA at www.fuqua.duke.edu

RETHINKING THE BOUNDARIES

JEWEL OF COLLABORATION

KIMBERLY-CLARK PROFESSIONAL

Reduce Today,

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

A

s 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 firstever 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. KimberlyClark Professional is aligned with the company’s commitment to sustainability at all levels of its business strategy and decisionmaking processes.

“Our ongoing efforts to achieve superior 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, companywide 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

( 36 )

06.09-07.09

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

» The truth is, reducing impact on the environment is much broader and more nuanced than measuring the recycled content of a product. «

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-

06.09-07.09

( 37 )

JEWEL OF COLLABORATION

KIMBERLY-CLARK PROFESSIONAL

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, “KimberlyClark 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 SmartWaySM Transportation Partnership.

The EPA recognized Kimberly-Clark for its leadership in conserving energy and lowering greenhouse gas emissions through a

( 38 )

06.09-07.09

» Focusing on 100 percent recycled alone does not look at 100 percent of the picture. « 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, KimberlyClark 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 KimberlyClark 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

» 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. «

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 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 oversimplified 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.”

06.09-07.09

( 39 )

JEWEL OF COLLABORATION

COLORADO INTERNATIONAL TRADE OFFICE

Colorado’s International

Trade Office Opening the Door to Exports and Investors By Pam Reichert

I

n 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.

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. 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

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

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

» In 2008, Colorado exported $7.7 billion in manufactured, agricultural and mineral products, to 199 countries, an increase of 4.3% relative to 2007. « ( 40 )

06.09-07.09

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 repackaging. 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.

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 businessmatching services in order to assist them

Pictures from the Asia Economic Development Mission.

» Trade show efforts have equaled over $30 million in immediate export sales, with much more expected over the long term. « 06.09-07.09

( 41 )

JEWEL OF COLLABORATION

COLORADO INTERNATIONAL TRADE OFFICE

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

» Foreign majorityowned companies in Colorado employ close to 76,000 people and pay 15 percent higher wages on average. « 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. ( 42 )

06.09-07.09

MISSION ASIA What does Colorado, a landlocked state 5,792 miles from the Asian continent, and Japan and China have in common? More than you can imagine. And this was well before the International Trade Office and numerous state economic development and business partners came together to request that Governor Bill Ritter, Jr. lead a delegation to those two countries to highlight Colorado’s economic development strategy to build a twentyfirst century economy around renewable energy, bioscience and tourism. Here are just a few examples of existing ties to the region: • The Colorado Tourism Office has an effective marketing program in place attracting Japanese and South Korean tourists to vacation in our state.

• Colorado has an active Japanese Firms Association and the Japan-Americas Society of Colorado, promoting mutual understanding and commerce between the people of Japan and Colorado at a grassroots level.

• The State has a sister relationship with Yamagata Prefecture in Japan and the City of Denver maintains a sister city relationship with Takeyama.

• The National Renewable Energy Laboratory’s program with China has helped to promote renewable energy and energy efficiencies technologies, specifically rural energy, wind energy, geothermal energy and renewable energy business development, in addition to more general policy and planning support.

• Colorado’s public research institutions are building relationships in Japan and China for research partnerships as well as to recruit foreign students.

• China is becoming a global investor and it represents an attractive export market for Colorado companies in certain industries.

• Japan and China are two of Colorado’s top five trading partners, and Japan is the 7th largest foreign investor in Colorado.

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 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. «

Pictures from the Asia Economic Development Mission.

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.

A Colorado delegation meets with Toronto business executives at a roundtable luncheon to promote Colorado and discuss potential areas of economic cooperation in November 2007.

06.09-07.09

( 43 )

COLLABORATOR PROFILE

SECRETARY CARLOS GUTIERREZ

The State of

Trade in the U.S. An Interview with Secretary of Commerce Carlos Gutierrez By Jan Mazotti

A

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

It’s getting weaker by the day. Every time the G20 countries have gotten together, they mention that we’re all going to avoid protectionism and the U.S. has been right there. I believe that President Obama made a statement when he went to Canada as well. And little by little our foreign trade partners are seeing that protectionism is creeping in, especially related to the spending on the stimulus package. What this will do is promote retaliation – countries will be forced or will be in a position to retaliate – and we’re going to lose the most. It’s not just trade, it’s also foreign investment. We spent decades opening up markets, convincing ( 44 )

06.09-07.09

foreign officials to open their markets to U.S. investment, to U.S. trade, to trade from all over the world. Now, as we backtrack, it is a lot of work that is being undermined because of these protectionist measures.

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

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

that component that comes from overseas. The problem is that we don’t make that component in the U.S. There is confusion in the interpretation. Some local officials are interpreting it in different ways, some states and localities are interpreting the package as 100% of the components of the product have to be made in the U.S. So, it is very self defeating because you could have a component that is made overseas within a given product but the product is made in the U.S. by U.S. workers, yet is being denied by those administering stimulus projects. It gets very confusing, and the bottom line to our trade partners is that it’s getting more difficult to do business in the U.S. In turn, they are making it more difficult to do business in their countries too.

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

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

One immediate thing the U.S. government can do is to pass the three pending free trade agreements. Columbia’s FTA has been around the longest – probably two years – which is very ironic because Columbian goods come to the U.S. duty free, but our products pay a duty going into Columbia. In spite of that, Congress will not put it up for a vote - so our exporters are paying extra duties every day that goes by. More importantly, Columbia is a good ally and there are just so many good reasons to do this. There’s another pending free trade agreement with Panama. Panama is about to have a massive expansion of the Panama Canal which will be very good for the hemisphere and good for trade, but we’re sitting on this agreement because there are constituents that don’t like free trade agreements, such as unions, so they are pressuring the administration to stay away. The last pending agreement is with South Korea. Signing this would be a very powerful signal to the world that we’re serious.

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

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

Although we export close to $2 trillion if you add goods and services – we are still underdeveloped in terms of exports when compared to other countries – like Germany and Singapore.

Exports are very important to us but we can export more. The administration recognizes that as we look forward and say, “how are we going to grow?” it’s going to be tough to grow through more consumer spending, because we know that will most likely be curtailed over the next several years. Business spending will follow consumer spending – so the one part of our GDP where we can grow is exports. That’s the big opportunity. In order to grow our exports, we have to be willing to be open to imports, because it’s a two-way street. It’s an opportunity that can help us grow our way out of this recession but we have to be aggressive. We have to send signals and we have to take a proactive stance – not just through passive ways of saying we’re not going to be protectionists.

» Panama is about to have a massive expansion of the Panama Canal which will be very good for the hemisphere and good for trade, but we’re sitting on this agreement because there are constituents that don’t like free trade agreements. «

Using Columbia as the example, why isn’t Congress addressing these open FTAs?

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

» It’s fine to say we’re not protectionists, but we’ve got to back it up with actions and we need something that’s not as passive as simply saying that we’re not going to be protectionists. «

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

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

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

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

06.09-07.09

( 45 )

COLLABORATOR PROFILE

SECRETARY CARLOS GUTIERREZ

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

I believe his primary challenge will be to get trade on the agenda.

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

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

I think it’s a combination. It has to be pressure from the business community, pressure from members of Congress, even pressure from the foreign policy establishment that these are agreements with allies and these are important for our allies. For example, the President of Columbia has been tremendously supportive of the U.S., he’s been a close ally and close friend of the U.S. – he has said that this is the most important thing that the U.S. can do for Columbia is pass this free trade agreement. So, we’re basically

» In order to grow our exports, we have to be willing to be open to imports, because it’s a two-way street. It’s an opportunity that can help us grow our way out of this recession. « letting that slip away. The President of South Korea has almost lost his Presidency as a result of this free trade agreement. He took a very big risk to have a free trade agreement with the U.S. and we’re basically turning our back on him. There are a lot of very good reasons. Another thing that I’ve heard that gives me a bit of optimism is when administration officials, Larry Summers for example, say, that he considers exports to be an important component of growth. If that is true, then that leads us to an active trade agenda.

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

Well it’s absolutely critical, because if there is one thing that we’ve learned from this recession is that there is no such thing as decoupling.

There is no such thing as a country that can say this doesn’t affect me – this isn’t my problem. I suppose the countries that aren’t affected are North Korea and Cuba because they don’t take part in world trade, so therefore they’re not affected. But every other country, whether it’s China, the European Union, Latin America, we’re all in this together.

There is no question that we need to be committed to globalization because it hurts us all and when the recovery comes, it will help us all so in that respect collaboration across countries and companies is absolutely necessary.

( 46 )

06.09-07.09

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

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

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

Companies have competitors, and it’s not so much that the country competes with another country but U.S. companies compete, in some cases, with Chinese companies, and European companies, so it really depends on the industry. Generally speaking, competition

» If there is one thing that we’ve learned from this recession is that there is no such thing as decoupling. There is no such thing as a country that can say this doesn’t affect me – this isn’t my problem. «

will come from countries like China, Japan, Korea, the big markets that are developing their own industries and of course the European Union – where there are not only small manufacturers and exporters, but there are big multi-national firms that compete with our firms – like Mercedes Benz, and the Swiss food companies. But I would say the biggest competition comes primarily from the European Union, China, Korea, and Japan.

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

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

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

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

» Real social justice, I believe, is giving people the opportunity to grow on their own and not to be dependent on their government for everything they have and everything they do. «

You’ve said, “Government does not employ most Americans, nor should it. The innovative and entrepreneurial engine of America resides primarily in the private sector.” Then, you talk about three key elements, encouraging entrepreneurship, lowering trade barriers, and learning from the experience of others – especially regional and state-level officials.

Can you expand on that thought and describe if the elements are still the same and how?

Those elements are even more important today because we’re actually going in the opposite direction today. There is almost a sense that government can provide the jobs and fill the vacuum that isn’t getting filled by the private sector – and it’s a big trap because our economy is only as good as the return we get on every single investment we make. And the private sector has to get a return on their investment – otherwise they go out of business. The government doesn’t . And, a lot of what the government spends is not profitable so it’s not money that makes our economy stronger over the long term – it’s kind of a one-time investment. So, we are falling into the trap of making the government a bigger component of the economy and having more jobs in the hands of government.

There will most likely be a tax increase on

» Our economy is only as good as the return we get on every single investment we make. « businesses making over $250,000 a year, which includes a lot of businesses. That flies in the face of entrepreneurship – it becomes an obstacle for entrepreneurs and small business creation and growth.

In fact, 50% of all new jobs in our country are created by businesses that are less than 5 years old. And, small businesses employ over 50% of all Americans. A lot of people think this is about multi-national firms, it really isn’t. It’s about small entrepreneurial companies that grow, provide jobs, and support economic vitality.

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

06.09-07.09

( 47 )

BUILDING BRIDGES

CANADA AND MEXICO WEIGH IN ON NAFTA

Why Open Trade Matters for

North America’s Prosperity

Prime Minister Stephen Harper (Canada) with President Felipe Calderón (Mexico).

NAFTA at fifteen

F

The Mexican Perspective

By Eduardo Arnal, Cónsul General of Mexico in Denver

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. ( 48 )

06.09-07.09

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.

Simultaneously, 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.

A Story of Success: MABE The regional integration of the household appliance sector is an example of success under NAFTA. Today, Mexico is the leading supplier of household appliances to the United States and Canada, delivering high quality home and kitchen appliances such as ranges, refrigerators, dryers and washing machines to meet the needs of million of consumers in the NAFTA region.

The Mexican firm MABE, which opened its first small shop in Mexico City back in 1946, is now considered a leading global appliance supplier. The first big step of the company to integrate into the North American market was the consolidation of a strategic joint venture with General Electric in 1987.

Ten years later and thanks to the business-friendly framework created by NAFTA and the elimination of barriers to trade, this venture secured MABE and GE as leading manufacturers of gas ranges and refrigerators in Mexico and the United States. Today MABE is the design center of 100% of the stoves that GE sells in the U.S. Together, both companies have reaped great rewards in terms of quality, innovation and technology.

As a result of expanding business opportunities in North America, MABE acquired Canadian appliance company Camco to consolidate operations in 2005. Today, the company has a strong presence in the NAFTA region. In Canada, it has 17% of the market share with a total of nearly 1 million units sold in the last years. In the U.S. it has achieved a placement of 3.5 million units through export sales, while in Mexico it has the 47% of the market share and around 3.5 million units sold.

NAFTA empowered MABE to join forces with other North American industry leaders to deliver products and professional expertise, with transactions valued at around $2 billion.

With information obtained from: 1. MABE, available at http://www.MABE.cc/portal/main.aspx?idioma=143 2. NAFTA NOW, available at http://www.naftanow.org

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).

06.09-07.09

( 49 )

BUILDING BRIDGES

CANADA AND MEXICO WEIGH IN ON NAFTA

The Canadian Perspective

By Dale Eisler, Consul General of Canada

“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.

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.

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.

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.

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

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.

( 50 )

06.09-07.09

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.

$200 $150

$50 $0

Export

Balance

Machinery 16.52% Electrical Machinery 9.23% Mineral Fuel, Oil 6.3% Plastic 4.38% Optic, Med Instr 3.06% Iron and Steel 2.61% Other 40.54% Vehicles 17.34%

2008

2006

2004

2002

2000

1998

1996

1994

-$50 -$100

PRINCIPLE U.S. EXPORTS TO CANADA IN 2008

Source: Bureau of Economic Analysis

$100

1992

billions of dollars, months seasonally adjusted

U.S. TRADE: THE BIG PICTURE $250

Imports

Source: World Trade Atlas

U.S. Trade: The Big Picture The above chart 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.

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.

PRINCIPLE U.S. IMPORTS FROM CANADA IN 2008 Vehicles 14.16% Machinery 6.45% Plastic 3.19% Electrical Machinery 2.97% Paper, Paperboard 2.87% Aluminum 2.76% Other 34.27% Mineral Fuel, Oil 33.33%

U.S. EXPORT GROWTH $500,000

billions of dollars

$375,000 NAFTA Rest of World EURO 27 Other bilateral China Japan DR-CAFTA

$250,000

2008

2006

2004

2002

2000

1998

1996

1994

1992

$0

1990

$125,000

Source: International Trade Administration, U.S. Department of Commerce

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 exports, in other words growth in the “stuff” the United States sells

Source: World Trade Atlas

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.

06.09-07.09

( 51 )

BUILDING BRIDGES

CANADA AND MEXICO WEIGH IN ON NAFTA

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.

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.

“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

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

Consulate General of Canada in Denver 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.

( 52 )

06.09-07.09

JEWEL OF COLLABORATION

CAFTA-DR

CAFTA-DR:

a Resounding Success Accord is a “Win-Win” for Workers, Farmers, and Companies By John Murphy

L

ast 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.

projected to surpass $26 billion in 2008.1 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 CAFTADR 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. In fact, the six countries purchased more U.S. exports than Russia, Indonesia, and South Africa combined.

