International Business

The construction sector: persistent credit risk in most countries

2012-01-31T21:50:00.000-08:00

The situation of companies in the construction sector closely reflects the world, regional and national economic trends. At a time when the world economy is characterized by divergences between countries, with a recession in the euro zone, there are significant disparities between countries and subsectors. The construction sector was badly hit by the 2009 crisis, and a large number of payment incidents were still occurring in 2011.

Sensitivity to economic conditions specific to each market and subsector
The intensity of activity in the construction sector vary according to the impact of the crisis on the economy of the concerned country and according to sensitivity to economic conditions that varies from one subsector to another. Activity is strong in emerging markets that are making up for lagging development, and this is particularly favourable to certain subsectors, such as public works and private and institutional non-residential construction. Conversely, activity in developed markets is either moderate or stagnant, with particularly large disparities in the residential construction sector linked to differences in demographics, economic environments, credit terms, fiscal legislation, stocks of vacant housing, and prices.

This fragile and variable economic climate, combined with changes in orders form the public sector and regulations as well as fluctuations in both costs of materials and demand, explain the increase in payment incidents during the early months of the crisis in 2008 and again from October 2011 onwards.

Construction in Europe will depend on the austerity plans in 2012
After a three-year decline and a 17% drop in activity over the period, the European construction sector at last almost stabilized in 2011, particularly in the residential subsector, despite disparities between European countries that can be divided into three groups:

- The first group is the one where construction has suffered the most, and where the cleaning up will take some time. Ireland, Iceland, Spain, Denmark, the Netherlands, Greece and Central Europe have been affected by significant excesses in pricing and supply, and keep seeing a large number of payment incidents.

- The second group, United Kingdom, France, Belgium and Italy, has suffered less from the crisis and business even bounced back in 2010. Despite this, a new decline has set in due to the persistence of excessively high prices. Payment incidents are still widespread, particularly in the UK where the number of corporate bankruptcies is the most significant.

In France, companies face tough competition and fight to win contracts even if this means sometimes tightening their margins while taking into account price increases for raw materials. There were fewer bankruptcies in the first quarter of 2011 than in the first quarter of 2010, although the number remains much higher than before the crisis.

- The third group is made up of European countries where the crisis has not affected the construction sector: Germany, Austria, Norway, Sweden, Finland and Poland. Bankruptcies are nevertheless higher than in other sectors, mainly affecting companies whose activity is regional and which work in a single sector.

For 2012, Coface forecasts a very modest advance in construction in Europe, if the upturn of the housing segment continues. The construction sector will, however, be affected by austerity plans. Public works and institutional building are expected to stagnate under the influence of budget restrictions. Construction of business and industrial premises is likely to be affected by economic uncertainties.

North America: large disparity between the US and Canada
In the United States, falling prices combined with rising costs have weakened the entire sector. Investment in construction fell by 2% in the first 11 months of 2011. Although the decline affects most subsectors, the new building segment has been especially weakened. Non-residential construction also continues to suffer due to budget difficulties of the States and Cities. In Canada, the recovery that began in early 2010 explains the low level of payment incidents recorded by Coface. A sharp slowdown is nevertheless expected in the housing segment in 2012 following the introduction of more stringent credit access conditions.

Asia-Pacific: upturn in activity
Construction in the Asia-Pacific zone is relatively buoyant. Activity is expected to recover fairly well in 2012 in Japan and New Zealand, both affected by environmental disasters, in response to the need for reconstruction. In Australia, in the short term, economic uncertainties are likely to hinder the dynamism of the sector, but activity is expected to pick up in the medium term thanks to favourable demographics.

The case of China
Sales have fallen in China since 2010 following the steps taken by the authorities to cool down the property market, in particular by restricting bank loans to the sector. The drop in sales, price adjustments and increased stock levels are expected to slightly slow the activity in the private residential segment, but this will be partly offset by the launch of a new public social housing construction programme.

The building boom has seen world-class players emerge in China, not only in the construction companies but also as producers of raw materials and machinery manufacturers. These newcomers are more and more active in emerging zones, particularly in Africa and the Middle East.Click here to download a full copy of the report >

Press contact: Maria Krellenstein / ( 33 (0)1 49 02 16 29 / maria_krellenstein@coface.com

On-line export sales

2012-01-29T21:51:00.000-08:00

There has been a lot of press regarding the impact of Australians purchasing on-line, particularly from overseas suppliers, and the erosion of the market for our local retailers.

Many of those retailers are now recognising that the change in buying habits is permanent and are getting on the bandwagon.

This acceptance of on-line sales has positive implications for sectors of the Australian market, especially for a product that suits an international consumer market. The costs of transport to main destinations abroad by parcel can be reasonably standardised; and after also ensuring payment is made up-front, and the entry documents (where required) meet the overseas customs requirements; it can be an exciting and lucrative addition to the domestic consumer market.

Of course 1) getting found by an overseas buyer and 2) capturing their interest so that they want to buy, are two key steps that precede the sale. This involves refining the website so that it receives a high ranking on the main search engines, and for Google, perhaps paying for positioning. Then having been found, you have a very short time span to capture the attention, interest and desire of a potential buyer once they land on your site.

Structuring a website for domestic and overseas visitors requires some finessing. Some companies set up separate sites in major markets so that they are perceived as a “local” supplier. Another check point is ensuring your IP is protected in your key target markets, and equally that you are not infringing someone else’s IP already registered in that market.

You need to succinctly outline your USP….why would someone in say Tokyo buy from you? Having text in Japanese may be a good start. Then outlining the originality/quality/uniqueness of your product in values a Japanese consumer would appreciate. Finally clear pricing and a simple delivery process will be the things that clinch the deal. Many suppliers include delivery in their pricing, or if not, set out standard costs per region so the buyer knows exactly what they are up for. Can you include guarantees for delivery, returns, exchange (for clothing sizes) etc that take the risk away for the buyer?

There are some very successful Australian suppliers currently doing very well selling to the global consumer market. To do it properly though requires focus: monitoring hits, responding to questions, refreshing information so it is always current. Your website does become the shop front for your business, open to the world 24/7.

So for all businesses with a consumer focus, you need to actively consider the potential overseas customer. 2012 might be the time to start, or your competitors could be taking your market!

Peter Mace, General Manager- Australian Institute of Export

America Welcomes Chinese People

2012-01-29T21:15:00.000-08:00

Today, America has replaced Canada and become rich Chinese people's No. 1 choice when it comes to immigration.

The reason is simple: From the difficulty and waiting time, US has got the first strike. From investment immigration policy, all it takes is 500,000 USD, 5 years of time and providing 10 jobs to exchange a permanent America green card.

Some people say this is due to the America's economic crisis, so US is selling the green cards and keeping the door widely open to rich Chinese people coming over here for tourism . For the first time in history, US Department of State announced over one million visas to Chinese people in 2011. The estimated revenue from granting visas in 2012 is 1.3 million USD.

Will this help to ease the current pressing need financially? Maybe, some anyway. For example, in 2010 alone, US received over USD 5 billion investment from Chinese people, exceeding the total amount of all the previous years. Since 2008 when US opened to Chinese tourists, the number of tourists has increase 20% each year. It is estimated this year the number will reach one million. Those tourists usually have a huge buying power. Last year, 800,000 Chinese tourists spent over 5 billion USD, average $6243 per person for a few days travel.

But why is this happening? Why when everybody is saying China has all the money, and how bad shape US is now, yet all the rich and talented Chinese people are leaving their hometown and moving into a country where they can't even really speak the language? According to a report from Bank of China, in 2011, 14% of Chinese billionaires are already emigrated or in the process of emigration.

I say this interesting phenomena is not because those people worshiping western culture, but the root of the problem comes from Chinese government and the sick system. Some people come over here because they just want to be able to have the 2nd Child; Some people come over here because they want their children to have better education; Some are just simply looking for better quality of lives. When these people have all the money they can ask for, they start to seeking for some values that they can't purchase in China, like education, freedom, pure air, etc. At the mean time, while these people are away enjoying their better lives, they still can operate their companies and factories back home, so why not? But this special treatment may not exist too long, as China is standing at the intersection of political system reform.

Other than the rich people, another group of people that are welcomed here are those highly demanded skilled workers. These people also find a way to get more value for their skills. Its a tactic for US, and it seems like a win-win for both parties, however, in a long run, China is going to be in trouble as She's losing money and talents. I can't make any recommendation for Chinese government, but they need to do something before things spinning out of control.

Apple Surprise and more

2012-01-25T19:03:00.000-08:00

The biggest news in this a couple of days I would say is about Apple's earnings. It blew away all the "false prophets". With Steve Jobs passing away, we all thought Apple would drop, but what a surprise! Apple’s116 percent profit growth helped push its total cash to $97.6billion -- enough to cover Greece's debt payments due in thenext two years, according to data compiled by Bloomberg.

Interesting enough, around the same time of Apple's earning announcemen, Dr. Mahon sent us an article called "How the U.S.lost out on iPhone work". It mainly discusses the reasons Apple moved and plans to keep its manufacturing overseas. According to the article, "It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products."

I understand this is a very sensitive topic, and I have no intend to hurt anyone's feeling, but I believe, Apple will not be as successful as it is now if without its overseas workforce's support. here's the original link for the article http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?_r=3&ref=charlesduhigg&pagewanted=all

It always annoys me when I hear people say Chinese people live with no dignity if they are even willing to take on so much. Those Chinese workers are not forced but choose pursuing better lives in their own perspectives. They are desperated in some sense, because they have to make hard-earned money to support their families. It isn't like here in the US, people can get food stamps. I've heard people said "only 12 dollars an hours is not worth it. I would rather stay at home." What is the reasoning behind this statement? "Well, Uncle Sam will take care of me. " Where does Uncle Sam's money come from other than printing machine? For the last a couple of years, the majority has come from China. But why China has money, it comes from those people who work with no dignity in some people's standard. And the money comes to support those people who live in dignity by sitting at home receiving government fund.Without any bias, I understand why Apple would prefer one group of workforce over the other.

This is a picture of poor people from US vs. China. Who has more dignity? Perhaps we should stop blaming others and take a moment to self exam.

Most Australian companies ill-prepared for Personal Property Security Reform (PPSR)

2012-01-24T20:49:00.000-08:00

A high proportion of Australian businesses, 82 percent, are not looking to register their assets under the new Personal Property Securities Reform (PPSR) coming into effect on 30 January.
In a recent report conducted by Coface Australia, Survey of Corporate Credit Risk Management in Australia, many Australian SMEs were still unaware of the implications to their business, despite significant changes to the way many companies will conduct their trading relationships.

The survey revealed 76 percent of respondents do not have a strategy in place to adapt their business to the changes. One of the key reasons for business operators being under prepared is due to a lack of education and awareness of the reforms. Some 74 percent said they were still unaware of the reforms, compared to 91 percent last year.

Chris Doubé, General Manager of Coface Australia said: “It’s alarming so many businesses are not yet prepared for this critical new piece of legislation, as the reforms will impact virtually all business operators in Australia.

“The PPSR will affect business documentation and procedures, providing a new level of security and certainty in business relationships. Australian companies should seek advice on registering their debtors to protect them against default,” he said.

The PPSR will bring together the different Commonwealth, State and Territory laws and registers governing personal property under one national system. The reforms will introduce the Personal Property Securities Act 2009 and the online PPS Register.

Press Contacts:
Tania Muñiz: ( +61 (0)2 8235 8615 / tania_muniz@coface.com.au
Daniela Nasso ( +61 (0)2 8920 0700 or +61 (0)421 792 765 / dnasso@sefiani.com.au
Mark Roberts: ( +61 (0)2 8920 0700 or +61 (0)405 447 824 / mroberts@sefiani.com.au

About the survey:
This is the third annual survey by Coface Australia on corporate credit risk management in Australia, and supports Coface’s commitment to developing the credit risk management market in Australia. The Survey of Corporate Credit Risk Management in Australia was conducted between 20-24 October 2011, with responses from 533 companies of all sizes, ages and industries. The survey aimed to provide a broad understanding of the status of payment experiences, payment trends and credit risk management practices among companies. The majority of respondents were private (39%) and sole traders (27%) from a wide range of industries including manufacturing, wholesale and retail, and finance services. In 2011, a greater number of larger companies (those with 100+ employees) took part in the survey, accounting for 34% of respondents compared to 4% last year. Public companies made up 16% of respondents compared to 2% in 2010.

Unleash the Dragon

2012-01-22T14:45:00.000-08:00

Today marks the start of the Chinese Year of the Dragon. Traditionally, the Dragon is one of the luckiest signs in the Chinese Zodiac, so perhaps 2012 is the right time to consider exporting to China.

China is Australia’s largest two-way trading partner and export market. In 2010/11 the value of goods exported to China amounted to a whopping AUD $64.8 billion (DFAT, 2011), which is an increase of 39.4 per cent over the previous year. With such a significant volume of trade, it is important for Australian exporters to know how to protect their intellectual property (IP) in this vast market.

China’s counterfeit and piracy market is reportedly the biggest in the world with many manufacturers so skilled at copying items it can be difficult to distinguish fakes from genuine items. In fact, the so-called ‘fake markets’ have become major tourist attractions in large cities like Shanghai and Beijing.

How can you protect your IP in China?

If you are thinking about exporting to China, or using China as a manufacturing base for your products then you should be protecting your IP rights in China. IP Australia is responsible for administering registered IP rights in Australia only. In China, there are a number of agencies that are responsible for registering IP rights. The Chinese Trade Mark Office registers trade marks and the State Intellectual Property Office registers patents and designs.

You have two options if you wish to file a trade mark or patent application in China. You can file your application in China directly, either through a Chinese attorney or an Australian attorney who has a Chinese counterpart. Alternatively, you can file using an international agreement such as the Madrid Protocol for trade marks or the Patent Cooperation Treaty for patents. An Australian patent or trade mark attorney will be able to advise you on your best option.

Protect your trade marks (and their Chinese translations) immediately.

In Australia, we follow the ‘first-to-use’ rule, which generally gives the first person to use a trade mark the rights to that trade mark. In China, the first person to file a trade mark application will generally have priority over an earlier user of the mark (the ‘first-to-file’ rule). This means that even if you are already operating in China, you may have difficulty preventing someone else from registering your trade mark if you do not apply first.

Pharmaceutical giant Pfizer recently learned this lesson the hard way. When it released Viagra in China, Pfizer chose to market one Chinese translation but did not register a similar Chinese translation that was being widely used in the media. When an unrelated company, Guangzhou Wellman Corp, registered the popular translation, Pfizer became embroiled in an 11-year court battle to claim back the translated trade mark but ultimately lost. (Foley & Lardner 2010)

Be watchful of potential IP violators and respond swiftly.

Once you have secured your IP rights, consider developing an infringement strategy to protect yourself against the unauthorised use of your IP. It is not only important to protect yourself but also to make sure that you do not infringe on the IP rights of others.

Know what your rights are and be prepared to act if they are violated. If you find your IP has been infringed in China you have several options. The Administration Industry of Commerce has the power to investigate trade mark infringement and a decision will usually be reached quickly and relatively cheaply. This usually results in a fine for the infringer or the seizure of the counterfeit products. There are, however, disadvantages with the administrative system especially when dealing with repeat offenders.

Alternatively, you can use the judicial system and take your infringer to court. For a foreign company the court process can be lengthy, due to procedural requirements such as translation of documents. Damages awarded by Chinese courts in IP matters have been quite low in the past, although the situation is changing.

Chint Group, a Chinese manufacturer of low-voltage electronics, took action against the French company Schneider Electric for infringing its utility model patent in China. The court initially awarded Chint a record RMB 334 million in damages but the case ultimately settled for RMB 157 million (approximately AUD 24 million) (Foley & Lardner 2010). The case is an example of the greater value being placed on IP by both Chinese companies and the courts and how having a strong IP infringement strategy could minimise the risk of your IP being used without your permission.

Enforcement actions in China can be complex, as they can involve a number of different state and provincial administrative and regulatory agencies. It can be difficult to ascertain which court or other body has jurisdiction over an IP matter, so specialist legal advice before taking any steps is crucial. The Chinese government has also established numerous IP rights service centres around the country in an effort to make it easier to address enforcement issues.

