Camembert from Wisconsin
In America, calls to boycott French goods are being spread by the movement Veto la France. Its blacklist includes dozens of French companies, including Air France, Michelin, Club Med, and Bic. It is proposed to replace a holiday on the Côte d'Azur with a tour of the French Quarter in New Orleans or a visit to a French hotel in Las Vegas, or, failing that, to go on a culinary cruise to cheese factories in Wisconsin. "We receive letters and phone calls with boycott threats every day," admits Fabienne de Brébisson from Michelin, "but so far we have not recorded any particular drop in sales." Similar events are also happening around popular French brands such as Danone and Evian. The head of the well-known alcoholic beverage producer Pernod-Ricard SA, Patrick Ricard, also acknowledges the fact of the anti-French campaign. But in his opinion, there will be no serious consequences: most brands are positioned as American, Scottish, and Australian.
The French and Germans are not to be outdone. Coca-Cola, along with California wines, has disappeared from the menus of many restaurants in "old" Europe. Pacifists are calling for a boycott of McDonald's. The American oil giant Exxon Mobil has also ended up on the blacklist of the European public organization "Consumers Against War." Through its subsidiary Esso France SA, it owns 815 gas stations in France. For now, Exxon remains calm. The French are still faithfully pumping gasoline and are not particularly defecting to competitors. In any case, no noticeable drop in sales has been recorded.
Although in form the boycott itself can cause nothing but a smile, the stakes are not so small: the volume of trade between the US and France today is $56 billion. One contract alone between the American defense department and the French company Sodexho is worth almost a billion dollars. The French supply the US Army with instant food kits. After the start of hostilities and the sharply anti-American reaction of French President Jacques Chirac, 60 Republican congressmen demanded that the Bush administration immediately end all relations with Sodexho.
The chances of the French losing a long-term contract are very high - America, as they say, has taken a matter of principle. Moreover, the US no longer pays attention to the fact that many French companies do not simply import finished products into the American market, but directly produce them in America, providing jobs for tens of thousands of people. For example, Bic is generally a joint Franco-American company, which, because of the war, has already encountered problems selling disposable blades and ballpoint pens in the Middle East, where they are perceived as products from across the ocean. As for Michelin, the company operates in the US market through its subsidiary Goodrich, which employs 25,000 Americans. McDonald's activities in France are structured along the same lines. The PR campaign of the fast-food giant is based on the fact that its network uses exclusively local meat; beef is bought from farmers, thereby providing work for 38,000 French people.
The Lament of Exporters
The calculation of the American developers of the "Shock and Awe" plan was simple: a crushing blow to Saddam's regime demonstrates to the whole world the power of a superpower and restores confidence in its economy and financial system. "America will be able to count on an inflow of foreign capital only when people in other countries become convinced that the US is a symbol of economic might and geopolitical reliability. On the one hand, war strengthens anti-American sentiment; on the other, it enhances US prestige, and therefore the position of our country in international financial markets, including demand for our securities," assures Edward Luttwak from the Washington Center for Strategic and International Studies.
True, as soon as the course of the war deviated from the original lightning-fast scenario, the voices of skeptics were heard. Not even everyone in America is convinced that there is a direct link between military power and the economy. "The economic sphere functions according to different laws, distinct from the laws of war and geopolitics," warns Harvard University professor Joseph Nye. "In the economy there is close interdependence, in other words, parity between different blocs. That is, America cannot do without the rest of the world, and vice versa."
American exports account for 10% of the country's GDP, and millions of jobs depend on them. But in order to sell goods and services, it is necessary to have well-disposed buyers. Today a situation is developing where brands such as Coca Cola or Nike could seriously suffer if consumers in Asia, Latin America, and Europe perceive the US as a willful and selfish empire.
At first glance, it seems that the war in Iraq will have little impact on the American economy. Thanks to its enormous potential, the US can well afford both guns and butter. After all, the seemingly prohibitive defense budget of the world's only superpower - almost $400 billion - is only 3.5% of the country's GDP. Spending on the war itself is even less - from 70 to 80 billion.
Indeed, America is an economic giant. Although its population makes up only 5% of the world's, the country accounts for almost a third of global production. The overwhelming majority of the world's 100 leading corporations have their headquarters in the US, and the lion's share of investment banks are located on Wall Street. No other nation in the world supplies as many films, television series, and musical works to the global market; moreover, more patents are registered in America than anywhere else. The US practically controls the Internet and has a monopoly on training top managers: it is in America that the leading business schools are located.
