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Lessons in navigating US economic rapids
2006-06-07
China Daily
For long-time observers of American politics, the current fear of foreign-owned firms operating in the United States brings to mind the classic misstatement of baseball great Yogi Berra: "It's deja vu all over again."
The United States goes through waves of economic nationalism every few years whenever the economy is underperforming. Replace Dubai World Ports or CNOOC with Toshiba in the 1980s or British Telecom in the 1990s and the situation, as Berra hinted, is remarkably similar.
The situation heightens the challenge for all foreign firms, not just Chinese ones, doing business in the United States. However, there are a few ways companies can effectively position themselves in this difficult climate.
The challenge for foreign firms seeking to do increased business in the United States is that they are being caught in a political squeeze play from both left and right. While government statistics demonstrate that the US economy is humming along, public opinion polls show that there is an undercurrent of dissatisfaction. Many Americans worry that the economy is sluggish.
Key to this is recent data that suggests that growth in wages is not keeping pace with productivity gains. In short, firms are asking staff to work harder, but wages are not keeping pace with gains in output. Add to this the fact that companies are reducing healthcare benefits, fears over technology and white-collar jobs moving overseas, numerous companies ending long-established pension programmes, and many American workers are fearful about their future.
Moreover, with ongoing discontent over the war in Iraq and continuing fears of potential terrorist attacks, there is a general sense of public unease on the national security front.
Given this is an election year, both political parties are trying to benefit from the current situation. On the left, unions and liberal Democrats continue to convert the fear of fewer jobs and lower wages brought about by globalization into votes for their candidates. They are also opposing mergers involving so-called "critical" economic sectors, such as transportation and energy, to show that they are tough on national security.
On the right, the Republicans are split into two camps. The first is a combination of economic nationalists and those who oppose Chinese foreign and military policy. They wrap their opposition to foreign firms in national security terms. The other group is made up of those with more of a global economic, pro-China view.
Although the Bush administration has supported multilateral mergers and spoken out against protectionism, the split in his party has limited the president's ability to speak out effectively.
In fact, the views of the left and the Republican economic nationalists are remarkably similar, further complicating the situation. For example, two of the harshest critics of the Dubai World Ports deal were former Democratic presidential candidate Senator John Kerry on the left and highly popular conservative radio talk show host Rush Limbaugh on the right.
Moreover, this situation will not go away soon. Congress is set to act to make things tougher for foreign-owned firms. Senator Richard Shelby unanimously moved legislation through a key committee that would tighten reviews of foreign investment and increase the role of Congress in approving these deals. Senator Charles Schumer has introduced legislation that slaps a 27.5 per cent duty on imported Chinese goods until the president certifies China is no longer manipulating its exchange rate.
In short, it is a daunting climate for foreign firms. But all is not lost.
As foreign firms attempt to make inroads into the US market, there are four steps that firms can take to lessen the impact of the current economic environment.
Demonstrate that you are a global company, not a foreign one. Be able to point out the amount of US jobs created, sales made and taxes paid. As an example, the fact that Lenovo employs several hundred people in the United States and assembles its products in North Carolina and Mexico makes it a truly global company with an important US connection. It is these types of stories that companies need to tell when entering the US market.
Manage your political risks. Obtain the most up-to-date information on the political landscape in Washington. Develop a proactive strategy to leverage your US presence by building ties with key decision-makers. The recipe for success is to establish a presence and strategy before a crisis, rather than reacting to one.
Build your brand and reputation in the United States. Proactive corporate social responsibility and philanthropic projects help generate goodwill (and sales) and help show you are a responsible global company.
Be committed for the long term. Relationship building and communications cannot be a one-off project. It needs to be an ongoing part of your business plan in the United States.
Many of the problems that foreign firms face in the United States are out of their control. But rather than viewing the current situation as an obstacle to investment, it should be viewed as an opportunity to take the necessary steps to build the firm's brand at both national and local levels. By taking a few basic steps now, foreign firms will be in much better shape the next time these problems re-emerge.
The authours are Drew Maloney and James W. Moeller. Drew Maloney is a partner at the Federalist Group, one of the largest bipartisan lobbying firms in Washington D.C.; James W. Moeller is the managing director of Global Public Affairs at Ogilvy Public Relations Worldwide.
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