Whatever action you do take, make sure any infringer knows you are serious about protecting your IP.

IP Australia has country specific information outlining issues exporters may face in different countries including China. For more information visit http://www.ipaustralia.gov.au/understanding-intellectual-property/ip-for-business/doing-business-overseas/ip-protection-in-china/.

Austrade has a network of offices in China and are able to assist Australian exporters and investors. Phone: 13 28 78, email: info@austrade.gov.au or visit http://www.austrade.gov.au/

Jessica Huntley

Marketing and Customer Engagement

IP Australia

On behalf of us all at the Australian Institute of Export welcome to 2012

2012-01-16T20:30:00.000-08:00

On behalf of us all at the Australian Institute of Export welcome to 2012. One can never really predict what lies ahead but if the dollar remains high and the international business environment shows little sign of recovery, it will continue to be tough for many Aussie exporters. But in saying that, the US is looking brighter and if China holds up then many major export opportunities will continue to flourish pushing growth in the Australian economy, albeit a two speed economy, for some time yet.

The Institute’s agenda in 2012 is strong. First we have a new President. Dianne Tipping, well known to many of our colleagues particularly those who have experienced an AIEx training program, who took up the task this month. We would like you to join with us in welcoming Dianne to this important role and wishing her well.

Top of the AIEx activities list is the Australian Export Heroes Awards which will be held this year in Sydney. If you know of someone who has, over a long period of time, made a significant contribution to international trade please let us know. Nominations close at the end of February should be directed to Lisa McAuley at lisamcauley@aiex.com.au

This year we also celebrate the fiftieth anniversary of the Premier's NSW Export Awards. Given this important milestone the Institute and NSW Trade & Investment are planning a number of special events in metro and regional NSW culminating in the awards ceremony in October. It will be the biggest export event on the state’s calendar and we encourage you to get involved through entering the awards and having your company recognised for its export achievements. Contact lisamcauley@aiex.com.au for details.

For those new to export, those looking to export to develop their business, or current exporters assessing new market opportunities, the Institute has a range of activities planned for 2012 designed to help develop and build a sustainable export business. Details of these programs including the Future Leaders in Export Club, seminars and workshops on new markets and international trade disciplines will be available on our website at the end of this week.

In the meantine, we would like to invite you to participate in a short survey that will help ensure our 2012 Future Leaders in Export (FLEx) program continues to present topics that you are interested in. Please click here to follow the link to complete the survey online, which should take just 5-10 minutes of your time. We look forward to seeing you at FLEx meetings commencing in February 2012.

In a difficult export environment possessing the sound international trade skills must be top of your list. Never has it been more important to effectively manage the export risk than it is today. With over fifty year’s experience, the Institute has the best skills development programs available in Australia. Whether face to face, on-line or at your company the Institute provides a flexible range of programs on all key aspects of doing business overseas. For details contact petermace@aiex.com.au or consult our website at http://www.aiex.com.au/education-training/short-courses-workshops

One of the most important things we do at the AIEx is to work with Government in building Australia’s international competitiveness. Whether promoting improvement to the Export Market Development Grants Scheme, lobbying government on tackling the high cost of trade facilitation or building a case for greater access to trade finance, the Institute is there on your behalf taking these issues to Government. To do this effectively, build our export skills and recognise excellence we need your input and participation. Through becoming a member of the Institute you can participate in a range of rewarding activities, benefit through discounts on skills development programs and assist us in getting your message to Government. Details can be found on http://www.aiex.com.au/membership/membership

We wish you every success in 2012 and thank you for your support.

Ian Murray
Executive Director, Australian Institute of Export

New Year, New Start

2012-01-11T10:11:00.000-08:00

I sincerely hope all of you had a great holiday season! I don't believe Mayan's calendar, so I still did a new year resolution for myself. My goals are: graduate from MBA; obtain CPA certificate; get a job that I desire; have a vacation somewhere; learn a new music instrument, and sell one million pounds of lobsters. I don't have a crystal ball, so I don't know what's going to happen in 2012 in the world, but I do know in my little big international trading world, it's off to a good start.

Right after Western's Christmas and New Year, we welcome Chinese Spring Festival. It's supposed to be the year of Dragon. Lobster literally translated into Chinese is "dragon shrimp". "Dragon" in Chinese culture is a symbol for power and excellence, valiance and boldness, heroism and perseverance, nobility and divinity. This pretty much explains itself why lobsters ("dragon shrimp") becomes the No. 1 choice on people's dinning table this year. For the first week of Jan., I've get 20,000 lbs of orders. We have run out of lobsters, but customers are still bombing my phones and emails. It looks like my one million goal is not too unreachable.

The sad thing is this year Maine's lobster is terrible as far as the quality concerns. The weather can't make up its mind to be cold or hot. People are getting sick, so does lobster. They are still soft and the shell never turns hard. Unfortunately, this grade of lobsters are not suitable for far east shipment. In the end of the day, Chinese people's appetite really is booming Canadian's fishing industry. I wish I could do something for our lobster industry here, but other than buying a few from the local seafood market, there's not much I can do. The frozen market is growing, however, all the processing plants closed down for the winter. There got to be a better way operating our fishing industry here in Maine I think, and hope.

Reflections on our export community

2011-12-14T15:12:00.000-08:00

The year just past will not go down in history as the most satisfying for Australia’s export community, many of whom are our members and friends.

While skills development is and always will form the cornerstone of what we do, we have this year played an increasing role in getting the message to Government on the plight of our non resources based exporters. While on the surface it may not be apparent, the message, we believe, is getting through. Our task in 2012 is to “maintain the rage” and simply not accept the argument that Australia’s future is based on the resources sector alone, but on a well balanced portfolio of exports which includes manufacturing, food and services to name just a few. With your continued support we will continue to hammer this message home and to take the strongest stance possible on reminding Government that continued additional taxes will even further erode our international competitiveness.

We would like to take this opportunity to thank all who participated in the 2011 Export Awards across Australia and congratulate those who won. The awards program is a wonderful vehicle for exporting companies to review their export strategies, reward their hard working staff and measure their performance against their peers. It would be remiss of me not to make mention of the six outstanding people who become Australian Export Heroes this year. Their extraordinary contribution to building Australia’s international business capability and our export culture was recognised at Government House in Queensland in June.

As a sound believer in the value of collaboration, the Institute has worked closely this year with a whole range of organisations including Universities, associations and government agencies. We would like to thank all our partners and sponsors for their support this year and we look forward to working with you in 2012 to play our role in driving Australia’s export performance. Especially though, we thank our members and friends for not only their support but their wise counsel, which is often drawn upon. It’s greatly appreciated.

Although next year will once again be tough, the Institute has on the agenda some exciting initiatives a number of which will be revealed quite early in the year. All these initiatives are aimed at building capability and performance in International Trade. We wish you all a safe and happy festive season and look forward to attacking the challenges of 2012 with your support. And please remember, if you are a member and you have issues you would like taken to government or queries relating to the process of International Trade please send them to us; it is what we are here for.
Ian Murray- Executive Director, Australian Institute of Export

Export in 2011/2012

2011-12-14T14:45:00.000-08:00

As 2011 draws to close, it is interesting to reflect on how the year shaped up for Australian Exporters.

Even though our balance of trade is looking positive, it has been the resources sector making the running on export growth.

With the high AUD and events such as the devastation in Japan, cyclones in Queensland and floods in Victoria, new problems emerging in Europe, and the US still trying to rebuild from the GFC, it has not been a great year for many exporters.

Thank heavens for Asia! The continuing growth to our north has kept many exporters in business and has had to make up for lower demand in established markets.

And for 2012? Well the signals are that the problems in Europe will persist and the USA is still some time away from recovery.

So again Asia and sectors in South America, plus new markets in Africa will form the vanguard for our 2012 opportunities. Perhaps a FTA with South Korea would be a great way to start the New Year, along with progress on the Trans Pacific Partnership.

It is difficult to predict what might happen with the AUD, but it will require strategies for exporters, so as to avoid rate volatility playing havoc with export pricing.

With the Government focused on returning to surplus, there won’t be much in the way of financial support for exporters outside the EMDG scheme.

Mining and Agriculture should be strong sectors for 2012, and for others it will be finding a niche and working hard at it. Australian Exporters have proven they are strong adapters, and they have a capacity to find opportunities in the most unlikely places. The big risk seems to be contagion from Europe impacting the domestic economy.

So with things potentially a bit slow domestically next year, export can still be the road to growth. It will require though a realistic assessment of the risk/reward of certain markets to ensure a positive return. As the (purported) old Chinese saying goes, “may you live in interesting times” and 2012 is certainly shaping up as interesting.

Peter Mace
General Manager
Australian Institute of Export

ASEAN and China

2011-12-05T08:20:00.000-08:00

ASEAN stands for Association of Southeast Asian Nations, was established on 8 August 1967 in Bangkok, Thailand, with the signing of the ASEAN Declaration (Bangkok Declaration) by the Founding Fathers of ASEAN, namely Indonesia, Malaysia, Philippines, Singapore and Thailand. Brunei Darussalam then joined on 7 January 1984, Vietnam on 28 July 1995, Lao PDR and Myanmar on 23 July 1997, and Cambodia on 30 April 1999, making up what is today the ten Member States of ASEAN. (http://www.aseansec.org/about_ASEAN.html)

Last year, China emerged to be the No 1 trading partner of the ASEAN group of countries and Thailand's second-largest export market last, thanks to the Asean-China Free Trade Agreement (FTA). A Trade Negotiations Department report showed that since the full implementation of FTA last year, bilateral trade between China and ASEAN had surged to USD 290 billion in 2010, from only 178.18 billion in 2009. In the first 11 months of last year, more than 34% of ASEAN countries' exports to China and 11% of their imports from that country resulted from privileges granted by the FTA.

China has also become Thailand's largest export market. Thai accounted for 22.7% of total exports last year to Asean countries, 11% to China, 10.5% to Japan and 10.3% to the US.

In terms of the value of bilateral trade, China has risen to become the Kingdom's biggest trading partner, ahead of Japan. The department's director-general, Srirat Rastapana, said the Asean-China FTA would play an even more important role in future trading between China, Thailand and Asean.

Major products exported to China by Asean countries include tapioca, rubber products, plastics and chemicals. Products imported by Thailand from China include ceramics, machinery, vegetables and fruit and textiles.

Srirat said that as well as the FTA, Asean and China have expanded and deepened their bilateral economic and trade ties by tightening cooperation in 10 clusters, under a five-year plan. The clusters include agriculture, foods, energy, logistics, tourism, restaurants and small and medium-sized enterprises.

It’s a lovely planet

2011-11-28T18:38:00.000-08:00

In the early days of Lonely Planet, founder Tony Wheeler quickly learnt the importance of building a brand and protecting his valuable intellectual property (IP) overseas.

The Lonely Planet brand was originally created by Tony and Maureen on a side table in a hotel room. Tony came up with the name while singing the song ‘Space Captain’ written by Matthew Moore. He sung the words ‘Once while travelling across the sky this lonely planet caught my eye’. The actual words are ‘lovely planet’ but Tony preferred his version of the lyrics and from this humble beginning Lonely Planet is now one of the world’s most respected and valuable travel trade marks.

To maintain the integrity and value of the Lonely Planet brand Tony and his team played an active role in the management their IP by monitoring the market for imitators and taking swift action against infringers. This was part of the reason the brand was so attractive to BBC Worldwide who purchased the remaining 25 per cent stake in February 2011 for $67 million.

It was during the carefree days of their youth in the 1970s that Maureen and Tony Wheeler learned that IP ownership arrangements with third parties need to be clearly defined - after the first profits of their tiny company were eaten away by authors who had retained copyright ownership over their books.

‘We realised almost immediately that this was not sustainable business model. It became very clear to us how important it was to control and manage our IP. Clearly defining the IP ownership arrangements with any third parties or suppliers involved in the business – before they started work was something we started doing very seriously from that point.

We started paying writers to go and research and write for us, but ensured that the IP belonged to Lonely Planet’.

‘This was the thing that made Lonely Planet a success story – the integrating an IP management strategy into our overall business and exporting plan. Controlling your IP rights is very important’, Tony said.

Tony still continues to travel and write for the Lonely Planet and recently gave a presentation at IP Australia on the company’s history—how he and Maureen grew a small Melbourne business in the 1970s into what is now internationally recognised as the global ‘Bible’ for tourists – Watch it now at IP Australia’s YouTube Channel.

For more information on protecting your IP abroad visit www.ipaustralia.gov.au

The Big fish eats the small fish?

2011-11-28T15:27:00.000-08:00

Since I returned from China, I've got at least 4 companies consulted me regarding setting up some sort of big plant for Chinese market. But the question is: will the future return pay off the investment and then keep making profit in the long run?

One of the questions people constantly ask me is: will Chinese market pay premium for it? My answer is Yes or No. Yes to the retail market, No to the wholesale market. The consumers are willing to pay big bucks for high end products, lobster is one of them; however, for manufacturers, the margin is not much at all, because they have to go through all those "filters".

Currently, the whole frozen market is under test. Personally, I don't think it's a great time to enter it with full force, because no one knows how the market is going to response after this initial period of time. Besides, there are too many players in the market right now, and ultimately, as we expressed in Chinese sayings, "The big fish eats the small fish". Even though I truly hate this part in the business world, it's a cruel fact. When there are too much competition, the big player is going to lower their price until all the little players get pushed out of the game. Any investment involves risk, but I would want to know who the players are before I position myself in a more appropriate place, and then make business strategy accordingly.

For those companies have huge amount of capital and are willing to be in the "red" in the earlier years, the wholesale market is the way to go for sake of volume and long term steady accounts. The trade off is the premium margin. For the less competitive companies, I would toward the retail market - sell smaller quantity but with higher margin. Usually this way they get paid faster which allow the cash flows among the business cycles, but it's not always easy because it requires a lot of more work, especially in "building relationships".

I'm no market expert, so above just a few thoughts of mine while I got to think if I were a company who wants to share a piece of pie in this market, what would I do.

World Food Crisis

2011-11-22T19:38:00.000-08:00

With all the financial crisis going one all over the world, I don't know how many people aware of the world food crisis is just as bad if not any worse. We may have complained or heard mom and grandma complained the soaring prices in the grocery store. It's not the grocery stores get greedy; it's because the shortage of food and the uncertainty of the future outcome drive the prices higher and higher. Reducing market uncertainty may not be among the fastest remedies for loweringthe number of hungry. Yet, letting international markets continue in their presentstate, volatile and unpredictable, will only aggravate an already grim outlook for worldfood security.

Even though the demand has been weakening, agricultural commodity market conditions still remain fairly tight, which is the major factor underpinning prices. Strong underlying demand in certain countries,where economic growth is robust, is price supportive. Aside from being high, mostprices are also extremely volatile, moving in tandem with unstable financial and equitymarkets. Fluctuations in exchange rates and uncertainties in energy markets are alsocontributing to sharp price swings in agricultural markets.

Given all these uncertainties, it is difficult to tell how markets will evolve in the near future. For most commodities, we may be optimistically predict that the prices would remain below their recent highs, but the general picture still points to firm markets well into next year. For most food commodities, next year’s production will have to increase in order to meet the expected demand. However, if this demand were to rise faster than currently envisaged, which is a possibility even assuming a slow economic recovery, then a more significant production expansion will be required. The question therefore is: do the current market signals convey the correct information for producers to adjust their production plans for next year? More critically, will there be enough time for an adequate production response in the event of an unexpected surge in demand? Input costs, from fertilizers to energy, remain high, interest rates have climbed in many emerging economies, all of which could dampen production next year and, hence, draw down stocks and boost prices further.

Brazil: the new frontier

2011-11-20T14:47:00.000-08:00

Having worked in some difficult business locations I know the value of having somebody do some good upfront research which identifies not only the market dynamics but importantly the business culture or business philosophy likely to be encountered in a complex market.

Brazil, because it’s one of the world’s fastest growing markets, promises wonderful opportunities for Australian exporters but in saying that, it remains a very complex place in which to do business, with lots of unknown traps for the inexperienced exporter.