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, the

» 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. «

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 CAFTADR 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 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.

( 54 )

06.09-07.09

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.

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

» 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. « 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.”

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

U.S. Exports to Central America and the Dominican Republic, 2005-2008 (thousands of dollars and percentages) TOTAL Electric machinery Fuels Other machinery Plastics Cotton yarn, fabric Cereals Vehicles Knit fabrics Paper products Medical & optical instruments Knit apparel Animal feeds & other food waste Precious stones Manmade staple fibers & fabrics Manmade filaments, fabrics Non-knit apparel Animal & vegetable oils & fats Chemicals Iron & steel articles Fertilizers Other foods Organic chemicals Meats Paints, tanning materials, dyes Rubber articles Oilseeds, fruits, other grains

2005 16,826,889 2,347,981 2,608,337 1,585,277 976,582 1,006,483 759,731 506,034 867,476 584,083 508,919 868,513 231,639 309,964 252,799 165,077 450,109 104,267 116,527 121,460 111,049 132,273 124,164 91,301 95,877 85,122 111,225

2006 19,603,498 2,913,893 1,700,110 1,842,277 1,150,508 1,147,357 944,579 627,107 727,778 687,888 579,755 740,247 296,196 377,067 262,887 214,052 286,928 129,731 138,369 132,490 119,424 187,190 128,990 97,362 111,177 107,924 106,561

2007 22,412,939 3,450,776 2,771,911 2,131,049 1,286,049 1,214,426 1,192,854 854,174 770,887 751,822 675,084 479,909 385,163 383,683 281,370 238,850 221,363 190,899 182,098 170,582 164,521 162,441 151,791 142,004 137,317 135,213 129,865

2008* 26,016,892 3,662,771 3,686,642 2,248,418 1,467,944 1,354,698 1,648,786 853,393 811,030 815,379 682,112 266,749 554,837 423,275 352,755 224,694 184,927 326,323 216,771 207,213 249,294 160,586 205,581 162,731 152,274 151,180 149,218

% Change 2005-2008 54.6% 56.0% 198.6% 41.8% 50.3% 34.6% 117.0% 68.6% -6.5% 39.6% 34.0% -69.3% 139.5% 36.6% 39.5% 36.1% -58.9% 213.0% 86.0% 70.6% 124.5% 21.4% 65.6% 78.2% 58.8% 77.6% 34.2%

Source: Foreign Trade Division, 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.

06.09-07.09

( 55 )

JEWEL OF COLLABORATION

CAFTA-DR

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 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. CAFTA-DR is not a panacea for the textile and apparel sectors or for any other sector, but it has given these industries a fighting chance.

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 CAFTADR’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.

» CAFTA-DR is not a panacea for the textile and apparel sectors or for any other sector, but it has given these industries a fighting chance. « 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 3

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

Export diversification statistics provided by the Embassy of El Salvador, Washington, D.C.

( 56 )

06.09-07.09

FDI Inflows to Central America & the Domincan Republic, 1993-2007 (millions of dollars & percentages) Costa Rica Dominican Republic El Salvador Honduras Guatemala Nicaragua

1993-1997* 343 266 22 65 89 100

1998-2002* 552 99 448 259 325 235

2003-2007* 1,082 1,160 555 608 280 262

2006-2007* 1,679 1,579 873 745 445 309

% Change 2006-2007 vs 1998-2002 204% 58% 95% 188% 37% 31%

Source: United National Economic Commission for Latin America and the Caribbean (ECLAC), estimates based on official figures as of April 30, 2008. *Annual averages.

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.4 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.

» 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. «

4

Foreign Investment in Latin America and the Caribbean 2007, United National Economic Commission for Latin America and the Caribbean (ECLAC).

06.09-07.09

( 57 )

JEWEL OF COLLABORATION

THE BIG MOVE

The Big Move Highlights and Current Developments for Businesses Considering International Expansion By Alex Furman, Gayle Strong, Robert Stang, & Richard Petkun

E

xpanding 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

» 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. « ( 58 )

06.09-07.09

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

» Compliance with trade regulations can be complicated and costly, but the alternatives are certainly worse. « 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

06.09-07.09

( 59 )

JEWEL OF COLLABORATION

THE BIG MOVE

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.

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

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.: 1. Proper tariff classification of the goods under the U.S. Harmonized Tariff Schedule.

2. Proper valuation of the imported products.

3. 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.

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,

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

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, ( 60 )

06.09-07.09

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.

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.

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, revenueraising provisions would include the following: 1. A new statutory mechanism would be enacted to limit the benefit of most deductions associated with overseas income. The

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.

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.

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.

» 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. «

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-

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.”

2. Additional restrictions on a U.S. taxpayer’s use of double tax relief (“foreign tax credits”) would be enacted.

3. 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.

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.

06.09-07.09

( 61 )

JEWEL OF COLLABORATION

U.S.-CUBA POLICY

A New Direction for

U.S.-Cuba Policy

By Jake Colvin

F

or 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 highlycontrolled, propaganda-filled package tours arranged by the government of North Korea, but outlaws tourist travel to Cuba altogether. ( 62 )

06.09-07.09

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. In spite of the embargo, the United States is now Cuba’s largest source of

foreign agricultural imports, which topped $700 million in 2008.

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.

» In spite of the embargo, the United States is now Cuba’s largest source of foreign agricultural imports, which topped $700 million in 2008. «

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

» 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. «

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, nonCuban Hispanics – who tend to disagree with U.S. policy towards Cuba – now out number Cuban 06.09-07.09

( 63 )

JEWEL OF COLLABORATION

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.

U.S.-CUBA POLICY

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 ( 64 )

06.09-07.09

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.

» The Obama Administration and Congress should rip off the bandaid 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. «

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

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.”

COLLABORATOR PROFILE

SIROLLI INSTITUTE

No Geography

to Passion Enterprise, Entrepreneurship and Their Role in The Global Economy

By Dr. Ernesto Sirolli

T

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

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

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

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

( 66 )

06.09-07.09

Ernesto Sirolli in Scotland

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

trading and commercial associations, banks and mutual aid societies, laying the historical foundations for the modern region that is Emilia Romagna today - the 8th wealthiest region of Europe.

CIVIC SOCIETY

In Calabria, like in most of the south, impoverished and landless peasantry had neither advantage nor opportunity to work with their neighbours.

Their only possibility of advancement came from obtaining more or better land from the feudal lord and that could be only obtained at a neighbors’’ expense. In the absence of horizontal solidarity (neighbor to neighbor) survival depended on vertical dependence (ingratiating oneself to the feudal lord), which in turn led to isolation, hopelessness and constant fear.

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

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

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

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

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

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

One thousand years ago, according to Putnam, Emilia Romagna, the “best” Italian region, and Calabria, the “worst”, were equally wealthy.

The difference was in who owned that wealth. In the north, free men owned the land, traded freely and governed their own cities. In the south, the rich timber, agriculture, mining and fishing resources were owned by a succession of feudal lords who ruled over an impoverished peasant population, which was both landless and helpless.

The free men of the north developed skills essential to their economic and political survival. They cooperated, they worked together, and they built their own fortified cities to protect themselves and each other from foreign invaders. Because they had to fend for themselves, they had to develop bonds of solidarity and mutual assistance to survive, and in the process they learned to govern themselves, to form

Poor, fearful of their neighbours, with no possibility of either economic or political advancement, Italian southerners developed unique ways to cope with their predicament.

None brought them wealth, but some gave them the short-term satisfaction of achieving summary justice and revenge. After all, it was those people who created, maintained, and still abet the most notorious criminal organization in the world: the Mafia.

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

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

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

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

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

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

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

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

06.09-07.09

( 67 )

COLLABORATOR PROFILE

SIROLLI INSTITUTE

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

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

But if it is true that a wealthy economy is an entrepreneurial economy then civic leaders have to recognize that infrastructure development, even though essential for entrepreneurship to occur, is not sufficient for entrepreneurs to appear and prosper.

The infrastructures mentioned above are like oxygen, a precondition for life to appear, but not life itself.

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

ALONE NO MORE It is scandalous that 80% of new businesses fail in the first two years of activity. The ‘second leg’ of development has to be as competent and relevant as the ‘first’. All information relevant to business failures point to one, overwhelming cause - lack of management.

This is because, astonishingly, even in the most advanced and industrialized countries management is taught differently to those who go to work in the corporate world from those who intend to start a new business. Entrepreneurs are told to follow their dreams bravely, but they battle long odds. The statistics tell the hard truth: in North America, 80% of start-up businesses fail within their first year of operation.

Since 2002, five Kansas projects involving 28 countries have begun using Enterprise Facilitation to grow their business. The results have been spectacular.

• 94% of the businesses started in these projects are still active • Each project averages 10-15 business startups annually, producing 40 to 60 new jobs each year per project • Average annual project budgets are $70,000 - $90,000, an average of about $2,000 invested per job created • In 2007, the Kansas state government recognized the success of Enterprise Facilitation by passing legislation providing up to 30% of ongoing annual funding for the five projects

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

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

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

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

Dealing with entrepreneurs is different from planning for infrastructures. Actually, • With over 20 years of proven best practices in Australia, according to Peter Drucker: “Planning, as the There is universality to the human condition. the United Kingdom, Canada, and the U.S., Enterprise term is commonly understood, is actually The ‘wish to improve oneself’, the ‘élan vitale’, Facilitation projects around the world retain an average incompatible with an entrepreneurial society or ‘wish to grow’ of which philosophers of 80% - 90% of new businesses after five years and economy. Innovation does indeed need talk, is species wide and is as genetically to be purposeful and entrepreneurship predetermined as our heart beat. has to be managed. But innovation, almost by definition, has to be decentralized, ad hoc, autonomous, specific, and microeconomic. It As soon as conditions permit, healthy people surge with ideas to had better start small tentative, flexible. Indeed, the opportunities improve themselves, to do beautifully what they love to do, to feed for innovation are found, on the whole, only way down and close to their families, to create a better world for themselves and those events. (…) Innovative opportunities do not come with the tempest surrounding them. but with the rustling of the breeze.”

The ‘second leg’ of economic development has to be built to There is a second leg to economic and community development, respond to the creativity and “passion” that is characteristic of which balances the strategic one. This is a bottom-up, responsive leg the entrepreneurial field. And this leg has to be bottom up and which captures the motivation and imaginative intelligence of local responsive. It has to start with entrepreneurs willing to come forward individuals who wish to engage in bona fide economic activities. with their ideas and it has to be tailor-made for them.

Such an infrastructure will be: •C onfidential because entrepreneurs jealously guard their ideas •C onvivial because unless the service is free, friendly and companionable they will not use it •C ompetent because entrepreneurs want to learn how to be successful from someone who has done what they are attempting to do Top down and bottom up, the two legs of development complete and complement each other and propel the economy to sustainability and prosperity.

Ernesto Sirolli is Founder and CEO of the Sirolli Institute.

Contact him at 1.877.sirolli or at www.sirolli.com.

Northeast Kansas client serviced with Enterprise Facilitation

( 68 )

06.09-07.09

Prevent | Prepare | Respond

Crisis Management And Alert Notification Through Your Supply Chain.

+1 612.822.4800 | info@missionmode.com | w w w.missionmode.com

COLLABORATOR PROFILE

UTAH FTZ

The Salt Lake City

Foreign Trade Zone The FTZ Provides Cost Savings Opportunities and Supports Global Businesses By Brandi Hanback

I

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

“We are pleased to be working with the Rockefeller Group to reorganize the Salt Lake City Foreign Trade Zone. The Trade Zone is a great location for businesses dealing in international trade and is one of the lynchpins in our plan to fortify Salt Lake City as the leading international city in the Rocky Mountain region. The Zone dovetails nicely with our international airport expansion, global business and cultural relationships, and many other connections that still come into play as a result of Salt Lake City’s role as host city for the Winter Olympics in 2002,” commented Salt Lake City Mayor Ralph Becker.

Salt Lake City

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

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

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

Development plans for the site currently include eight buildings ranging in size from 40,000 square feet to 360,000 square feet. Construction will commence as tenants are secured. The Rockefeller Group will then work with individual tenants as needed to activate the zone and realize FTZ savings.

Individual subzones for existing importers/exporters in the region may also be applied for on a case-by-case basis as circumstances warrant where it is not feasible to move operations to the general-purpose zone.

( 70 )

06.09-07.09

» The Trade

Zone is one of the lynchpins in our plan to fortify Salt Lake City as the leading international city in the Rocky Mountain region. «

The U.S. Foreign-Trade Zones Program has existed since 1934. In times of global expansion and cost cutting strategies to support U.S.-based manufacturing and distribution, interest in the program has intensified.

Combined with a relatively weak dollar and renewed interest by foreign investment in the U.S., economic developers can also leverage the benefits of FTZs to attract jobs and investment and encourage maintenance and expansion of their existing industrial base.

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

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

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

The FTZ program provides importers the ability to apply for

» Economic

developers can also leverage the benefits of FTZs to attract jobs and investment. « clients as we help them implement their expansion, relocation and consolidation strategies, and will help existing Utah companies expand their global reach.”

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

Financial savings from U.S. FTZs are derived from a combination of benefits including traditional savings from duty deferral, reduction and/or elimination along with logistics and supply chain facilitation.

Fundamentally, instead of filing a Customs entry and paying U.S. duty (import tax) when a shipment arrives at a U.S. port, duty payment is deferred until the goods are actually withdrawn from the zone for consumption in the U.S., providing valuable cash flow benefits.

Compare this outcome to the $5.00 in duty due if the Part was Customs cleared upon arrival into the U.S. This represents a 50% reduction in the amount of duty owed in this example and encourages U.S. based production and value added activities.

Over time and volume, the savings can be significant.

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

Value added activity is encouraged in the U.S. while equalizing the duty treatment with products finished abroad and imported into the U.S. without the addition of U.S. labor or inputs.

If finished goods are exported from the FTZ, no U.S. duty is owed except for exports to Canada and Mexico based on an exception provision

06.09-07.09

( 71 )

COLLABORATOR PROFILE

UTAH FTZ

» FTZ usage as part of an integrated supply chain strategy can result in lower inventory levels and expedited movement of goods to and from the zone. « Utah is an Excellent Location for International Business Utah is a hub for air, ground and rail distribution with its primary transportation centers located almost equidistant from all major western U.S. markets.

Salt Lake City International Airport is within a 2.5-hour flight of half of the population of the United States and ranks as the 22nd busiest airport in the United States.

Utah’s road transportation system offers more than 43,000 miles of federal, state and local highways and roads including the critical distribution arteries of I-15, I-80, I-70 and I-84.

There are more than 700 trucking companies in Utah and approximately 2,500 registered carriers that provide one-day and two-day direct services to any point in the continental western United States.

