globalEDGE Blog Archive May 2014

For the first fiscal quarter of 2014, Canada will outpace the U.S. in GDP growth. Although the U.S. markets picked up after a rough winter, GDP growth is still set to decline by 0.5% according to the Globe and Mail. Meanwhile, Canada saw GDP growth of 1.7% in the first quarter, and although this is down from 2.9% in the previous quarter, GDP growth is still healthier than that of the U.S.

No one enjoys paying taxes. For many, the most grueling exercise when budgeting is seeing the amount deducted from one's paycheck by the government. For this reason, tax avoidance has been a business that is almost as old as taxes themselves. From personal to professional, tax avoidance has become a common practice across many cultures and seems to be here to stay.

For many corporations in the US, having to pay the high corporate tax rate is a problem worth avoiding. In order for these companies to avoid having to pay these taxes, they are reporting profits under the holdings of offshore subsidiaries. There is a lot of speculation that if companies could bring the money back over to the US, it would stimulate the economy and help the United States. In order for this to become reality though, the current tax rate would have to be much lower. There is in fact some myth to this. In order for the money to be considered "offshore" on the financial statements, the money simply has to be under a foreign subsidiary, even if it is invested in a bank in the US like a lot of companies' profit currently is. This allows them to avoid having to pay the US corporate tax rate on their offshore profits, while still having the money accessible in the US.

The international marketplace offers great opportunities to Michigan food companies who wish to increase sales. Worldwide, consumer food product exports are growing three times faster than U.S. sales. Though exporting can seem intimidating, Michigan food and agriculture companies can look to upcoming export assistance programs that are happening nearby in Grand Rapids and Canada as a way to enter export markets.

This past weekend, European Union nations experienced eventful elections for the Europe Parliament that will cause a stir on future economic reforms. This election term saw a very aggressive battle between two opposing forces – pro-European Union parties supporting strong central powers, and anti-European Union parties (also known as Eurosceptics), who are nationalists that want to decrease central powers of the union. The elections were forecasted to see anti-European forces make major gains and double their seats in parliament as a result of increasing unrest caused by unfavorable union wide measures.

The Globalization of the fur industry has given Denmark’s agricultural-based economy the boost it was looking for. Fur is used as a luxurious item for clothing, decoration, comfort, etc. Being home to about one-fifth of the world’s supply of minks, it is no surprise that Denmark is the heart of the global fur industry. With all of the growth in the industry, Kopenhagen Fur has been the leader all along.  The company has used Chinese demand to fuel growth and has focused its innovation on the Chinese consumers, as demand in Europe weakens. With the greatest passion for animal-rights, the Danes have stayed out of the way of Animal Rights activists, and the buyers feel a lot more confident and humane about their purchases.

After 10 years of negotiations, Russia and China have finally reached a natural gas deal.  The 30-year agreement worth an estimated $400 billion will supply China with Russian natural gas, beginning in 2018.  China will make advance payments amounting to as much as $25 billion to Russia to develop the necessary infrastructure to effectively supply the gas.  With this deal signed, Russia may be in a better position to negotiate with the United States and European Union over imposed sanctions for Russia’s involvement in Ukraine.

Most countries' finances are dominated by their respective central banks. This makes their role, in not only their country but in the world, extremely prominent. They make large, macro policy decisions that affect even the smallest businesses. What role do these policy decisions play in the world though? With globalization and the intermingling of economies across the globe, all of these different policy decisions is sure to dictate how the world interacts.

While the globalEDGE team is comprised of students and professionals with various academic backgrounds, one common theme amongst us is our passion for international business and to experience first-hand the effects of an increasingly globalized economic, political, and cultural world outside of the classroom. In my case, I have been given an incredible opportunity to work this summer with a non-governmental organization (NGO) called Poleas Global in Barcelona, Spain, which works to promote the coordination and multiplication of successful international relationships between the different sectors of the business world and projects aimed at social development. Alongside working in a dynamic international business-focused environment here in Barcelona, I will also be reading news articles from local sources, such as La Vanguardia and El País, to utilize different perspectives for analyzing global business news.

International economists are all asking the same question: Is the Eurozone's financial crisis over? For a region of the world that has borne some of the worst repercussions of the Great Recession, it could potentially be said now that the biggest brunt of the crisis is over, and the countries of the Eurozone are now on their (uneasy) way to recovery. However, this is not a confident prediction. Several factors, such as worryingly low inflation and high unemployment, are still present in these economies, showing that more problems may still be nigh. At this point it may be dangerous to assume the Eurozone has seen the last of its economic woes. Here is a closer look.

