Smoke & Mirrors in Paradise?

Who will dive in next?

Who will dive in next?

Is Hawaii getting serious about attracting international tourists? Hard to tell, but there are some recent good signs. It used to be that the state’s tourism marketing agency, the Hawaii Tourism Authority (HTA), would only put marketing funds into countries or regions that had direct flights to Hawaii. That’s a bit limiting since Hawaii’s beaches are located in one of the world’s most isolated archipelagos. It meant that HTA’s international marketing spend was effectively limited to Canada, Japan, a few other places in east Asia, Australia and New Zealand. That list has grown a bit, but I suspect that an overwhelming preponderance of the budget still goes to Japan. More on that below.

HTA started taking Europe seriously a long time back when European airlines began to talk about polar runs between London and Honolulu. That didn’t last, but HTA had gotten used to spending a pittance in Europe. Out of perhaps a $60 million international marketing budget, something like $100,000 would be spent in England and Germany. A little of that now leaks into Switzerland, Austria and France, but the Europe spend, I’m told, is still the same order of magnitude. Some of us pointed out over the years that Europeans are dedicated travelers who aren’t likely to let something like changing planes stop them if they want to come. But we didn’t get anywhere.

HTA enthusiastically greeted the emergence of China and South Korea as tourism markets. Major efforts went into building these markets, both of which – again – had direct flights to Honolulu. Travel from Taiwan appears to be growing due to the U.S. visa waiver program and prospects for renewed direct flights. Some of us hoped this would presage attempts to attract all those rich tourists in South East Asia or even India, but no such luck. No direct flights.

On the plus side, HTA has begun paying attention to Latin America and is putting some shekels into marketing in Mexico and a few other places. They have apparently realized that Latins might not object to changing planes, say, in Los Angeles or Houston. Still, it is hard to know how much HTA really devotes to the Latin markets.

The reason it is hard to tell is that HTA guards its budgets. HTA argues that they have to hide their budgets so that their competitors won’t know what they are up to. That sounds reasonable until you realize that everybody in the travel industry who cares can see HTA’s activity. It is clear that a majority of HTA’s foreign marketing spend is still in Japan. Growing segments go to China and South Korea. Some continues in Canada, Australia and New Zealand. And there are now risible amounts spent in Europe, Taiwan, Mexico and a few other places. The industry knows that HTA has no plans for marketing to the well-to-do travelers of the Middle East, most of Latin America, South East Asia, India, Scandinavia or much of the rest of Europe. Plus, HTA’s marketing budgets were openly published up until a few years ago – and competitors didn’t seem to notice or care.

So how did we get to hiding the marketing budget? A small group of us here in Hawaii started asking pointed questions about foreign marketing strategy and why HTA was ignoring large parts of the world. We analyzed how much other markets could be worth and asked if perhaps some of HTA’s effort should be shifted to new markets. HTA had only one answer to those questions – no direct flights – and was seemingly irritated that anyone would question their supreme judgement. So HTA convinced the Hawaii state legislature to allow them to close any of their board meetings that discussed budget allocations and marketing plans, so that the rest of us could no longer be certain what they were up to.

A bit of HTA’s budget information leaked out last Friday, though not enough to get the overall picture. David Uchiyama, HTA’s vice president for brand management, told the Honolulu Star-Advertiser that he will have an extra $1.2 – $1.3 million to spend on international markets in 2015. Plus, he has an extra $1.5 million to throw at Brand USA promotions and to spend on websites and social media. That’s all good, but it doesn’t tell us anything about the overall global spend. And amounts like these are pocket change in the world of international tourism. They will be quickly burned up. (Here’s the link to the Star-Advertiser article. Good luck with that unless you subscribe. They have a ferocious pay-wall.)

It is great news that Hawaii is paying a little more attention to the rest of the world. Just how serious it is remains a state secret.

 

Raising the K-129

I didn’t know I was working for the CIA. It was only for a month or two and my pay stubs said “University of Hawaii”. Years later, I found out I had been a very minor part of the cover story for perhaps the biggest intelligence coup of all time. It all started with the mail mix-up.

John Craven

John Craven

I was a grad student in economics at the University of Hawaii in 1973 and had a job as a teaching assistant. One day, I got a bunch of mail at my T.A.’s office that was addressed to the wrong guy. They got the last name right, but the mail was meant for Dr. John Craven – not for Steve Craven, lowly grad student. I knew who he was. Dean of the School of Ocean Engineering, marine advisor to the governor of Hawaii, former Law of the Sea negotiator, and former chief scientist on the U.S. Navy’s Polaris missile program. So I picked up the box of mail, trekked it across campus and introduced myself to the esteemed Dr. Craven. We hit it off, established that we are not related, and have been friends for years. I served on the board of John’s company, Common Heritage Corporation, for several years.