Utah has approximately 1,700 miles of railroad tracks that converge in the Salt Lake-Ogden metropolitan area; the state’s location makes for an excellent interline switching route for shipments destined for West Coast or Eastern and Midwestern main terminals without the need to backhaul shipments.

Salt Lake City offers a fullservice Customs port of entry.

In January 2009, Utah’s unemployment rate was the third lowest among U.S. states at 4.6% (U.S. Bureau of Labor Statistics).

As of July 1, 2008, Utah ranked first in the nation in population growth – at a rate of 2.5% yearover-year.

( 72 )

06.09-07.09

under the North American Free Trade Agreement that applies to manufactured goods in U.S. FTZs.

security at the FTZ to complement government efforts to secure international cargo.

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

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

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

Full security reviews are still in place at the port, based on manifest and advance trade data information, and are supplemented by additional

From an import compliance perspective, by filing Customs entries after goods have been physically received, verified and shipped, high

Debunking FTZ Misconceptions Contrary to popular misconception, it is important to know that:

» FTZs do support many companies’ global initiatives to successfully compete internationally from a U.S. base of operations. «

The FTZ program isn’t just for exporters. In fact, most financial savings associated with FTZs are generated from importing, which results in the ability to stage exports as well as imports competitively.

Foreign and domestic merchandise do not have to be physically segregated and may be commingled or stored together by SKU within an FTZ with proper recordkeeping and reporting systems in place.

There is no on-site presence

by Customs in an FTZ, although the facility is subject to compliance reviews that generally occur once per year.

FTZ users are not audited more than importers at large. A company’s volume, value and nature of product generally dictates whether and when Customs performs an audit not FTZ usage.

FTZ users do not have to report to Customs on a lot or specific identity basis. Other approved methods including FIFO make FTZ reporting flexible and workable without disrupting operations.

FTZ users are not required to have a greater reporting accuracy than importers overall. Overages and shortages as a normal part of business operations are acceptable and may be reported periodically based on established FTZ procedures.

Merchandise may remain in FTZs for an unlimited period of time.

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

volume importers find that FTZs support their Customs compliance efforts by allowing for more accurate Customs reporting and reduced post entry adjustments and amendments.

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

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

Over $500 billion in value of merchandise is received at U.S. FTZs annually and that number

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

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

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

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

06.09-07.09

( 73 )

COLLABORATOR PROFILE

FAIR TRADE COFFEE

Spreading the

Educational Wealth Fundraising Effort at Morey Middle School Provides Lessons in Fair-Trade, Sustainability, and Social Enterprise By: Meg Thams, Ph.D.

Coffee beans are handpicked by the Honduran farmers.

S

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

( 74 )

06.09-07.09

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

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

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

One potential solution came in the form of fairtrade coffee grown and sold by a Honduran farmer-direct cooperative. The Fair Trade initiative is becoming an increasingly important topic in developing countries trying to combat poverty.

As governmental and non-governmental organizations (NGOs) recognize the importance of Fair Trade, consumers are becoming aware of products that are labeled Fair Trade and are beginning to put increased pressure on the corporate world to be fair by providing proper treatment and a livable wage to their workers. That said, independent farmers have great difficulty exporting their product to larger foreign markets because they must operate outside of traditional distribution channels.

These small farmers cannot make a sustainable living selling their coffee crops for the low prices commanded in the commodities environment, where the majority of coffee is bought and sold. This is due to a number of factors including limited crop capacity and the relative power of the traditional retail sector that purchases in huge quantities, and tightly protects costly product shelf space. Under these conditions, farmers often give up their coffee production in favor of more profitable crops (in some cases to drug crops), or leave farming altogether, abandoning their homes, and in many cases their countries, in order to provide for their families.

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

Morey Middle School Community Liaison, Karen Duell (right), and students Nic Nealy

So began the sale of Morey Honduran Coffee, a fundraising project that would bring handpicked, sun-dried, and pesticide-free specialty coffee directly from Honduran farmers and sell it on an ongoing basis during the school year to parents and staff who ordinarily and routinely bought coffee. Because the beans were not traded on the commodities exchange, and because much of the marketing costs were minimized by the collaborative effort of the cooperative, the transfer price to Morey Middle School allowed the school to sell gourmet specialty coffee for a very competitive price, and make a 35% profit on each pound sold.

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

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

It was “viral marketing” at its finest with parents paying a fair price for a gourmet product, the school receiving a fair return for their efforts, students and parents connecting with the global community, and the farmers making a

and Eben Clark sell Morey Honduran Coffee at a parent meeting in February, 2009.

06.09-07.09

( 75 )

COLLABORATOR PROFILE

FAIR TRADE COFFEE

» It was “viral marketing” at its finest with parents paying a fair price for a gourmet product, the school receiving a fair return for their efforts, students and parents connecting with the global community, and the farmers making a living wage from their hard work. «

living wage from their hard work. All this occurred with very little financial investment in packaging, advertising, and logistics.

Morey Middle School’s Community Liaison, Karen Duell commented, “Our after- school Business Club gave our students hands-on business experience while giving to their school at the same time. The students were able to apply a range of business skills that contributed to our school in a meaningful way. The students learned about marketing, money management, public relations, bookkeeping and many other business related skills.

The skills they learned for their future career goals kept them motivated and eager to learn more as they knew they were contributing to a worthy cause and raising funds for their school.

The funds they raised through this club went to assist our students and teachers with much needed supplies and awards. It was a great social enterprise experience for everyone!”

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

Three Regis College students, Keith Wood, Lauren DeRosier, and Chelsea Coalwell, interested in social business applications, then joined the effort by developing a business plan that would extend the coffee fundraising and business club curriculum to other Denver area middle schools.

Working on their own time, and without college credit, these students submitted the social business idea, which required full start-up plans and financial projections, to a business plan competition sponsored by two Denver-area non-profit organizations - Friends of Micro Credit, and Micro Business Development. The students were selected as finalists in the competition and were given scholarships to the Social Business and Microeconomic Opportunities for Youth Conference held in Denver in March, 2008. The conference featured sessions with Nobel Peace Prize recipient Muhammad Yunus, who founded the Grameen Bank, the world’s largest micro-lending operation. The Regis students were given the opportunity to present their work at the conference, and met personally with Yunus regarding their project.

The concept of social enterprise is gaining steam as one possible means of addressing chronic unemployment, and poverty in general. The Honduran farmer-direct cooperative, whose product we supported in the fundraising effort, is itself a micro-enterprise.

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

Mo rey rti se wo rki ng wi th ise r. the ir cre ati ve ex pe dra ted fun na do the ve for ati s ial Cre sin g ag en cy, Howe els an d sal es ma ter rti lab ve the ad a in are ed us errk nv De art wo nts to deve lop the Bu sin ess Clu b stu de ( 76 )

06.09-07.09

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

Earth, Energy, Environment

Mines occupies a unique role in the educational fabric of Colorado and the nation. The school, which was founded in 1874 to serve the needs of the local mining industry, was the first public institution of higher learning to open its doors in Colorado. Since then the school has gained an international reputation for excellence in engineering education and the applied sciences with special expertise in the development and stewardship of the Earth’s resources. Mines is a focused institution with an outstanding faculty and student body of some 3,400 undergraduate and 950 graduate students. Mines graduates have gained prominence in industry, academia and research institutions throughout the world.

www.mines.edu

JEWEL OF COLLABORATION

CORRUPTION IN EMERGING MARKETS

Guarding Against Corruption

In Emerging Markets

By Kimberly Reed

A

s 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. anticorruption 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, ( 78 )

06.09-07.09

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?

» Virtually all emerging

markets have specific laws against such illegal payments to officials, though these laws are frequently and even flagrantly ignored. «

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).

Interpreting TI’s findings, it may be generalized that corruption is more prevalent in dictatorships and very young democracies in 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.”

» It

may be generalized that corruption is more prevalent in dictatorships and very young democracies. « 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.

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: 1. 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” 06.09-07.09

( 79 )

JEWEL OF COLLABORATION

CORRUPTION IN EMERGING MARKETS

» Company

ethics policies and procedures should include not merely platitudes about operating ethically, but also specific examples of acceptable and unacceptable conduct. « 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.

2. 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.

3. 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.

4. 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. 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.

5. 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.

6. 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.

7. 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

» Whistle-blowing should be encouraged with respect to bribery and corruption, given the very high stakes. « ( 80 )

06.09-07.09

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.

8. 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.

9. 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

» 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. «

so long as it finds the business environment favorable.

10. 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.

06.09-07.09

( 81 )

JEWEL OF COLLABORATION

USMEF

U.S. Meat Export

Federation

Building Global Markets for U.S. Pork and Beef By Philip Seng with Joe Schuele

Nebraska grain farmer and cattle feeder Mark Jagels says meat exports offer tremendous benefit to his bottom line

I

t 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

( 82 )

06.09-07.09

» In the first quarter

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

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.”

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

» 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. «

Philip Seng joined the U.S. Meat Export Federation in 1982, becoming president and CEO in 1990

» 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. Thanks to that foresight, those markets are now paying excellent dividends for U.S. agriculture. «

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.”

06.09-07.09

( 83 )

JEWEL OF COLLABORATION

USMEF

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 ( 84 )

06.09-07.09

In Russia, chefs prepare for a cooking demonstration featuring U.S. beef

Consumers in the Middle East enjoy samples of U.S. beef liver, which commands a premium in overseas markets

» 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. «

FoodEx Japan – Asia’s largest annual food exposition – provides an excellent showcase for U.S. beef and pork products

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.

CONSULATE GENERAL OF HUNGARY PROVIDING THE FOLLOWING SERVICES IN COLORADO AND WYOMING: Promotion of commerce and economic ties between companies in Colorado, Wyoming and Hungary Cultural and educational events and exchanges Consular services, such as passports, visas, notarizations and assistance to Hungarian nationals Promotion of tourism and distribution of tourist information Organization of trade conferences Organization of programs for trade and political delegations in Colorado, Wyoming, and Hungary

FACTS ABOUT HUNGARY:

CONTACT:

Population 10 million

Eugene F. Megyesy, Jr. Consul General

Located in Central Europe Historic role in ending Cold War – 1956 Hungarian Revolution and opening of Iron Curtain in 1989 Primary industries: pharmaceuticals, agriculture, high tech/communication, auto manufacturing, and tourism Member of European Union and NATO

Honorary Consulate General of Hungary 1700 Broadway Suite 2100 Denver, CO 80290-2101 Phone:(303) 861-8013 Fax:(303) 832-3804 emegyesy@duffordbrown.com

JEWEL OF COLLABORATION

RUSSIA AND THE GLOBAL ECONOMIC CRISIS

Russia and the Global

Economic Crisis

By Deborah A. Palmieri, Ph.D.

R

ussia, 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 ( 86 )

06.09-07.09

» 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. «

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.

06.09-07.09

( 87 )

JEWEL OF COLLABORATION

RUSSIA AND THE GLOBAL ECONOMIC CRISIS

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 anticorruption 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

( 88 )

06.09-07.09

» 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. « 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 equalled 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

Bottom Line Outlook on Russia and the Economic Crisis What’s Ahead?

Structure of Russia’s Foreign Trade (2009)

The crisis hasn’t bottomed out yet, neither for Russia nor the U.S. or the global economy. More defaults and problems are likely. Meaningful recovery is about 2 years out, and then another year to equilibrium.

Russia is well-positioned to weather the storm and is competently searching for solutions. Russia is holding its own. A long history of coping with adversity has made it a strong and resilient country.

Future-oriented, growth-driven companies seeking new markets and profits will find Russia a good bet, so long as they are looking for the long-term and not pressured to deliver short-term results. Companies should think independently of media stereotypes.

Foreign companies should stay put if already in Russia or get into Russia and plan for future expansion to stay ahead of the curve. Down markets generally offer a good time to enter cost-effectively. The economy and market will recover and Russia will continue to grow and modernize. It remains an untapped and undervalued market.

If you understand the characteristics of smart companies who thrive in Russia you can increase your probability for success: • They adapt the right model for Russia.

• They understand where to go for reliable information.

• They are prepared to weather the current storm.

• They have a zest for problem-solving.

• They have long-term commitment and perspective.

• They see opportunity in adversity.

take advantage of reduced tariffs and benefits among Exports Imports member countries. Russia Food & Agricultural Products 2.7% 17.2% has applied since 1993 Mineral Products 67.7% 3.1% (it was then the General Chemicals 7.3% 15.1% Agreement on Tariffs and Wood & Pulp 2.8% 3.1% Trade or GATT). Until early June 2009, Russia was part Textiles 0.1% 7.8% of a number of bilateral and Metals 13.1% 5.8% multilateral commitments Machinery & Equipment 4.5% 43.1% and has cooperated with the Other 1.7% 4.8% WTO’s Working Party on Source: State Customs Service Russia. But it has still not been approved by the WTO General Council for accession (see www.wto.

Russia: heavy exports in the area of mineral ru, Russia’s official website on the issue for products and metals, and imports heavy in more details.) food products, machinery and equipment In a surprise move announced and chemicals. Russia’s foreign reserves are heavily dependent on the price of oil, which has by Prime Minister Putin on June 9, Russia abruptly abandoned its separate talks with the fluctuated wildly, from a high of $146/barrel WTO, and announced it would be forming a last year, to lows of under $40/barrel. With a customs union with Kazakhstan and Belarus. shrinking global economy, there is less need for The three countries are aiming to launch their Russia’s exports. But as the crisis subsides and customs union on January 1, 2010, and to economics begin to recover, the demand will complete all formalities in forming the customs return. Russia’s import demand will fall, but space by July 1, 2011. This would be the first they are still buying, just less. application to the WTO as a customs union.

Itar-Tass quoted Mr. Putin as stating, “Entry Russia and the WTO into the WTO is our common priority, but we want to do it as a common customs space.”

A key issue for Russia is accession into There are many opinions as to why the World Trade Organization (WTO). It is Russia, the largest economy not belonging important to belong to this organization to

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 06.09-07.09

( 89 )

JEWEL OF COLLABORATION

RUSSIA AND THE GLOBAL ECONOMIC CRISIS

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.

» 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. «

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 Deb@DebPalmieriRussia.com.

( 90 )

06.09-07.09

Utah. “Best State for Business” - Forbes Salt Lake City FTZ by The Rockefeller Group

Salt Lake City – Crossroads of the West

Salt Lake City FTZ #30 / 1105 S. 4800 West • 55 acres • Available for development of 8 buildings ranging from 40,000 to 360,000 s.f.

• Adjacent to Union Pacific Intermodal Terminal; close to SLC International Airport and multiple interstate arteries

The Rockefeller Group provides everything needed for a start-up, turn-key Foreign Trade Zone facility.Tenants choose from six pad-ready locations on the East and West Coasts and in Mid-America.They benefit from more than 30 years of FTZ experience in designing and developing build-to-suit facilities. Equally important is the hands-on expertise needed to set up and activate the FTZ for ease of compliance, management and savings optimization.