As the violent protests and riots in Vietnam affect the country’s social harmony, the business climate is also being seriously impacted. Anti-Chinese riots erupted in Vietnam on Tuesday after the Chinese government placed an oil rig in disputed waters between the two countries, and by Thursday the riots had claimed at least 21 lives. Following mass demonstrations, some Vietnamese protestors began to loot and destroy Chinese businesses, and as the rioting intensified, the protestors started to target all foreign owned businesses. Along with Chinese establishments, Taiwanese, South Korean, Japanese, and Malaysian companies have all reported damages from the riots, which threatens to continue as emotions are still running high throughout Vietnam.

Post graduation, previous students have to make a decision. Should they continue to educate themselves and receive a higher degree in order to make more money upon entering the workforce? Some select this option; however, in recent years the number of students immediately planning to do the opposite has increased, particularly in China. In regards to Chinese Business School grads alone, 76% plan on beginning their job search promptly after graduating.

With draws such as competitive labor costs, profitable domestic markets, and a skilled workforce, India is a top candidate for foreign investment. India has very strong management and business education systems, leading to a working class of citizens that foreign companies can accept as the workforce in expanding business. India's infrastructure, consumer products, technology, media, telecommunications, and life-sciences sectors are expected to drive the country's growth over the next few years.

Globalization has been the result of many different developments. From the increasing ability to ship goods across the world at low rates to moving manufacturing to achieve lower labor expenses, globalization is an entrenched part of the new economy. Another element factoring into globalization, that is not mentioned quite as much but has played an increasingly large role, is that of taxes.

As the western allies prepare to impose new sanctions on Russia, the complexity of Germany’s relationship with Russia is becoming increasingly apparent. German Chancellor Ms. Merkel will have to be mindful of the regional economic ties some states have with Russia, as she sides with her western allies.

Nowadays, people have more opportunities to move to different parts of the world than ever before, thanks to globalization. Global trade, therefore, is changing with the increasing mobility. A new report says that, while the last era of globalization was driven largely by sourcing low-cost production, the next era will center on the rise of the global knowledge economy.

Ethiopia is home to rich natural, cultural, and historical sites, yet the number of foreign tourists it attracts ranks only 17th across the African continent.  There is no question that Ethiopia has the destinations to attract overseas visitors; however, currently it is lacking adequate infrastructure to meet tourists’ expectations.  Ethiopia needs investment to build up its infrastructure and domestic and foreign investors alike are beginning to see the country’s largely untapped tourism industry as an excellent investment opportunity.

This past week in Luxembourg, the European Court of Justice struck down legal opposition by the British government in order to move forward in creating a new tax law in the European Union. Commonly known as the "Tobin Tax," named after American economist James Tobin who first proposed the idea in the 1980s, the law would tax the financial sector of the EU in order to cover some of the costs placed on taxpayers in the outcome of the recent financial and debt crises. The European Commission first announced the proposition of the new law in 2011, during which it stated that the financial tax law would require institutions in participating member states to pay a tax of at least a tenth of 1 percent of the value of transactions with other institutions. Since then, debate among EU member states regarding the effectiveness and possible consequences of implementing the tax has ensued.

Technology companies all over the world have engaged in lawsuits against each other over various controversies since the beginning of the industry. Major corporations that produce smartphones, such as Nokia, Microsoft, Samsung, and Apple, have often engaged in 'smartphone patent wars', which are lawsuits over patent and design disputes. Often, these companies have sued each other in several countries at a time in order to protect their creative patents and keep up their presence in the global market. A typical case of this happened only two years ago when, on January 2012, Motorola sued Apple in a German court over allegations of Apple infringing on Motorola's technology patents. The results of this particular case and some others, however, spell a different story for the future of smartphone patent wars.

Negotiations on the proposed Trans Pacific Partnership (TPP) heated up over the past week during President Obama’s visit to Asia, although no major breakthroughs in the talks were announced. The negotiations slowed down during the President’s visit to Japan, as talks between the United States and Japan focused on the auto industry; the two countries have long had a rivalry in the auto sector.  Japanese car companies entered and ended the Big Three’s dominance of the US market during the 1970s. This tension has continued today, influencing the trade discussions and preventing the countries from reaching a deal during last week’s negotiations.

A disgruntled employee can have catastrophic effects upon the work environment of a company. Although it may begin with one person being unmotivated to complete their daily work tasks, his or her negative energy can impact other coworkers. One employee's unproductive mannerisms can also cause management resources to be diverted away from employees who consistently work hard and accomplish all tasks. In the long-run, this behavior is helpful to neither the employee nor company, as the company accomplishes less and the employee feels unsatisfied with his or her work. However, new human resources programs are being created to combat this issue in an innovative way.