For five lucky Australian Institute of Export members upfront research into the Brazilian market is about to be the order of the day. In February 2012 five teams of students from the University of Sydney will be heading for Brazil to undertake a two week intense business project as part of their Masters’ degree. Each team comprising up to four final year students in Master of Management, Master of Marketing or Commerce will work with an Australian export company that has identified Brazil as a potential export opportunity.

From a university perspective the objective of the project is to provide students with real life business experience along with the opportunity to prove skills within a professional environment. From a business perspective the assignment will provide the five participating companies with a skilled resource to undertake research and provide solutions/outcomes by way of a professional consulting.

All that sounds pretty straight forward and exciting, but as Academic Advisor Professor Sid Grey puts it, “it won’t be a walk in the park or two weeks taking in the sights of Rio, it’s going to be full on in Brazil and during the lead up which essentially starts now”. Briefings in fact started this week. These briefings will be followed by visits by the students to all the companies involved, meeting the key people and getting a thorough understanding of the company, the products, the competitive advantage and of course their financial ability to meet the likely demands of building a business in Brazil. At the end of the project, students will be required to deliver a presentation and submit a report for assessment.

As one would expect there was strong interest from Australian companies wanting to be involved. Submissions were assessed by key University personnel who will be involved in supervising the project from start to finish. On the final list is a really diverse range of companies all with great potential and all providing the students with a wide range of challenges. The five Institute members involved are, Flip Screen Australia, a Wagga Wagga based company in industrial screening, whose key interest is the mining sector. Well known and highly successful coffee company from Castle Hill in Sydney, Gloria Jeans Coffees International, award winning and well know wine company McWilliams Wines, Taree based commercial boat builder Stebercraft, who design and build craft for the police, armed services and emergency services and surf and streetwear company Zanerobe.

What is really pleasing about this project is the value it adds to both parties. Students will get enormous benefit from working on real projects and delivering business outcomes. The companies involved will naturally receive professional research and between them I’m sure strong relationships will evolve.

And given the success of the Brazil project the University of Sydney is planning similar projects through the Australian Institute of Export in China and India in 2012.

With all the difficulties being faced by exporters, cut backs by Government for programs that drive our export growth, it’s really refreshing to see this sort of initiative from Sydney Uni. We wish Sid and his team a safe and successful trip to Brazil and perhaps we will see a few export winners a little further down the track.

Author:

Ian Murray

Executive Director

Australian Institute of Export

ianmurray@aiex.com.au

www.aiex.com.au

Business Success in the US – Blog #3 Changing Channels: US Television retailing is not about steak knives!

2011-11-20T14:42:00.000-08:00

Like me, I bet many of you grew up being bombarded by offers from an eclectic mix of characters selling ‘high quality’ items on TV. To seal the deal most offered some sort of sweetener - My favourite would have to be the old chestnut, a set of steak knives.

I will be the first to admit that I brought this perception with me when I moved to the States about 6 years ago ..... How wrong I was! Television retailing is big business in the US with current estimates putting annual turnover at somewhere in the vicinity of US$9 billion.

The largest player, QVC, reaches over 90 million cable households and broadcasts ‘live’ 24 hours a day, 364 days a year! It has built its business on promoting big brands (e.g Dell, Birkenstock, Bose, Toshiba, Nintendo) plus establishing new (high value) ones. QVC has over 7 million active customers and takes anywhere from 5000 to 15000 orders per hour. Whats more it also ranks #7 in the US for online sales which now accounts for over 30% of its business.

Now to the crux of the matter - How can I successfully sell my products to a US television retailer? Well, apart from being a very lucrative channel it is also one of the most competitive (for obvious reasons) and in my experience you should look to one of the many manufacturers’ representatives that work with the likes of QVC and HSN. But to get you started, here are some basic questions you need to answer:

• Product, product, product: Television retailers buy products they feel are unique and will sell well. Due to limited air time they must be convinced that your product will perform better than current offerings (or the competition). QA/QC checks are also rigorous to avoid costly returns.

• What are your best selling SKUs? Are these currently available in the US? Its possible that the retailer may want a unique offering that can only be purchased on their channel and many carry Private Label brands.

• Can you demonstrate your product’s unique product attributes on air? Seeing is believing and definitely leads to higher sales.

• Beware of dodgy brothers: There are lots of companies and individuals out there in the ‘infomercial’ business who promise the world but are only after a quick buck.

Products of Interest

QVC carries a broad assortment of merchandise. In general, items with broader appeal will sell better that niche items. However, there are many, many exceptions. Some of the top categories on QVC include:

Jewelry: Either with noteworthy designers or unique construction or story

Beauty: Color, skincare, haircare, nails, tooth whitening

Consumer Electronics: Brands, new technologies, problem solvers

Kitchen: Gadgets, electrics, tabletop, cookware

Food: Center of plate, regional, healthy snacks

Garden/Outdoor: Tools, grilling, plants

Other: Cleaning, home décor, watches, gifts, health & fitness, apparel & accessories

For more information a fact sheet on ‘Selling Successfully to QVC’ is available on request from Access USA.

Quote: “Television is an invention that permits you to be entertained in your living room by people you wouldn't have in your home.” David Frost

Author:

Ian Smith

Chief Executive Officer

Access USA Pty Ltd

ian@accessusa.com.au

www.accessusa.com.au

Indonesia to fully implement the ASEAN - Australia New Zealand Free Trade Area (AANZFTA)

2011-11-16T21:35:00.000-08:00

If HS2012 was not an exciting enough start to 2012, it has now been announced that Indonesia has finally taken all steps to fully implement the AANZFTA with effect from 10 January 2012.
This will allow for full implementation of the AANZFTA by all contracting parties and will, hopefully, further enhance our trade with the region.

Doubtlessly this will start a mad scramble for appropriate Certificates of Origin and softwear upgrades for reporting Import and Export Declarations to claim preferential treatment for goods of Australian and Indonesian origin as provided for in the AANZFTA.

There will also be the usual move to schedule the transport of qualifying goods to ensure that they secure the full benefit of preferential access. There were issues on this for both the AUSFTA and the earlier stages of the AANZFTA.

As always we would be delighted to assist and time spent preparing in advance of the “go” date will be well rewarded.

Presumably, the Australian Customs and Border Protection Service will be issuing a Notice or Notices regarding this development.

I should also add that amendments to the Singapore-Australia Free Trade Agreement (SAFTA) came into force on 2 September 2011.

Contact: Andrew Hudson, Melbourne +61 3 8602 9231 ahudson@hunthunt.com.au

© Hunt & Hunt 2011 Disclaimer: The information contained in this e-alert is not advice and should not be relied upon as legal advice. Hunt & Hunt recommends that if you have a matter that is legal, or has legal implications, you consult with your legal adviser. If you no longer wish to receive this e-alert or any other publication from Hunt & Hunt, please email us at unsubscribe@hunthunt.com.au

High hopes for a Trans-Pacific Partnership

2011-11-16T21:02:00.000-08:00

Recent discussions on Australia’s Free Trade Agenda have come to include reference to the conclusion of the “Trans-PacificPartnership Agreement” (“TPP”).

The origins of the TPP can be found in the earlier Trans-Pacific Strategic Economic Partnership Agreement (described as the “P4”) between Brunei Darussalam, Chile, New Zealand and Singapore which entered into force in 2006.

Subsequently, the original “P4” parties together with Australia, Peru, the US, Vietnam and Malaysia have joined to consider the establishment of the TPP. The Australian Federal Government has publicly described the TPP as the Federal Government’s highest regional trade negotiating priority.

Wider international interest in the TPP has increased at the same time as an increase in interest from the United States which now perceives the TPP as a means to support and expand the US economy as well as the regional economy. Broader US support for trade liberalisation can be seen from the very recent Congressional approval for other US Free Trade Agreements which, while negotiated and completed some years ago, have only recently been passed by the US Congress with approval for implementation.

From an Australian perspective, it is hoped that the TPP would build on existing liberalisation through bilateral Free Trade Agreements (“FTA”) with New Zealand, Singapore, Thailand and Chile as well as the regional FTA with the ASEAN nations. There is also a wider hope that the TPP could be a precursor to a broader APEC free trade zone.

The parties to the TPP have been engaged in extensive negotiation and prior to the current meeting of APEC leaders, the parties negotiating the TPP released a statement to the effect that they had agreed, in principle, to the content of the TPP.

The release identified a number of areas where agreement in principle had been reached to allow completion of the TPP. These included the following (in general):

Comprehensive market access (ie. reductions in tariffs and other non-tariff barriers).
Regional Agreement.
“Cross-cutting” trade issues (including regulatory coherence, competitiveness and business facilitation, SME assistance, customs clearance and economic development).
To assist new trade challenges.
That the TPP should be a “living” agreement.

These are all largely consistent to the outcomes of any FTA (whether bilateral or regional). This reference to SME assistance is welcome as small and medium sized businesses can often “miss out” on FTA benefits through lack of resources or complexity in implementation of the FTA.

It is also reported that Mexico, Japan and South Korea are being approached to join the TPP. However, at this stage, the PRC does not appear to be engaged and it has expressed concerns as to its apparent specific exclusion from negotiations. Clearly, there is significant merit in expanding the TPP to additional countries. However, there is always the fear that the broader the base for an agreement, the more difficult it would be to secure significant concessions from that broader group of countries.

While the spread of regional trade liberalisation is to be supported, the merits of any agreement would depend upon the precise terms of the TPP, any specific exceptions and the degree to which it represents an improvement on existing FTA. It also needs to be remembered that any agreement such as the TPP must first be finalised and agreed between negotiating countries and it then needs to be approved by and implemented in each of those negotiating countries. That can all take time and may lead to further compromises. Given the proposed timeframes (which suggests the TPP could be completed by the end of 2012), the TPP would also need to secure bilateral political support in all negotiating countries as future changes to the Governments of negotiating countries could have adverse outcomes for the completion and comprehensive adoption of the TPP.

To date, we have also yet to see any developments on the announcement of completion of an Australian FTA with Korea. Recent comments from the Federal Government suggested that an announcement of completion of an FTA with Korea would be made during the course of November. As always, we will keep you informed of developments and assist with the implementation of the TPP or any other FTA.

Contact: Andrew Hudson, Hunt & Hunt, Melbourne +61 3 8602 9231 ahudson@hunthunt.com.au

Doing Business with Chinese

2011-11-09T22:47:00.000-08:00

I just returned from China's International Seafood Show in Qingdao. It has been a real interesting trip, and I have witnessed some "culture shocks".

After this trip, some people hate it, while some people love it. The ones who love it usually the ones who like challenges. One thing I hate yet laugh a lot is the craziness the traffic there and how people drive. So much for the rules, but so little for obeying the rules.

We didn't go to the big city like Beijing and Shanghai. Qingdao is a secondary city, with population 700-800 million. Within 20 years, there has been world-shaking changes. The first day we went out to do some "Christmas shopping", and our eyes were popping out of our heads. The price tags were just shocking. One jacket was priced at ￥15，880; that's about $2,600. A regular T-shirt can run over ￥2，000. We decided that our lobster price just went up 5 dollars.

Ok, get back to business. The number one riddle doing business in China is about "guanxi", which means relationship. Almost everything boils down to this word. I like to describe their business strategy as "Taiqi", slowly build up verses Western culture's gun and bullet, aim and shoot. You've got to have patience with them. My boss hasn't got it I imagine, because she kept saying how come they said they were going to order, but then the process would last forever.

Building THE relationship with Chinese businessmen usually happen at the dinning table, usually in the fancy restaurant to be exact. Even though after all day's show, I usually wiped out, I still had to go just so they felt being respected, which is a very serious issue, the "mian zi" (face) issue. As a girl sometimes it can be tough because they will make you to drink, so mastering the skill by rejecting some drinks yet without offending your customers is critical. A deal usually forms after a few drinks.

But if you assume a contact can gain the respect, you're dead in the water. If anytime you made them lose face, all work will be in vain. The only thing can save it is you have some special person that has special relationship with that person who's willing to put in some good word for you. We had an incident happened on the last day of the show. The previous night we were out for dinner with our customer, and we agreed upon a deal. The next day he was offended, so everything blew up. I called a guy he respected most, and he called him for me. A few hours later, the customer called me back, and we resume the deal.

Another important thing to keep in mind is if you underestimate the role of the Chinese government in creating demand and fostering enterprise growth, you are dead in the water again. If you underestimate the importance of the regulatory regime in China, for example, getting your permits, licenses, and operating documents in order, you are dead in the water. I don’t think corporate America really knows that yet.

If you want to do business in China, you have to earn their respect. Do this by being open, flexible, realistic, having a sense of humor, and being a human being rather than a corporate functionary. Be someone they want to have a relationship with, not just the mercenary of a transaction. You have to prove to them that there’s some advantage in working with you. Don’t just take for granted that there’s some built-in incentive.

Get Yourself Published!

2011-11-08T21:54:00.000-08:00

Did you know that you too you could publish your articles on our blog? The Australian Institute of Export team offers you the opportunity to publish your own articles online!

Your article will be published on the official website of the Australian Institute of Export , on the Australian Export Forum, and other internet sources used by our organisation. You will receive an official Certification of your publications by the Australian Institute of Export.

What can you write about?

Country updates: provide up-to-date information about the opportunities to do business in a specific country, and the current trading relations with Australia.

Company case study: describe the success story of a specific company you know about. Many businesses succeeded in difficult times, and we would love to hear what has been contributing to those successes. (The company will need to approve the copy).

International Trade: discuss theory-based models related to current international trade issues or news concerning Australia.

International Business: describe practical aspects and practices or discuss theories of international business. This could also include global supply chain and logistic topics.

International Financial Management: provide information about exchange rate management, risk management, credit arrangements, insurances policies and so on.

What should your article look like?

Keep it short: you article should have no more than 3,000 words

Do not hesitate to express your own opinion

Referencing your work is essential, and plagiarism is not permitted

The Australian Institute of Export team will be happy to assist you by reviewing and providing guidelines for your articles. We are a friendly team happy to work with students and teaching staff.

If you wish to send us your publications or just want to have some more information,

Please contact Lisa at info@aiex.com.au .

The world wide web of laws entangling Social Media

2011-11-03T21:22:00.000-07:00

The nature of communication and the interaction between people is drastically evolving. Technology is dictating the way we communicate with each other, the way we do business, and the way products and services are marketed. We are moving towards a world where everything is connected through the internet, specifically via social media. The traditional methods of communication are slowly vanishing and more and more people and businesses are using social networking sites such as Facebook, Twitter and LinkedIn to keep in touch and market their businesses, services and products.

We have a strong desire to obtain information and news instantaneously as it is released or happens and the capability of being able to communicate via our smartphones or Tablet PC’s has only increased this hunger. Figures released late last year by Facebook show there are currently 10 million Australian users of Facebook¹ and the use of Twitter and LinkedIn is increasing. If the Facebook community was a country, it would be the third most populated country with more than 800,000,000 active users².

What is Social Media?

The term ‘social media’ has rapidly increased over the last few years. The term refers to the use of web-based and mobile technologies to turn communication into an interactive dialogue. Academics have defined social media as “a group of Internet-based applications that build on the ideological and technological foundations………that allow the creation and exchange of user-generated content.”³ Social media is a group of new kinds of online media that allows social communication, as a superset beyond more conventional notions of social communication. Anthony Mayfield in his ebook “What is social media?”⁴ says the new kinds of online media share most of the following characteristics:

Participation: everyone who is interested has the opportunity to contribute and provide feedback on an issue through social media. The line between media and audience is blurred.

Openness: the majority of social media services encourage feedback and contribution allowing users to vote, comment and share information. Any form of barrier prohibiting access and the sharing of content is non-existent. Very little is a secret anymore. The results of sporting events, awards ceremonies, the death of a celebrity (at its peak there were over 6,000 tweets per second recorded on Twitter in response to the announcement of the death of Apple co-founder Steve Jobs⁵) or the occurrence of a natural disaster are able to be broadcasted to the whole world within seconds.

Conversation: social media is seen as a conversation between two, three or more users opposed to traditional media which is generally a one-way broadcast.

Community: people that share a common interest (such as a sporting team, particular film genre or political view) are able to communicate effectively and instantaneously as soon as something occurs.