We literally offer the complete package.

BUILDINGS WITHOUT BORDERS

Brandi Hanback, Managing Director Rockefeller Group Foreign Trade Zone Services 410-897-4858 tel 410-897-9032 fax rgftz.com Locations: Charleston/Los Angeles Area/Metro Chicago/New Jersey(4)/Tucson/Salt Lake City

Would Like To Thank The Following Friends For Their Inspiration Emanuel Anton Paul G. Bergman, Jr. John Boner Bill Brady Larry Burton Brendan Landry Business Roundtable John Castellani Kip Cheroutes Dennis Chrisbaum Consul General of Belgium Consul General of Canada Consul General of Japan Consul General of Mexico Jennifer Cook Karen deBartolome Michael Driver Duke University Robert Edson

Georgetown University Greenberg Traurig, LLP Carlos Gutierrez Honorary Consul General of Hungary Honorary Consul General of Russia Honorary Consul of the Slovak Republic Kimberly-Clark Professional Patty Lalich Janet Lee Tom Mauro Scott McCallum Kathleen McInerney Morrey Middle School National Foreign Trade Council Office of the United States Trade Representative Beth Parish PDP, Inc. John Perkins Kimberly D. Reed

Regis University Pam Reichert Jim Reis Tom Ritter Pietra Rivoli Rockefeller Group Foreign Trade Zone Services Rocky Mountain Trade Adjustment Assistance Center Rebecca Saltman Kristy Schloss Joe Schuele Sirolli Institute Small Business Administration State of Colorado – Office of Economic Development State of Utah – Office of Economic Development Meg Thams, Ph.D. U.S. Chamber of Commerce U.S. Export Assistance Centers U.S. Meat Federation U.S. Trade Representative Zonta International

International Trade and Business Experts

The best tool to overcome obstacles in global business is one you

invent together.

The catch is, you don’t become the legal solution chosen by middle-market global businesses by identifying problems – you get there by collaborative solutions. Which is why at Anton Law Group our focus is on meeting real needs by driving innovative solutions. We can grow and expand your global reach – no matter what you do – by leveraging our solutions-oriented approach and broad global network.

This unique approach has resulted in Anton Law Group pioneering solutions that have helped clients overcome the most challenging of international issues – whether to help overcome maritime piracy or billion-dollar mission-critical export obstacles. It’s made Anton Law Group a trusted leader in international trade and business and prepares us for whatever challenges tomorrow may bring.

To learn more about what we can do for you today and in the future, please call +1 720-536-4600.

www.antonlaw.com

COLLABORATOR PROFILE

USA: DESTINATION EDUCATION

USA Destination Education By Karen de Bartolomé

W

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

The Kenyan’s decision to study in the United States back in 1960, where he met Barack’s mother at the University of Hawaii, is but one example, albeit more dramatic than most, of one of our nation’s most powerful strengths – the “soft” power that comes when the rest of the world regards us as a repository for their dreams, and drives them to come here to study in our colleges and universities. That influence comes from winning the hearts as well as the minds of future generations of regional and world leaders. ( 94 )

06.09-07.09

» That experience creates a

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

A personal story illustrates this point. As a new member of the development staff of a nonprofit in Colorado, I found myself substituting at the last minute to give the “pitch” to a powerful businessman in Brazil. We wanted his financial backing to sponsor a seminar that would take place in his country. As I began to speak, I could tell he had more interest in what was in his inbox than in what I was selling.

Suddenly, he took his eyes off the papers on his desk and asked, “Where did you say you were from?” “Colorado,” I answered. I never had to say another word: the next 45 minutes were spent listening to his vivid, emotionsoaked memories of studying at the Colorado School of Mines and living as a student in Colorado in the ‘40’s. He had become such an evangelist for our state that he sent two sons back to Colorado to study and probably others as well. My sponsorship deal was sealed.

of Mines and the Community College System are also very important magnets for international students. The presence of so many international students, many of whom will return home to positions of leadership in their home countries, enhances and expands Colorado’s influence as a center of business, innovation, culture, education and recreation.

It’s one thing to read about western hospitality and the creativity and inventiveness that go with our open skies, or to hear about Colorado’s natural beauty, renowned recreational opportunities and rich diverse cultures; it’s quite another to experience it all firsthand. That experience creates a lasting bond and one that is more important today than ever before as the world is increasingly riven by misunderstanding, cultural stereotyping, sectarian and religious conflict, and terrorism.

At last count, Colorado had 5,898 international students in the state, an increase of 11% over the previous year, according to the Institute of International Education’s annual Open Doors Report, funded by the U.S. Department of State. The University of Colorado at Boulder hosted 1,264 and Colorado State University had 1,046 international students. The University of Denver, CU-Denver, Colorado School

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

International Student and U.S. Higher Education Enrollment by Academic Level, 2007/2008 Academic Level 2007/08 Int’l Students % of Int’l Total Total U.S. Higher Education Enrollment* % Int’l Undergraduate Associate’s Bachelor’s Graduate** Non-Degree Optional Practical Training Total

243,360 65,378 177,982 276,842 46,837 56,766 623,805

39.0 10.5 28.5 44.4 7.5 9.1 100.

15,348,881 6,789,709 8,559,172 2,609,119 — — 17,958,000

1.6 1.0 2.1 10.6 — — 3.5

* Based on NCES projections for 2007. ** Includes first professional degree programs. *** Includes students in intensive English programs and other non-degree students.

The benefits of international academic exchange work both ways. Just as important as foreign students studying here are American students going abroad, widening their horizons, learning how to become responsible global citizens. Students who return from their study abroad often report, as did one of our recent scholarship recipients, “My [study abroad] experience will continue to impact my future professional goals in addition to affecting my daily life as I have a new understanding and appreciation for other cultures and an innovated outlook on life.” The most recent Open Doors data finds that nearly 4,000 students studied abroad who were enrolled through colleges and universities in Colorado. Overall in the U.S., about 242,000 students studied outside our borders for academic credit last year.

Institutions hosting international students are not only the sprawling campuses of large public and private universities like CU-Boulder, CSU and the University of Denver. Community colleges throughout the country have been making great headway in providing to international students the same opportunity they provide to local students – an achievable, affordable first rung on the higher education ladder, particularly in acquiring the English language skills that will enable their success in fouryear institutions. Colorado’s community colleges have been successful in attracting a growing number of international students, to the benefit of their local student body as well as the entire state.

06.09-07.09

( 95 )

COLLABORATOR PROFILE

USA: DESTINATION EDUCATION

International Student Enrollment Trends, 1953/54 - 2007/08.

Global View of International Student Origins, 2007/2008.

700,000 600,000 500,000 400,000 300,000 200,000

Total International Students

Enrolled Students

07/08

01/02

95/96

89/90

83/84

77/78

71/72

65/66

59/60

0

53/54

100,000

Practical Training

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

International education is one of the leading service sector exports in the country, making substantial contributions to every state’s economy, as students pay not only tuition, but room and board and cost-of-living expenditures in their local communities. The record high number of international students in the United States – over 623,000 in the last academic year - contributed over $15.5 billion to the American economy, with $147 million spent in Colorado alone.

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

The presence of international students in the classroom benefits U.S. students, too. Whether or not students study abroad, having

fellow students on campus whose language, culture and nationality are different, presents an easily available opportunity to globalize one’s education. The personal friendships, teambuilding skills and working relationships forged during these years render borders meaningless and frequently last a lifetime.

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

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

» International education

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

( 96 )

06.09-07.09

PDP PDP PDP PDP

MakingPeople all the piecesResources fit.

Renew Your

Making all the pieces f

Making all the pieces fit.

Making all the pieces fit.

PDP PDP PDP PDP

We believe that people are the heartbeat of your business. Our proven management system allows you to harness the energy of your people resources—reducing conflicts andfit. improving Making all the pieces communication.

PDP is Making a world leader in workforce research and development. all the pieces fit. ® Let us help you create a positive climate change for your corporate culture.

Results

High performance teams Making all themorale pieces fit.

Healthy company Clear communication Customer loyalty Making allIncreased the pieces fit. productivity Retention of key people Increased sales Decreased costs

PDP PDP PDP PDP P PDP PDP PDP Making all the pieces fit.

Energize people.

Making all theyour pieces fit.

Connect with PDP.

—Recipient— Making all the pieces fit.

2009 Colorado Governor’s Award for Excellence in Exporting

Making all the pieces fit.

Making

Academic Banking Government Healthcare Making all the piec Hospitality Insurance Legalfit. all the pieces Manufacturing Military Retail

Making TEL 719.785.7300 WEB www.PDPworks.com

Making all the pie

JEWEL OF COLLABORATION

TRADE, ETHICS AND COMMUNICATIONS

Trade, Ethics And

Communications Public Relations Can Help Raise the Bar By Louis X. (Kip) Cheroutes

T

rade 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 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? ( 98 )

06.09-07.09

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 multilateral 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.

» 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. « 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.

•D isclosure 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.

•S afeguarding 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.

PRSA Code of Ethics The preamble emphasizes honesty, expertise, loyalty and fairness. Expertise is included to 06.09-07.09

( 99 )

JEWEL OF COLLABORATION

TRADE, ETHICS AND COMMUNICATIONS

• 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

( 100 ) 06.09-07.09

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.”

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.”

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

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 kcheroutes@mgacommunications.com.

The future of every community lies in capturing the passion, imagination and intelligence of its people.

“Sirolli’s ideas are not just good. They are inspiring, inflammatory, they resonate – and they are based on 25 colorful years of failing and succeeding in hundreds of communities throughout Australia, New Zealand, Canada, the United Kingdom, Africa and the United States.

Sirolli has proven that bottom-up, person-centered, responsive economic development works – and if well understood and led at the community level, it works better than anything else.”

Peter Donovan, www.ManagingWholes.com Enterprise, Oregon, USA

Attend a FALL SEMINAR SERIES delivered by Dr. Ernesto Sirolli himself • • •

USA – September 2009 Australia – October 2009 United Kingdom – November 2009

go

Dr.Ernesto Sirolli; CEO, Sirolli Institute and the first Enterprise Facilitator®

For more information contact Yvonne Fizer North America 1.877 SIROLLI International 001.780.413.4464 Yvonne@sirolli.com www.sirolli.com

COLLABORATOR PROFILE

ICOBA

Turbulent Times For Sporting

Goods Exporters

By Tom Ritter

T

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

These companies and the sporting goods market as a whole have been severely affected by the economic downturn and are finding themselves altering their business models as a result. Bankruptcies have been seen in the retail sector as well as at the manufacturing level.

The industry remains over supplied and is extremely competitive.

Survival in today’s sporting goods market requires a well founded yet flexible business strategy.

Global trade is moving through its most challenging time since the 1930s and the sporting goods industry is not escaping the challenges.

Global GDP is declining and may or may not have reached bottom

( 102 )

06.09-07.09

at the time of this writing. Governments are spending unprecedented amounts of money, taking their countries into newly charted debt territory. The banking industry is under great stress. While government loans or guarantees may have stabilized the larger banks, many sporting goods suppliers and dealers are still experiencing a reduction in credit limits and more stringent loan requirements. Meanwhile, most companies continue to experience the same level of competition they encountered before the economic downturn began last fall.

Âť While there are many varying economic forecasts, it is apparent that global GDP will likely decline in 2009 by between 2.0% to 2.75%, assuming the world economy reaches its bottom in the third quarter. ÂŤ

While there are many varying economic forecasts, it is apparent that global GDP will likely decline in 2009 by between 2.0% to 2.75%, assuming the world economy reaches its bottom in the third quarter.

Germany has reported a first quarter 2009 decline of 14.4% while Japan reported a 15.2% decline in the first quarter. At the same time, the U.S. reported a decline of 6.3% for the same period. The European Union has reported an overall decline of 4.4% for the first quarter in the Eurozone countries. Given the first quarter 2009 number for Germany, the overall number for the Eurozone may be revised downward.

» Many sporting goods importers hedge the currency risk by adding as much as 10% to their landed costs, retarding further a product’s price competitiveness. «

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

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

Alternatively, some U.S. companies quote their prices in foreign currencies, taking on the exchange risk, thereby hedging the risk over greater sales.

The most common currencies used other than the dollar are the Euro and the Yen. These exporters are presently gaining a margin advantage against their European or Japanese competitors when the currencies are exchanged back into dollars.

showing economic growth such as China and Brazil. Likewise, certain segments of the sporting goods industry are seeing an increase in sales such as the sport shooting market in the U.S. The dramatic increase in handgun sales in the U.S. is also enhancing the sales of shooting sports accessories.

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

Price is not the only consideration, however. A strong brand image is helping many companies maintain their price level and keeping their products on the store shelves as retailers look to consolidate their suppliers and offerings. Deep discounting is occurring where inventories are high at the retail, trade and supplier levels. The speed of the economic decline last fall caught many in the trade off guard. Inventory levels grew quickly as the consumer suddenly became reluctant to purchase and focused their attention on increasing their savings levels. Many economists now believe that the inventories are beginning to return to levels consummate with the shopping patterns of consumers. However, distributor and retail buyers have installed strict buying programs where they will only buy what is absolutely needed when it is needed.

The international banking crisis is also having an effect on the market as a whole. Liquidity is essential to a competitive market. Given the nature of the sporting goods industry, this is especially true. Credit

A significant amount of sporting goods are made in China and sold by international companies under their respective brands. These companies are able to hedge their market pricing since the Chinese government has loosely pegged its currency to the dollar. Many companies in the sporting goods market find their main competitors are either other U.S. companies or brands which source products in China. In these cases, the decline in the dollar is not offering a significant impact on their sales.

