| THE AGENDA OF FOREGN TRADE OF THE 21st CENTURY:
Relevant topics for the training of those who assist SMEs with global projection.
by Félix Peña
English translation: Isabel Romero Carranza
There are several issues that due to their relevance
and the multiple unfoldings they can lead to, should be taken into account
when defining or updating the training programs of human resources, especially
of those who have already acquired through academic study or practice
a good understanding of why and how goods are produced or services are
provided spanning multiple national markets.
The main issues in this case are those resulting from
the sharp increase in urban consumers with middle class income and consumption
patterns; the transnational production chains of regional and global scope;
and the proliferation of preferential trade areas, including some resulting
from mega interregional agreements.
The three above-mentioned issues share common elements
at the moment of defining the contents and methodology for training specialists
fit to guide SMEs in their internationalization processes. Such common
elements refer to recognizing the absence of a single model on how to
access remote and culturally diverse urban consumers; to valuing practical
experience as an essential complement to academic learning, and to using
imagination and creativity when addressing the problems that may arise.
To travel to different countries and try to understand
and appreciate the differences with one's own country would be one of
the main recommendations for those training to guide and direct companies
with their global projection. To facilitate such experiences and provide
academic and practical direction would be the role of those institutions
that train specialist on international trade. But this training could
be more effective if it were coordinated with trade promotion institutions
and the business sector.
It is a task that could be enriched within the scope
of cooperation networks between the academic, public and business sectors
of several countries of the region. The idea of the "triangle"
inspired by Jorge Sabato, who was a great connoisseur of the region and
its potential, could be functional to an initiative with such scope. Capitalizing
on the European experience of "Erasmus for Entrepreneurs" could
also prove valuable.
As noted on other occasions, when training international trade specialists
who aspire to succeed in their careers it is important to consider some
issues that could have the most impact on the design and development of
strategies for world insertion of firms doing business in our country,
especially SMEs (see the June
2014 edition of this Newsletter).
These are issues that, due to their relevance and the multiple unfoldings
that they may originate, should be taken into account when defining or
updating training programs for human resources, especially of those who
have already acquired, through academic studies or in practice, a good
understanding of why and how goods are produced or services are provided
with a transnational scope.
This time we will focus on three issues that we have mentioned on other
occasions and that deserve special attention because they stand out in
the agenda of world trade of the 21st Century. Even when they have deep
historical roots they have not always been as current as they are today,
or as influential as they have become in recent times, a fact that will
probably continue in the future. Nor are these the only relevant issues
to consider. Other issues refer, for example, to the relationship between
world trade and the protection of both the environment and knowledge.
The three topics we are considering in this opportunity are those resulting
from the sharp increase in the number of urban consumers, especially those
with middle-class income and consumption patterns; the development of
transnational production chains of regional and global scope; and the
proliferation of preferential trade areas, including some resulting from
mega interregional agreements.
These are issues that are enhanced by deep changes taking place in global
economic competition as a consequence of, among others factors, the shifts
in relative power between nations, the emergence of new major players
and the collapse of physical distances.
The first issue concerns how to reach urban consumers, many with middle-class
income and which, in growing numbers, have become characteristic not only
of developed countries but increasingly of other countries that have a
strong potential to influence the growth of world economy. This involves
reaching, especially with differentiated end-products, the different types
of outlets that urban consumers use to stock up. But it also means being
able to render them attractive and adapted to the multiple and very diverse
cultural realities that characterize different world regions.
Arif Naqvi (http://en.wikipedia.org/wiki/Arif_Naqvi)
reminds us that, in accordance with current trends, by 2015 urban consumers
will reach 4.5 billion and by 2050 70% of the world population will live
in cities. Hence, the title of the very interesting article he wrote:
"Cities, not countries, are the key to tomorrow's economies",
(published in the Financial Times of April 25, 2014, on http://www.ft.com/).
In the South American space it has been estimated that in the upcoming
years fifty cities will have more than one million inhabitants (half of
these in Brazil) and many of them will have middle-class incomes (the
Brazilian C class). This reminds us of the vision, inspired by the strategic
musings of Eliezer Batista (http://pt.wikipedia.org/wiki/Eliezer_Batista),
that was maintained at the beginning of Mercosur and which conceived it
as a network of large cities located in the original member countries
and also in Chile.
In this perspective, the quality of the connection between the respective
cities and their areas of influence becomes of fundamental economic value.
This considers not only the physical infrastructure but also the transport
and logistic services and the measures aimed at improving trade facilitation,
starting with the quality of customs and the preparedness of those involved
in the corresponding procedures.