Connectedness: most kinds of social media allow for links to other websites, video material, resources and people creating a web of connectivity between users and content.⁶

There are various forms of social media and there are always new forms of social media being developed hoping to be the next big thing. The main forms of social media are:

Social networks (Facebook, MySpace, Google+);
Blogs;
Wikis (Wikipedia, Wikinews, Geo-wiki, GeoNames);
Podcasts;
Forums;
Content communities (YouTube, Flickr, wesabe);
Microblogging (Twitter, Posterous, Dailybooth);
Virtual game worlds (World of Warcraft); and
Virtual social worlds (Second Life).

Using Social Media to Advertise

We have seen in recent times a number of innovative ways in which social media has been used by businesses to promote their products and services, but this must be done in a way which ensures that representations made in relation to the products or services of a business are accurate. This includes information relating to price, quality and performance.

Material advertised through social media must be clearly identifiable and be easily distinguished from any other content, such as terms and conditions and independent product reviews. Businesses should also monitor their social media pages to ensure testimonials, feedback or comments from third parties do not contravene any laws. A recent decision by the Federal Court of Australia highlights how businesses may be liable for misleading and deceptive statements made on their social networking sites by third parties. In Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd (No 2) the court found that the company and its former director were liable for testimonials posted on its Facebook and Twitter pages by clients, even though the company itself did not post the testimonials. The Court found that the company had become the “publisher” of the testimonials because it knew of the posts and chose not to remove them.

Complex Web of Laws

There are generally three schools of thought regarding social media law:

those that believe that social media law does exist, but it is made up of a complex web of laws that are generally misunderstood in the online environment;
those that deny that social media law exists; and
others who are of the misconceived perception that a social media law does not exist in cyberspace.

In a nutshell, the laws that apply in the real world also apply in cyberspace.

Although there are a number of benefits that social media brings to both personal usage and business purposes, there are certain risks and implications that can arise. While the law has not entirely caught up with technology and there is no specific piece of legislation that regulates social media sites and the use of social media, it is important to keep in mind that what you do with social media can have real world legal consequences.

In examining the law and how it applies to social media, it is difficult to pinpoint one particular area of the law that social media applies to. It spans a number of areas of the law because issues cross social boundaries and business use, employers and employees, contract and tort and common law and statute. The nature of the jurisdiction and deciphering which law applies are key issues to be considered as most of the more popular social networking sites are based overseas, mainly in the United States.

At this stage there has not been any discussion of legislation specifically tailored towards the regulation of social media sites and the use of social media but it isn’t hard to imagine a law in the future that could regulate social media. The basis for a specific social media law would arise from laws that currently exist. The following are some of the areas of law that currently govern the way we interact and do business through various social networking sites.

Privacy

If a business stores contact details and personal information about its customers, the Privacy Act 1988 (Cth) requires the business to make the customer aware of what personal information is being collected, how it is to be handled and give them the opportunity to “opt-out” from receiving any marketing material from the business.

However, if your business is considered a ‘small business’ meaning it has an annual turnover of $3 million or less, then it does not need to comply with the Privacy Act unless:

it is a health service provider;
trading in personal information;
related to a larger business;
a contractor that provides services under a Commonwealth contract;
a reporting entity for the purpose of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth).

Despite the above examples as exemptions from the Privacy Act, there is a general perception in the wider community that when a business collects and stores personal information via the internet that it should do so pursuant to the Privacy Act. Even if your business does not need to comply with the Privacy Act, there is always the risk of your business database being hacked into and customer personal information being stolen. It is good business practice to put in place some procedures that comply with the Privacy Act regarding the collection and storage of personal information in an effort to defend against any potential cyber attack.

Spam and Commercial Messages

Spam is defined under the Spam Act 2003 (Cth) as “unsolicited commercial electronic messages”.

Commercial electronic messages such as email, instant messaging, SMS, MMS are an important tool for businesses as they are an easy and cost-effective way for a business to communicate with its employees and customers.

The Spam Act applies to any commercial electronic message with an Australian link, regardless of the size of the business that sent the message.

The Spam Act also applies to emails sent by a business to anonymous email addresses, where the identity of the individual cannot be reasonably ascertained. This principle would apply when a business purchases a list of email addresses for marketing purposes.

Depending on what other information is held, an anonymous email address may or may not be considered as ‘personal information’ under the Privacy Act. Information is deemed ‘personal information’ if the business can identify or reasonably ascertain the identity of the individual to whom it relates.

If a commercial electronic message is sent without the use of personal information, then the Privacy Act would not apply, although the Spam Act may still apply. Alternatively, if a sender is deemed exempt under the Spam Act (such as religious organisations, registered charities, political parties and educational institutions), the sender must still comply with the Privacy Act if the direct marketing message contains personal information.

When sending a commercial electronic message, the sender must comply with the Spam Act to ensure the commercial electronic message:

is sent with the consent of the recipient;
identifies the sender;
allows the recipient to unsubscribe from receiving further commercial electronic messages.

Even where messages are ‘exempt’, they must still identify the sender.

Intellectual Property

Businesses need to be familiar with copyright laws whenever they develop social media content. The copyright in social media content developed by a business or its employees belongs to the business. However, posting a comment, image or video file without the permission of the author could be a breach of copyright.

In certain circumstances, Facebook status updates, the posting of links/photos/logos or the re-tweeting of another’s original work can amount to breaches of copyright or trademark infringement.

Businesses need to be mindful of the terms of use of social networking sites such as Facebook and Twitter when posting photos, logos or comments on these sites. Facebook and Twitter’s terms of use clearly state that for content that is covered by intellectual property rights (photos, logos, videos etc.) the user grants Facebook and Twitter a worldwide non-exclusive, royalty-free license (with the right to sub-license) to, amongst other things, use, re-produce, copy, publish and transmit any IP content that you submit, post or display through your account. Facebook’s terms of use provide that “the license ends when you delete your IP content or your account unless your content has been shared with others, and they have not deleted it.” Twitter’s terms of use do not contain a period on which the license ends.

Businesses need to be mindful that even though they do not intend to establish a Facebook or Twitter account, it is very easy for a person to create an account using the businesses name or brand causing confusion. Even if a business does not intend to use a social networking site it might be worthwhile to create an account to prevent another person creating an account using the name of your business or logo.

Another issue that is creating confusion for businesses is the creation of millions of Facebook community pages by Facebook. Many businesses have been angered by the creation of the community pages as they had invested time and money into creating their official Facebook page for their business. The purpose of a Facebook community page is to let the user connect with others who share similar interests. These pages are auto-generated from users ‘likes and interests’ and ‘work and education’ sections of a users personal profile and depending on how users have described their place of employment or education, there could be more than one Facebook community page for a particular company or educational institution. Depending on the subject matter of each community page, content (including that page photo) is automatically taken from Wikipedia. All other content is auto-populated from wall posts and status updates made by any Facebook user containing the keywords of the community page. Unfortunately, there are no administrators monitoring community pages meaning businesses have no control over what shows up on the page.

Businesses need to be vigilant that social networking sites could in fact be creating pages that contain content about their business that might not be favourable.

Defamation

Users of social media, whether it be for business or personal use, must recognise that posting content to a social media site is the same as publishing that material via traditional forms of media. Posting or tweeting a slanderous comment against another person via a networking site can in fact be a lot more dangerous than a defamatory comment appearing in the local newspaper as there is little control over how far and wide that material could spread and the amount of damage it could cause. Traditionally, a defamatory comment could be retracted via publishing a suitable retraction in the local newspaper, however, given the speed in which information is updated and moves through cyberspace, this would seem near impossible, especially if it has gone viral.

Even though action can be taken against the writer, the difficult part is ascertaining who the actual writer of the defamatory comments is as most people post comments under an alias. One way is to search the IP address of the writer of the defamatory comments, but technology has advanced allowing posters of defamatory comments to disguise their IP addresses.

In the Workplace

Businesses are increasingly relying on social media to promote their business. With this comes the increased use of social media in the workplace. There are an increasing number of businesses that are restricting their employees access to social media sites such as Facebook and Twitter. However, a number of businesses are reluctant to restrict access as they hope allowing employee access to these sites could increase promotion of their business or assist with the recruitment of new staff.

Employers need to be mindful that they must provide clear guidance to their employees of their businesses social media policy to ensure employees are aware of their social media responsibilities in the workplace. There have also been cases where the inappropriate use of social media against co-workers (such as harassment) outside of work hours has resulted in employees being dismissed for serious misconduct.

Recent decisions by Fair Work Australia have again confirmed that proof of excessive use or the inappropriate use of social media during or outside of work hours may constitute a valid reason for termination of employment.

Employers have used Facebook profiles as evidence in workers compensation cases and to dismiss rogue employees who have continually failed to show up for work without any apparent reason.

Conclusion

The growing impact that social media is having on our lives and on the way we do business should make us all a lot more vigilant and cautious of the possible legal consequences that could arise. Some points that you should consider when using social media:

even though there isn’t a dedicated piece of legislation known as ‘the Social Media Act’ there are legal consequences from the misuse of social media;
ensure that you provide customers the opportunity to “opt-out” from receiving any online marketing material from the business;
put in place procedures that comply with the Privacy Act regarding the collection and storage of personal information to defend against any potential cyber attack;
make sure posting a comment, image or video file is not a breach of copyright;
make sure a post or tweet via a networking site is not a slanderous comment against another person;
be mindful that social networking sites such as Facebook and Twitter can use any content that you post on your Facebook page or Twitter account; and
implement a social media policy in the workplace to ensure employees are aware of their social media responsibilities in the workplace.

If you have any questions on the possible legal ramifications that social media might have on your business, please contact Hunt and Hunt.

Contact:

John Kell Sydney (City)	+61 2 9391 3163	jkell@hunthunt.com.au
Catherine Logan, Sydney (City)	+61 2 9391 3267	clogan@hunthunt.com.au
Harold O’ Brien (North Ryde)	+61 2 9804 5753	hobrien@hunthunt.com.au
Tony Raunic, Melbourne	+61 3 8602 9266	traunic@hunthunt.com.au
Ashley Pelman, Melbourne	+61 3 8602 9213	apelman@hunthunt.com.au
Robin Lonergan, Brisbane	+61 7 3292 9710	rlonergan@macrossans.com.au
Rick Harley, Adelaide	+61 8 8414 3373	rharley@hunthunt.com.au
Darren Miller, Perth	+61 8 9488 1300	darren.miller@culshawmiller.com.au
Antony Logan, Hobart	+61 3 6210 6213	alogan@hunttas.com.au
Chris Osborne, Darwin	+61 8 8924 2600	cosborne@huntnt.com.au

John Kell

John Kell is a Partner at national law firm Hunt & Hunt. He provides a wide range of commercial advice to clients in relation to joint venture arrangements, mergers and acquisitions, contract preparations and negotiations and compliance. John also provides advice to Australian companies doing business overseas, especially in China, and foreign companies entering Australia including set-up, exporting and sourcing goods and materials.

¹ "10 million Aussies in love with Facebook", Lee, Julian, Sydney Morning Herald, 10 December 2010.

² Facebook -www.facebook.com/press/info.php?statistics

³ "Users of the world, unite! The challenges and opportunities of Social Media", Kaplan, Andreas M.; Michael Haenlein (2010).

⁴ "What is social media?", Mayfield, Anthony, V1.4 – Updated 01.08.08, icrossing.co.uk/ebooks.

⁵ "Tweets about Steve Jobs spike but don't break Twitter peak record", Sullivan, Danny, Search Engine Land, 6 October 2011, http://searchengineland.com/tweets-about-steve-jobs-spike-but-dont-break-twitter-record-96048

⁶"What is social media?", Mayfield, Anthony, V1.4 – Updated 01.08.08, icrossing.co.uk/ebooks.

The Real Commitment - Joint Ventures for International Business Success

2011-11-03T18:51:00.000-07:00

Ian Murray, Executive Director- Australian Institute of Export:

From my experience most joint venture partnerships work well, but in saying that, some joint ventures do fail and the cost of failure can be substantial. Unlike an agency or distribution arrangement which can and often are changed due to any number of factors, entry into a joint venture must be viewed as a long term arrangement that benefits both parties.

While it may sound simplistic, the key to any joint venture is to do your homework, ensure that outcomes and investment criteria are clearly understood, really examine the fit and get the right advice.

Doing your homework of course is wide ranging and the due diligence aspects of it are critical, particularly if you are new to a market. But, so too are the more anecdotal aspects and that can simply mean talking to other Australian companies operating in the market that know the key players, their strengths, weaknesses and reputation. If you have been operating through an agent or distributor in a market this may differ a bit but the suggestion that you consult others remains a priority.

Many joint ventures break down simply through a failure of both parties to fully understand the expectations, outcomes and importantly the investment each party is prepared to commit. This needs to be clearly understood, documented and signed off with the appropriate contingencies, otherwise money will come into the equation and failure will loom.

The fit with you and your business partner is critical. Both parties need to have something to offer that complements the arrangement. Size of company is not always important but experience, hunger and mutual respect can be. It is better to have a relationship with somebody who needs you as much as you need them and has the market experience and desire to build a business than somebody who has joint venture arrangements to simply fulfil a regulatory requirement in a particular part of the world.

Finally, get the right advice, independent legal advice or from someone you can trust to look after your best interests. The importance of this cannot be overstated; it is critical. John Kell, Partner at Sydney law firm, Hunt & Hunt outlines some of the key legal issues companies should consider when forming a Joint Venture, including contractual considerations to joint venture operations such as the term of agreement, cost and income sharing, control of the Joint Venture, relationships with third parties and Intellectual Property.

John Kell, Partner- Hunt & Hunt

Joint Ventures

The meaning of the term joint venture is not precise. Any commercial arrangement between 2 or more parties is in essence a joint venture. Joint ventures can either be incorporated (ie the parties to the joint venture agree to establish a company) or unincorporated.

While an unincorporated joint venture has some of the features of a partnership, there are important differences. These include:

Whereas a partnership is formed to allow the partners to carry on business together. An unincorporated joint venture is usually established for a particular business enterprise rather than a series of enterprises that together might constitute a business;

Assets are contributed to the joint venture for the particular enterprise for which it has been established and ownership of an asset will commonly remain with the joint venturer who contributed that asset. In the case of partnership, assets are held by the partnership;

Joint venturers are not the agent of other joint venturers and are unable to bind them. Partners are bound by the actions of their partners on behalf of the partnership;

The liability of joint venture parties is several rather than joint. The liability of partners is joint and several.

Important contractual considerations

Term

Regardless of whether a joint venture is incorporated or unincorporated, it is important for the parties to turn their mind to the term of the joint venture. In some circumstances, the term of the joint venture will be determined by the nature of the joint venture (for example, if it was to stage a particular event).

In the case of an incorporated joint venture, the incorporated entity will continue until the joint venturers dispose of their interest(s) or it is wound up. Even so, the parties (shareholders) to an incorporated joint venture will usually want to know that their fellow joint venturers are committed to their joint venture for a minimum period of time. This can be achieved by specifying a period of time when the right to dispose of a joint venturer's interest is not permitted or is controlled in some way.

Contribution and ownership of joint venture assets

The easiest way for parties to contribute assets to a joint venture is for them to contribute cash. In that way, there is certainty about the value of what each joint venturer has contributed.

However, it is also common for parties to make contributions other than cash. For example, one party may have developed intellectual property that they are looking to commercialise with the assistance of others. In another example, one party may have property or land that they wish to develop for a particular purpose again with the assistance of others. Where parties contribute assets other than cash, it is important that all the joint venturers agree on the value of those non-cash contributions so that they can be properly recognised.

Where assets other than cash are contributed to an unincorporated joint venture, the ownership of those assets can be retained by the relevant joint venture party. In the case of an incorporated joint venture, this is not possible as, when contributed, the asset will belong to the incorporated entity. Through a shareholders agreement the parties can address what happens to particular assets if the incorporated entity is wound up.

Cost and income sharing

One of the reasons it is important that the parties agree on the value of the contributions made by each of the joint venturers is to ensure that the costs of the joint venture and income generated by the joint venture are shared between the joint venture parties in proportion to their interest in the joint venture.