That afternoon John offered me a job. He needed an economist for an inter-disciplinary study of the feasibility of mining manganese nodules from the Pacific Ocean floor. I already knew about manganese nodules and their promise, plus we had copious data from Woods Hole, Scripps and similar places to work with. I could get the trade and production data with little problem. So we put a short paper together that concluded that mining manganese nodules was economically feasible. Other teams were working on the technical feasibility of mining the seafloor. We were excited because a manganese nodule industry in the Pacific would likely be based in Hawaii, providing a much needed new industry. But that wasn’t the purpose at all.

Nobody knows what happened after the Soviet submarine K-129 put to sea in 1968. She was headed from Vladivostok to an assignment near Hawaii, where it was not unusual in those Cold War days to see Soviet submarines, surface ships or suspicious-looking fishing boats, keeping tabs on Pearl Harbor. But K-129 went down enroute in 16,500′ of water some 1800 miles northwest of Hawaii. She probably flooded while snorkeling near the surface, though there is outlandish speculation. Some say K-129 died in an accidental collision with a U.S. submarine, Swordfish. Others say that rogue Russians had mutinied and sank the boat in a hurried attempt to fire missiles at Hawaii. Nobody knows.

The CIA was immediately interested, as was the U.S. Navy. K-129 was a diesel-electric submarine, but she carried three nuclear missiles and two nuclear-armed torpedoes. Not to mention code books. The Russians didn’t think she could be raised from such depths, but the CIA came to John Craven to see if it could be done. On his instructions, a U.S. submarine, Halibut, began nosing around the area where K-129 disappeared. Halibut found her, so the problem became how to get K-129 off the sea floor without the Russians knowing about it.

Glomar Explorer, now a drill ship operating in the bay of Bengal

Glomar Explorer, now a drill ship operating in the Bay of Bengal

Howard Hughes had already been interested in manganese nodules, but came into the plot enthusiastically when he was approached by Craven and the CIA. Much of the same technology could be used to lift K-129. Hughes’ manganese research ship, Glomar Explorer, was secretly modified for her new mission, equipped to lower massive claws to the seafloor. The idea was to grapple K-129‘s hull and bring her up inside Glomar Explorer‘s hull without ever showing anything above water.

Forty years ago today, Glomar Explorer went on station above K-129, closely watched by Soviet ships who asked what she was up to. There had been plenty of publicity about Howard Hughes’ manganese nodule efforts, so the Soviets weren’t surprised by the story. The raising of K-129 was accomplished without suspicion, but not without adventure. K-129 broke apart as she was raised so only about a third of the submarine reached the surface. But that 38′ section housed two of the nuclear torpedoes and documents that still haven’t been revealed by the CIA. It also held six Russian seaman who were then buried at sea.

Talk about Business Beyond the Reef! I want to see the movie!

Childish Diplomacy

Have you noticed how childishly nations behave? I have long held that the best preparation for a career in diplomacy is to study child psychology. Somebody does something a country (or a child) doesn’t like – and they instantly lash out to punish whoever it is. I’m not talking about military confrontations, though most are immature enough to qualify. It is things like China’s sudden embargo on bananas from the Philippines after Manila objected to China’s takeover of islands in the South China Sea. Or America’s knee-jerk reaction to use trade embargoes in almost any situation, succeeding only in putting Americans out of work.

Early in my career, I testified to a U.S. Senate committee about using trade embargoes against what was then Rhodesia. Nobody liked Ian Smith’s regime and U.S. politicians were looking for ways to express their distaste. Trade embargoes seemed an easy punishment because we could do it quickly and unilaterally. Presto, the United States would be on record as opposing something. The Congress grew fond of this solution and Washington used it off and on for decades. I was the Commerce Department’s desk officer for southern Africa at the time – and the committee asked me how well our embargo against Rhodesia was going. I told them it wasn’t going well at all and explained that no embargo works unless you control all the supplies of the products you are trying to cut off. The effect of the embargo on Rhodesia was to create a good market for those who had no embargo, e.g., Japan and France. The embargo merely hurt U.S. exporters and job prospects for Americans. The committee, you may be surprised to learn, was not happy with me and the embargo stayed in place because we had to tell other parts of the playground that we didn’t like Ian Smith.

