Category Archives: France

“We try to avoid China”

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I am a sucker for data, so I was jubilant when I received the results in Washington last week of a survey of experienced American exporters about the trade barriers they face in foreign markets. The survey was done by the Department of Commerce and canvassed about 400 exporting companies about the most bothersome trade barriers they have run into over the last five years. Some of the respondents, like me, are consultants who responded in behalf of their clients. Companies of all sizes were included, but most were small firms, though with considerable experience. The survey did not address the experiences of new exporters, who might be more inclined to let a foreign barrier stop them in their tracks.

The trade barriers that excited the most complaints were the pedestrian ones of customs barriers and disagreements about customs classification (seen by a bit over 15% of the respondents), or product standards testing, labeling or certification requirements (also about 15%). About 12% of the companies complained about excessive or unfair government requirements and fees (I am surprised this isn’t higher). Rules of origin issues come in at about 8%. The headline issues of bribery and corruption were mentioned by 6.5%, closely followed by government procurement barriers (6%) and intellectual property concerns (5.8%). Import licensing requirements and having to compete with state-owned companies both came in at over 5%. Fewer than 2% of the responding companies said they hadn’t run into any significant barriers.

Another BRIC in the Wall?

Where were you most likely to hit a road block? China, hands down. Taking your products to China is a risky business, cited by 17% of the respondents. The next most likely country to do you wrong was deemed to be Brazil (12%), followed by Russia and India at 8%. Gives BRIC a whole new meaning, doesn’t it! South Korea was next up (6%), accompanied by the European Union (as a whole), France and Germany (individually), and Mexico – all at 5%.

Most of these markets tend to specialize in the types of barrier they use. The EU, Germany, France, China and Japan all like to stop imports by using standards restrictions. Brazil is especially prone to use tariffs, customs classification and other barriers at the borders, though Russia, India, China and South Korea aren’t shy about this. China seems particularly tight on invoking rules of origin to keep products out. China and India were the most often criticized for their government procurement restrictions. It won’t surprise you that these two are also top of the list for intellectual property violations. Excessive fees and bureaucratic restrictions also feature Brazil, China and Russia. It is China and Brazil yet again for imposing import licensing requirements. China, Russia, India and Mexico lead the way on corruption. (I was pleased to see only one complaint about bribery in Indonesia.) Notice that China appears in almost every category, employing the full arsenal of trade restrictions.

To their credit, the exporters didn’t usually let the trade barriers stop them. Some handled the issue themselves, while others sought help from the foreign government or from the U.S. government, but most succeeded in doing business. Almost all, however, noted that they could have done a lot more business without having to run the barrier gauntlet. The countries where companies were most likely to give up were, of course, China (8 out of 42 that reported barriers), Brazil (3 out of 33), and the European Union (3 out of 23). Small sample, but intriguing.

There was a final question that tried to get at how many companies had not even tried to do business in a market because they were already aware of a deal-killing trade barrier. A huge 29% of the responding exporters said they had not gone to China because of its trade restrictions. 10% said the same about Germany! And 9% had stayed away from Brazil and Mexico.

Respondents were encouraged to comment, which produced a few gems. While most argued that India is tough to do business in, others made the point that you can’t consider India as a single market; if you pick the right state, you can do very nicely, thank you. One company, presumably with tech products, complained that the worst trade barrier they see is America’s own export licensing requirements. Individual companies commented that they refuse to do business in China, India or Italy (!). Another picked out eastern African markets as being good business, while different companies said they avoid Kenya, Nigeria, Ghana, Venezuela and the Middle East. Customs barriers in Italy and Turkey were hit, as were unexplained cargo seizures by customs agents in Russia, Belarus and Kazakhstan.

Protectionism is alive and well.

Arms Trade

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My last arms deal was in 2000 when Austria bought nine Sikorsky Blackhawks. Their prime mission was search and rescue, so I’m not sure it should count. Many U.S. commercial officers are ambivalent about the arms trade, and political appointees periodically frowned on our involvement, but I always felt that the customer was going to buy from somebody, so it might as well be us.

An analysis of global arms trade was published recently by the Stockholm International Peace Research Institute (SIPRI), taking a searching look at arms flows from 2007 through 2011. SIPRI stresses its independent analysis, but bear in mind that it gets a lot of its funding from the Swedish government. That said, despite Sweden’s role as a military equipment supplier, I have no reason to doubt SIPRI’s data or analysis. You can get the complete report here.

The major countries selling military gear and weapons don’t change all that much, so it is no surprise that SIPRI’s Top 5 arms suppliers are, in order, the United States, Russia, Germany, France and the United Kingdom. The United States sold 30% of the world’s arms in 2007-2011 and the Russians dealt 24%. The Top 5 together controlled 75% of the business. That, however, means that other players are growing because the Top 5 controlled 78% during 2002-2006. Here’s who the Top 5 are selling to:

Major arms sellers & their customers

What is extraordinary, and a big change over the years, is that the Top 5 arms buyers are all in Asia: India, South Korea, Pakistan, China and Singapore. India has an aging war machine and is replacing much of it, plus they have little domestic arms manufacturing capability. South Korea faces problems to the north, and Pakistan is nervous about India and Afghanistan, and has problems of its own. China is moving down the buyers list, swiftly becoming an arms exporter itself. Singapore, given its size, was a surprise to me, but they appear to be going very high tech in their purchases.

Major arms buyers & their suppliers

The biggest arms deal of 2011 – and the biggest in decades – was Saudi Arabia’s decision to buy or renew 154 F-15 fighters from the United States

Cruising Report

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L'Art de Vivre

Dole – That’s France, not pineapple.  We have just spent a week of luxury, cruising the Canal du Nivernais in Burgundy on a hotel barge.  Seven passengers, four crew, including our own gourmet chef.  Stuffed full of wonderful food and drowned in excellent wine.  Gives one a different perspective.