Control of joint venture

Control of the joint venture requires agreement between the joint venture parties. In the case of an incorporated joint venture this will be in the form of a shareholders agreement. In the case of an unincorporated joint venture, this can be in the form of joint venture agreement or management agreement. The issues to be addressed in these agreements are similar.

They include:

Membership of the board/management committee – the numbers and manner of appointment, what constitutes a quorum? Should the chair have a casting vote?
Matters requiring unanimous consent or a special majority;
Limitation of voting rights in the event of default;
Calculation of voting rights;
Procedures for breaking deadlocks;
How the joint venture is to be managed;

While John has outlined very clearly the most important legal contractual considerations to consider during the formation of a Joint Venture, there are further key considerations which we have not touched upon but should be given due consideration:

Management of joint venture operations
Intellectual property
Financing and encumbrances of joint venturers
Transfers by joint venturers

The beginning of a Joint Venture might start off with both parties in agreement, however it is important to also reflect on what would happen in the event of a default by either party. While this is not the objective when embarking on a new project it is important to agree upfront the rights of each party in the event of a breach or default of the contract, or if one party wishes to terminate the arrangement prematurely. Yet, this could probably require a follow-up article!

Authors

Ian Murray is Executive Director of the Australian Institute of Export. Ian has held senior general management positions with private sector companies including Johnson & Johnson, and has lived and worked in Indonesia, Malaysia, Singapore and Pakistan.

In his role as CEO of the Australian Institute of Export, Ian works with Australian companies of all sizes and across all industry sectors, to develop and grow their business in the international marketplace. As a non-for-profit organisation, AIEx works closely with government and the private sector to drive the development of our Australian resources internationally.

Contact:

Australian Institute of Export

Tel: + 61 2 8243 7400

E: ianmurray@aiex.com.au or info@aiex.com.au

www.aiex.com.au

Contact:

John Kell,

Partner,

Hunt & Hunt ,

T + 61 9391 3000
F + 61 2 9391 3099
E jkell@hunthunt.com.au
www.hunthunt.com.au

Social Media, with Nancy Georges

2011-11-01T16:57:00.000-07:00

LinkedIn, Twitter, Facebook, Myspace: new media channels that are particularly powerful and cost-effective weapons in the battle to reach global audiences, provided they are used well and as part of a well thought out comprehensive global marketing plan. This podcast will demystify the so-called new marketing so that you can harness the power of social media in your marketing mix to reach new as well as existing customers while building your international brand.

Nancy Georges is the retail Miss Fix-It of Magnolia Solutions, and has over 20 years experience in retail, wholesale, customer service, sales, social media, ecommerce, manufacturing, importing and exporting.

New HSBC forecast tool predicts continued International Trade boom for Australia to 2025

2011-10-27T22:29:00.000-07:00

Australia will have the fourth largest increase in trade growth in Asia over the next 15 years according to HSBC Trade Connections, the new quarterly global trade forecast tool launched by HSBC.

HSBC Trade Connections forecasts that Australian trade will increase by 129% by 2025, nearly double the pace of world growth (73%) and exceeding Asia (96%) over this same period. Australia will be the world’s second fastest growing export market (equal to China) and the seventh fastest growing importer (equal to the Czech Republic).

HSBC Trade Connections predicts how trade is going to develop over the next 5, 10 and 15 years. Spanning 37 countries, it covers the top 10 sectors in each for both export and import goods. It forecasts overall trade growth (exports, imports and total trade) globally, regionally, and in-country. The forecast has a unique approach to understanding the drivers of trade from a business perspective informed by: trade trends, macroeconomic and market influences on trade (for example GDP, oil prices, inflation, foreign direct investment), and business environment influences on trade (including regulation, demographics, access to capital and finance).

The report found that Australia’s strongest trade growth between now and 2025 will be in the next five years when it will hit 7.7% annually (8.9% in 2012 and 2013), almost four times world growth (2% in those years). The doubling of Australia’s trade will bring merchandise trade volumes to US$702.5 billion from US$347 billion today.

Commenting on Australia’s immediate trade horizon, James Hogan, Head of Commercial Banking for HSBC Bank Australia said, “HSBC Trade Connections forecasts a strong trade pipeline for Australia with a particular sweet spot in the next two years. This trade growth is consistent with HSBC’s own Australian experience where, despite AUD/USD appreciation, our trade export turnover saw strong double digit growth year-on-year to June 2011. It sends an encouraging message to Australian companies to seize the opportunities now to establish overseas trade relationships for short-term and future growth.”

Australian trade flows steady in immediate future

Within the HSBC Trade Connections report, the HSBC Trade Confidence Index shows a dip in the short-term confidence amongst Australian traders who expect global economic headwinds to impact global trade over the next six months. However, the sentiment amongst traders is that Australia will be relatively protected with the index revealing that 85% of Australian traders predict that their trade volume will either be maintained or will increase over the next six months, citing Asia as their most promising market for trade growth.

Australian traders falling behind in Chinese reminbi

The forecast predicts that China’s share of world trade will reach 13% by 2025, overtaking the US as the top exporting nation, driven both by commodities trading and by an increase in manufacturing in China. According to HSBC Trade Connections, China will remain Australia’s largest trade partner with total trade between the two countries estimated to reach US$148 billion by 2025 – more than double that projected for Japan.

The report further notes that, despite the fact 48% of Chinese companies surveyed are likely to use the reminbi (RMB) currency for settlement in the next six months, only 7% of Australian traders plan to settle in RMB, falling behind other markets like Hong Kong, Malaysia and Vietnam in their expected use of RMB for trade.

New HSBC forecast tool predicts continued trade boom for Australia to 2025/2

Hogan continued, “China is by far our largest trading partner. As the use of RMB becomes more commonplace, Australian companies that do not have the capability to transact in RMB may be disadvantaged if Chinese traders prioritise RMB-ready businesses.”

Click here to download a full copy of the media release >

CE Marking with Nick Williams, Conformance

2011-10-27T21:06:00.000-07:00

The CE mark is a mandatory certification mark, which must be applied to almost all products imported to and sold within the European Union. It demonstrates that the product complies with the all the essential requirements of the relevant CE marking directives, and allows products to be freely traded between EU member states.
Nick is the founder and managing director of the UK company Conformance, with over 15 years’ experience of CE marking products. Nick specialises in electrical safety and manufacturing engineering, and his expert knowledge of the legislative procedure has enabled him to guide over 2,000 manufacturers through the CE marking process. He also has extensive experience of managing product design and production engineering, and as such is in an ideal position to help clients consider the CE marking requirements of their products from the design stage onwards. Nick has also established a sister company in Beijing, working with manufacturers who want to import to the EU.

110th Canton Fair - China Import and Export Fair

2011-10-24T21:11:00.000-07:00

Canton Fair, officially known as the China Import and Export Fair, is China's largest trade fair and a key indicator of the country's trade and economic development. The fair is held biannually in Guangzhou every spring and autumn since 1957. This year is the 110th year of Canton Fair, and also is the 10th anniversary of China's entry into the WTO.

A total of 529 enterprises from 49 countries and regions attended the import exhibition at the fair. A series of bilateral seminars between Japan and Sweden, as well as seminars among Central and South American countries and China were held to boost trade relations and prompt the world to learn more about China.

Europe overtook the U.S. as China's largest trading partner in 2008. But Sino-EU trade growth has headed downward since the second quarter of 2010, partly due to the region's escalating debt crisis.
The slowdown was particularly apparent in Sino-EU trade last month, with exports rising just 9.8 percent in September from a year earlier, compared with a 22.3 percent rise in August.
During the first three quarters of the year, the growth rate of the Sino-EU trade stood at 20.9 percent, 3.7 percentage points lower than the country's overall trade growth, according to data from the General Administration of Customs.

Wu Minghui, vice manager of the Qingdao Taifa Group Co., a manufacturer of carts and gardening tools, said demand from Europe has dropped significantly. "Europe used to be our biggest export destination, but the worsening sovereign debt crisis pressured cash-strapped European consumers to cut expenses on gardening tools because the our products aren't necessities," Wu said.

The impact of the eurozone debt crisis on the country's foreign trade will be more visible over the next six months, said Wei Jianguo, former vice commerce minister.
Many Chinese business executives at the fair said they were trying to sell more domestically after concluding that overseas markets were far weaker.

"Chinese companies increasingly see a danger in becoming too dependent on a single overseas market. It's an irresistible trend that they will look to domestic and emerging markets to preserve profits," said Zhang Yansheng, director of the Institute for International Economics Research of the National Development and Reform Commission, China's top economic planning agency.

New South Wales top exporters recognised

2011-10-23T22:38:00.000-07:00

“Even in these tough times for exporters there are some outstanding success stories that can inspire the export industry.” - Lisa McAuley, Australian Institute of Export

The success and sustainable growth of an export business depends on its ability to face challenges head on and seek new opportunities.

Right now companies are battling a high dollar, continued fallout from the Global Financial Crisis and increasing international competition.

“Business as usual” will not be enough to ensure success. Now more than ever there is a need to be more innovative, and look at new ways to keep up with the international market. Last night at a reception attended by the Hon. Barry O’Farrell, Premier of New South Wales the 2011 Premier’s NSW Export Awards recognised the State’s top export companies big and small and there were some outstanding winners.

“The 2011 winners of the Premier’s NSW Export Awards are role models for other businesses in our State. The innovation, persistence, and focus they have exhibited in taking on the world and winning, in a period where the AUD is high and economic recovery is very fragile in many markets, is testament to their tenacity. This year’s winners represent the wonderful cross section of industry sectors in NSW that can compete on the world stage. They are wonderful ambassadors for our State and we wish them well as they continue their export journey”.

– Peter Mace, General Manager, Australian Institute of Export

The winners of the 12 national categories will now go on to compete at the national level in the 49^th Australian Export Awards on the 8 December in Brisbane.

The 2011 Premier’s NSW Export Award winners are:

MEDIA CONTACT

Lisa McAuley

Australian Institute of Export

Tel: 02 8243 7400/ mobile: 0430 172458

E-mail: lisamcauley@aiex.com.au

beauty by wind

2011-10-22T01:36:00.000-07:00

beauty by wind

HSBC Trade Connections:Trade Forecast Quarterly Update

2011-10-17T21:05:00.000-07:00

New quarterly forecast exploring the future of world trade and the opportunities for international businesses

• World trade will grow by 73% in next 15 years

• World trade will grow at 2% until 2015

• Companies to increase trade activity annually by 4.1% to achieve projected growth

• Australia’s trade to grow by 129% by 2025

Global Trade Review

The new Trade Forecast is predicting that world trade will grow by 73% in the next 15 years, with merchandise trade volumes in 2025 hitting US$43.6trillion compared to today’s $27.2trillion. To achieve this growth, the Trade Forecast is predicting that companies across the world will increase their trade activity by a combined 3.9% between 2011 and 2025. The Trade Forecast anticipates that the spotlight will be on Egypt, India, China, Indonesia and Brazil to drive world trade growth during this period.

This is reflected in HSBC’s Trade Confidence Index which reveals that businesses around the world believe that China will continue to be a source of key trading opportunities over the next six months, with Latin America, South East Asia, and the Middle East also featuring strongly. Despite an overall dip in global trade confidence, businesses in Indonesia, Saudi Arabia, Egypt and the UAE are particularly optimistic about the future, showing a positive uplift in confidence on the first half of 2011. On a global scale, the majority of respondents (84%) anticipate either an increase in international trade, or consistent levels of international business activity, over the next six months. For businesses trading internationally or starting to trade internationally, the combined global outlook provides a positive view of future business opportunities with new trade corridors opening.

Click here to download full press release >

U.S. - India Relations

2011-10-17T18:59:00.000-07:00

India's eight percent growth rate makes it the world's second fastest-growing major economy today. It is projected to become the world's third largest economy in the year 2025. The rise of India is in America's best interest, said Assistant Secretary Blake, and its growth has many benefits for the U.S. economy. On his November visit, President Barack Obama announced trade transactions that exceed $14.9 billion in total value with $9.5 billion in U.S. export content, supporting more than 50,000 U.S. jobs. These deals, said Assistant Secretary Blake, reflect a "growing continuum of mutually beneficial private sector and government business between" India and the United States.

Despite the global economic recession, recently-released goods trade for 2010 show record trade with India. U.S. exports to India rose by 17 percent. U.S. imports from India rose by 40 percent. The United States continues to encourage the Indian government to expand trade and investment opportunities for American businesses.

"India is also among the fastest growing sources of investment into the United States," said Assistant Secretary Blake. "Investment from India already contributes to the growth of the American economy and to the creation of jobs in the United States."

The U.S. has also been cooperating with India on agricultural issues. Both countries are working together to help meet food requirements in Africa and to improve weather and crop forecasting. Bolstering Indian food security would help the entire region feed its growing population and thereby lower global food prices.

The United States and India are increasing their defense ties through exchanges, visits, and joint exercises. From counter-piracy to disaster relief, the U.S. and Indian militaries have much to gain from each other. Indeed, India has purchased more than $4 billion of U.S. defense hardware over the last decade.

The global strategic partnership with India will remain among America's top foreign policy priorities. As President Obama told the Indian Parliament last November, "with India assuming its rightful place in the world, we have an historic opportunity to make the relationship between our two countries a defining partnership of the century ahead." (from VOA)

Insights into the US market by Kylie Hargreaves, NSW Trade & Investment

2011-10-11T21:09:00.000-07:00

Kylie Hargreaves, the Executive Director of International Markets and Trade at NSW Trade & Investment, is sharing some insights into the US market.

Interviewed by Lisa McAuley, Australian Institute of Export.

White House to force the appreciation of the RMB against the fear of international rules

2011-10-10T09:08:00.000-07:00

Currentlyone of the big issues out there is White House intends to force the appreciationof Chinese currency (RMB). But there’s concern that this practice mayviolate international trade rules.

According to the report, "WhiteHouse spokesman Carney in the regular press conference that theWhite House on the RMB exchange rate have concerns that the yuan needs toappreciate, but the Senate feel for the motion of the RMB exchange rateconcerns, worry will bring and the US do not conform to the internationalresponsibility of the problem. Carneysaid the White House has been to communicate with the parliamentary motion,identify any measures needed to meet the United States’ internationalobligations.

Senate vote afterthe announcement, the Chinese government immediately expressed strongopposition, the proposal emphasized the so-called “currency imbalance” as anexcuse to further upgrade the exchange rate, protectionist measures, a seriousbreach of WTO rules, China-US economic and trade relations seriously interfere.

U.S. Republicanleaders, House Speaker John Boehner 4 also stressed that legislation throughCongress to force other countries to deal with currency issues are verydangerous, not only much higher than the Congressional mandate, and results arequestionable. "

I don’t likepolitics, so I don’t want to talk about it, but I still want to express myopinion regarding the ethic and international trade point of view.

First, let’s havea hypothetical example. Party A is inbig financial trouble, so asked Party B to loan a lot of money to him. ThenParty B said, “You know what, the money you loaned me worth more than its facevalue, so I’m going to pay you back less. You get the same value anyway; and if you don’t agree with my decision,I’m going to force you.” If this is betweentwo people, any reasonable person will say it’s not ethical. If this is between two trading companies, anyjudge will rule the debtor has no right to do so; how come when it comes to twocountries, this is even an issue? If it were China borrowed so much money fromAmerica, will America agree with such a decision? I doubt it!

Internationally,people are already losing faith in US economy as a whole. Earlier in August, we were worried that US wasgoing to default. Devalue USD is not amean of default? How other countries aregoing to look at US as a country as far as the integrity goes? US governmentbond is really even worth AAA-? I don’twant to offend anybody, and I’m saying this is not because I’m a Chinese; I’m justsaying something that’s common sense.

Second,appreciate RMB means USD is going to keep losing value. USD to RMB has already gone from 100: 830 to100: 600 in a matter of just a few years. People here do not see the inflation in China. For example, a person makes 2000 RMB a month,but a 2010 Buick SUV costs about 500,000 RMB before tax. How many years a person is able to own acar? 20 years without eating anddrinking and saving every penny. If anAmerica earns 2000 USD a month, and the same car here costs $50,000, under thesame condition, it will only takes 2 years. My question is: is China really rich? How many percentage of RMB’s valueis actually bubble? Can they afford tokeep appreciating it more?