The economic effect on sales is wide and varied when specific countries are considered. Certain countries are still

06.09-07.09

( 103 )

ICOBA

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

The goal of most sporting goods companies has historically been to increase sales, profits and market share

» A keen emphasis on cutting costs in manufacturing, sourcing and supply chain management have helped many companies improve their delivery times, offer “hot” pricing programs and improve their overall supplier performance. «

Top 20 Export Destinations for Golf Equipment – Annual Data U.S. Domestic Exports by FAS Value NAICS 3399203 SIC 39492 2004 2005 2006 2007 2008 Country In 1,000 Dollars United Kingdom 169,335 172,310 165,169 189,559 171,862 Japan 126,167 119,853 120,402 115,973 124,240 Canada 96,256 92,016 98,691 97,902 111,641 Korea 36,234 62,271 80,861 99,030 92,164 Hong Kong 40,271 52,452 43,714 41,374 42,580 Australia 34,206 38,399 31,574 35,096 34,088 Singapore 17,444 19,336 20,545 18,422 23,890 Netherlands 26,663 32,412 36,120 23,499 22,711 South Africa 12,904 17,423 15,199 16,591 15,953 Mexico 21,029 31,163 33,059 22,569 9,736 Thailand 2,224 2,848 2,557 3,272 8,444 China 4,208 4,329 3,974 6,293 6,327 Malaysia 1,922 3,666 4,338 2,872 4,451 Argentina 1,981 3,375 3,145 2,990 3,786 Sweden 10,110 7,062 6,645 6,369 3,217 Taiwan 8,845 6,601 3,836 4,359 2,906 Germany 3,848 4,672 3,050 2,555 2,677 New Zealand 6,637 5,869 3,355 3,849 2,392 Philippines 1,448 1,854 696 1,162 2,019 Switzerland 868 1,738 990 1,228 1,708 Subtotal : 622,601 679,647 677,918 694,963 686,791 All Other: 29,584 26,439 25,391 22,483 20,894 Total 652,185 706,086 703,309 717,446 707,685

Percent Change 2007 - 2008 -9.30% 7.10% 14.00% -6.90% 2.90% -2.90% 29.70% -3.40% -3.80% -56.90% 158.10% 0.50% 55.00% 26.60% -49.50% -33.30% 4.80% -37.90% 73.70% 39.10% -1.20% -7.10% -1.40%

Top 20 U.S. Import Sources for Golf Equipment – Annual Data U.S. Imports for Consumption by Customs Value NAICS 3399203 SIC 39492 Country China Taiwan Thailand Japan Mexico Indonesia Vietnam Korea Bangladesh India Hong Kong Canada Germany Malaysia United Kingdom Br Virgin Is New Zealand Netherlands Australia Sweden Subtotal : All Other: Total

2004 696,239 35,470 48,312 46,051 69,692 20,276 336 29,790 4,530 2,075 9,004 4,741 521 1,559 1,044 811 58 226 331 339 971,405 2,672 974,077

2005

2006 2007 2008 2007 - 2008 Percent Change In 1,000 Dollars 807,911 870,282 903,389 854,829 -5.40% 30,390 43,758 49,839 68,639 37.70% 50,390 50,156 42,283 61,517 45.50% 53,494 51,631 43,310 46,401 7.10% 56,960 46,645 37,629 26,205 -30.40% 25,331 28,232 30,931 26,032 -15.80% 1,152 4,259 9,809 12,557 28% 20,374 16,824 8,718 6,260 -28.20% 4,722 5,405 7,528 5,340 -29.10% 2,368 3,948 3,981 4,734 18.90% 8,920 5,113 5,377 4,135 -23.10% 4,343 11,514 4,037 3,401 -15.80% 300 695 642 663 3.20% 883 1,869 880 661 -24.90% 2,716 1,662 3,708 573 -84.50% 373 2 0 156 N/A 7 4 16 140 786.30% 102 108 54 122 126% 195 257 164 109 -33.40% 114 252 292 83 -71.50% 1,071,045 1,142,613 1,152,588 1,122,559 -2.60% 2,406 1,708 1,972 329 -83.30% 1,073,451 1,144,321 1,154,560 1,122,887 -2.70%

For additional sporting goods import and export reports please see www.ita.doc.gov/td/ocg/sports.htm. ( 104 ) 06.09-07.09

Source: U.S. Department of Commerce International Trade Administration

at the manufacturing, distribution, retail and consumer levels are the lifeblood of the industry. In October, 86% of senior loan officers surveyed by the Federal Reserve saw their lines of credit requirements and loan balance levels tighten significantly. As of April this year, 40% on average are still seeing tight credit markets. As a result, trade terms have taken on an even higher importance but slow payment and default risks are increased.

Source: U.S. Department of Commerce International Trade Administration

COLLABORATOR PROFILE

Deflation is still working its way through the market. Downward prices are putting great pressure on all businesses. Cost reduction and productivity gains are essential in order to survive in today’s global environment.

Those companies that have in depth real time market intelligence and understand the market dynamics, their customers and marketplace will survive the current economic environment and become well positioned for the upturn when it begins.

In summary, the head winds facing sporting goods companies are significant.

Innovations in product design, sourcing, supply chain management and channel segmentation will be the ongoing focus of successful companies. Retailers will continue demanding even faster deliveries, revamped product mix and fewer suppliers. Consumers will continue to hunt for reputable brands offering the best prices and expect the product to be on the shelf when they want it.

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

U.S. Domestic Exports NAICS 339920 SIC 3949 2004 2005 2006 2007 2008 Percent Change Country 2007 - 2008 In 1,000 Dollars Canada 368,924 357,767 374,941 390,787 437,814 12% United Kingdom 278,109 278,897 258,371 280,832 257,237 -8.40% Japan 254,248 252,897 271,653 246,353 247,854 0.60% Korea 58,172 85,546 104,385 133,189 125,337 -5.90% Australia 88,587 97,037 97,802 101,694 104,270 2.50% Netherlands 74,722 91,299 102,972 99,785 103,452 3.70% Mexico 72,375 80,933 86,427 78,357 69,051 -11.90% Hong Kong 63,923 75,148 69,345 58,572 59,419 1.40% Germany 68,499 53,439 54,330 57,565 59,260 2.90% Singapore 30,341 32,897 39,965 34,830 40,174 15.30% Belgium 23,181 18,390 21,743 24,176 36,928 52.70% China 31,054 26,685 28,901 34,694 34,765 0.20% France 46,191 43,682 51,250 46,140 30,558 -33.80% South Africa 20,565 29,363 28,671 33,975 30,087 -11.40% Sweden 29,699 24,948 24,953 26,278 26,116 -0.60% Russia 15,500 16,531 18,653 19,601 23,989 22.40% Thailand 10,988 17,014 14,389 14,643 20,883 42.60% UAE 15,484 13,315 13,941 17,127 20,766 21.20% Saudi Arabia 10,046 11,973 14,582 15,690 20,679 31.80% Italy 20,383 20,884 22,097 17,496 19,112 9.20% Subtotal : 1,580,988 1,628,644 1,699,373 1,731,782 1,767,751 2.10% All Other: 283,552 296,217 326,102 354,486 389,513 9.90% Total 1,864,540 1,924,861 2,025,475 2,086,268 2,157,263 3.40%

Source: U.S. Department of Commerce International Trade Administration

» Deep discounting is occurring where inventories are high at the retail, trade and supplier levels. The speed of the economic decline last fall caught many in the trade off guard. «

Top 20 Export Destinations for Sporting & Athletic Equipment – Annual Data

Top 20 U.S. Import Sources for Sporting & Athletic Equipment – Annual Data U.S. Imports for Consumption by Customs Value NAICS 339920 SIC 3949 2004 2005 2006 2007 2008 Percent Change Country 2007 - 2008 In 1,000 Dollars China 3,135,848 3,499,449 4,033,723 4,287,072 4,304,776 0.40% Taiwan 412,179 424,491 430,590 421,391 432,613 2.70% Canada 311,689 276,326 290,151 274,250 230,114 -16.10% Mexico 190,505 172,211 183,681 195,006 178,561 -8.40% Thailand 163,988 136,393 147,257 133,184 148,142 11.20% Japan 124,308 130,926 133,426 119,227 116,184 -2.60% Indonesia 63,480 72,574 90,213 116,175 87,317 -24.80% Korea 87,951 77,922 79,190 77,408 61,889 -20% Vietnam 14,874 21,303 33,062 49,502 61,227 23.70% Italy 57,275 53,210 66,772 61,789 56,218 -9% Philippines 45,290 57,306 56,319 62,521 54,423 -13% Austria 62,004 47,435 49,769 48,622 46,723 -3.90% Pakistan 37,000 37,375 42,482 38,528 41,136 6.80% Germany 45,031 41,479 40,691 42,908 40,441 -5.70% France 65,076 54,801 45,897 45,674 38,039 -16.70% Hong Kong 55,016 38,809 39,497 57,198 37,979 -33.60% Malaysia 39,874 37,907 33,390 37,686 36,599 -2.90% Czech Republic 27,552 25,954 23,785 32,869 34,502 5% India 13,674 15,600 17,614 18,650 21,572 15.70% Estonia 14,276 14,626 15,364 17,246 19,730 14.40% Subtotal : All Other: Total

4,966,892 5,236,097 5,852,871 6,136,906 6,048,185 232,507 218,905 226,473 222,183 206,341 5,199,398 5,455,002 6,079,344 6,359,089 6,254,525

-1.40% -7.10% -1.60%

For additional sporting goods import and export reports please see www.ita.doc.gov/td/ocg/sports.htm.

06.09-07.09

( 105 )

Source: U.S. Department of Commerce International Trade Administration

while elevating their brand recognition and image. In today’s troubling times and declining markets, maintaining sales and market share while holding the line on margins have become the watchwords.

A keen emphasis on cutting costs in manufacturing, sourcing and supply chain management have helped many companies improve their delivery times, offer “hot” pricing programs and improve their overall supplier performance. Some have increased their marketing efforts to support their brand and pull sales through.

COLLABORATOR PROFILE

U.S. SMALL BUSINESS ADMINISTRATION

Don’t Let Financing

Stand in Your Way Grow Your Export Business with Help from SBA By Dennis Chrisbaum

In fact, the World Trade Organization expects the volume of world trade to decline by 9% this year, the largest decline since World War II, while the International Monetary Fund now projects that world GDP [Gross Domestic Product] will decline for the first time in 60 years.

These forecasts break with past decades when global economies experienced steady growth and world trade increased even more rapidly, typically at double the world’s growth rate in GDP.

» Major changes to SBA’s loan programs have been put in place for this year in order to help jumpstart the economy and to encourage banks to make more small business loans, including loans to small business exporters. « Nevertheless, just as the U.S. economy will recover in the coming months, so too will the economies of our trading partners around the world. And, in the short term, the stimulus programs adopted by various governments also will create new opportunities for U.S. products and services. Consequently, 2009 is an excellent time for companies to review its business plan, to evaluate opportunities in other markets, and possibly to diversifying away from a position that might have been too heavily dependent on the U.S. economy alone.

Entering New Markets

I

n February, the U.S. had a trade deficit of only $26 billion, the lowest in nine years, as imports plunged while exports stabilized — even growing slightly. This was in stark contrast to 2008, which saw an average monthly trade deficit of $57 billion. As imports continue to plummet, primarily due to the drop-off in U.S. retail sales and the decline in oil prices, the U.S. trade deficit with the rest of the world has finally begun to narrow.

Clearly, we are in new territory, both for our struggling domestic economy and for emerging global trade patterns.

( 106 )

06.09-07.09

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

Upon making the decision to pursue global opportunities and develop an international business plan, the U.S. Small Business Administration (SBA) is a logical next stop for discussing payment and financing options.

The SBA staff, assigned to 19 U.S. Export Assistance Centers across the country, can assist in sorting through international payment conventions and explain working capital options to support export expansion plans and international sales.

loan guarantee of 90% and, if the term of the loan exceeds 12 months, the guaranty fee currently is being waived.

Proceeds can be used for equipment, other fixed assets, transaction costs, foreign trade show participation, translation services or other working capital needs. SBA typically approves these loans in 2-3 days after receiving them electronically from a bank. However, in order to qualify for this program, the applicant must have been in business for a least one year and must demonstrate that the loan will help the firm enter a new export market or expand in an existing export market.

Financing Market Expansion

Major changes to SBA’s loan programs have been put in place for this year in order to help 2. For companies that would like jumpstart the economy and to to expand their business because encourage banks to make more of growing export sales, or for small business loans, including those businesses that have been loans to small business exporters. adversely affected by imports and The American Recovery and need to re-tool to be competitive, Reinvestment Act of 2009, signed the SBA’s International Trade into law on February 17, 2009, Loan can help, by providing created some short-term relief (currently, under the American and incentives by providing $375 Recovery and Reinvestment Act Dennis Chrisbaum, SBA Regional Manager and Colorado Governor Bill Ritter. million to temporarily waive the of 2009) up to a 90% guaranty to guaranty fees on SBA-backed the lender on commercial loans loans, while also raising the SBA’s of up to $2.0 million. The SBA guarantee percentage on most guaranty can go as high as $1.75 loans to 90 percent. In addition, million per borrower, unlike other the SBA temporarily is allowing SBA loans which generally are the use of alternative size capped at $1.5 million. Terms can standards, matching those used go out as long as 25 years, while for the Certified Development loan proceeds can be used for Program, which will make more both fixed assets and working small businesses eligible for SBA capital. Refinancing is possible support. This alternative size under this loan program. standard will be in effect until September 30, 2010, and will allow companies (and any affiliates) with a net worth of $8.5 million or 3. The Export Working Capital Program (EWCP) provides a 90% less and an average net income, after federal income taxes for the guaranty to the lender and can be set-up to finance a single export preceding two fiscal years, of no more than $3 million to qualify. For transaction--one that might be larger than the firm’s normal a complete listing of historic size standards by industry classification, order--or set-up on a revolving, line-of-credit basis to finance please see: http://www.sba.gov/sizestandards. multiple transactions. For loans of 12 months or less, the guaranty fee is only 1/4 of 1%; for loans over 12 months, the guaranty fee Since 97% of all U.S. exporters are small businesses by SBA’s size has been temporarily waived under the American Recovery and standards (and account for one-third of all U.S. exports, or more Reinvestment Act of 2009. The collateral required for these loans than $500 billion annually), the vast majority of U.S. exporters should is what is in the transaction: inventory, accounts receivable, workqualify for one of SBA’s several financing programs, ranging from in-process, and an assignment of proceeds for letters of credit working capital loans to loans for export expansion to loans for and/or an assignment of proceeds under a credit insurance policy. equipment and buildings. While any of SBA’s loans programs can Loans can go as high as $2 million, under a co-guaranty agreement be used by small business exporters, three programs are specifically between the U.S. Small Business Administration and the Exporttargeted for use by the exporting community.

Import Bank (Ex-Im Bank). Applicants must have at least one year of business operating history to qualify. Unlike the Ex-Im Bank, 1. The SBA Export Express Program provides guarantees on the SBA does not have a U.S.-content requirement (the Ex-Im Bank loans up to $250,000. Typically, these loans are for 5-7 years, will only finance exports with at least 51% U.S. content), nor does but they can extend to 25 years based on the use of proceeds. it have a prohibition against financing sales to foreign military Under this lender-expedited program, SBA currently provides a establishments in friendly countries.

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

06.09-07.09

( 107 )

COLLABORATOR PROFILE

U.S. SMALL BUSINESS ADMINISTRATION

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

To mitigate that risk, many SBA borrowers work with the Ex-Im Bank to obtain export credit insurance on their open account sales, insuring those overseas accounts receivable against commercial and political risk.

Such policies may pay up to 95% of the invoiced amount on claims for default. The same credit insurance policies also can be written to cover unconfirmed letters of credit and documentary collection sales.