I often find myself ranting about China’s use of trade restrictions for non-trade purposes, such as against the Philippines or Japan. But I am especially amused by Beijing’s reactions when anybody brings a dispute settlement case against them in the WTO. The country simply isn’t mature enough to realize that most trade disputes are aimed at achieving equal treatment in how trade rules are applied. China is still at the toddler stage that sees any challenge as “unfair” – so Beijing almost always lashes out with weak cases of their own filed immediately against whoever is being mean to them. They would fare better if they took the time to actually build a coherent case on things that really matter to China, but immediate retaliation is part of the toddler mentality. Very satisfying until you lose the case.

Polish reaction to Russia's apple embargo.

Polish reaction to Russia’s apple embargo.

And then there is Russia. Those mean Poles dared to challenge Moscow by supporting European Union sanctions over Russia’s actions in Ukraine. So the Kremlin decided to teach them a lesson this weekend by banning Russian imports of most fruits and vegetables from Poland. The Russians, of course, say this has nothing to do with politics, but reflects Polish violations of Russia’s health regulations and documentation requirements. Sure. The timing is just a bit too precious and these sorts of trade issues, if they exist, are best dealt with shipment-by-shipment at the border.

This is a pattern for Russia. Ukraine has been punished by Russian embargoes on imports of Ukrainian dairy products and canned foods. Moscow added cornmeal, sunflowers and soy products just last week. In each case, Moscow insists that the embargoes have nothing to do with politics. They are merely protecting the health of the average Russian (not to mention increasing prices and scarcity for Russians). They said this, too, when Moscow banned wine and mineral water from Georgia in 2008, just before sending their troops in. Moldova signed an association agreement with the EU last month and was immediately slapped with a Russian embargo on fruit. And, last year, Russia banned imports of chocolates made by a Ukrainian company. This may have backfired because the company is owned by Petro Poroshenko, Ukraine’s new president. Russia, I would say, is still at the toddler level.

Poland, on the other hand, has responded with maturity. Most of the impact of Russia’s embargo will fall on Poland’s apple sales. Rather than put on a tit-for-tat embargo on, say, Russian cabbages, Warsaw is reacting by promoting domestic consumption o apples and especially of hard apple cider. One Polish businesswoman tweeted: “An apple a day keeps Putin away!

Humor is often the best response when dealing with unruly children.

Can Developing Countries Implement Trade Agreements?

Through most of its history, the members of the World Trade Organization – and the GATT before it – simply assumed that, if a country signed a trade agreement, it had the knowledge and ability to carry it out. To say otherwise was to cast aspersions and violate a country’s pride. It eventually became clear that many developing countries, especially the least developed, did not have the money or the administrative capacity to fully carry out the agreements they had signed. Their ability to carry out agreements was often overshadowed by arguments that the developed world was expecting too much of developing countries and needed to leave room for the weakest to use things like “infant industry” policies to try to find economic growth. This confused the problem of the capacity to carry out agreements with the question of whether substantial obligations should be applied to developing countries at all.

The Tokyo Round in the 1970s saw a new style of trade agreement that contained special clauses to help the least developed countries. Some clauses delayed implementation if you were deemed a developing country, but with “graduation” procedures to prevent an eternal free ride. Others might give the least developed countries an out from implementing the toughest passages of an agreement. The definitional fights (who was developed, developing, emerging or least developed) would have impressed any theologian. I was one of the chief U.S. negotiators of these special clauses, which got wrapped up under the idea that developing countries should be offered “special and differential treatment” in trade agreements, recognizing their inherent limitations to fully implement such agreements. There were plenty of inside jokes among the negotiators that involved “S&D”.

One of the prime arguments was at what point, if any, developing countries should be “graduated” to follow more stringent requirements. Some seemed to look forward to “graduation” as a badge that they had succeeded in achieving economic growth. Others took the position that they should have S&D forever, while their competitors should be graduated. I knew we had made progress at a negotiating session in Geneva in which the Indian and Bangladeshi delegations nearly came to blows over when India should be graduated.

Roberto Azevêdo announces the new Trade Facilitation Agreement Facility, July 22, 2014

Roberto Azevêdo announces the Trade Facilitation Agreement Facility, July 22, 2014

Forty years on, the WTO is achieving another watershed in treatment of developing countries. The WTO’s Trade Facilitation Agreement that came out of the Doha Round talks in December 2013 finally drops the question of whether or not developing countries “should” take on full obligations in an agreement, and focuses rightfully on how to help them get it done. The mechanism for this has the unfortunately bureaucratic name of the WTO Trade Facilitation Agreement Facility (TFAF). But what it will do is encouraging.

