Week in Review

Global Roundup

December 23, 2019

Week in Review

Global Roundup

December 23, 2019

Trump impeached for abuse of power. The House of Representatives approved two articles of impeachment against President Donald J. Trump on the evening of Dec. 18, charging Mr. Trump with abuse of power and obstruction of Congress. (New York Times)

Citizenship Act protests: Three dead and thousands held in India. Three people have died in India and thousands have been detained amid demonstrations against a controversial new citizenship law. (BBC)

Money has been leaving China at a record rate. Beijing is battling to stem the tide. Beijing is stepping up the battle to stop money flowing out of China as the country contends with economic woes and trade war tensions that have eased but show no sign of ending altogether. (CNN)

U.S.-China trade tensions eased but not resolved. The "Phase One" trade deal reported to have been reached between U.S. and Chinese negotiators offsets much of the damage done to global trade and activity prospects from earlier U.S. plans to raise tariffs in October and December, according to Fitch Ratings. Nevertheless, trade tensions remain high and renewed escalation remains a significant risk. (Fitch)

Diplomats race to defuse tensions ahead of North Korea's deadline. A last-minute flurry of diplomacy aimed at engaging with North Korea ahead of its declared year-end deadline for talks has been met with stony silence from Pyongyang so far, with the looming crisis expected to top the agenda at summits in China next week. (Reuters)

U.K. lawmakers OK Johnson’s Brexit bill, pave way to exit EU. British lawmakers gave preliminary approval Dec. 20 to Prime Minister Boris Johnson’s Brexit bill, clearing the way for the U.K. to leave the European Union next month. (AP News)

Turkey isn’t leaving NATO, but it may be breaking with the West. Just weeks after a NATO summit brushed internal disputes under the carpet, renewed sparring between the U.S. and Turkey points to longer-term risks to the alliance. (Bloomberg)

The U.S.-China trade deal leaves a large American deficit and a permanent collision course. Looking at the latest U.S.-China trade numbers, one wonders how the agreement announced two weeks ago could lead to an acceptable balance of bilateral trade accounts. (CNBC)

A U.S. withdrawal will cause a power struggle in the Middle East. Washington could find itself fighting its way back into the region for the first time since World War II. (Foreign Policy)

Iraq protests take toll on economy, vulnerable suffer most. With Iraq’s leaderless uprising now in its third month, the protracted street hostilities, internet outages, blocked roads and a general atmosphere of unease are posing risks to Iraq’s economy. (AP News)

USMCA: A done deal in all but name. The United States-Mexico-Canada Agreement (USMCA) looks set to be passed into law by year-end, after the Trump administration reached a deal with House Democrats to move forward with the deal, following months of negotiations. (Global Trade Review)

U.K. companies fear hit from Brexit migration rules. Britain’s plans to introduce a new system for immigration after Brexit risk being too complicated and causing a shortage of skilled workers, an employers group said on Dec. 19. (HSN)

Preventing employees from getting tricked by phishing emails. What can a business or institution do to help prevent employees from falling for email phishing schemes? Here are three tips to avoid falling for the latest tricks. (Risk Management Monitor)

 

 

A Whole New Approach to Trade?

Chris Kuehl, Ph.D., NACM Economist

There has always been a good deal of controversy involved with trade; it didn’t just start with the Trump administration. By its very nature, trade creates winners and losers for companies in a given domestic economy.

Those companies that can produce and sell to a global audience thrive when there is open access to those global markets. Many of the largest businesses in the U.S. have been wildly successful in those international ventures. Thousands of smaller companies have also cracked these multinational markets as well.

U.S. consumers have been the biggest winner from global trade because they have been given access to goods from throughout the world and at lower prices than they would pay for the domestically produced versions. The losers in this scenario are the companies that have to compete with these foreign-made goods. Many simply have been unable to and have gone out of business entirely. This has meant millions of lost jobs and the decline of whole industries unable to fend off the imports.

There was never a conscious decision to favor an open trade policy vs. protectionism. There have been periods when one approach seemed to be favored over another, but usually there have been elements of both in place. Some industries were allowed to fade away and others were provided with extensive support from the government.

The policy emerging since President Donald Trump took office has been far more focused on protection. There have been major changes taking place in the U.S. and global economy as a result. The question is whether these changes are “good” or “bad.” The answer will depend on one’s perspective and whether a given company now falls into the category of winner or loser.

The winners under a more protectionist approach will be those companies in the U.S. that have struggled to compete with foreign rivals. They will be facing less pressure from imports and will have the U.S. market to themselves. It is possible some industries that ceased functioning in the U.S. will make a return, but this will be a long process at best. Their inability to compete on a global basis will still limit them.

The losers will be those companies that engaged in global business. They will lose market access throughout the world and will lose access to the imports they used to produce. The consumer will be the big loser if this trade shift accelerates. They will no longer have access to foreign products and the costs of maintaining their current lifestyle will increase. Estimates vary considerably (depending on what a given person or family buys) and have run between $3,000 and $8,000 a year. For all intents and purposes a protectionist policy based on tariffs, trade restrictions and other barriers is a tax on the consumer and a pretty steep one at that.