If USD declinesmore, then the next thing we’re going to see is the jacked up price in thegrocery store and everywhere else. It’strue that it will encourage the export, but US has more weight on the import thanexport, which means we’re going to pay more to import, and all the overseascosts, like the military.

Just my twocents, above solely represents my personal opinion, University of Maine hasnothing to do with it, thus, a disclaimer.

Building with new BRICs

2011-10-09T20:19:00.000-07:00

The rapid economic decline of the US and western Europe, fuelled by indecisive and frightened politicians, massive debt and a bloated sense of entitlement, has accelerated the process (first predicted by Jim O’Neill of Goldman Sachs as early as 2001, and now referred to as “the end of the great divergence” by Niall Ferguson in his recent TED lecture in Edinburgh) of transforming the global economy into one which is dominated by four countries – Brazil, Russia, India and China (The "BRIC" countries). Not far behind, although starting from a much lower base, is Continental Africa, referred to as the “last great emerging market “ in our most recent issue of Insights (click here to read it)

What we don’t know, and is very hard to predict at the moment, is how painful this transition will be. Will Germany accept the horrible reality of a $2 trillion deficit in southern Europe and take decisive action by paying a figure which represents two-thirds of their total GDP into the system to save Greece and other ailing economies, and prop up the banks that will become insolvent in the event of a sovereign default? Or will the politicians prefer the “death by a thousand cuts” approach which has prevailed so far? Will the US face up to its own insolvency (with its total debt now at 100% of GDP and rising) and make serious and meaningful cuts to its Federal Budget? Or are we simply putting off the day when the US faces its own major debt crisis which will be too large for any other country to rescue and lead to a deep and painful global recession? As each day goes by it isn’t hard to paint a very pessimistic scenario for the future, despite the hope that sense will eventually prevail. Volatile investment markets simply reflect the confusion, optimism, fear and panic that oscillates each day throughout the investment community.

Unfortunately, this all happened much sooner than it was meant to! The BRICs are still relatively small economies (though growing rapidly) and are nowhere near ready to prop up the whole global economy. In any case, they are all going through their own internal transformations so as to be able to maintain economic growth despite the absence of the American consumer, the engine that has fuelled global growth for the last 50 years or more.

The key BRIC trends to be following to feel confident and optimistic about the future are as follows:

Domestic Consumption
China’s transition from an export driven economy to one which is dominated by domestic consumption (with urbanisation, rising wages and the development of a world class services industry as key drivers) is the focus of the 12^th Five Year Plan and was the subject of the July issue of Insights (click here to read it). India’s economy is already dominated by strong domestic spending, and Brazil’s wealth of resources, agriculture and renewable energy offers a high degree of self-sufficiency.

However, Russia has the largest consumer class amongst the BRIC countries, the highest GDP per capita, the lowest level of debt, and now leads the whole of Europe in the sale of key consumables eg pharmaceuticals, mobile phones, broadband and even beer (catching up with Vodka as the beverage of choice amongst Russians!). According to the recently released Forbes survey of billionaires, Moscow has more billionaires (79) than any other city in the world (the closest is New York with 58) and Russia accounts for a third of Europe's 300 billionaires, and 15 of the world's 100 richest people. Not surprisingly, retail sales in Moscow now exceed Paris and London, and by 2025 the consumer market in Russia, which is now approx. 142 million, is expected to be larger than Germany’s, one of Europe’s largest markets.

Intra-BRIC trade
The recent BRICS Leaders Meeting in China in April 2011 laid the tracks for greater “intra-BRIC” trade and investment co-operation in the years ahead. This is vital to the global economy and should be occupying the minds of all forward thinking business leaders and entrepreneurs.

With a combined GDP of $8.7 trillion in 2010, the BRIC economies already account for 45% of global economic growth, and the combined BRIC share of world trade increased from 6.9% in 1999 to approx. 14.2% in 2008. Furthermore, BRIC collective trade with the world increased almost six times from $790 billion in 1999 to $4.4 trillion in 2008.

Intra-BRIC trade, or trade among the BRIC members, has accounted for the fastest growth rate in global trade in the last decade, and is expected to continue as the BRIC economies become more dominant. According to the IMF, intra-BRIC trade, which is valued at more than $170 billion, has grown at the rate of 30% p.a. since 1999 and now accounts for 8% of global trade. During the 10-year period up to 2009, intra-BRIC trade increased nine fold compared to global trade, which only doubled over the same period.

In recent years, Intra-BRIC trade has been mainly characterised by Russia and Brazil supplying natural resources to satisfy the industrial and infrastructural needs of India and China. However, this is likely to change. Watch out for more investment and trade deals between the BRICs as they create their own trading bloc, settle deals in local currencies (notably RMB) rather than USD, and invest in eachother’s capabilities.

Strong Leadership
You have to admit that western style democracy is looking pretty sick at the moment! With hung parliaments all around the world, short parliamentary terms, continuous electioneering, disengaged and disgruntled voters, and career politicians looking after their own interests, the will to engage in structural reform and long term planning has virtually disappeared. It is not surprising that the west is in such a mess!

In contrast, the political systems of China and Russia (now with the prospect of Putin serving as President until 2024, having first been elected President in 2000) look remarkably strong, stable and effective, despite the way they are portrayed in the western media. And Brazil’s recent economic success can largely be credited to the successful 8 year terms of two reforming, pragmatic and popular Presidents, Fernando Henrique Cardoso and Luiz Inacio Lula da Silva.

The question now is whether India, the largest democracy in the world, will be able to remove the stifling influence of Government bureaucracy and consensus to allow their entrepreneurial culture to thrive. India’s growth rate of 10% p.a. would be much higher with decent infrastructure and less Government interference, and the hope is that India’s reforming Prime Minister, Manmohan Singh and his successors can be allowed to finish the job of transforming India into a modern economy. With its young demographics, entrepreneurial flair, technological excellence and strong domestic demand, India will surely reach its true potential and demonstrate that democracy (famously referred to by Churchill as “the worst form of government except all those other forms that have been tried”) is still alive and well!

Innovation
Here lies the big question for the BRICs to address....and for the US and the developed world to ponder. Will the next Steve Jobs be Chinese? Will Bangalore in India take over where Silicon Valley left off? Will Brazil become the world’s clean source of food, energy and transportation? Will Russia put the first man on Mars?

It’s too early to know for sure, but the BRICs benefit from “latecomers advantage”. The opportunity to leapfrog technological advances, capitalise on knowledge and past experiences, tap into existing networks and, above all, learn from the mistakes of those who have gone before. They also have the funds to spend on research and equipment which is rapidly running out in the west.

So, here lies the key to the future. As so eloquently put by Seth Godin in his recent blog entry, The forever recession (and the coming revolution) “the future is about gigs and assets and art and an ever-shifting series of partnerships and projects”. It’s not a zero sum game…..we can innovate and they can innovate…the rest can be outsourced or ignored. Let’s fix the debt problems quickly, take the pain, start again and get on with the innovating! The BRICs will lead the way…we all must follow.

David Thomas, BRIC expert- Think Global
www.davidthomas.asia

2011 Premier's NSW Export Awards - Finalists

2011-10-06T22:57:00.000-07:00

2011 Premier's NSW Export Awards - Finalists, a set on Flickr.

Check out our new photos!

Tips for successful international business negotiations

2011-10-04T18:04:00.000-07:00

By Maxence Lefebvre

Preamble: this article points out the influence ofintercultural factors on the negotiation process in an internationalenvironment. This article is mostly based on the work of Brian J Hurn, teachingpostgraduate students InternationalCommunication and Cultural Awareness at the Universities of Westminster andSurrey, UK.

Negotiating issimply the process you follow to get somebody else to do what you want him to do.A successful negotiation has to follow a certain process with seven mainstages: pre-negotiation, entry, establishing relationships, review ofstrategies, bargaining, agreement and post-agreement.

Thisnegotiation process will pretty much keep the same structure in both domesticand overseas environments, however many new factors will need to be taken intoconsideration when negotiating across borders, such as the difference oflanguage, cultural sensitivities, legal systems, tax regimes, labor laws andbusiness practices. Moreover government-led bureaucracy, restrictiveregulations and direct government interferences could further complicate thenegotiating environment, as well as the need to analyze political and economicinstability, currency fluctuations and ideological differences before startingany overseas negotiation. At the end of the day, even if the stages of thenegotiation process remain the same in theory, international businessnegotiations are crucially different from domestic negotiations and thenegotiator that engages in this should be aware of those differences andappropriately trained to ensure a successful negotiation.

This articlewill give you some general recommendations, tips and facts that you may want toknow before dealing with foreign businesses to expand your own company.

Communicate effectively with yourinternational negotiator

With theglobalization and the multiplication of business transactions across borders,English became the main international language used in negotiating acrosscultures. This is more precisely, what is described as “international English”or “off-shore English” that became the official business language: a form of“low-risk English” using words, phrases and grammatical structures which can beeasily understood, avoiding idioms, slang, jargon and complex structures. Whenstarting contact with a foreign negotiator who may not be a native speaker,make sure you adapt your speaking and writing style to your counterparty toavoid misunderstandings.

If yournegotiator cannot speak English, the use of an interpreter becomes essential.Before starting any direct conversation with the counterparty, the interpretershould always be briefed and provided with any notes you may have on theproposals you intend to make. During the negotiation discussion, you shouldexpress your main points in several different ways so that the meaning is clearand helpful for the interpreter. Moreover you should always look at thenegotiator while corresponding, not the interpreter, since it could beperceived as a lack of respect in some cultures.

Adapt your approach to your negotiator’s culture

The “gettingto know you” phase could be crucial in determining the success of a negotiation.The “shared experience” are a form of cultural shorthand and are extremelyhelpful in preliminary and informal discussions, as “ice-breakers”, coveringinterests, sport, art etc. In some cultures, building relationship and mutualtrust are initially more important than proceeding to detailed negotiations. Ifyour company is dealing with organizations from India, Middle East or Africa,showing interest and respect towards your counterpart’s family could be vitalfor successful relationship, since the family unit is highly valued in thoseregions. Such questions about building afamily could be judged as private and not appropriate to the situation in someother cultures (e.g. France, Germany). In any case, those “small talks” shouldavoid contentious subjects such as political, cultural or religioussensitivities, when not sure whether they are appropriate or not.

The use ofhumor could also be used as an “ice-breaker”. Humor was described as “theshortest distance between two people” by the comedian Victor Borge. However, inan international context, humor could be something of a double-edged sword, asit does not always translate well across cultures and could causeembarrassment, offence or confusion through misunderstanding. While humor isoften used in British business presentations, Germans would judge it as a lackof seriousness.

Developinggood listening skills is really important to succeed in internationalnegotiations, because it enables you to pick up the various subtle cultural nuances.Silence is often used by the Japanese to mull over what has been said and thinkof the alternatives, but it could be mistaken by Westerners as showing a lackof understanding. Do not feel uncomfortable and jump in, or worse, makeconcessions, if you encounter this situation.

The concept of“face”, defined as the regard in which one is held by others, is of a vitalimportance in the Chinese, Thai and Japanese cultures. This could explain whyChinese business people use indirectness and prefer intermediaries fornegotiations, in order to save and give “face” because of the importance theyattach to the establishment and maintenance of long-term relationships. Keep inmind that Westerners separate business life from personal life, but thisdistinction is less significant for eastern cultures.

Adopt the right negotiation practices

The business etiquette differsgreatly across cultures, especially the exchange of business cards. In theJapanese culture, the ‘meishi’ is treated with great respect because Japaneseconsider the business card as the manifestation of the person’s persona. Theywill give you their business cards directly after the initial formalintroduction: make sure you analyze the cards before carefully placing them inthe front pocket of your wallet or on your desk in front of you. Concerningyour own card, the best would be to print one side in your own language and theother in the other culture’s language. When making business in Hong Kong youwill meet many Westerners with business cards on which they even have theirnames translated into Chinese characters. Another aspect of business etiquettewhich differs across cultures is the level of familiarity in the approach. In Germany,The Netherlands and Italy, people address each other by their academic titles,calling Doctors people with doctorates, as opposed as the more familiarapproach used by Americans and increasingly by the British. Greetings can alsobe more formal for some cultures, including Germany and Russia. When dealingwith women from other cultures, always wait for them to initiate the handshake.

Socializing plays an important rolein successfully negotiating across borders. Due regard to seniority isessential with strict attention to seating at formal dinners, order ofspeeches, and giving and receiving gifts. On this last aspect, you should knowthat exchanging gifts for business purposes is very important in some cultures,sometimes it could even be an offense not to offer gifts, but it may be viewedas bribes in Australia and other western cultures. Try to offer gifts thatsymbolize the status of your company and the importance of an impending deal,such as an item characteristic of your local area, or one that displays yourcompany logo.

The negotiating environment shouldalso be considered carefully to maximize your chance to make a successfulbusiness deal. Some cultures, such as Latin America, Japan and particularlyFrance, business people tend to see negotiations as ‘social ceremonies’ asopposed to the British, Americans and Scandinavians who put less emphasize onthe social aspects. When dealing with French negotiators, make sure you invitethem to a restaurant during a lunch break, rather than offering them sandwichesin the Board Room.

Understand your counterpart’s negotiationprocess

Inan international context, your negotiator will probably not use the samenegotiation steps and methodology than the ones you are used to dealing with inthe domestic market. Agreeing on an agenda is probably the best way to clarifythe stages of the negotiations and determine what has been agreed on at acertain stage of the negotiation process. This agenda takes even more importancewhen dealing with a foreign organizations, and you should try to follow it asmuch as possible, since surprises and hidden items could affect long-term trustin some cultures.

Thepace of negotiations will differ a lot from culture to culture. In India and theMiddle East, the progress will be initially slow until the negotiator succeedsat establishing trust. In contrast, indirectness is disliked in the USA, withan emphasis made on “getting the point”. The French, tend to view negotiationsmore as an intellectual exercise in logic, defending or disproving hypothesis.Arabs look upon deadline as merely general guidelines and see the possibilityof amending these in the light of circumstances. The German, British andJapanese like deadlines and the agenda to be specifically stated and agreed uponin the contract and would expect negotiators to honor these.

Anotheraspect that is influenced by culture is the attitude to time. The existence ofdifferent attitudes to time could cause concern. There are two types of cultureconcerning time: the monochronic and the polychronic cultures. Negotiators fromNorth America, Germany, Scandinavia, and Japan, are part of monochroniccultures, so they will like strict time-keeping, punctuality and keepingschedules. On the other hand, negotiators from Latin America, Southern Europe,Africa and Arabic countries, are part of a polychronic cultures: they mayarrive late, deal with several issues and activities at the same time, andengage in multiple conversations. This behavior could cause frustration, beperceived as irritating and unhelpful for people from monochronic cultures. Ifyou find yourself uncomfortable dealing with people with such behavior, youwill then need a high level of patience if you want to ensure the success ofyour business deal.

Doyou think your efforts made during the whole negotiation will be rewarded? Firstyou should be aware of your counterpart’s ability to make decision by himself.Indeed, decision making in negotiations is often influenced by culturalcharacteristics and so the amount of authority given to the negotiator willdiffer from culture to culture. In Latin America and Greece, decisions will bemade by the negotiating team leader. In Anglo cultures, negotiators often havehigh power and can make decisions by themselves concerning their businessdeals. In contrast, Japanese negotiators do not have much decision power. Theyhave to report back to higher authority. This explains why Japanese will adopta step-by-step approach to decision making with emphasize on what is agreed.This aspect of the Japanese culture causes frustration for western companiesthat are used to face-to-face negotiations with those who are empowered to makefinal decisions.

Inpractice, many negotiations oftenconclude in some form of compromise, either through mutual agreement or by someform of external mediation. Here are some examples of things that will maximizeyour chances to successfully negotiate: study and review the cultural sensitivitiesand characteristics; use skilled and experienced translators if necessary; adaptyour negotiating style and pace accordingly; spend time building trust byestablishing personal relationships at an early stage; always show patience;and be prepared for negotiations to continue after an apparent agreement.

