During the second term of President Ronald Reagan, I was the United States Department of Commerce Assistant Secretary for Trade Administration. Subsequently, I became Under Secretary of Commerce. In those positions, I had responsibility for regulating international trade and overseeing the defense industrial base. Those positions also provided me with the privilege of working with Michael Czinkota on a daily basis.
I was indeed fortunate. He was a valued member of my management team, and I relied on him for advice and counsel. All government officials are not equal in their skill and acumen. Michael Czinkota was one who was exceptional. He was particularly valuable to have as a colleague. I appreciated his insights into the practical workings of international trade and the interconnectedness of the modern trading system.
Reflecting that knowledge, in this book he shares some of his understanding of how the system functions, what aspects of trade are organic and inherent in the process of trading, and what are the strengths and weaknesses of the structures that have been created to bring order to the system and how to market into that environment. As he illustrates, language, culture, technology, proximity, and many other factors play a role in the success or failure of efforts to sell in the international environment.
As a former colleague, I attest to the accuracy with which he describes the factors which made up our decisions. In this book, through vivid illustrations and anecdotes, he analyzes the key factors that determine success or failure of international enterprises. These factors can require governmental action or signal a need for the government to get out of the way and allow private entrepreneurs themselves create a solution to the problem.
All too often, we hear government officials talk as though the United States is self-sufficient to control its actions and policies independent of its trading partners or the state of the world economy. These same individuals talk as though supply chains and joint ventures can be altered to fit the preferences of the president or the policy goals of any administration without regard to the preferences of our trading partners, or adversaries for that matter. These same individuals seem to be ignorant—or perhaps do not care—about how difficult it is to establish a reliable supply chain and how difficult it is to try to re-establish a supply chain or trade relationship if it is disrupted by government sanctions or changes in the technical parameters of export controls. Some, including both the current and former presidents, talk as though United States Government officials can increase exports with the snap of a finger, or bring industries back on shore when it suits the needs of our country.
Unfortunately, as one reads Dr. Czinkota’s book, it will become clear that increasing exports or inducing companies to relocate in the continental United States involves a difficult and painstaking effort and does not always work out as planned, no matter how good the intentions. As he points out, over the past two years we have imposed tariffs on two-thirds of Chinese exports, and apparently what that has accomplished is to push the manufacturing of those products to other Asian countries, particularly Vietnam. It is a great aid program for Vietnam but not what we intended. The Chinese have suffered but so have we.
Dr. Czinkota demonstrates how interdependent and fluid world trade is. His data and insights give the reader an interesting and realistic perspective on international trade and marketing, a perspective that should help any policy maker or serious student of the subject understand just how complex trade actually is.
As I write this forward to Dr. Czinkota’s book, the Congress is addressing the complexity of international trade through legislation aimed at increasing American competitiveness in the 21st century. In a just-passed Senate bill, tens of billions of dollars are being allocated to ensure, or so its sponsors claim, that the United States stays at the forefront of technology in semiconductor manufacturing, computer design, telecommunications, biotechnology, and all the other high technology fields that will determine which nation will be the future leader in these fields and which nation will be obliged to follow or to make copies of the technologies that others have pioneered. It was a shock to these Senators to find out that the Chinese company Huawei, which was heavily dependent on research and development carried out in the laboratories that served the Chinese People’s Liberation Army, had become the preferred telecommunications equipment for countries around the world that are seeking to install new 5G telecommunications networks. They were competing with our best telecommunications manufacturers and winning.
The House has yet to act. But this situation reminds me of the panic that gripped Congress in the 1950s, when it was realized that the Soviets had launched Sputnik and were ahead of the United States in the space race. It seems that the Congress needs what it perceives to be a hostile challenge to jolt it into action. Today, China provides that incentive to develop a national strategy for technological competitiveness.
Few would doubt that the world is better off with China having lifted more than half a billion people out of poverty and allowed them to reap the beneficiaries of a middle-class life. For their part, even the Chinese Communist leaders would admit that the world trading system that was created in the shadow of the Second World War, with the guidance of United States leadership, played a great role in China’s rapid rise. In the 21st century, once China was welcomed as a full partner in the World Trade Organization (“WTO”), and once it promised to adhere to norms of international trade embodied in the WTO, it began to enjoy all the benefits of a full-fledged member of the international trading system. Nevertheless, to say that the WTO was a great benefit to China and that this in turn provided for the basis of world peace and prosperity is not to say that the system is perfect or that it cannot be improved.
The WTO’s ability to resolve trade disputes and to set the standards for trade has been recognized by its members to be significantly in need of improvement. The so-called Doha Round, the most recent negotiations organized to achieve those improvements, fell into disarray as the world’s great trading nations proved unable to resolve their differences over such issues as dispute resolution, intellectual property, investment, agriculture, and a number of other vexing disagreements. The question of whether there is presently a fair and equitable forum for trade dispute resolution has gotten so bad that the United States Government is currently unwilling to allow a quorum to be established at the WTO’s dispute resolution panel. Many other critical issues remain to be resolved before we can say that the WTO is functioning smoothly.
All is not lost. Trade disputes continue to be resolved outside the WTO auspices. Bilateral and multilateral trade agreements with their own separate dispute resolution mechanisms continue to be signed between and among the various regions of the world. In fact, regional trade agreements have supplanted—and in many cases replaced—the WTO as forums for dispute resolution and standard setting. These developments are the context that demonstrates the need for us to understand the dynamics of international trade, all the more.
Michael Czinkota accomplishes what he sets out to do in this book. He brings order and understanding to a chaotic international trading world. The book illustrates what effective marketing can do in the current world trade environment, given the constraints of the trading system. It should be required reading for all serious students of international trade.
—By Dr. Paul Freedenberg