 

UPCOMING WEBINARS




Gaining Insight into International B2B Credit Sales

As businesses continue to become more and more global, they need staff who can adapt quickly and efficiently to new environments and challenges. Although many of the concepts and practices of domestic and international business-to-business credit are similar, there are some important differences and having a plan to learn about them and address them is critical.

FCIB recently heard from a number of credit professionals about why they chose its International Credit Risk & Management (ICRM) online course to help fill these gaps as well as what they got from the course. Key takeaways from the program ranged from obtaining techniques for managing international credit to sharing real-life global credit experiences among participants.

Students who took the course in 2019 hailed from Africa, Asia, Europe, South America and the United States, and they chose the ICRM course for a variety of reasons. “I live in a rural area and would not be able to receive this type of training any other way,” explained Rebecca Cassel, CICP, a director of compliance-AR/collection in McAlester, OK.

Timeliness and relevance were echoed by many of them. “Two weeks after I had finished the module on documentary collections, I had to do one,” a student shared. “The module was thorough, and I was able to gather all the necessary documents and submit them to my bank for processing.”

Both seasoned and novice credit professionals found value in the curriculum. “As a beginner in international credit management, this course was really great to learn about the general practices, particularities and challenges of this field of activity,” said Marion Linder, CICP, a group credit manager in Denklingen, Germany. “By taking part in the different discussion boards, I also learned about other opinions and approaches from international colleagues.”

Another student agreed. “It is an ideal course for credit professionals who want to expand on international credit and risk management,” said Kenia Espinoza, CICP, a senior credit analyst in Zeeland, MI. “I've been in credit for 16 years, and I gained valuable knowledge and confidence to be the credit expert at my company.”

The students found the rigor of the course challenging, but achievable. “This course is intense, but not impossible to complete with a busy schedule,” said Laura Hazen, CBF, CCRA, CICP, a credit coordinator in Gibson City, IL.

“It is a well-structured course with easy to understand study materials and can be completed within a reasonable timeline,” said Cynthia Yang, a credit manager in Beijing, China. “It covers a broad range of topics that credit professionals must master.”

The online, instructor-led class attracts credit professionals with diverse backgrounds and professional experiences worldwide. Students should expect to spend about five to seven hours a week on coursework, but the program provides flexibility to work with credit professionals’ day-to-day schedules. It covers 12 modules—one a week—and includes weekly assignments and short quizzes. The instructor provides guidance, and there are plenty of opportunities to learn from other students via discussion board activities. The program culminates with the Certified International Credit Professional (CICP) certification exam, which is also taken online.

Click here to learn more about the next ICRM course, which starts Jan. 13.
Click here to learn more about the next ICRM course, which starts Jan. 13.

 

The Global Automotive Industry: Steep Path Ahead

Coface

Hit by increasingly stringent regulations, particularly for environmental purposes, the global automotive industry is facing a downturn and is being forced to reinvent itself.

In a gloomy global economic context, the automotive sector faces several specific challenges, including stronger and stricter environmental regulations. As a result, car sales are experiencing negative growth not seen since the Great Recession of 2008 and there is an uncertainty prevailing in the sector.

Forced to comply with this new technological situation and consumers' desires, car manufacturers are investing massively in redesigning their vehicles, subsequently increasing their production costs.

Furthermore, the arrival of many new players—such as Google Waymo, Tesla, Arcfox or Aiways—adds an additional degree of uncertainty to a market that was used to a certain stability, or even had a tendency for concentration via mergers, acquisitions and co-investments.

In September 2018, the European Union (EU) was significantly affected by the implementation of stringent certification rules for new car models, the Worldwide Harmonized Light Vehicles Test Procedure (WLTP).

These stricter rules have notably led to bottlenecks for car manufacturers, with delayed approvals leading to a shortage of models available at dealerships. Customers were therefore forced to delay their purchases, directly impacting the number of new registrations (23.5% in September 2018).

In addition to these technical and administrative barriers, there has been a negative trend in consumer sentiment in the eurozone since the beginning of 2018. This is discouraging consumers from buying new vehicles, especially as incentives to switch to greener energies dry up.

The U.S. market is also affected by lower demand (1.1% at the end of October 2019, over 10 months, particularly for sedans and other cars, although surprisingly stable for SUVs, pick-ups and other light trucks). This trend continues to affect car manufacturers’ activities, with the closure of several factories in the country.

Finally, the Chinese market is severely affected by the drop in demand (4% in October 2019) partly due to a certain wait-and-see attitude from consumers, who are waiting for the tax incentives announced by the government. This is in addition to the effects of the trade war between China and the United States.

In addition, large municipalities such as Beijing, Shanghai and other similar cities impose strict license plate limits for new cars every year. Chinese households are therefore turning massively to the sale of second-hand cars. 

Naturally, the growth and revenues of automotive suppliers are severely impacted by this slowdown. The rationalization of production costs and technological developments linked to the environmental constraints imposed on car manufacturers subsequently have repercussions on the entire supply chain. This is particularly true for R&D expenditure. This may lead to mergers and acquisitions in order to rationalize these costs, which are necessary to bring decisive technologies to market—again leading to a redesign of the automotive industry landscape.

 



 

 Week in Review Editorial Team:

Diana Mota, Associate Editor and David Anderson, Member Relations