Business Beyond the Reef

There has been some press play given to a report published a week ago about the vast number of protectionist measures that countries have implemented during the recession and, especially, since the G-20 promised not to do such things nearly a year ago.  The report, Broken Promises: a G20 Summit Report by Global Trade Alert, was produced by the Centre for Economic Policy Research in London and is an eye-opener.  In the United States, depending on which news sources one follows, we either paint ourselves as the most put-upon of nations or as the worst offender, loving to enact protectionist measures.  Actually, we come out somewhere in between.  It’s just that when we do go off the reservation with protectionist actions, our economy and clout is so great that we impact an awful lot of people all over the world.

Broken Promises: G20

Broken Promises is intended to look at the performance of the world’s nations on protectionist actions during the recession, and particularly at the actions of G-20 members following the G-20 pledge not to do such things in November 2008.  The pledge was lofty – and the performance is dismal.  Since the pledge, the authors count 192 new discriminatory actions, nearly five times the number of liberalizing actions worldwide.  Of these, 63% or 121 of the discriminatory actions have been implemented by the G-20 nations themselves, the very nations that made the pledge not to be naughty during the recession.  That means the G-20 countries broke their pledge on the average of once every three days.  So much for promises.

We have changed how we go about being protectionist.  The big fear was that, during the recession, countries would resort to massive tariff discrimination such as happened in the 1930s, e.g., the infamous Smoot-Hawley Tariff.  But we have become more subtle over the years.  Broken Promises reveals that the favored methods of discrimination now include bailouts and other state aids or subsidies that favor national companies, export taxes and restrictions, export subsidies, buy national policies and other non-tariff measures.  Customs duties are still used, of course, but they are so last century.

China has been the most frequent target for discrimination, not surprising given China’s startling emergence on the world business stage.  The next most likely targets for trade actions are the United States (yes, we are a victim, too, not just a perpetrator), Germany, France and Japan.  So who is leading the assault against China?  Despite all the headlines given to the recent U.S. safeguard action against Chinese tires (for which I am not in a mood to forgive the Obama Administration), the most consistent anti-China actors are, in order, Russia, Indonesia, India, Germany and Spain.  But they aren’t alone; 56 countries have established new restrictions that may adversely impact Chinese companies.

So who are the worst offenders overall?  The report makes it clear that there are many ways in which to measure this, but all their measures seem to point squarely at countries such as Indonesia, China (it works both ways), Russia, Germany, India, Ukraine and Algeria.  Notice the absence of the United States?  We appear in some of the lists of wrongdoers, but not at the top.  Our importance is that any time the United States uses protectionism, we are so important to world trade that we impact almost every country.

Broken Promises is but one report on a new website, Global Trade Alert, which first saw the light of day in June.  I recommend the site and have added it to my website list on the right.  Use the site to explore the world of trade restrictions and to report new restrictions and actions that you pick up in your travels.  The mainstream media is not particularly good about this, but experienced business people know a protectionist measure when they see one.  Get the word out!

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Koko Crater - Oahu

While I was exploring Europe, the Hawaii Tourism Authority (HTA) released its budget for tourism marketing in 2010, which Pacific Business News analyzed in its September 4 edition.  The article contained sidebars that attracted this economist’s attention, putting Hawaii’s visitor arrival numbers for 2008 right next to HTA’s planned marketing budget for 2010.  Now, I know you are not supposed to compare 2008 numbers with 2010 numbers, but I don’t have the HTA budget numbers for 2008 – and I just can’t resist seeing which tourists we are spending the most money on to attract.

Dividing the 2010 budget plans by the 2008 arrivals from each region, here’s what we get in the way of marketing expenditure per visitor for each region:

• North America (U.S. & Canada)                                 $  4.65
• Japan                                                                          $  6.22
• Other Asia (Korea, China, Taiwan, Hong Kong)        $ 13.51
• Oceania (Australia, New Zealand)                             $  4.50
• Europe                                                                        $    .87
• Latin America                                                             $       0

One shouldn’t compare the numbers as I have done, but I am only using them to look at orders of magnitude – which are probably close to what the comparable numbers would indicate.

The conclusion is pretty clear.  HTA continues to ignore world markets that are highly lucrative for other travel destinations, and continues to concentrate its marketing funds in markets in which Hawaii has long been a well developed brand.  The big spend per visitor for Other Asia may be appropriate as some of these markets are newly opened and visa waiver programs hold the promise of building these markets.  But I am baffled by the continuing spend on Japan and the U.S. West Coast.  It’s not that I object to spending money there, but I am concerned about NOT spending marketing funds in super rich travel markets like Europe and Latin America.  I know from my years living and working in Europe that European tourists are exactly what Hawaii should be going after.  These are visitors who will stay for far longer vacations than our U.S., Canadian or Japanese customers – and will likely spend more than the first two on a daily basis.  And Latin America always gets left out.  Hawaii seems to have a cultural bias that prevents its decision makers from taking Latin America seriously.  The fact is that Latin America is a potential source for high quality, high spending visitors  without visa issues – yet HTA is spending nothing in this region according to the published 2010 budget. 

Isn’t it time we thought about re-allocating some marketing funds?  For any other export business, a downturn requires that you take good care of existing customers AND that you go after new customers.  HTA doesn’t seem to have fully glommed on to the latter point.

London – My first impression was that London is coming out of the recession in good shape.  When we checked into our hotel in Bayswater, the desk clerk commented that the hotel was full and the shopping streets of Bayswater were teeming with people. The restaurants were full and the shops seemed to be doing business.

Stormcluds Over the Eye

But first impressions are not always accurate.  Bayswater is now a neighborhood of immigrants and transients, which explains the busy restaurants.  And my hotel had a particularly good offer.  As I spoke to friends in the city and paid attention to the news broadcasts, quite another picture emerged.  Real estate prices that seemed atrocious to me (that takes some doing if you live in high-cost Honolulu) were down 20% or more from their highs.  A local news show visited an industrial park where 20% of the factory space was vacant, and the more we looked, the more retail space we saw with “For Lease” signs on them.  Another news story averred that London has a quarter of a million people suffering from depression brought on by financial setbacks.  I mentioned all this to a friend who is involved with Europe-wide project finance, and he said his bank’s economists aren’t expecting things to really improve in England or Europe as a whole until 2012.  That’s a long time to wait and certainly at odds with all the ‘green shoots’ that the politicians claim to be seeing.