International trade geared towards urban consumer's means having a good
knowledge of their tastes and preferences and, in particular, becoming
familiar with the linkups that lead to urban retail outlets. They will
be, increasingly, consumers well informed about their options and demanding
in terms of the quality of the goods offered to them -especially including
the sanitary quality of foods- and of the consistency of production and
distribution methods, with the growing requirements for an adequate protection
of the environment.
The second issue concerns how to articulate on a transnational scale
the production processes and channels of access to urban consumer's of
those goods and services that they will demand in the future. This leads
to assign greater importance to the accurate knowledge of the multiple
forms of global and regional value chains, through which to produce and
distribute goods and services valued by sometimes distant consumers and,
above all, with very diverse tastes, values and customs.
In particular, it makes the question of scaling towards higher added
value links in the corresponding value chains something of importance
for companies seeking to add the greatest intellectual value to the product
that will finally reach the consumer. How to scale in the context of a
production chain will be an issue of increasing practical value to SMEs
going international. In this regard, in its latest report on "The
International Outlook of Latin America and the Caribbean" the ECLAC
again provides valuable insights on the importance of production chains,
including their relationship with the strategies of industrialization
and regional integration in Latin America (see the reference to the ECLAC
report in the Recommended Reading Section of this Newsletter).
And the third issue relates to the proliferation of preferential trade
agreements. Their denomination, form and scope may vary greatly. But whatever
the name, it would be difficult to point out a single model for them.
They can be bilateral (such as the network of preferential agreements
that have been concluded by the countries of the region with third countries,
either within the region or with other regions); regional (Mercosur and
the Pacific Alliance are current examples), and interregional (the most
publicized today are those negotiated between groups of countries from
different regions, such as the Trans-Pacific Partnership and the Trans-Atlantic
Trade and Investment Partnership, even when their actual content and completion
dates are still uncertain). And their real contents, topics and sectors
involved can be very different as well.
Such agreements are always discriminatory, even when they are held within
the framework of existing WTO rules. How they discriminate against the
goods and possible services and investments not coming from member countries,
it may be something that can be difficult to understand in practice. Many
times the discriminatory effects can be found in the "fine print"
of the agreements and, in particular, related to the scope of the rules
of origin. Therefore it may also be relevant for an international trade
specialist to be able to advise an SME on how to take advantage of preferential
agreements concluded by third countries, even if one's country is not
The three issues mentioned in this opportunity present common elements
that should be taken into account when defining the content and methodology
for the training of specialists who are fit to guide SMEs in their internationalization
process. Such common elements relate to recognizing the inexistence of
unique models on how to access remote and culturally diverse urban consumers,
to knowing how to scale in a value chain or how to take advantage of a
preferential trade agreement; to valuing practical experience as an essential
complement to academic training and to using imagination and creativity
when addressing practical problems that may arise in real life.
Travelling within different countries and trying to understand and appreciate
the differences with one's own country, would be one of the main recommendations
for those training to guide and direct SMEs in their global projection.
Facilitating such experiences and providing academic and practical guidance
would be the role of those institutions that train foreign trade specialists.
This training would become much more effective if it were coordinated
with trade promotion institutions and the business sector. The idea of
the productive "triangle" introduced at the time by engineer
Jorge Sábato, great connoisseur of the region and its potential,
could be functional for an initiative of such scope (see, among others,
the article by Gastón Lucas, "El triangulo de Sábado
como paradigm de una exitosa inserción internacional", in
GEIC from August 21, 2013 on http://www.geic.com.ar/).
Moreover, these are issues that lend themselves to much interaction between
those seeking to specialize in the thrilling task of guiding SMEs aspiring
to go international and, at the same time, to facilitate the design and
development of their strategies. Sharing experiences seems to be something
highly recommended. Such interaction may be more fruitful if academic
activities are combined with professional practices through program networks
of transnational scope developed, for example, between Latin American
countries and eventually including countries from other regions such as
could be, at least in the initial stages, China and India and some others
from the European Union.
Even with different contents, Latin America could capitalize on the rich
experience gained by Europe with its Erasmus program, considered one of
the most successful pillars of European integration. And, in particular,
this would be still more enriching if combined with a recent variation
of the program called "Erasmus for young businesspeople and entrepreneurs"
(in this regard see http://www.erasmus-entrepreneurs.eu/).
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Félix Peña Director
of the Institute of International Trade at the ICBC Foundation. Director
of the Masters Degree in International Trade Relations at Tres de Febrero
National University (UNTREF). Member of the Executive Committee of the
Argentine Council for International Relations (CARI). Member of the Evian
Group Brains Trust. More