Nations tend to play nicer with each other when the global economy is happy and everyone’s getting a fair share of the spoils. Recession, on the other hand, eats away at a nation’s jobs, cash reserves and confidence. Defences can get erected and the minds of the men behind the barricades turn to preservation and protection. This environment creates a challenge for communication departments representing the global commercial interests on either side of the quarrel.
There’s an escalating international tit-for-tat trade battle, if not a full-blown trade war, taking shape. In one corner is the United States representing itself and its old world superpower allies; in the other, the emerging BRIC nations (Brazil, Russia, India and China – recently joined by South Africa), fronted by China.
The latest round of awkwardness started last year with solar panels when first the US, and then the EU, complained that products manufactured in China were too cheap and cried foul, citing “price dumping”. Cue import duties on Chinese manufactured panels to made them more “price-comparable” with domestic competitors. China swiftly responded with a formal complaint to the World Trade Organisation over what it believes is illegal state subsidies by Italy and Greece for solar panel manufacturers in their jurisdictions.
More recently, telecoms equipment from China (and increasingly Korea) has been banned or challenged in the US over fears that it could pose a threat to the US’ national security. The allegations were tested in a US technical laboratory and no evidence was found. But what sane person would accept even the slightest risk – with or without evidence – of a threat to national security?
A de facto blockade was put in place. Now the French Government, with an ailing telecoms equipment vendor on its doorstep, is said to be considering similar action. Interest declared – I represent a global telecoms equipment vendor headquartered in China.
The macroeconomic and political environment is important to understand here. The collapse of the global economy in 2008 inflicted near-fatal damage to the reputation of free market capitalism. A succession of Eurozone aftershocks kicked it again, and again. To add insult to injury, the US economy had to turn to China, long considered misguided for its commitment to state-led capitalism, for help and a hand out. China complied with the call for cash but, then – somewhat pettily – exercised a little smug triumphalism. They also suggested a greater say in international policy, in line with its new economic status, might be in order.
With free trade and bi-lateral trade agreements in place, truth becomes the first fatality in a trade battle. With import tariffs and market quotas open to legal challenge, more palatable justifications are called for. If declaring the self-interst of protecting a domestic player is legally invalid, the shield of ‘national security’ – practically disprovable by either side – can be easily adopted.
In these cases, political lobbying, the traditional route to having trade restrictions discussed, revised, reduced or erased, becomes ineffective. It’s difficult to lobby against decisions already made or investigations staged to justify already made decisions.
The impartial media are often conflicted. Challenging opaque issues of national security could be seen as conspiratorial. In any event, straight reporting of battles, of winners and losers, are much easier stories to write and make better headlines.
For internal communicators, it’s difficult to explain to a global workforce in terms they understand or accept that the potential loss of their livelihoods is really nothing personal and that commercial organisations sometimes have to pay the price for bigger debates.
Ultimately, there are three key implications of trade wars.
Firstly, consumers are denied choice and lower costs. In the case of the solar panel dispute, American consumers are forced to pay a higher price to reduce their heating bill or minimise their carbon footprint. And before you suggest it, only a cynic would suggest this activity was a gift to US oil and gas companies, contributors to both the Republican and Democratic parties.
Secondly, protecting the weak seldom encourages them to understand and address the underlying causes of weakness (the banks in the US, the UK and across the Eurozone that were bailed out by taxpayers may prove this theory wrong in time but the early signs aren’t encouraging). In a global, free market economy, competition (assuming fairness and the rule of law is respected) should raise standards and reduce costs for consumers and businesses alike and businesses that invest, innovate, risk capital and operate profitably by giving customers what they want should have a reasonable expectation of success.
Finally, international trade wars are a zero sum game. Markets blocked from other markets typically bite back. The BRIC nations are enjoying economic growth, while the free market economies of the west are in decline.
With time, and an improving economic outlook, trade wars usually get resolved but if ever there was a time when the global market needs to support the global economy, to cooperate and remove all the barriers, that time is surely now.