[Mb-civic] Fw: Earth Policy News: Foreign Policy Damaging U.S. Economy

[Harold Sifton]

FYI my fellow MB Civic friends

H


Eco-Economy Update 2004-13
For Immediate Release
Copyright Earth Policy Institute 2004
October 27, 2004


FOREIGN POLICY DAMAGING U.S. ECONOMY
http://www.earth-policy.org/Updates/Update44.htm

Lester R. Brown

Last week I spent two days at an international conference of parliamentarians 
in Strasbourg, France, with delegations from some 81 countries, and two more 
days at the European Parliament in Brussels. Although I was invited to talk 
about population, food, water, climate change, and energy, the question-and-
answer sessions and the individual conversations invariably turned to U.S. 
foreign policy.

Elected representatives from other countries are not only bewildered by a U.S. 
foreign policy that they cannot fathom, but increasingly they are angered by 
it. The America they now see is not the America they once knew. 

Elected officials are not the only ones upset with U.S. foreign policy. 
Anti-American sentiment is spreading throughout the world. In March of this 
year, the Pew Global Attitudes Project reported that, "A year after the war 
in Iraq, discontent with America and its policies has intensified rather than 
diminished." 

The Pew polls show that "the war in Iraq has undermined America's credibility 
abroad," and that "there is broad agreement in nearly all the countries 
surveyed ... that the war in Iraq hurt, rather than helped, the war on terrorism." 

Not only is the arrogance of U.S. unilateral decisionmaking deeply resented, 
but in many countries, the United States is no longer viewed as trustworthy. 
The rejection of American foreign policy is translating into a rejection of 
products with U.S. brand names. Europeans are in effect holding an economic 
referendum on U.S. foreign policy, voting with their pocketbooks. The effect 
of this can be seen in the third quarter earnings reports now coming out for 
several leading U.S. corporations. 

Worldwide, eight of the ten leading product brands are American. More than 
half the sales of each of these brands are outside of the United States. John 
Quelch, professor at the Harvard Business School, says, "A deepening opposition 
to American foreign policy is threatening the long-term strength of these brands." 

The Financial Times reports that some of the world's strongest consumer brands, 
like Coca-Cola, McDonald's, and Gap, are being hit hard. Coca-Cola sales in 
Germany dropped 16 percent from the similar period last year and the company 
is writing off $392 million "to reflect impaired business assets there."

McDonald's, a corporation with a remarkable historical growth record, has seen 
its sales come to a near standstill across Europe. Gap has pulled out of Germany 
entirely, a move that has helped to reduce its international sales by 10 
percent. Falling attendance at Disney's theme park outside Paris dropped revenues 
to where it had to be rescued by its parent company. Wal-Mart, the world's most 
successful retailer, is facing heavy losses in Germany, which is the world's third
 largest economy after the United States and Japan. 

Sales of automobiles made by GM and Ford are also suffering in Europe. With losses 
of $236 million in the region, GM is laying off 12,000 workers in Germany. Ford 
may soon follow with layoffs. 

Not wanting to feed the anti-American backlash, companies typically blame 
economic conditions for their declining sales, but the International Monetary 
Fund estimated in September that Germany's economic growth this year would be 
2 percent, a much better performance than its negative growth last year. In 
France, another country where U.S. products are taking a beating, growth is 
projected at 2.6 percent, compared with 0.5 percent a year ago.

The decline in sales and earnings of U.S. companies abroad is most evident with 
the leading name brands cited earlier, but the acceptance of U.S. brand products 
is declining across the board. Other well-known brands where consumer approval 
abroad is declining include Microsoft, Nike, and Yahoo. But much more is at stake 
than name brands. The economic fate of thousands of U.S. companies operating 
internationally will be affected.

The indirect effect of the Iraq war on the U.S. economy may soon become a major 
issue. Quelch shares this thinking, noting that, "the cost to the American 
economy could be far greater than the cost of the war."

This downturn in sales of U.S. products abroad will likely touch all Americans in 
one way or another. Within the United States, it will affect job creation and the 
stock market. It will affect the holdings of some 90 million individual investors, 
the market value of both mutual funds and pension funds, and the retirement income 
they generate. It will likely reduce the cash flow of the endowments that 
foundations rely on to provide grants and that universities rely on to help cover 
operating costs. 

I've been traveling abroad for nearly 50 years, ever since sailing from New York 
to Bombay to spend the last half of 1956 living in Indian villages. At no time 
during this period have I encountered the level of concern about U.S. foreign 
policy that exists today. While it is too early to see clearly all the long-term 
effects of U.S. foreign policy, some of the economic fallout is becoming 
disturbingly clear. 

The time has come to fashion a new U.S. foreign policy, one that is responsive to 
the concerns and needs of the entire world. In today's integrated world economy, 
for example, eradicating poverty may contribute as much to U.S. security as 
eradicating terrorism. 

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