Maxence Lefebvre,Australian Institute of Export

Brian J Hurn (2007), The Influence of Culture on InternationalBusiness Negotiations, Industrial and Commercial Training Vol. 39 No. 7.

Cohen, R. (1999), Negotiating across Cultures: InternationalCommunication in the Independent World, US Institute of Peace Press,Washington, DC.

Guy, V. andMattock, J. (1991), The New InternationalManager – An Action Guide to Cross –cultural Business, Kogan Page, London.

Business Success in the US – Blog 2

2011-10-04T18:00:00.000-07:00

By Ian Smith, Chief Executive Officerat Access USA Pty Ltd (www.accessusa.com.au)

USDistribution Debunked

For any of you that have read myprevious blogs you will be sick of me banging on about the importance ofsegmenting the US market, both by geography and industry! But the most commonmistake people make is thinking of the States as one market – It is in factmade up of many markets (all significant in their own right) and companies notonly need to carefully consider segmentation, but also what distribution modelthey will set up to achieve successful market entry. In this month’s Business Success in the US blog I lookat some of the mechanics of setting up successful US distribution.

Whatare the common types of distributorships in the US?

Standard Distributorship – Buys andresells

Agency relationship/Manufacturer’sRepresentative – Generates sales but does not buy and resell

Isit important to enter into written agreements?

YES – The US is a common lawjurisdiction and parties should therefore include all important terms andclauses in their contracts. In general, courts will only enforce what is in thewritten agreement signed by both parties.

Exclusiveor non-exclusive?

This will be highly dependent on thenature of the product or service offering, the market share the potentialpartner offers and the competitive environment. In general, it is not advisableto offer exclusivity, particularly not across all geographies and segments –Remember that an exclusive means that you are completely reliant on your newpartner for all sales in that territory! Consider the pros and cons of eachbefore rushing in.

Whatperformance requirements should I set?

Any agreement entered into should setout the minimum performance standards required of the distributor. In the caseof exclusives, this is often an enforceable part of the contract. These mayinclude (in no particular order):

·                - Valueof initial order
       - Minimumpurchase requirements (generally set by mutual agreement taking intoconsideration market dynamics and stage of product development)
           - Marketingbudget

· - Minimuminventory levels

Itgoes without saying that all distribution agreements should be a two-way streetand should outline your commitments to the distributor as well. For somereason, many Australian companies think that appointing a distributor is theend point and do not provide adequate in-market support to help to drive sales.Remember that you are dealing with the most competitive market in the world andyour product runs a real risk of being lost amongst the other 1000 SKUs your newpartner has if you don’t push hard!

Is it advisable to use a law firm?

Withover 500,000 lawyers in the US it is not hard to see why it is one of the mostlitigious countries in the world. Seeking legal advice is just part of doingbusiness in the US and seeking advice on distribution agreements is top of thelist. A good lawyer will be able to assist with indemnification, limitations ofliability, IP (trademarks, copyrights and patents) and termination of contractsjust to name a few.

Make no little plans. They have nomagic to stir men’s blood and probably will not themselves

be realized.” Daniel Burnham

Ian Smith

The Wealth of Maine_ Wild Blueberries

2011-10-03T04:30:00.000-07:00

Since I started talking about thewealth of Maine, I have to talk about Maine’s blueberries.

First I want to say is blueberries areawesome. I’m the type of person who’sinto natural food, and when I found out we had wild blueberries in the neighborhood,I was overjoyed. It’s because the promising health benefits of wild blueberries include Anti-aging, cancerprevention, heart and vision health, and they’re not like Chinese bitter herbs;they taste great! They are so good thatI’m actually thinking about purchasing a blueberry field.

Maine has 60,000 acres of wildblueberries grow naturally in fields and barrens that stretch along the Down eastcoast to the state’s southwest corner. Adapted to Maine’s naturally acid,low fertility soils and challenging winters, wild blueberries are a low inputcrop requiring minimal management. [1]

In 2007, directand indirect economic impact of the wild blueberry industry in Maine totaled$250 million, so wild blueberries make a major contribution to Maine’s economy.What’s more, thanks to new research on the health and nutritional benefits ofblueberries, there is a growing demand for both fresh and processed wildblueberries in the U.S. and abroad. [2] FromIceland to Japan, consumer demand is sky high as information on the health andnutrition benefits of blueberries is received and understood. The blueberryindustry has experienced explosive growth in the export markets, and newproducts are proliferating.

I saw a report recently that China had precededJapan and Germany and became the biggest importer of wild blueberries fromFinland. In 2010, Finland exported total4.4 million kilograms of wild blueberries, among which 3.1 million kilograms went toChina. Currently, Finland can’t meet thedemand due to the shortage of supply. Personally, I see this as a great opportunityfor our Maine wild blueberries.

Though we all hate to admit it, but the factof cancer rate nowadays is scary, so people are searching for the natural anti-cancerproducts. Wild blueberries fit right inthe line. I was told that blueberrieswere sold at $18 a pound in Japan. Well,I never attest that myself, but it could be true because of the radiation afterthe disastrous earthquake.

Wildblueberries are not available everywhere, and Maine is so fortunately blessedwith abundant. I certainly wish thiswould bring more opportunities to Maine economy.

[1] http://umaine.edu/blueberries

[2] http://umaine.edu/blueberries

Free Trade Agreements ---- have your say

2011-09-28T20:04:00.000-07:00

Australia has now signed on to 6 Free Trade Agreements, and the original one with New Zealand remains the most comprehensive.

The newer agreements cover the United States of America, Thailand, Singapore, New Zealand & ASEAN, and of course Chile. There a number of other agreements under negotiation, including with China, Japan, India, Korea, Malaysia, Indonesia, the Gulf Co-operation Council and the Trans Pacific Partnership. The Government’s pursuit of high-quality, truly liberalising free trade agreements that support the multilateral trading system complements its commitment to multilateral trade reform and liberalisation, including concluding the Doha Round of trade negotiations. .

What does this all mean for Australia’s small to medium exporters? It means the government has a goal of trying to remove the distortions in international trade flow that detract from quality and price being the determinants of success in another market. Some of these distortions are created by high tariff barriers at the border, but increasingly they are the ‘behind the border’ issues like quotas, content rules or trade facilitation charges and requirements that effectively bar, or price-out products and services from certain countries.

In addition to tariff reductions, as a large services exporter we need to see our businesses given the same opportunity to compete and win business as both local providers and other international players. Ensuring that IP protection is honoured in these partner countries is another important consideration.

The government has teams led by the Department of Foreign Affairs and Trade (DFAT) working on the content of future FTAs to ensure Australian business is not disadvantaged by exclusions from the partner country, and to highlight any existing issues that restrict access by our exporters.

How do they know? Well to a large extent they rely on information given by Australian businesses currently exporting to or working in, or wishing to work in, the partner country. To this end consultation sessions are run in each state to seek the experiences and views of Australian business and those that support them. There is also the ability to forward submissions, by email, letter or fax, to the negotiating teams or via your DFAT State Manager. Addresses for the FTA teams can be found on the DFAT website pages on each FTA negotiation. These views are listened to and incorporated into discussions, and the size of your company is not the determinant.

So the important action for exporters, and particularly for the small to medium exporter without a full time advisor, is to have a look at the agreements under negotiation, and provide your legitimate feedback and views. This is the stage where your concerns will be taken into consideration, and perhaps influence a key part of the outcome for your company and others.

The existing agreements that we have in place are also reviewed at regular intervals to see how effectively they are working, so practical experiences should also be forwarded through to DFAT.

FTAs include a lot of detail, and there may be many exporters who are not aware of the potential benefits of the agreements we have in place for their business. For instance under the tariff reduction schedules for their particular product, there may be relative advantages in exporting under say the Australia-Thailand FTA vs the AANZ FTA (which also includes Thailand). The full details on the agreements and the tariff levels (and the origin certificates where required) can be found on the DFAT website at www.dfat.gov.au.

We would encourage exporters then to take advantage of the FTA’s in three ways:

1. Provide information on any issues effecting, or likely to affect your business under an FTA under negotiation.

2. Review existing agreements to ensure you are aware of benefits to your company.

3. Provide feedback on experiences (both good and bad) under existing agreements so that they work as effectively as possible.

With FTAs, the government is listening, so have your say...

The Wealth of Maine_ Wood

2011-09-26T20:45:00.000-07:00

I have talked about the Lobsters a couple of weeks ago, andI would like to continue this topic – The Wealth of Maine. Today I want to switch the topic from theocean to the land- the forest to be precise.

I was not borne as a business person, but day by day whenyou’re surrounded by a great wealth of nature, you start to think about how youcan turn this type of wealth into more liquid type of wealth – business andprofit. Interesting enough, while I wasthinking about this topic last week, Dr. Strong mentioned about the increased institutionalinterest in the timberland, and how valuable it is. “The different motivations for timberlandinvestment generally fall into one of three groups: timberland as collateral,timberland as a strategic investment, or timberland as a pure investment”.[1] While I’m interested in investment forthe sake of being an MBA Finance student, from an international trader’s aspect,I’m more interested in export market. Trades happen when one side has sufficientsupply, and the other side has great demand. In this case, a lot of countries are not as blessed with all theseforest coverage as we do, such as China, Japan, Thailand and Middle East. Wood and its products are essential in our everydaylive, so the demand is always there.

We have the resource, (84% of Maine is covered by forest), butwe don’t use it wisely! This is onething really bothers me sometimes. I owesome timberland here in Washington, andthe sad thing about it is when you hire somebody to cut the tree, and truck itto the dealer, you’re making about $400 a truck load provided the wood is inhigher grade. Then the dealer truckslogs to the mills, sadly, most to the mills in Canada, just like lobsters. Canadian companies mill the lumbers, and shipthem to China, fold the price a few times, and then Chinese companies make furnitureand sell them back to USA. We all know that China does not have enoughlumbers for their own use because of government’s 50 years ban. Whenmy house was under construction, we had to buy lumbers from Lakeview Company,and most of their lumbers are from Canada. I just cannot explain why. In asense, this increases the job opportunities for the shipping company, but notmuch benefit to our State economy other than the purchasing tax the government collects.

My question is: why can’t we produce lumbers locally andmake products right here, and sell to other countries? I have a friend who has been in Marine shippingbusiness for many years, and she told me that they shipped at least a couple 40foot containers of logs and lumbers to China every week. Unfortunately, it’s in the West Coast, not inMaine, but my point is, it can happen here in Maine too! After Japan’s earthquake, there’s a greatdemand for wood for their reconstruction work, why can’t we be thesupplier?

Talking about Japan, another thing I want to mention here ismushrooms, the wonderful by-products from the wood. Japanese people lovemushrooms to a degree that they almost worship them. In our Maine’s wood, there grows those highpriced mushrooms – Matsutake, which can run as high as $180/lb. in Japan; andLingZhi also known as Renshi, which Chinese people would die for it. I just checked this particular species up inChinese website, and the price was outrageous, something like over $1000/ lb.,because they are used for cancer treatment. Ironically, I don’t see any those supplement pills are made in Maine inthe local health food, and a pack of 2 oz. Mutsutake is sold around $6 which isimported from Japan.

Trading is the oldest business ever existed in the humancivilization. Before the currency everinvented, people traded everything for their needs. There is a fortune of wealth in the woodright around us, and they are not like sands which people can find everywherein the world. If we sit on the mountainof gold and cry we are poor, we need to do something about it.

[1] Portfolio Construction, Management, & Protection by Robert A. Strong

China Fisheries & Seafood Expo

2011-09-19T07:37:00.000-07:00

China's market is heating up a lot recently regarding the lobster, and the exciting news is the upcoming China Fisheries & Seafood Expo, which will be held in Qingdao in Nov. Companies in Maine are acting positively regarding this show, and I know many want to expand their products to this booming market. Here's why according to the research:

At a time when seafood consumption in most major markets around the world is either declining or static, seafood consumption in China continues to increase at an exceptional rate. To meet its soaring demand, China is importing more seafood, and a lot more seafood. In 2010, the reported value of China's seafood imports grew an amazing 22 percent to $6.5 billion. By 2015, China's seafood imports are projected to reach $10 billion.

In addition to China's booming demand for imported seafood for domestic consumption, China's huge value-added processing industry is constantly in search of more seafood for processing into a growing array of value-added products for domestic and international market. In 2010, China's seafood processors exported a record $13 billion worth of seafood – more than double what the industry exported just five years ago.

However, most of Maine companies are facing a critical problem - the language barrier. It is true that most Chinese companies hire those can speak English, but only to certain extent as far as the communication and understanding goes. I remember a customer flew into Portland, ME, and brought with him an interpreter, but nothing worked out because even though the interpreter spoke perfect English but she knew nothing about the industry. Another interesting story was a customer wanted to sign a purchasing contract with a lobster company here, and forwarded them a contract with 100% written in Chinese, except two words: "Seller Signature" . I burst out laughing when I saw that contract, so I ended up spending 8 hours translating that contract.

My thought is perhaps it's time for Americans to start learning Chinese, especially for some Business students who are interest in doing international trade, it will be a great tool for them if they know Chinese. If our business students know English and Chinese well, they won't even know what to do with all the opportunities and doors open to them. I have about 5 companies called me to be their representatives, some are real big international firm, and there's even a company wants me to be their partner by setting up a factory right here in Maine, without me contributing a penny.

I know this language is hard, and I'm fortunate to have it as my mother tongue, but it can be learned. Bottom line, I really encourage those who wants to swim in the ocean of international market, LEARN Chinese, as you just can't simply ignore this giant market and trade only with Canada and Europe nowadays. Sometimes I feel like why am I bother taking CPA exam, but the truth is, China is not only opens to business students, but all other major industries. American companies in China and Chinese companies in America both need AICPA, so accounts, come join the Chinese learning club. Good luck!

EFIC helps Australian exporters to keep working capital flowing

2011-09-14T16:17:00.000-07:00

Melbourne-based Environment Systems and Services (ES&S) has provided weather and meteorological solutions in locations as far afield as Antarctica and Samoa, for clients from China, Korea and Japan.

Like many SME businesses, ES&S faces the constant challenge of maintaining enough working capital to win contracts, deliver on contracts, develop business opportunities, and generally keep the business running.

To win contracts with the Polar Research Institute of China and the Defence Acquisition Program Administration of the Republic of Korea, ES&S were required to provide advance payment and performance bonds to their buyers.

These bonds give a buyer comfort that if an exporter doesn’t perform the contract obligations, they can claim for lost upfront payments and related losses. An exporter usually asks its bank to issue the bonds in favour of its buyers. However, to do so banks generally require the exporter to provide assets to secure the bond. Sometimes all available assets are already secured or valuable working capital is tied up to provide this security.

Export Finance and Insurance Corporation (EFIC), Australia’s export credit agency, helped ES&S by providing guarantees to ES&S’ bank to satisfy the security requirement. This allowed the bank to issue the advance payment and performance bonds to ES&S’ buyers.

“EFIC’s financial assistance helped to free up our working capital so we could meet the customer’s requirements,” said Bob Wright, CEO of ES&S.

Recently ES&S won a subcontract as part of Japan’s Grant Aid programme for improving the weather forecasting system and meteorological warning facilities in Samoa.

Under the subcontract, ES&S received periodic payments from its customer, however, the time lag between when ES&S incurred costs and received payments meant that the company faced a working capital shortage and needed additional funding to perform the subcontract.

EFIC provided a six-month $500,000 export working capital guarantee to ES&S’ bank, ANZ, enabling the bank to lend the same amount to ES&S.

“EFIC’s support enabled us to access additional working capital to undertake this contract and provide essential improvements to Samoa’s weather forecasting and meteorological warning facilities while continuing to expand our overseas business,” said Colin Cookes, Owner and Chairman, ES&S.

For more information: visit www.efic.gov.au

RELATED CASE STUDIES

http://www.efic.gov.au/casestudies/Pages/esschina.aspx

http://www.efic.gov.au/casestudies/Pages/esskorea.aspx

http://www.efic.gov.au/casestudies/Pages/Environment-Systems-and-Services-Samoa.aspx

Why should you attend the Import Procedures & Documentation course offered by the Australian Institute of Export?