Donors of America
However, a detailed analysis of the situation gives a somewhat different picture. The state of affairs in the American economy is far from ideal: the trade balance deficit has increased by 28% over the past year. In other words, the excess of imports over exports amounted to half a trillion dollars. This imbalance is covered in the traditional American way - by selling corporate stocks and government securities to the rest of the world. That is, the economic colossus still lives in debt, and the rest of the world acts as a creditor. During the presidency of another “hawk” - Ronald Reagan - such practice ended in October 1987 with a collapse of the dollar and a crash of the stock market. A similar threat exists today. “International investors currently do not have that much money, and what they have is already invested in American stocks,” warns Catherine Mann from the Institute for International Economics. In other words, there are not many free funds in the world today, and the fact that they will regularly flow to America as in the good old days is far from obvious.
Another factor that invariably helped the American economy and whose existence today may also be under threat is immigration. The influx of labor from other countries allowed American society to maintain phenomenal dynamism. The British weekly “The Economist” even published a forecast according to which by the middle of this century American society should have become younger compared to European by 15 years - with all the favorable consequences for the economy and social sphere. But today the question arises: will immigration flows remain at the current level if the United States loses its attractiveness in the third world? After the events of September 11, immigrants from Muslim countries are subjected to unprecedented discrimination in the United States, and in some cases even forcibly deported. “I fear that in the future the processing times for applications for residence permits in the United States will triple,” says Alan Goodman, head of the Institute of International Education, which awards prestigious Fulbright scholarships to foreigners.
Finally, American companies operating abroad depend on the favorable attitude of local governments. For example, any merger requires approval from the European Union, and Microsoft corporation must account for cases of unfair competition not only before American but also European authorities. The sluggishness of the European bureaucracy has become a byword, but what scale can red tape with licenses and permits take if a political factor intervenes? It is unlikely that Europeans will calmly watch their firms being discriminated against and boycotted in the United States. US airlines need airport services, film studios need copyright protection, and farmers need special permits to sell genetically modified products. “The current manner of dividing the world into friends and enemies may cost America too dearly,” warns New York economist Jeff Madrick.
The question is how far America can go. “In the United States, there are many voices demanding to ignore international institutions, and many of those who demand a special American path either belong to the Bush administration or are close to it,” says Professor Lester Thurow from the Massachusetts Institute of Technology.
Today, the reputation of the United States in the world is seriously undermined. And the more terrible pictures of death and suffering of peaceful Iraqis are shown by Al Jazeera and European television companies, the deeper the disappointment in today's America will become. Therefore, a mutual boycott of goods is only the tip of the iceberg; far deeper and larger conflicts may follow.
Stephen Roach, chief economist at investment bank Morgan Stanley, believes that the war has created “the deepest geopolitical rift after 1945.” In his opinion, the very process of globalization is now under threat. Many economists believe that political decisions will now dominate economic expediency. As a result, the threat of mutual isolationism, separation of national markets, and the collapse of the international division of labor, built with such difficulty, loomed before the world. If national barriers are erected for importers, risks will increase. And any increase in risks is expressed in money - interest rates on bank loans rise and, accordingly, prices. No one will be able to sit out and avoid the chain reaction of markets. After all, an increase in prices for finished products inevitably leads to a reduction in demand and a decrease in production volumes. This means producers will need fewer raw materials - metals, energy.
One of the most difficult issues remains the future course of Arab countries. What place will they take in the world economy after the end of the war? Many experts do not rule out that the Middle East region may distance itself from the United States and draw closer to Germany and France. According to Volker Nienhaus from the Ruhr University Bochum (Germany), the Arab world is already openly discussing the possibility of switching oil export payments from dollars to euros, as well as reducing the share of American currency in the gold and foreign exchange reserves of central banks. “Of course, there is no need to dramatize the situation: the aggregate GDP of a number of Arab countries is comparable to the GDP of Spain, but if the vector really changes, a certain imbalance in global financial markets cannot be avoided,” the German expert believes. Any flight toward the euro is a blow to the dollar, with no less serious consequences for the Old World. After all, Europeans, especially Germans and French as exporting nations, are extremely disadvantaged by the strengthening of the single continental currency: their goods become more expensive and less competitive on world markets.
So far the forecasts are discouraging. The same Stephen Roach calls on Americans to be restrained in their assessments, and experts at the Washington Institute for Economic Policy at best allow for moderate growth for the US, but without creating new jobs. So, another year of recession and stagnation?