I asked our skipper how the recession had impacted the barge business.  He said that his customers were down somewhat last year, but had come back strongly in 2010.  It was the nationalities that had changed.  The number of American clients dropped drastically and has not yet come back appreciably.  Similarly with his British customers.  But his clientele from Japan, Australia and New Zealand had boomed.  Seems an indicator of relative strength, though I can’t explain the increase from Japan.  Glancing at the visitors book on board, I also noticed a few Singaporeans.

For the record, a Japanese couple (he is a psychologist) and a New Zealand couple (farmers from the North Island) were on the boat with us.  Leaving the barge, when we arrived at our hotel in Dole, the lady at the desk asked us where in America we are from.  When we responded “Hawaii”, she said “that’s not America!”  Hawaii continues to have its own identity and brand worldwide.

Paris Report

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Paris – During my current trip to Europe I may file brief posts with observations of what I am seeing or hearing that concern European economies or trade.  Nothing scientific, just my own observations and those of people I speak with.

My wife and I strolled along the Rue du Rivoli the other day.  This is a shopping district, but one more likely to attract the locals than the millions of visitors to Paris.  What struck both of us was the fairly large number of empty shops, reflecting a tough time for retailers.  On the other hand, the tourist areas, such as the small shops and restaurants of the Latin Quarter, had almost no vacancies.  For what is it worth.  (And, no, I am not fooled by the shuttered shops of August, when Parisians are on vacation.)

A fellow traveler from a golfing town in northern Scotland tells us that fewer foreign golfers are arriving this year.  Of those that play, she thinks more are coming on day trips from Edinburgh or Glasgow than in the past, hurting local hotels and restaurants.  My informant also speculates that more U.K. travelers to Scotland this summer are using caravans (trailers to those of you in North America) than in the past – another hit for local hotels and eateries.

Breaking Waves

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  • I guess you want to be careful about currency reforms.  North Korea executed a party official this week for screwing up a reform of whatever passes for currency in the country.  Could this be why Beijing is so resistant to change?
  • Faced by Asian competition and shifts in fashion, Swiss watch makers have redesigned and repositioned their products – and their exports are beginning to boom despite the recession.  Some good lessons here for all exporters.  I know I love my Swiss watch: slender, light with the clearest clock face I have ever seen.
  • Have you noticed that, whenever China gets bad publicity about its products (e.g., dairy products laced with melamine, or improperly handled vaccines), they start criticizing other countries’ goods?  The latest is an attack on the quality of luxury products supplied by Hermès, Hugo Boss, Versace, Dolce & Gabbana and Tommy Hilfiger, among others.  Aside from the fact that I never feared for my life (only my fashion sense) due to a Hilfiger shirt, doesn’t this criticism come from the world’s top producer of counterfeit luxury products?
  • Ah, mercantilism.  Such a lovely word.  I was amused to see Germany’s reaction to French charges against Germany’s trade surplus.  They say that criticism by the French is a compliment.
  • It’s nice to see your stuff get picked up elsewhere.  Thursday’s post about Hawaii tourism (Selling Hawaii – or Not) was picked up by ETurbo News and I have been getting good feedback.
  • Amid all the dour news about U.S.-China relations, the two countries reached agreement Thursday to re-open the Chinese market to U.S. pork exports.  China had used swine flu as an excuse to close its pork market in 2009, shutting down $275 million in U.S. sales.  It’s back on for now.
  • Anybody interested in selling renewable energy equipment in China needs to look at the report issued by the National Foreign Trade Council last Monday: China’s Promotion of the Renewable Electric Power Equipment Industry: Hydro, Wind, Solar and Biomass.

Drinking Problems

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The bottom has dropped out of French alcoholic beverage exports – except for vodka.  Wait a second.  Since when does France produce vodka?  Isn’t that some proletarian beverage from further east in Europe?  Nope.

Bacardi’s Grey Goose vodka is made in France, and makes up virtually all of France’s vodka exports.  Running counter to normal recession trends, French vodka exports rose 13.7% in 2009 to $324 million.  And 70% of that was sold to the United States.  To put this in perspective, total French exports of wine and spirits plunged 17% to $10.5 billion.  That makes vodka, quite literally, a drop in the bucket.  But how did Bacardi get the job done?  I don’t drink vodka, but I have never noticed a hint in Bacardi’s ads that Grey Goose is French.  Any of you readers have an idea of how they did it?

Pinot Noir - but what gets into your bottle?

U.S. imports of French wines tumbled 22.7% last year to a dispiriting $1.8 billion.  And their prospects aren’t helped by a court decision last week that convicted a dozen wine growers and merchants of defrauding American buyers.  A French court in Carcassonne (one of my favorite places) found that French firms had duped E. & J. Gallo Winery (and others, as yet unnamed) into buying cheap plonk, thinking it was good pinot noir from the Languedoc.  (I’ve had some great wines in the Languedoc, but this apparently was not the good stuff.)  The perpetrators succeeded in passing off cheaper merlot and syrah as pinot noir for two years, beginning early in 2006.  Gallo says it is no longer selling any of the fake pinot, but they can’t vouch for bottles still on retail shelves.  Look out for Gallo’s “Red Bicyclette” pinot noir.  It may not be what you think.

The incentive for the French companies was immense.  The judge said they made $9.8 million from the scam.  The big winners (now losers) were respected firms: Ducasse harvested $5 million and Gallo’s supplier, Sieur d’Arques, took them for a $1.8 million bicyclette ride.  A French fraud squad broke the case when they audited Ducasse’s books and found the firm had been buying “pinot noir” at about half the market price.