The Trade Facilitation Agreement aims to improve all those little nuts and bolts issues of moving goods or services across borders that drive companies crazy (especially small ones that can’t afford dedicated staff for this stuff). It gets into improving customs clearance processes, inspections, storage facilities, shipping infrastructure, document requirements and so much else that may simply be beyond the capacity of a poorer country to put in place. So the WTO, together with the World Bank, the Organization for Economic Cooperation and Development (OECD), United Nations Conference on Trade and Development (UNCTAD), the United Nations Economic Commission for Europe (UNECE) and the World Customs Organization are going to help them get the job done.

The Trade Facilitation Agreement broke new ground for the WTO in the way it will be implemented. For the first time in the WTO’s history, the requirement to implement an agreement is directly linked to the capacity of the country to do so. In addition, the Agreement states that assistance and support should be provided to help them achieve that capacity.                     ~ WTO Director-General Roberto Azevêdo, July 22, 2014 

Some of the organizations, and other donors, will contribute funding to build capacity in the neediest countries. They and others will provide technical assistance and training. TFAF’s functions will include:

  • supporting LDCs and developing countries to assess their specific needs and identify possible development partners to help them meet those needs
  • ensuring the best possible conditions for the flow of information between donors and recipients through the creation of an information sharing platform for demand and supply of Trade Facilitation-related technical assistance
  • disseminating best practice in implementation of Trade Facilitation measures
  • providing support to find sources of implementation assistance, including formally requesting the Director-General to act as a facilitator in securing funds for specific project implementation
  • providing grants for the preparation of projects in circumstances where a Member has identified a potential donor but has been unable to develop a project for that donor’s consideration, and is unable to find funding from other sources to support the preparation of a project proposal
  • providing project implementation grants related to the implementation of Trade Facilitation Agreement provisions in circumstances where attempts to attract funding from other sources have failed. These grants will be limited to “soft infrastructure” projects, such as modernization of customs laws through consulting services, in-country workshops, or training of officials.

Why am I making such a big deal about this? TFAF is meant to make it easier to get trade done in all parts of the world. Improved customs procedures, for instance, in Malawi or Myanmar may make it easier for your company to sell in these markets, thus boosting the income of your firm and its workers, while at the same time lowering costs in importing markets.

The World Bank’s economists calculate that if trade could be facilitated worldwide to just half of what Singapore has done, for example, world income would grow by $2.6 trillion! You could take all the world’s tariffs to zero and not equal that. Trade facilitation means big money. And TFAF could be one of the least noticed, but hugely beneficial ways to boost world economic wellbeing.

Weird Science: Europe Hates Chlorine

This chlorine chicken thing is going too far. Politicians and self-appointed consumer protection groups in Europe (especially Germany) are threatening to kill the Transatlantic Trade & Investment Partnership (TTIP) before it can get started. And some fear the spat over poultry could expand to beef and other food products that also use chlorine washes to kill off micro-organisms in the stuff we eat. The idea, probably an urban myth, is that the chlorine in the disinfectant wash stays on the meat and becomes a danger to human health.

Ah, the aroma of chlorine ...

Ah, the aroma of chlorine …

Troglodytes on both sides of the Atlantic may have missed the discovery of harmful bacteria and micro-organisms a few decades back. Food safety authorities, however, tend to keep up with such weird science – as do food processors scared of liability suits. Scientists figured out that chlorine rinses would kill most of the bad stuff on the chicken, carrots, beef or whatever. They also figured out that after the chlorine rinse, it was a good idea to wash the chicken again with plain water. This cuts any chlorine residues to near zero and stops your food from smelling like a public swimming pool in July. But don’t take my word for it. I’m no scientist. Take the word of the European Food Safety Authority (EFSA).

EFSA has only been around for a dozen years, so you may not be familiar with it. It is the official European Union body that conducts risk assessment in the food chain. Here’s what EFSA says it does:

As the risk assessor, EFSA produces scientific opinions and advice to provide a sound foundation for European policies and legislation and to support the European Commission, European Parliament and EU Member States in taking effective and timely risk management decisions.

