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Anyone believe It’s not a Globalized Economy? Fisher-Price recall Chinese-made Toys contaminated with Lead-based Paint “Insanity is doing the same thing over and over again and expecting different results.” (Albert Einstein) INTERNATIONAL COMMERCE ____________________________________________________________ Why are Nike's shoes made in Vietnam but Toyota's Tundra trucks are built in San Antonio? _____________________________________________________ What is this situation's “net on-shoring/offshoring" result? Why isn’t everyone in Ohio happy with this? Would a law taxing foreign-earned Net Income of US-based companies fix problem? INTERNATIONAL COMMERCE ____________________________________________________________ A Global Balance Sheet might show the US as the World's largest Debtor (Borrower) and China as the World's largest Creditor (Lender) ______________________________ How did this happen? Has this always been the case? Is it something to worry about? What should (could) be done about it? INTERNATIONAL COMMERCE INTERNATIONAL COMMERCE ____________________________________________________________ Where does our oil come from? What happens if US becomes “energy-independent?” Crude Oil Imports (Top 10 Countries) (Thousand Barrels per Day) Country Aug-09 Jul-09 YTD 2009 Aug-08 YTD 2008 CANADA 2,007 2,110 1,928 1,873 1,926 MEXICO 1,057 985 1,126 1,292 1,209 VENEZUELA 1,007 865 1,014 1,146 1,049 NIGERIA 877 858 694 1,035 998 SAUDI ARABIA 745 1,137 1,022 1,533 1,537 IRAQ 500 365 459 663 ALGERIA 404 143 253 348 ANGOLA 352 320 484 483 BRAZIL 269 375 332 169 COLOMBIA 260 286 261 247 675 269% Import more313 from Canada 512 than Saudi Arabia 217 190 Source: Energy Information Administration, US Dept. of Energy ENERGY TRIVIA US is World’s Third largest Oil Producer (about 10%) but Consumes about 24% About one-half of Imported Oil comes from Western Hemisphere Nations Nearly 50% of Energy is Produced from Coal and Natural Gas Nuclear Capacity same as 1996 but Applications for 26 New Plants pending Source: Energy Information Administration, US Dept. of Energy Where are Global Markets: Demographics Population Growth Rates Where are Global Markets: Demographics Fertility Rates Number of children born to women aged 15 to 49 INTERNATIONAL COMMERCE ____________________________________________________________ How do you Compete Internationally? 2008 Chevrolet’s “Trax” 1968 Ford’s “World Car” Or does Global Competition offer Unique Market Segments and Countless Opportunities for Product Differentiation? Approaches. (1) Direct (2) Alliances (3) Licensing INTERNATIONAL COMMERCE ____________________________________________________________ EXCHANGE RATES Express Relationship between Currencies of Transacting Countries 2001 (“Strong Dollar”) $ 1 USD = 1.18€ $ 0.85 USD = 1€ _________________________________________________ 2005 (“Weak Dollar”) $1 USD = 0.86€ $1.17 USD = 1€ _________________________________________________ 2008 (“Very Weak Dollar”) $1 USD = 0.67€ $1.48 USD = 1€ _________________________________________________ Nov 2009 (No Change?) $1 USD = 0.66€ $1.50 USD = 1€ Historical Exchange Rates Monthly Average Exchange Rates: US Dollars per Euro Concerns about Inflation and US Economy’s Recovery have weakened Dollar Cf. Textbook, pp. 118-127 INTERNATIONAL COMMERCE ____________________________________________________________ Exchange Rate Impacts on Exports and Imports MSRP 84,475 € $ 85,000 Cost to Buy in USA Germany 2001 (Strong Dollar) $ 71,804 100,301 € 2005 (Weak Dollar) $ 98,836 73,100 € 2009 (Very Weak Dollar) $ 126,713 56,950 € INTERNATIONAL COMMERCE ____________________________________________________________ “Germany’s new finance minister has echoed Chinese warnings about the growing threat of fresh global asset price bubbles, fueled by low US interest rates and a weak dollar.” Financial Times, Nov. 20, 2009 THE CHINA FACTOR Did you know China has only one time zone? Another Perspective on Balance of Trade How does US/China Relationship look now? Current Account Balance of Payments As a Percentage of GDP Which Countries are Growing? Which are not? Where are Opportunities? Growth in GDP per capita Percentage change, annual rate INTERNATIONAL COMMERCE ____________________________________________________________ LEGAL SYSTEM How does Society redress Inequitable Treatment? Contract Enforcement: Will Contracts be consistently Enforced? Property Rights: Do they include Intellectual Property? Product Safety and Liability: Are there standards? What kind of liability? INTERNATIONAL COMMERCE ____________________________________________________________ CULTURE What are a Society’s Shared and Learned Values? How does it “Live?” Ethics and Religion: How do you reconcile conflicting ethics? Can religion influence business decisions? Male/Female Roles and Authority: What about Cultures where Women don’t (can’t) exercise authority? Subtleties of Language, Tone and Manner: Does it matter how things are said? INTERNATIONAL COMMERCE ____________________________________________________________ GLOBALIZED INSTITUTIONS Laws, Customs and Institutions (Public/Private) that Manage, Expedite and Regulate Global Trade World Trade Organization (WTO) World Bank Global-Scale Businesses United Parcel Service (UPS) 1907: Delivering documents by Bicycle in Seattle Today: 11th Largest Airline in the World Processes Daily 2% of the World’s GDP Ships more than 13.5 Million Packages/Day Largest User of Wireless Technology: The Clipboard Since 1996, spent $1 Billion on Supply Chain Management Services, including Financing, that are available to any Business or Person wanting to be Globalized INTERNATIONAL COMMERCE ____________________________________________________________ Motivating Forces of Globalization Political: Reduced Tariffs 1950 1990 2000 France 18% 5.9% 3.9% Italy 25% 4.9% 3.9% USA 14% 4.8% 3.9% Technological: Faster, More Reliable Transportation and Communication INTERNATIONAL COMMERCE ____________________________________________________________ INTERNATIONAL COMMERCE ____________________________________________________________ EUROPEAN UNION (EU) Total Population Rate Increase: 4.1% (Natural: 0.4%; Net Migration: 3.7%) Natural Increase Rate Germany -1.7% Italy -0.5% UK 1.4% USA 5.7% India 14.8% THE CHINA FACTOR World’s Leading Producer of Steel, Copper, Coal, Aluminum and Cement 2005: Second Largest Oil Importer 2006: Second Largest Auto Market Richmond, VA: $3.42 Guangzhou, China: $1.41 Positive Economic Benefits Lower Prices, Job Creation and Economic Growth Negative Impacts Shifting Job Distribution; Diminished Sovereign Authority; Multiple Tax and Regulatory Standards Is it worth it? Do Benefits outweigh Costs? INTERNATIONAL COMMERCE ____________________________________________________________ "Problem in Australia, chief. Everyone seems to be asleep." Cartoon by Leo Cullum