Especially priced for small business exporters (as defined by the SBA), the Ex-Im Bank’s small business, multi-buyer credit insurance policy will insure a company’s worldwide open account sales against political and commercial risk. To qualify, the company’s open account, annual export sales must have been less than $5 million on average over the past three years. The cost for this insurance coverage is only 55 cents per $100 invoiced amount, after a 15% discount that is being offered this year. As an added incentive, any small business exporter with an SBA EWCP loan would qualify for an additional 25% discount which would lower the premium to approximately 42 cents per $100 invoiced amount, in most cases.

And, having credit insurance offers one other benefit when it comes to financing: a higher borrowing limit.

Since a U.S. government agency is insuring the accounts receivable against commercial and political risk, banks typically will add them back into the borrowing base, making them “bankable.” Under the SBA’s export working capital program, advance rates against insured accounts receivable of 8590% are commonly allowed.

It is less well known that exporters can use a combination of federal loan guarantees to make a deal feasible. For example, an SBA preexport working capital loan [EWCP], supporting the U.S. exporter, could be paired with an overseas buyer

( 108 )

06.09-07.09

SBA Colorado District Director Greg Lopez and SBA Lender Relations Specialist Bob Martin counseling client at recent small business fair in Denver.

» The SBA’s Export Working Capital loan program would provide the necessary working capital for the exporter to produce the order, which would then be fully repaid upon shipment by the importer’s medium-term loan guaranteed by the Ex-Im Bank. «

using the Ex-Im Bank’s mediumterm, buyer financing program.

Under this program, the Ex-Im Bank will provide 5-7 year financing to foreign buyers of U.S. products or services. The importer has to come up with a 15% down payment and the Ex-Im Bank will provide a 100% guaranty on a loan covering 85% of the transaction amount. Under this scenario, the SBA’s Export Working Capital loan program would provide the necessary working capital for the exporter to produce the order, which would then be fully repaid upon shipment by the importer’s mediumterm loan guaranteed by the Ex-Im Bank. For more information on all of the Export-Import Bank programs, please visit: http://www.exim.gov.

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

Don’t let financing needs stand in your way of international business success.

Contact SBA and your local U.S. Export Assistance Center today!

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

JEWEL OF COLLABORATION

JOHN PERKINS

Creating a Sustainable, Just,

& Peaceful World An Interview with John Perkins By Jan Mazotti

( 110 )

06.09-07.09

Peter Thompson for the New York Times

I

n 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 traderelated 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.

» We

decide which companies will succeed or fail by the way we shop – if we shop consciously. « 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.

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

» For the first time in

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

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. « 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

06.09-07.09

( 111 )

JEWEL OF COLLABORATION

JOHN PERKINS

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. 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

» The change always

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.

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 multinational 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.

comes from us. And then our Presidents, if they’re enlightened enough, go along with that change. «

( 112 )

06.09-07.09

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

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

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.

» 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. «

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.

06.09-07.09

( 113 )

JEWEL OF COLLABORATION

MISSIONMODE

Supply Chain Risk

Management Global Trade and Collaboration for the New Global Economy By Robert N. Edson

F

rom 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 ( 114 )

06.09-07.09

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 communityoriented in your approach to your business. In other words, collaborate or evaporate.

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 supplychain 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

» Global

trade at its core is an exercise in the basics of supply chain management. « 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.

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

ability to see the future, it is about planning for the what-if ’s. 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

» 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. « 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. The key is that foresight isn’t the

06.09-07.09

( 115 )

JEWEL OF COLLABORATION

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

( 116 )

06.09-07.09

MISSIONMODE

» Foresight

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

isn’t the ability to see the future, it’s about planning for the what-if’s. «

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

» 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. « 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 publicprivate 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.”

So where do we go from here? Colorado can be the collaboration capital of the world; and thereby impact global trade and the global supply chain at every level. ICOSA can and is rapidly

MissionMode has been used in the following well-known crises:

• H1N1 Influenza Outbreak 2009 • 2008 Democratic National Convention in Denver • USA Hurricanes in 2004 and 2005 including Katrina - emergency healthcare, retail store security and recovery • A sian Tsunami - managing relief logistics for aid programs • L ondon Bombings - corporate crisis management • Indian floods - crisis management • A lleged Transatlantic Bombing plot – crisis management

becoming an engine at the core of that collaboration, which has significant impact on global trade and the global supply chain, right down to your front door. MissionMode is proud to be a partner in this effort to create a sustainable, socially responsible and corporately responsible solution to a need that grows more complex by the day; supply chain risk management and its impact on local and global trade. So the next time you see zombies threatening your widget factory, or an asteroid crashes into your warehouse, will you be able to leverage your relationships and collaborate for your own as well as the greater good?

Remember… plan, prevent, respond, recover; and take responsibility for yourself and your

business. It might just save someone else’s in the process.

Robert Edson has been dedicating his career to public/private partnerships, public safety and private sector safety and security for over 12 years. His passion for Homeland Security and the safety of our communities and businesses is surpassed only by the love of his wife and 2 beautiful children here in Colorado. Robert helped design and implement the first VOIP 911 network in the United States, worked tirelessly during the Democratic National Convention in the City of Denver’s Emergency Operations center where he worked to integrate public and private sector organizations into managing emergency situations that arose. He has written several white papers on Incident Command, Global Supply Chain Risk Management, and has spoken at numerous public safety conferences as an expert in Emergency Operations and communications.

Contact Robert N. Edson, Vice President, Western U.S. at Robert.Edson@MissionMode.com or visit online at www.MissionMode.com.

06.09-07.09

( 117 )

JEWEL OF COLLABORATION

U.S. COMMERCIAL SERVICE

U.S. Commercial

Service

The Collaborative “Jewel” of the U.S. Department of Commerce By Paul G. Bergman, Jr. & Jan Mazotti

U.S. Commercial Service Export Assistance Center – Denver receives the U.S. Department of Commerce Bronze Medal for Excellence in Service from Under Secretary Padilla.

N

eed 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”

( 118 )

06.09-07.09

called the U.S. Commercial Service. The governing mission is to increase U.S. exports. It offers a variety of free and feebased 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 highpotential 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.

Political risk is a reality and few small companies are prepared to negotiate

» 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. «

» Political risk is a reality and few small companies are prepared to negotiate these choppy waters. The Commercial Service can help. « 06.09-07.09

( 119 )

JEWEL OF COLLABORATION

U.S. COMMERCIAL SERVICE

these choppy waters. The Commercial Service can help.

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

» We take advantage of U.S. government contacts and relationships to leapfrog the partner development process. «

» Small and mediumsized companies account for almost 97 percent of U.S. exporters. «

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.

( 120 )

06.09-07.09

I help you turn risk into reward in Russia

Honorary Consulate General of Russia in Colorado The Honorary Consulate General office serves as a liaison and advocate for Russian citizens in Colorado; promotes understanding between the U.S. and Russia; and promotes business, trade, educational, technological, and cultural exchange between Colorado and Russia.

Dr. Deborah A. Palmieri is Russia’s first Honorary Consul General Colorado. Russia became a member of the Colorado Consular Corps for the first time in 2007.

You are invited October 1, 2009 "Navigating Russia's BusinessChallenges: Strategies, Risks, Forecasts" This national one-day fall business roundtable is geared for

Deb Palmieri Russia LLC ™

1552 Pennsylvania Street Denver, Colorado 80203 Direct (720) 980-4829 Tel/Fax (303) 831-9181 Deb@DebPalmieriRussia.com www.DebPalmieriRussia.com

senior executives doing business in Russia.

Comprehensive briefing on the latest business developments in Russia.

11:00 am-3:00 pm, includes lunch.

For information and registration, email Info@DebPalmieriRussia.com or call 303-831-9181.

Hosted by Deb Palmieri Russia Institute

COLLABORATOR PROFILE

GLOBAL PIRACY

Global Piracy Law Firm Launches Initiatives To Combat Piracy By Di Freeze

E

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

When shipping costs sharply increase, so do the costs of goods we buy.

Those facts alone show that this issue affects a multitude of entities.

One person striving to come up with a collaborative resolution to this problem, and getting close, is Emanuel Anton, founder of Anton Law Group, based in Denver. He is not working alone. ( 122 )

06.09-07.09

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

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

“Things died down in the press after several navies stepped up their patrols of the area in July 2004.”

But despite a current increase of various countries’ naval gunboats in the Gulf of Aden, piracy in east Africa is only rising – choking one of the world’s busiest shipping lanes.

“Once the pirates go out and commit their pirate barbary, armed robbery, hijackings or killings, there is always this safe harbor for them to retreat to,” he said.

Past failed attempts by the U.S. and other governments to squash Islamist movements and reinstate the Somali government and a land-based solution is keeping the issue alive at sea. U.S. Navy Vice Adm. William Gortney, commander of the Combined Maritime Forces of various militaries’ ships, has indicated that without a procedure to prosecute pirates, anti-piracy measures are severely limited.

A confluence of various events in late 2008 and early 2009 created an undercurrent leading towards some resolution in the maritime arena. Last September, Somali pirates seized a Ukrainian vessel in neutral waters near Kenya and Somalia carrying tanks, ammunition and crew. The pirates demanded a ransom of $3.2 million, which they were reportedly paid.

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

Anton began delving into the practical and legal issues causing the upsurge in piracy, reading any articles, publications and treaties he could get his hands on.

He also began working with a maritime law expert in New York, Mark Jaffe, which provided valuable insight to him. That research helped Anton begin to understand the complexities that were preventing the suppression of piracy and armed robbery against ships.

Piracy in east Africa is only rising - choking one of the world’s busiest shipping lanes. « »

When Anton began working with the Colorado Springs group, he was no stranger to the problems in that area.

As part of his aviation practice, he has counseled aircraft owners on ways to fully utilize their aircraft including employing planes on long-term leases to support, for example, relief efforts in Africa, Afghanistan, Iraq and Southeast Asia. He has helped pair clients with organizations like the U.S. Departments of State and Defense, UNICEF, the United Nations and Samaritan’s Purse, to fly aid into areas including Sudan and Somalia. His dealings with and increasing knowledge about the various areas, including Kenya and Nigeria, familiarized him further with the huge relief problems, producing his desire to help in any way possible.

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

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

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

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

There is such a large expanse of water that they can not possibly be everywhere all the time.”

Self Help Measures by Vessel Operators “More and more shipmasters and owners are seeking armed protection of their vessels.” The millions received in ransoms have purchased faster boats, more powerful weapons and the latest technology to assist pirates’ efforts.

“Under the laws that we have here in most U.S. states, if somebody enters upon my property, state law authorizes lethal force in defense of my life. By contrast, while international laws do not prevent the use of guns, they do not authorize it either. That is left up to the individual flag states to authorize,” Anton said. “The U.N. Security Council and the IMO are very clear in their resolutions and do not recommend the arming of seafarers - the crew aboard these vessels - because they are not trained professionals. Putting

06.09-07.09

( 123 )

COLLABORATOR PROFILE

GLOBAL PIRACY

a gun in their hands is as dangerous as in the hands of pirates. Crews are not equipped to deal with that contingency. They do not have the experience, the training or the skill to effect mission success.”

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

Collaboration With Flag States The way that maritime laws work is that whosever flag is flying on that ship, that is whose laws govern what happens on that boat in international waters,” Anton said. “Any solution would require cooperation from flag states’ registries to authorize the hiring of armed professionals and use of lethal means in defense of that flag’s vessels.”

With great interest in seeking an armed response to maritime threats, NEK MSS’s first priority was to meet with stakeholders to talk about concerns. NEK MSS has approached all of the major flags of convenience, including Panama, Liberia, Marshall Islands and Greece to understand their regulatory frameworks. Anton started with the largest meeting with the Panama Maritime Authority (AMP) in January 2009 as well as other individuals within the Panamanian government to understand their concerns and discuss an appropriate resolution. “We found Panama extremely receptive because they sought to understand the concerns of their 8,400+ customers, many of which are traveling through hostile shipping lanes.” The AMP proactively sought NEK MSS’s assistance to understand and address questions their customers had.

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

( 124 )

06.09-07.09

A vessel may be $100 million and the cargo might be another $100 to $200 million. When you factor in the significant risk, it’s no wonder why caution preceded action. « »

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

Anton Law Group initiated a dialog with the largest insurance organizations including Lloyd’s of London and non-London based insurers. They have brought into the discussions underwriters for the various insurance syndicates from Lloyd’s, as well as other syndicates that are willing to write marine policies that would cover these risks. Even AIG, a U.S. company that normally does not underwrite a lot of that risk, is willing to sit at the table and start talking.

“A vessel may be $100 million and the cargo might be another $100 to $200 million,” Anton said. “When you factor in the significant risk, it’s no wonder why caution preceded action.” Anton found, however, rumors that armed security guards would invalidate coverage were not the case. Rather, P&I clubs were willing to evaluate the risks on a case-by-case basis. “Confusion and a lack of understanding by ship owners and operators of where or if coverage would exist, especially where different insurers were involved and armed professionals were on board, simply required NEK MSS bring ships and their insurers together,” he said. “I believe having recourses readily available provides NEK MSS the resources they need to help bridge an understanding between insurers and vessel owners of how risks are reduced when traveling hostile shipping lanes with armed professionals aboard.”

Anton said there are three options with risk. “You can assume it, push it off to somebody else or insure around it,”

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

solution, at least in the short term, to help minimize some of the resultant pain.

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

Without a procedure to prosecute pirates, anti-piracy measures are severely limited. « »

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

The Solution Although he says there is no present-day global solution to piracy in east Africa, he feels NEK MSS’s security offerings are an effective

Di Freeze served as editor-in-chief for a national aviation publication for a decade.

Presently, she is an independent writer. Contact Anton Law Group at 720.536.4600 or visit their website at www.antonlaw.com.

06.09-07.09

( 125 )

JEWEL OF COLLABORATION

BE A SHORTCUT

Are You A

Shortcut?

By Rebecca Saltman

I

magine 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 (www.

BeAShortcut.com). 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

» A Shortcut is a person,

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

product or organization that effectively provides something we need, when we need it, with less aggravation and more precision than we could do ourselves. «

( 126 )

06.09-07.09

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

Scott Halford 06.09-07.09

( 127 )

JEWEL OF COLLABORATION

BE A SHORTCUT

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 ( 128 )

06.09-07.09

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.

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

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 rsaltman@foot-in-door.com.

Connecting You to the World

Denver World Affairs Council

The Fulbright Program

International Visitor Leadership Program

The Institute of International Education is an international non-profit that connects people from around the world for the benefit of businesses and communities across the globe.