EFSA’s remit covers food and feed safety, nutrition, animal health and welfare, plant protection and plant health. In carrying out its work, EFSA also considers the possible impact of the food chain on the biodiversity of plant and animal habitats. The Authority performs environmental risk assessments of genetically modified crops, pesticides, feed additives, and plant pests. In all these fields, EFSA’s most critical commitment is to provide objective and independent science-based advice and clear communication grounded in the most up-to-date scientific information and knowledge.

EFSA’s independent scientific advice underpins the European food safety system. Thanks to this system, European consumers are among the best protected and best informed in the world as regards risks in the food chain.

One would think that EU consumers and politicians might pay attention to EFSA’s findings, but no. (Not unlike certain U.S. and Australian politicians when it comes to climate science.) They have managed to ignore a 2005 EFSA study, done at the request of the EU Commission, that looked at the “Treatment of poultry carcasses with chlorine dioxide, acidified sodium chlorite, trisodium phosphate and peroxyacids“. No, I don’t know what all these are either. It has been a long time since high school chemistry. And it is the conclusions of Europe’s food science experts that interest me. Here we go, point by point (the bolding is mine):

Trisodium phosphate: On the basis of the available data, the Panel considers that treatment of poultry carcasses with trisodium phosphate as described is of no safety concern. …

Acidified sodium chlorite: On the basis of available data, the Panel considers that treatment of poultry carcasses with acidified sodium chlorite as described is of no safety concern. No chlorinated organics have been found upon treatment of poultry carcasses with acidified chlorite. Furthermore, potential semicarbazide levels from this treatment were below the limit of quantification of the analytical method (≤ 1 µg/kg) and would therefore be of no safety concern.

Chlorine dioxide: In contrast to the situation with acidified sodium chlorite, no specific data on chlorine dioxide by-products formation from poultry proteins or lipids were available to the Panel. Nevertheless, the Panel notes that chlorine dioxide is a less aggressive oxidant than acidified sodium chlorite and that it is used in lower concentration. Therefore, the Panel assumes chlorine dioxide will not significantly affect poultry lipids. … The Panel considers that the available data on the treatment of poultry carcasses with chlorine dioxide does not indicate a safety concern. …

Peroxyacids: On the basis of available data, the Panel considers that treatment of poultry carcasses with peroxyacids as described is of no safety concern. No detectable effects on the oxidation status of fatty acids or fatty acid profiles in poultry carcasses were reported following treatment with peroxyacids.

There you have it, folks. Europe’s own experts say that chlorine washing for poultry is of “no safety concern“. Let’s see if the birthplace of modern science will pay attention to its scientists. Not likely.

 

Is China Ready To Grow Up?

china-and-wtoI am reading between the lines, but I get a strong feeling that the members of the World Trade Organization think it is time for China to accept responsibility for the impact its trade regime has on other countries. The WTO did a Trade Policy Review of China early this month, the fifth review since China joined the WTO. It quickly became clear that China’s actions have an impact on trade all over the world. China has tried to hide behind development and “infant industry” arguments for what it does, but the rest of the world is not buying it. Of course, they don’t say that flatly in the genteel atmosphere of a well-appointed conference room on the shores of Lake Geneva, but I have read enough of these TPR reports to have an idea of what was going through their minds.

I am not going to summarize the nearly 350 pages of documents prepared for this TPR. The basic paper by the WTO Secretariat runs to 200 pages with a summary of 33 dense paragraphs. You can read it all here and, if you are doing business in China, it might be a good idea to skim your way through. What neither you nor I can see is the more than 1,700 written questions turned in by WTO members before the review even started. More than fifty countries participated actively in the review, and – while done politely – it is clear from the chairperson’s concluding remarks that they had a ton of concerns about China’s unilateral actions.

Members remarked that during the period under Review, China had become the major global merchandise trader and noted the impact that China’s policies had on the world economy and on the functioning of the WTO. Hence, they highlighted the need for China to recognize the increased responsibility that comes with becoming a lead player in the multilateral trading system.                                                                           ~ Chairperson’s concluding remarks, July 3, 2014

WTO members congratulated China on the many reforms Beijing is making in its trade policies, though they would like to see greater clarity on what further changes to expect. In fact, the lack of transparency was one of the dominant topics of the review. The chairperson’s remarks summarized the main issues of contention:

