Trade, or Something Like It
Cisco announced our quarterly earnings this week, and what I was drawn to is the fact that sales outside of the U.S. now account for 54% of all our company’s sales (that’s up from 52% a short time ago). What’s the Big Deal, you ask? Well, despite stiff competition from Asia, Europe and elsewhere, as well as ambivalence among some U.S. policymakers about how to help make U.S.-based companies more competitive, Cisco is selling to more customers outside the world’s largest economy than inside of it.
Selling abroad is a pretty tough endeavor, as there are so many ways that local firms have a leg-up. But, there are rules-of-the-road, which most governments agree to, that allow U.S. products and services to be treated fairly in foreign markets. These rules are enshrined in the World Trade Organization, and in a number of free trade agreements that the U.S. Government has negotiated with other countries over the years.
There’s a new free trade agreement that the U.S. Government negotiated recently with six countries in Central America (Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua), and it’s running into opposition in Capitol Hill, where its implementing legislation needs to be passed before the agreement can take effect. Among other things, the agreement (CAFTA) would lower a number of tariff and non-tariff barriers in these countries, so U.S. companies could sell more products and provide more services to these markets.
The thing is, U.S. barriers to products and services coming in from these six countries are already extremely low, so the agreement would benefit both sides – in fact, I had the pleasure of hearing the Guatemalan Ambassador to the U.S. explain how he’d heard this story of a farmer in Costa Rica who learns the world market price of coffee beans from a mobile Internet kiosk that comes through his village every week. The farmer can log-on and know what the going-rate is for his coffee and not get taken advantage of in the local market. Pretty cool. So, making this stuff more accessible and affordable I think is a good thing – keeps us all connected (and honest).
I know, there are a lot of politics swirling about over this agreement, but I think this vote comes down to a fundamental decision: are we in or are we out?