Find out how the Institute can help your business increase its global competitiveness by visiting www.RockyMountainIIE.org

INSTITUTE OF INTERNATIONAL EDUCATION

JEWEL OF COLLABORATION

TRADE ADJUSTMENT ASSISTANCE

Trade Adjustment

Assistance Creating and Saving U.S. Jobs By Brendan Landry

A

fter 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 ( 130 )

06.09-07.09

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

The goal of our program is to increase the competitiveness of U.S. firms. « »

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

If your

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, ineffective or non-existent marketing, but a manufacturer of agricultural equipment also from lagging performance in new received $60,000 in assistance to improve the product development. RMTAAC combines efficiency of its manufacturing process. Since expertise, discipline, and grant funding to the improvements were put in place nearly five save U.S. jobs and make it possible for firms years ago, the firm has doubled both its sales to survive and thrive in the global economy.

So what are the results of RMTAAC’s work? and employment.

These are just a few examples of the huge In a typical year, firms receiving TAA reach impact that RMTAAC has on employment employment and revenue growth that exceed and business growth in the Rocky Mountain industry averages. Among the hundreds of region; and with more funding in the firms in the Rocky Mountain region that have pipeline through the stimulus package and received TAA, average sales growth is nearly an expansion of the scope of work into 50% and the average increase in employment service-based firms, such as call centers and is 25%. Hag is careful to point out that this software developers, it seems the RMTAAC’s is anything but a typical year, and although reach will continue to grow. numbers are down due to our current economic As evidenced by the random contents of my desk, there is a certain Industries Served ubiquitous nature to the MADE IN industry is not listed, call them!

CHINA insignia; and it serves as a clear reminder of the reality faced by Aerospace Agricultural Products small businesses everywhere. Long Apparel & Accessories Appliances gone are the days of competing with Automotive Products Bicycle just your neighboring businesses.

Castings Ceramics Convenience is no longer just a Computer Equipment Construction Products/Machinery matter of physical location. Business Electrical Products & Equipment Electronics is a global competition, and Fabricated Metal Products Food & Beverage RMTAAC is putting lean mean Footwear Forgings U.S.-based firms into the mix.

Abrasives Air Conditioning Audio & Visual Boating & Marine Chemical Products Educational Products Environmental Equipment Food Processing Equipment Furniture & Fixtures Industrial & Analytical Instruments Leather & Leather Products Mining & Quarrying Paper Products & Machinery Plastics & Rubber Telecommunication & Navigation Equipment Valves & Fittings

» 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. «

Gears Jewelry Medical/Dental Instruments & Supplies Musical Instruments & Access Petroleum/Gas Products & Equipment Printing Machinery Textile Products & Machinery

Glass Products Lawn & Garden Products Metalworking Equipment Packaging Equipment Photographic Equipment Sporting Goods Toys Wood Products

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.

06.09-07.09

( 131 )

COLLABORATOR PROFILE

CONSUL SUCCESS STORIES

J apan Experience and Expertise in Energy-Saving Technologies

By Kazuaki Kubo, Consul General of Japan

I

t has been said that Japan is a nation that lives by trade.

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

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

The currently depressed world economy, originating from the so-called subprime loan and credit problems in the United States last year, has resulted in a worldwide trade slowdown which has seriously impacted the overall Japanese

( 132 )

06.09-07.09

economy. Exports from Japan that had been increasing through September of 2008 suddenly decreased by 7.8% in October of 2008, compared with the same month from the prior year. Since then, the decline in exports has continued and steepened, showing a record decrease of 49.4% in February of 2009, compared with February 2008. This environment casts a very long shadow on a Japanese economy led by exports, exacerbated by a prolonged exchange rate tendency toward a weak dollar and stronger yen.

» Trade with foreign countries and the free-trade systems that support it are crucial for Japan’s economy and its security in general. «

Under these conditions, Japan is reaching for new directions. One part of a solution is to reduce excessive dependence on the American market by diversifying into other overseas markets, especially in newly developing areas such as Asia. In relation to this, on May 21, Japanese Prime Minister Aso outlined a plan to help double the GDP of countries in Asia by 2020. The goal

is to achieve mid and long-term growth in the Asian region, by helping to stimulate the expansion of domestic demand in each country with financial support from Japan totaling about $67 billion in aid to the region.

As a result, Japan ranks high in comparisons of energy consumption rates in relation to GDP. For instance, if the consumption of primary energy for each unit of GDP in Japan is assumed to be 1, the rate of consumption in the EU is 1.9, the United States is 2, China is 8.7, and India is 9.1, according to statistics from 2004. Further, the Japanese auto industry is in a leading position in the development of eco-friendly vehicles such as hybrid gas and electric-powered cars.

» If the consumption of primary energy for each unit of GDP in Japan is assumed to be 1, the rate of consumption in the EU is 1.9, the United States is 2, China is 8.7, and India is 9.1, according to statistics from 2004. «

Contributing to worldwide energy-conservation and reductions in environmental impact, through the transfer of such technology and experience to other countries, would help serve to stabilize the global community both politically and economically.

This would likely be more beneficial for Japan than

immediate profits from simply exporting such technologies. Therefore, the Japanese Government works in close cooperation with the Japanese private sector toward realizing the transfer of its energysaving technology and green engineering knowledge outside Japan.

• J A PA N •

Another route for Japan is to utilize its experience and expertise in energy-saving technologies. With recent increases in world population and economic growth in many newly-developing countries, effective use of limited resources and the reduction of negative environmental impact have become a near universal preoccupation. During the era of rapid economic growth, Japan cultivated technologies and “green” engineering to address its global struggle against environmental pollution and during the oil shock of the 1970’s.

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

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

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

06.09-07.09

( 133 )

COLLABORATOR PROFILE

CONSUL SUCCESS STORIES

B elgium At the Heart of Europe

By Geert Criel, Consul General, Consulate General of Belgium

B

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

But Belgium also has a broader story to tell of economic success. WTO data show that the country is the 20th economy in the world, and the 10th exporter of goods globally. It attracted $40 billion in foreign investment in 2007, according to the latest World Investment Report by the UN, making a country the size of Maryland, the 11th destination for foreign investment. The Financial Times recently ranked two of its regions, Flanders and Wallonia, among the top five of Europe’s most important destinations for foreign investment.

The U.S. is the main foreign investor in Belgium, measured in number of investment projects as well as in capital investment. The total value of U.S. investment in Belgium topped $55 billion in 2008. Most of the investment has been in the finance and insurance sector, and in chemical manufacturing.

But investment in the service industry, including law firms, accounting firms, advertising agencies, and computer and management services, has more than tripled since 2000.

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

( 134 )

06.09-07.09

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

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

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

They are summarized on the investment website of the Belgian government, www.invest.belgium.be.

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

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

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

For additional information, please contact: Consulate General of Belgium in Los Angeles - www.diplomatie.be/losangeles/ Brussels Export – Flanders Investment and Trade Stephen Esbin, Director Investment Barbara Bruneel, Director Trade c/o Consulate General of Belgium 6100 Wilshire Blvd., Suite 1200, Los Angeles, CA 90048 Tel: +1-323-857 0842 Fax: +1-323-938 4024 losangeles@fitagency.com www.flandersinvestmentandtrade.com www.brussels-export.be

Wallonia Export and Investment Office Frederic Delbart, Trade and Investment Commissioner 155 Montgomery Street - suite 207 San Francisco, 94104 CA - USA Tel: 1-415-546.5255 Fax: 1-415-546.3144 sfo@belgiantrade.org sanfrancisco@awex-wallonia.com www.belgiantrade.com

» Over the last 5 years, the Belgian government has taken an increasingly proactive approach in creating a business friendly environment. «

• BELGIUM •

Other factors contribute to Belgium’s economic successes.

Belgium’s status as the top car exporter per capita in the world, for example, is also the result of its excellent business infrastructure and the second most productive workforce per hour worldwide. Low real estate costs contribute to Belgium’s appeal for distribution and logistical activities.

Belgium attracts more than 10% of all logistical foreign investments in Europe, according to Ernst & Young’s latest Barometer of Belgian Attractiveness.

06.09-07.09

( 135 )

COLLABORATOR PROFILE

CONSUL SUCCESS STORIES

HOpen ungary for Business

By Eugene Megysey, Honorary Consul General of Hungary

H

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

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

An excellent example of providing services and working with the local government is the investment of Daimler AG last year. From 2012, the automotive giant will assemble 100,000 A-Class and B-Class Mercedes cars annually in Kecskemét, Hungary. The total value of the investment is above $1 billion (USD), with the new plant directly responsible for 2,500 new jobs and a further 10,000 through local suppliers. The municipality also worked creatively with the company in providing attractive incentives. Mayor Dr. Gabor Zombor and Deputy Mayor Klaudia Pataky Szemereyné also played a critical positive role in making the investment possible.

( 136 )

06.09-07.09

» Hungary’s exports make up 70% of GDP. «

For now the work of the ITD Hungary is in flux, with “changing priorities under pressure of the current crisis,” explains Retfalvi.

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

Nonetheless, he is pragmatic. “In this regard, we also have to note that we face competition from rising markets such as Ukraine and Georgia, which are cheaper. However, Hungarian production remains half the price of Germany and the country offers a highly educated and technologically literate population that is able to leverage growing opportunities in high-value manufacturing,

» New investors like British Petrol showed confidence in Hungary with an investment creating 1,100 new jobs. «

technology and pharmaceuticals, for instance. Added to this is the fact that Hungarian salaries are still at 65% of the EU average, I think it is clear that we remain a competitive investment prospect,” stresses Retfalvi.

He went on, “This is also proved by the fact that in the first five months of this year, ITD Hungary-Investment Promotion and Trade Development Agency announced investments worth $272 million (USD) in Hungary, creating 3,099 new jobs. Companies like Vodafone, IBM and Infineon have decided to expand in Hungary and new investors like British Petrol showed confidence in Hungary with an investment creating 1,100 new jobs.”

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

• HUNGARY •

Not surprisingly, the geographic profile of Hungary’s inward investment reflects both history and new market preferences.

Germany accounts for some 30% of inward investment, while approximately 15% of the total comes from the U.S. and Austria. The UK and France account for about 10% each, with Italy and Japan round out the top 7 investing countries. The top inward investors should not be a surprise, acknowledges Retfalvi, as Hungary’s exports make up 70% of GDP of which the largest export segment is automotives.

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

06.09-07.09

( 137 )

COLLABORATOR PROFILE

CONSUL SUCCESS STORIES

S lovakia THE SLOVAK TIGER IN CENTRAL EUROPE

By Gregory Fasing, Honorary Consul, Consulate of the Slovak Republic

I

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

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

In sharp contrast to the early economic difficulties of 1993, Slovakia has emerged as a European leader in growth and economic development. How was this economic success achieved? The 1998 election was a watershed event. The new government designed and introduced carefully formulated

economic changes, restructured the banking sector, and streamlined the tax system with a 19% flat tax in 2004. Foreign direct investment surged. Slovakia, located in the heart of central Europe, was not only in close proximity to traditional European markets, but it also has a highly educated and qualified workforce, particularly in engineering, and relatively low labor costs. Slovakia in the past 10 years has been very attractive for foreign investors.

Large financial institutions from Western Europe have invested heavily in Slovakia. In 2000, Slovakia joined the Organization for Economic Cooperation and Development, and it became a full member of the European Union in 2004. Slovakia has also been a full member of NATO since 2004.

The automobile and electronics manufacturing industries have formed the backbone of the Slovak economy. Slovakia now produces the most motor vehicles per capita in the world. The year 1992 witnessed the creation of a motor vehicle assembly plant by Volkswagen in Bratislava. Today the Volkswagen plant is the largest business in Slovakia and one of the biggest non-financial companies in Central and Eastern Europe. It produces the Touareg and Audi Q7.

» Slovakia has emerged as a European leader in growth and economic development. «

( 138 )

06.09-07.09

equaled about one third of that figure, with nearly 87% of the exports going to other countries of the European Union.

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

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

» Slovakia now produces the most motor vehicles per capita in the world. «

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

• S L O VA K I A •

Other motor vehicle manufacturers have followed. In 2006 Peugeot Citroën, the French car manufacturer, commenced production of automobiles in Trnava, in western Slovakia, and in 2007 South Korea’s Kia automobile company began operating a brand-new one billion-dollar production plant near the western Slovak town of Žilina. Depending upon the outcome of the current worldwide economic slowdown, Slovakia could produce as many as 850,000 passenger automobiles in 2010. The presence of major motor vehicle manufacturers has led to the development of numerous satellite support industries, including at least 150 vehicle component manufacturers, several of whom also sell components to other car factories throughout Europe.

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

Slovakia exported products in 2007 which equaled €43.7 billion, which represents an annual growth rate of 15.2% year on year. Exports of automobiles

Gregory Fasing is Honorary Consul for the Consulate of the Slovak Republic. He can be reached at 303-692-8833 or at consulden@aol.com.

06.09-07.09

( 139 )

COLLABORATOR PROFILE

HUMAN RIGHTS TREATIES

Human Rights Treaties Global Progress Depends on Local Education & Action By Kay Meyer

E

leanor Roosevelt reminds us of something she clearly understood over 60 years ago… “Where, after all, do universal human rights begin?

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

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

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

Treaty Universal Declaration of Human Rights Convention on the Elimination of all forms of Racial Discrimination (CERD) International Covenant on Civil & Political Rights (CCPR) International Covenant on Economic, Social & Cultural Rights (CESCR) Convention on the Elimination of all forms of Discrimination Against Women (CEDAW) Convention Against Torture, & Other Cruel, Inhuman or Degrading Treatment or Punishment (CAT) Convention on the Rights of the Child (CRC) Int’l Convention on the Protection of the Rights of All Migrant Workers & Members of Their Families (CPMW) Convention on the Rights of Persons with Disabilities (CRPD)

( 140 ) 06.09-07.09

Year Adopted Year In Force Year U.S. Ratified 1948 1965 1966 1966 1979 1984 1989 1990 2008

N/A 1969 1976 1976 1981 1987 1990 2003 not yet in force

N/A 1994 1977 1977 not yet ratified 1994 1995 not yet ratified not yet ratified

Âť Where, after all, do universal human rights begin? In small places, close to home - so close and so small that they cannot be seen on any maps of the world. ÂŤ

06.09-07.09

( 141 )

COLLABORATOR PROFILE

HUMAN RIGHTS TREATIES

» One of the most significant challenges

facing the international community is maintaining a fair and predictable international trade regime, while at the same time, making progress toward addressing global social ills. «

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

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

Conversely, in very autocratic regimes with weak civil societies, ratification can be expected to have no effect and is sometimes even associated with more rights violations.

(Journal of Conflict Resolution, Neumayer, 2005) One of the most significant challenges facing the international community is maintaining a fair and predictable international trade regime, while at the same time, making progress toward addressing global social ills. A linkage between human rights and trade policies is perhaps necessary to achieve progress on human rights goals because of the lack of effective enforcement mechanisms within the human rights treaties. (Virginia Journal of International Law, Karbowski, 2009) However, because of commitments they have made to the World Trade Organization (WTO), many nations are unable to actively address human rights policies. Policies intended to improve areas such as human rights or environmental conservation are judged as ‘limiting market access’ and so have been abandoned to avoid WTO economic sanctions.