  • Transparency: as the world’s largest trader China bore great responsibility for supporting a predictable and transparent global trading system. China was encouraged to ensure the effective use of transparency mechanisms within the WTO, including ensuring that its notification obligations are fulfilled in a timely way. Members noted that although China had committed to publish in a single official journal all laws, regulations and other measures related to or affecting trade in goods, services, IPR or foreign exchange, both at the central and sub central level, and to make them available in a WTO language, this had not been effectively accomplished. Members urged China to address this shortcoming by making information regarding trade-related measures available. This would be beneficial to all as it would lead to increased trade and investment.
  • Consistency in implementation of laws, regulations and policies: Members understood the difficulties that China faced in ensuring the consistent implementation of laws, regulations and policies in such a vast country. It was noted that implementation inconsistencies affected business directly with and within China, compounding the often-reported problems of predictability and transparency. Members stated that addressing these issues was of the utmost importance, both to improve the operating environment of business – domestic and foreign alike – and to limit the risk of discretionary treatment.
  • Role of the State: Members noted that the State still had an active role in China’s economic development and that China continued to pursue policies to support domestic industries including those controlled by state-owned enterprises. They stated that on occasions this had led to overcapacity and excessive credit expansion. In Members’ view, given China’s size and importance, Government intervention affected the allocation of resources and competitive conditions of companies in and outside China.
  • TBT and SPS: Members expressed concern with respect to the use of technical requirements that diverged from international standards and the insufficient involvement of interested stakeholders in the standardization process. Regarding SPS measures Members questioned their scientific justification in certain instances, and requested China to make further efforts to increase transparency and predictability in this area.                                          ~ Chairperson’s concluding remarks, July 3, 2014

Members also raised questions about China’s subsidies and other support policies for domestic industries, the use of export restraints and export taxes to restrict the flow of certain commodities (e.g., the rare earth cases), and restrictions on market access for foreign-sourced services. No surprise that other countries are still worried about lax enforcement of intellectual property rights and protection of companies’ trade secrets. Questions were raised about restrictions on activities by foreign investors.

I was struck by the chairperson’s enigmatic mention of concerns about China’s “retaliatory use of trade remedies“. We have seen Beijing use export restrictions in retaliation for disagreements with Japan and the Philippines. And I have ranted here about China’s practice of quickly filing retaliatory WTO cases against any country that dares to challenge Beijing with a dispute settlement case.

It wasn’t all negative. WTO members liked some of China’s trade reforms and Beijing got credit for its work on the new Trade Facilitation Agreement. That said, Beijing was scolded for foot-dragging on joining the Government Procurement Agreement and its refusal to expand the coverage of the Information Technology Agreement. The chairperson summed up what must have been a largely negative Trade Policy Review:

China as a global economic power had an indisputable role to play in maintaining a rules-based trading system which is vital to the current and future prosperity of trading nations. … I would wish to emphasize that it is essential for the system that China abides by its WTO commitments including that of transparency. This, in turn, would allow China to continue reaping the benefits of economic liberalization in a rules-based multilateral framework. Members believed that it is crucially important that China continues to pursue trade liberalization and economic reform despite the challenges that could arise …                          ~ Chairperson’s concluding remarks, July 3, 2014

Building Your Global Value Chain

Global value chains are one of the most talked-about tools in companies and business schools today. Value chains take a product, whether hard goods or services, from conception to delivery to the customer – breaking that extended process into discrete links of the chain. Those links can be anything needed to create and sell the product: R&D, lining up suppliers for inputs, transport to market, after sales service, whatever it takes. A company can do all the links itself, or it may break up the chain by hiring other specialist companies to do some of the links. And a company can make a good living by supplying links to other firms. Just think about transportation and delivery by FedEx or its competitors. Of course, a value chain can be purely domestic. But when you go international, the chain goes with you.

Possible Global Value Chain

Possible Global Value Chain

Where does your company fit into global value chains? The answer will be different for every firm, but there will be few companies that do it all themselves. It is worthwhile to take some time to look at your firm’s value chain with an eye to deciding if you are doing too much of it in-house, or perhaps outsourcing inappropriately. Value chains can be vague concepts, so – to help you out – I recommend you take a look at Linking In to Global Value Chains: A Guide for Small and Medium-Sized Enterprises. This is a brief guide published by the Canadian Trade Commissioner Service, Canada’s analog to the U.S. Commercial Service that I often mention. (You can also check out their guides for exporting from Canada to the United States, a step-by-step guide to exporting and investment guides for Canadian companies.)

Linking In to Global Value Chains won’t give you a blueprint to build your value chain because every situation is different. But it will provide a format and questions to help you think about your global chain. You gotta start somewhere.