And, because WTO dispute settlement is costly and attracts international attention, nations often want to avoid it. This creates a chilling effect on the formation and implementation of policies that could otherwise benefit international human rights. (Ibid) Creative solutions that do not interfere with the WTO rules are being found in private and voluntary labeling systems.

Examples of these labels are ENERGY STAR, ‘Fair Trade’, and ‘No Sweat’. However, there are myriad examples of the failure to come to accord when private stakeholders on opposite sides of the debate deadlock who are unable to reach a mutually acceptable solution. (Ibid) Is it the ‘fault’ of a human rights treaty itself that there should be such diverse handling? Should these accords of how people should be treated not exist? Should they be derided, as some are, as signs of weakness and naivety? Should governments become more or less involved?

From a more philosophical point of view, perhaps a nation’s handling of these treaties could be considered a good

( 142 )

06.09-07.09

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

In the United States, CEDAW, the Convention on the Elimination of All Forms of Discrimination Against Women, is a good example of prolonged deliberation. In fact, CEDAW has undergone 30 years of deliberation in the

» Policies intended to improve

areas such as human rights or environmental conservation are judged as ‘limiting market access’ and so have been abandoned to avoid WTO economic sanctions. « U.S. Although CEDAW is endorsed by over 200 major civic organizations, the U.S. Senate has failed to ratify this treaty for numerous reasons stemming from constituent concerns and criticisms. Today, only eight countries have refused to ratify CEDAW: the United States, Iran, Sudan, Somalia, Qatar, Nauru, Palau and Tonga.

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

CEDAWs History in the U.S. 1979-80

United Nations adopted CEDAW; 63 countries plus U.S. President Carter signed treaty. Because CEDAW is an international treaty the U.S. Senate must ratify the agreement for adoption – that has never happened.

1994

U.S. Administration recommended ratification; Senate Foreign Relations Committee recommended ratification; several Senators put the ratification vote on hold.

2002

Foreign Relations Committee again recommended ratification; session elapsed without passage.

2008

185 nation states have ratified. Somalia, Sudan, Iran, Qatar, & the United States have not.

2009

The Obama Administration has CEDAW under review. The treaty is once again on the agenda for consideration by the U.S. Senate Foreign Relations Committee.

06.09-07.09

( 143 )

COLLABORATOR PROFILE

HUMAN RIGHTS TREATIES

» Today,

only eight countries have refused to ratify CEDAW: the United States, Iran, Sudan, Somalia, Qatar, Nauru, Palau and Tonga. « Major concerns of CEDAW include speculation that the U.S. would lose its national sovereignty upon signing, that the “laws of nature” or the Shariat are violated, and probably most timely – it is either too weak or too strong regarding abortion and family planning.

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

to learning that some State Legislatures had passed resolutions of support, which were sent to the U.S. Senate. This also led to panel discussions and interactions with State Legislators. The result… resolutions passed by the State Legislatures of Colorado and Washington urging CEDAW ratification. The Treaty is currently under review by the Obama Administration and is once again on the agenda of the Senate Foreign Relations Committee.

» Zontians are examining their role as members of the larger NGO to determine how best to assist in monitoring the treaty’s implementation in accordance to their local laws & civic structures. «

When Zontians in the United States were educated regarding the provisions of CEDAW, they began to search for ways to express their support for U.S. ratification. Dialogue with chapters of the American Association of University Women and Business & Professional Women led

Zontians in nations that are already a party to CEDAW are examining their role as members of the larger NGO to determine how best to assist in monitoring the treaty’s implementation in accordance to their local laws & civic structures. In addition to the regular reports required by countries that are party to the Treaty, there are ‘shadow reports’ where NGOs and civil society prepare a separate report that the CEDAW Committee considers alongside the formal report. Like other human rights treaties, CEDAW makes very general, sometimes ambiguous points.

This means that at the national and local levels, the wording must be reinterpreted, negotiated, contested, and locally owned. Zontians are learning about how to do this with CEDAW.

Why should the U.S. Senate see ratification of CEDAW as important?

To join other countries in supporting a global definition of human/women’s rights.

To deny countries resisting CEDAW reforms,ºv the excuse that the United States is an example of not needing such guidelines.

To demonstrate & emphasize that violence against women is part of a larger pattern of discrimination.

To begin to better align current U.S. laws and statutes for enforcement purposes.

To assure U.S. women that their government affirms their human rights.

( 144 )

06.09-07.09

Kay Meyer is the Zonta International Lieutenant Governor for District 12.

Contact Zonta International at www. zonta.org or the Rocky Mountain District at www.zontadistrict12.org.

For further information on CEDAW, link to www.womenstreaty.org or www.ohchr.org/english/bodies/ cedaw/index.htm.

The Green Building Road Show DATE:

November 2-13, 2009

VENUE:

Four U.S. Cities—Pittsburgh, PA, Denver, CO, San Francisco, CA and Phoenix, AZ

AUDIENCE: Sustainable Construction equipment and services firms (including HVAC, Insulation, Waste Treatment, Architectural Services)

The “Green Building” Road Show will: • • • •

Promote five European markets to a targeted audience: France, Germany, Italy, Great Britain, Nordics Inform companies on market-entry strategies, Brief on EU Product Certification and Standards Offer One-on-One meetings with market specialists from five U.S. Embassies plus U.S. Mission to the E.U.

The Market Opportunity: The market for sustainable construction equipment and services, also called “Green Building”, has taken off in both Europe and the United States over the past five years. Despite the worldwide recession, growth is expected to outpace many other markets due to strong government involvement. EU national and local governments are committing funds, establishing tax and policy initiatives and revising building codes – all of which creates demand for sustainable construction. High energy costs in Europe further strengthen business and consumer interest in Green Building. Architects, builders, developers, and building products manufacturers are looking at old and new technologies to reduce the energy and environmental impact of commercial and residential

Register Today as Space is Limited!

Register at: http://www.buyusa.gov/france/en/greenbuildingroadshow.html For additional information contact:

Pittsburgh: Lyn Doverspike, Office Director (412) 644-2820 or lyn.doverspike@mail.doc.gov Denver: Paul Bergman, Office Director (303) 844-6001 Ext 222 or paul.bergman@mail.doc.gov San Francisco: Stephan Crawford, Office Director (415) 705-2301 or stephan.crawford@mail.doc.gov Phoenix: Eric Nielsen, Office Director (520) 670-5540 or eric.nielsen@mail.dov.gov

COLLABORATOR PROFILE

PROFESSIONAL DYNAMIC PROGRAMS

Professional

Dynamic Programs Integrated Management Systems Producing Measurable Results By Cos Lindstrom

I

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

It takes twice as long as it should to piece together than it would if they all took a section and concentrated just solely on that section.

The Solution Employees are hard to find and are valuable when you find the right ones to fit well in their positions. For the owners of an organization, the task of training, retraining and motivating their employees can be an ongoing battle. Like the four people and the puzzle, an

( 146 )

06.09-07.09

organization must work as one and fit together like a puzzle to solve everyday tasks as one.

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

PDP offers five integrated network applications that help organizations including: defining specific human characteristics for

a new position with selection assistance to find someone with select experience and working style attributes with 90% accuracy; applying employee profiles and PDP licensed technology to more effectively manage staff - individually and in teams - by understanding their natural abilities, needs and motivation; building effective, balanced teams, while anticipating potential problem areas; and learning the most effective ways to understand and manage employees.

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

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

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

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

• JobScan® measures the job rather than the person to indicate what personal characteristics would be most desirable in the position.

Using JobScan® in tandem with administering ProScan® Surveys to

ProScan creates a 26 page report on employee strengths.

06.09-07.09

( 147 )

COLLABORATOR PROFILE

PROFESSIONAL DYNAMIC PROGRAMS

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

Here is what some of their clients have to say: • “ To me, the greatest use is in providing a vehicle for understanding people.

With this understanding has come a better functioning department.”

- Director, Knoxville News Sentinel Co., Knoxville, Tennessee

PDP International Team

applicants substantially increases the likelihood of job success.

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

Real-Time and Measurable Results PDP produces measurable, bottom-line results with people at every level within an organization.

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

Quantitative results: • Increased productivity • Greater retention • Reduced turnover • Increased sales • Decreased costs

Qualitative results: • Clear, effective interpersonal communication • High-performance teams • Healthy company morale • Loyal customers • A vibrant workplace where the business of your business gets accomplished

( 148 )

06.09-07.09

» PDP’s work, both nationally and globally, earned them the 2009 Colorado Governor’s Award for Excellence in Exporting. « The company works in various industries including: banks, government, hospitals, hotels, insurance companies, law firms, manufacturers, newspapers, military, real estate, restaurants, retailers and transportation. Clients come in all and from anywhere in the world. Select clients include, GE Capital, Harris Teeter, Henry Schein Inc., Hong Kong University Business School, Focus on the Family, The Lion Group, Hughes Christensen, UPS, Watsons Personal Care Stores, and Tata Power Company.

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

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

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

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

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

- Vice President Sales, Broadwing Communications, Cincinnati, Ohio

• “ PDP helps us better match the person to the task by identifying and utilizing their inherent talents.

We have found that our associates who are naturally inclined to their jobs usually enjoy their work more, are more productive, and have greater longevity. It’s a great management tool!”

- Chairman of the Board, Vista Host, Inc., Houston, Texas

• Regarding downturn in the economy: “It wasn’t even a thought to cut [PDP], because to keep our people is the least expensive thing we can do.”

- President, Pikes Peak National Bank, Colorado Springs, Colorado

• “ I learned that besides hiring right, another real benefit to PDP in my region has been a dramatic decrease in stress and profound increase in mutual respect.”

- Regional Manager, Penhall, U.S. Southern Region

OPINION

Cuba

It’s Time for Coloradans to Rethink Our Policy

A

AS A JUNIOR IN HIGH SCHOOL IN 1959, I was intrigued by Fidel Castro’s efforts to force Cuban dictator Fulgencio Batista to flee Cuba and I was naively optimistic that democracy might return to this Caribbean Island, ninety miles south of Key West, Florida. Like many Americans I had high hopes that Castro’s 26th of July Movement would bring peace and prosperity to the island. I quickly learned that he was not the social reformer he claimed to be, but just another power hungry demagogue intent on imposing his political and social ideas on a poor and abused civilian population.

In response to Castro’s repression of dissent, the United States imposed an embargo on Cuba in October 1960, imposed Cuban assets control regulations in July 1963 and led the movement to exclude the current Cuban government from the Organization of American States. I wholeheartedly agreed with these actions, certain that they would embolden the Cuban population and force Castro out of power as quickly as he had risen to power.

by Jim Reis

exports to Cuba in that year, and Chinese exports to Cuba reached $1.35 billion in 2008 and include many products that could easily be supplied from the U.S. These include trucks, locomotives, beans and peas, refrigerators, footwear, tractors and air conditioners. None of these products threaten U.S. security and all help Cubans earn a living and provide the Cuban population with an improved quality of life.

Colorado has supplied humanitarian aid to Cuba through organizations like Dr. Doug Jackson’s Project C.U.R.E. Project C.U.R.E. works with recipient partner organizations by donating the medical supplies and equipment they need to provide healthcare to the people in the local community. Beginning in 1997, Project C.U.R.E. has a history of working with partners in Cuba to deliver containers of medical supplies and equipment to hospitals in Havana, Matanzas and Pinar del Río and more recently in the mountainous city of Yateras. A number of Coloradans have traveled to Cuba to support Project C.U.R.E.’s efforts and the potential for Colorado humanitarian organizations and businesses to help the Cuban population exists. The United States government needs to rethink its position on Cuba and let Americans and Coloradans help our nearby neighbor and create a better life for the Cuban population.

» The United States government needs to rethink its position on Cuba and let Americans and Coloradans help our nearby neighbor and create a better life for the Cuban population. «

Fifty years later it is clear that the embargo and other actions that the U.S. has taken against Cuba over the years have only hurt the Cuban people and encouraged Castro to link up with other power hungry leaders in places like Russia and, more recently, Venezuela. Meanwhile Castro’s government over the past fifty years has executed or jailed thousands of political opponents and practiced and compiled an abysmal human rights record.

As Cubans fled to the United States, some elected U.S. officials recognized that the embargo was only inflicting hardship on the Cuban population, not the leadership, and Congress passed the Trade Sanctions and Export Enhancement Act of 2000 giving the Commerce Department the power to authorize the sale and export or re-export of food, agricultural commodities, medicine and medical supplies to Cuba. Since then U.S. exports to Cuba have grown from $6.9 million in 2001 to $717.9 million in 2008 with businesses in states like Louisiana, Texas and Florida enjoying the bulk of the proceeds from these sales. Colorado finally showed up in the export statistics in 2008 with exports of $1 million of butter to Cuba.

The increase in U.S. food and medical exports to Cuba sounds like progress until you look at Cuban imports from China. In 2002 Chinese exports to Cuba had already grown to $310 million, double U.S.

( 150 )

06.09-07.09

The World Trade Centers Association, of which the World Trade Center Denver is a member, has as its motto “Peace and Stability Through Trade.” The Association’s leadership over the years has contributed to building more positive relationships between countries around the world including the U.S. and the Soviet Union in the 1980’s and Taiwan and the People’s Republic of China in the 1990’s.

It is time the United States expands its business relationship with Cuba so we in Colorado can contribute to “Peace and Stability Through Trade.”

Jim Ries is President and CEO of the World Trade Center Denver. Prior to joining the World Trade Center, Mr. Reis had a 26-year career in business as an executive with the Johns Manville Corporation headquartered in Denver, Colorado. Mr. Reis served as President of the Colorado Host Committee for the Western Hemisphere Trade Ministerial & Commerce Forum held in Denver in 1995, was a member of the host committee for the 1997 Denver G8 Summit and served as co-chair with Denver Mayor Wellington E. Webb for the 2001 trade mission to China to open the City of Denver’s Trade Office in Shanghai.

He is a member and past Chairman of the Rocky Mountain Export Council.

Photos courtesy of Project C.U.R.E. 06.09-07.09

( 151 )

Utah: We’ve scoured all 84,904 square miles so you don‘t have to.

EDCUTAH has gathered detailed information on virtually every spot in Utah. We are your single source for comprehensive demographic, economic and industrial reports to help you determine Utah is the place to relocate or expand your business. We also provide public and private contacts and guidance throughout the entire process of placing your business in Utah. And, we do it all for free. Call us, we’ll help.

For information on expanding or relocating to Utah, please call us toll free at 1-800-574-UTAH (8824) or drop by www.edcutah.org