2011-09-13T16:05:00.000-07:00

By Maxence Lefebvre

Understanding importing is vital for your business! “Why? Freight Forwarders do the job for us.” This is the most common answer when it comes to importing. However, at the end of the day, this is your business that will suffer from mismanagement. Having the ability to understand and judge how a third party is managing your freight movements is essential in order to overcome the risks associated with importing. Are the import procedures respecting the law? Am I using the safest Incoterms® and insurance policy? Is the job done effectively and cost efficiently?

This Import Procedures & Documentation course can assist in showing you the risks in importing, arming you with real life examples and giving you the ability to make changes to your import strategy in order to import more efficiently and/or decrease the risks associated.

After participating in the 2-day course offered by the AIEx in Sydney, I would like to tell you a bit more about my experience and what I learned during this training.

You will learn about successful import practices, documentation, finance and payments, transportation options, marine insurance, customs clearance and risk management in a friendly environment. Classes are relatively small, with approximately 15 people and open discussion is encouraged between trainers and participants. The facilitator and trainers are experts and professionals working in areas related to importing. The main facilitator, Dianne Tipping, a highly skilled expert with years of experience in international business, runs her own business and has been solving import and export issues for many years. During the training, you will have the opportunity to meet several other experts from the banking and insurance industry and the Australian customs.

The course is well balanced with theory, practical examples and discussions. You will start with the basic principles of international trade and finish with a very detailed description of the different types of containers used in the import process. At any time, participants are encouraged to ask questions, even if this is specifically related to their business. The background and experience of the facilitator make the learning experience practical rather than academic.

You will be provided with all necessary materials: course note folder with copies of presentations and support material, the Australian Import Handbook (value of $89), Incoterms® 2010 Chart, notepads and pens. The 2-day course will end by working on a case study that summarizes most of the points discussed in the course, using samples of real import documentation. After those 2 days, you will receive a certification of attendance.

There is another aspect, less often considered, but which can considerably positively affect your learning experience with the AIEx: learning from the other participants. Indeed, you are encouraged to share with the rest of the class and explain your difficulties and issues. By listening to other companies, you may find out some risks that could possibly affect your own business. You may want to know the solutions the facilitator will give to others and consider it for yourself. Other participants may ask questions that you might not have thought of. Once again, this spillover effect is more than encouraged through discussion and interaction.

You must also appreciate the fact that the learning outcomes from this course will not only be relevant to your imports. You will obviously learn a lot for other areas of your business. Indeed, this will also be relevant to your exports (using Incoterms®, insurance policy, and so on.), your intercompany and other overseas operations.

The objective at the AIEx is to support and follow Australian businesses for the long term. You will be more than welcome to come back and ask for some more advice after training.

Remember, that it does not matter whether you want to start importing or you are already importing and looking to streamline your process and eliminate areas of risk. In both case you will learn a lot from this training, feel confident in this field of expertise and be able to have your own opinion about whether your company is optimizing and securing its import strategy and processes.

Find more info on AIEx website: http://www.aiex.com.au/education-training/short-courses-workshops

Maxence Lefebvre is interning with the Australian Institute of Export while studying a postgraduate program majored in International Business at Macquarie University, Sydney.

The Wealth of Maine_ Lobster

2011-09-12T12:06:00.000-07:00

When I first came here, I was shocked! From the Portland airport all the way to Washington ME, I hardly see any people, only cars on the road and trees on the roadsides. Not long after that, the winter came. It was such a cold winter that I saw nothing but snow.

After a year's adjustment from the "culture-shock", I started to see some goodness here, the lobsters! The price is even better! You can buy one for $5 on the road side, then I understood the sign I saw outside of a restaurant saying "Wicked cheap lobster dinner". It is "wicked" because this price is not even enough to buy lobster shells in China. I had eaten lobster in some wedding feast before, but never more than a chunk. Due to the high price, normally a table of 8 people share one lobster.

Even though I knew I had found something great for export, the common lobsters one can find in the Chinese market are Australian lobsters. They are actually should not be called lobsters, but crayfish. However, for years Chinese people have been consuming this type of "lobster", so they firmly believe these are the real stuff, but the price tag will make ordinary people like you and me starve to death if there's no other food available. It's roughly $23/lb, more or less.

The differences between these two species not only exist in the price, it has more to do with the looking and habitat of the lobsters. First, Australian lobsters have no claws. Second, they get colorful shells. Third, their tails seem to be a bit of bigger. Forth, most of them are warm water lobsters. These differences create some obstacles trying to introduce a new spices to the market. With much lower price, people think it's not as good as the Australian lobster; however, with the current industry's strength, no one will buy it if you increase the price.

Not only our competition comes from the Southern Hemisphere, we also get competition from our neighbor - Canada. Canada has exactly the same lobsters as we do, but they have quite different marketing strategies. I would say they are pretty successful on entering Chinese market, and has established some good customer database and relationships by setting up agents there and advertisement.

I certainly admire their success, however, one thing I do not agree. Before Maine even started shipping our lobsters to China, they engraved a lame picture of our lobsters in people's mind. Basically, they brand their lobsters as "Canadian lobsters", and proclaim that theirs are much better than "American lobsters". The only reason behind it is we do fish the new shell lobsters, and obviously, the lobster meat yield is not comparable to the hard shell lobsters, even though it's sweeter and more tender; and at the mean time, the mortality is a lot of higher during the shipping. Canadian companies stop fishing in the summer time, and store the extra hard shell ones they catch in the specific tubes, which will be kept for the off season use. This way, they have hard shells year around.

It's not right for me to laugh at other people's calamity, but Chinese government banned the Australian lobsters import last year certainly helped North American lobsters' export. The desperate lobster importers couldn't get their supply, so they had to find some "substitute", which explains why all a sudden there were a lot of phone calls to me asking for lobsters. Unfortunately, Maine's lobster catch is about 40% less this year. But I think we still can be glad that at least more and more people know our lobster, and accept it as the best.

Frozen Lobster Export

2011-09-07T22:18:00.000-07:00

I went on a business trip last week, and the result was great - a container of raw frozen lobster sale! The customer said this would be just a sample. 20,000 lbs sample is quite something in my perspective. Hope everything will go well, because next time he will take 40,000 lbs per shipment, and he wants at least 10 containers per year. That's 400,000 lbs a year! This certainly will help some people in Maine other than myself. As the lobster price has been quite low since the opening of the season, and the poor fishermen are not making much money at all.

However, cool down from the excitement, I do have to consider about how to handle the new business model. Since I used to do air shipping, not ocean, so the payments normally is not a problem because the turnover is quite fast, and usually it's not such a big amount. Now the customer prefers to pay 50% cash upfront, and use Letter of Credit for the other 50%. So, things get a little bit complicated.

Letter of Credit in the international trade serves as a means of payment guarantee. It normally issued by the banks, so both buyer and seller can have peace of mind that both parties will carry out the obligations according to the terms. Most common type of L/C used in International trade is irrevocable credit, which means the LC cannot be changed unless both parties agree. It is very risky with a revocable LC, because changes can be made without the beneficiary's (the seller's) consent. In practice, I have never seen anybody used this method.

Who prepares what?

The Supplier: Commercial Invoice, Packing List, Shipper's Letter of Instruction (for export purpose), Health Certificate, contract

The forwarder: Bill of Lading, Certificate of Origin

The buyer: Letter of Credit, contract

Before the buyer issues the LC, the seller normally provide a proforma invoice, which contains pretty much the same information as the commercial invoice if the order results.

The points to be included in the proforma are:

Both parties' names and addresses
Buyer’s reference
Products quoted
Prices of goods: unit price and total price
Quantity of the goods: Weights and dimensions
Discounts, if applicable
Terms of sale or International Commercial Terms used, include delivery point
Terms of payment
Estimated shipping date
Validity date

After the boat leaves US wharf, shipper is subject to pay the forwarder before the forwarder will issue the Bill of Lading, which is a must for clearance of the custom. The the supplier gets all the documents together, and send them to the Accepting bank. After carefully checking the conformity of the documents, the Accepting bank sends the documents to the Paying bank. The Paying bank will issue the payment according to the L/C terms.

Note: watch out the reasonableness of the terms listed in L/C, because the buyer can refuse to pay you by disputing you breach of the contract. For example, they want every lobster to be exactly 1.99 lbs. Well, obviously, it's not possible, but if you're not careful, and you sign your name, then this sale may end up putting your house up for sale.

Sounds like fun? International Trade is a world of excitement.

About me

2011-09-05T20:13:00.000-07:00

To start this blog, I would like to start with introducing myself.

People here call me "Fiona", which is the name my English teacher gave me when I was first year in college. My real name is "Feiyan", means "flying swallow". My dad said he knew one day I would fly away, but I guess he never knew that I was going to fly this far away.

I was born in a family that had nothing but poverty. I have two brothers and one sister, and unfortunately, I'm the oldest child, so I had to work since I was 5 years old. Before I turned 13 leaving home, I had done everything that today's kids couldn't even imagine in their wildest dreams. I had to babysit the little ones; carrying water home on my shoulder from a well; washing whole families' clothes by hands in the cold water, even in winter; cooking; cleaning; going to the mountain to gather pine cones and needles home for cooking, because we didn't have any gas; going to sea to dig clams for food; planting and harvesting potatoes and peanuts; feeding chickens and ducks; helping my mom knitting sweaters for commercial purpose; working in my grandparents' vineyard... At the mean time, I had to guarantee I kept my first place in the school. In my very early age, I have learned what is called responsibility.

I went to school at age 6. I got straight A every year, so after Grade 3, the school didn't want me to go through Grade 4, and sent me directly to Grade 5. After successfully passed 3 competitive exams, I was accepted by the best middle school in the area. (There were competitions in every stage. No push through or whatsoever.) Before I graduated from Middle School, the school told me to go home one month earlier than others because my three years' average grades in all courses were among the top, and the school didn't want me to get accepted by other school if I took the state-wide exam, so by providing me full scholarship for 3 years and waive the exam, I agreed to stay in that high school. It was one of the best anyway. My father didn't want me to continue the school because I'm just a girl. He didn't believe high education for girls; besides he didn't have money to support me. However, I believed that the education was the only way to help me avoid all the other poor girls' miserable fate. With the scholarship, I was able to continue drawing my dream.

Life didn't change much for me afterwards as far as the family's finance went, but I was happy, even with only 10 RMB (less than 1.5 USD back then) a week living in school's dorm by myself. I had to survive by commuting between school and home (3 RMB one way), a whole week's food, and any additional cost such as if I ran out of notebook, laundry detergent, etc,. If nothing special happened, I would end up with ￥5 left in the end of the week, and I normally would buy some snacks to take home for my little brothers and sister by walking hours going home instead of paying for a ride. Thinking about their happy faces, the journey never seemed to be too long and tired. Other than the love I was able to give and receive, I've learned how to manage money in the very early age too.

Then I went to college. My health started to collapse due to all the years of lack of balance food. But I still graduated with honor, passing the highest level of English test in China, however, I could no longer continue my Master degree because my little brothers and sister were no longer little. They were in college and high school then, so I had to start to make money to support them to go to school.

Two years later, I came to the US. I had no place to stay but a God-forsaken broken shelter in the wood. I started my first career here as a carpenter - building my own house. 2 months later, I broke my hip. No insurance, so I didn't want to stay in the hospital; came home sleeping on the floor for a couple weeks, taking 2 pain pills total. (I know it's dumb to think this way, but somehow I think pain pill would make me dumb. ) When I was able to move around with the walker, I continued sharpening my carpentry skills until the house was done. I believe a strong will can overcome pain.

After the house was done, I started lobster business. It went well, and I paid off all my dad's debt, and my sister and brother both graduated from college. It was time for me to go back to school to continue my dream. Even though I had to put it off for a few years, but it was so well worth it.

When I consider the name for this blog, I really thought it over. The value lies in every aspect of life, and you got to be able to sense it, and how you response to the value shapes who you are. Sometimes sacrifice a little, one can gain a lot more. I remember my first job working in a foam factory when I graduated from Middle school due to the early graduation. (I will never forget how terrible the 3rd shift from 12pm to 8am was.) I made ￥900 for 3 months' work. I gave all the money to my mom except asking her for ￥50, because I wanted to give that ￥50 to my grandpa. It was not much, but the value in that little money was more than anything I can ever make in my life time, because I never got another chance to honor him with the money I make again.

I don't really have any word to describe myself accurately, but through these little stories, I think they present me well. :)

Copyright infringement /= theft.

2011-08-03T12:23:00.000-07:00

It has become common, especially among those lobbying for tighter enforcement of copyright protection, to refer to illegal copying of copyrighted material as theft. I want to address a question of language: should illegal copying of copyrighted material be called theft? Let me be clear about two things. First, this is definitely NOT a discussion of whether or not copying is good, or what copyright policy should be, or any hard question like that. It is also not a debate about “correct” language, per se; most interesting discussions of language are not about right or wrong, but rather about what is useful. Is calling copyright infringement “theft” useful language? I think the answer is no, in the sense that it does not correspond to standard use of the word theft. Of course, the terminology might be useful politically for those wanting tougher enforcement of copyrights; certainly no one likes being called a thief, and theft has a particular negative connotation that goes beyond simple law breaking. Many people might admit to breaking the speed limit; virtually everyone agrees that theft is morally wrong. But it is a bad use of the language, in terms of corresponding to our usual definition of theft, to attach the term to copyright infringement.

It is useful to start with a “conventional” example of theft. If I steal your computer, than you have one less computer and I have one more computer. No additional computers are created; my enjoyment of your computer prevents you from enjoying it.

Copyright infringement can’t be considered theft of the work itself, since my copying the work does not destroy the initial copy of the work. The claim, then, is that the intellectual property, which is a right to exclude others from enjoying copies, is what has been stolen. What I want to claim is that infringement of a right to exclude is not routinely called theft; in fact it is quite unnatural to call it that. Perhaps the clearest example of this is your front yard. You have the right to exclude others from your front yard. If someone has walked across your front yard, would you call them a thief? I think not; they have trespassed, but calling them a thief would be misleading. If you yelled “Stop, thief!” when the person crossed your lawn, and a nearby policeman apprehended the trespasser and asked you what was stolen, you would probably be quite embarrassed to accuse them of stealing the right to exclude them from your front yard, even if they were guilty of trespassing. This shows the sense in which use it is important to make sensible use of language: whether or not it is technically correct to say that the trespasser stole your right to exclude doesn’t change the fact that it is misleading to use the term in that way. (And it explains why those wanting tougher copyright protection use the term: yelling “Stop, thief!” is a very effective way to get the attention of law enforcement.)

Most of the discussion of the use of the term theft in regard to copyright infringement focuses on the foregone value that the copyright holder could have received by selling the work to the person who makes the copy. But this is no different, in principle, from the front lawn example: you could have charged the trespasser to cross your lawn, and you lost that revenue when the trespasser crossed your lawn without permission.

Perhaps the difference, then, is that the trespasser wouldn’t have paid to cross the lawn. But if one claims that the difference in the copyright example is in the magnitude of the lost revenue, does that mean that infringement of copyright is fine if the infringer wouldn’t have been willing to pay for the work that is infringed? The term copyright infringement, like trespassing, need not come to a judgement about willingness to pay, and therefore is more precise than theft. Even if you want to focus on a substantial destruction of value as the motive for calling infringement theft, it is still difficult to justify. If the trespasser tramples your flowers, it would still not by typical to call them a thief, even though they have destroyed value and might sensibly be asked to pay restitution.

(Destruction of value, though, is itself a tricky concept in a world of competing ideas. Certainly a new album released by Lady Gaga reduces the value of the other music on the shelves, as customers substitute away from those albums and toward the popular new release. Of course we do not expect Lady Gaga to pay restitution any more than we expect a popular new restaurant that draws customers from neighbouring restaurants to pay restitution to its neighbours. On the other hand, if Lady Gaga’s album were literally a copy of one of those other works, the substitution toward Lady Gaga’s album would be viewed differently. In practice, copyright opens up a difficult grey area in between. Some say that Lady Gaga is reminiscent of Madonna; if so, do we view sales of Lady Gaga’s album as destroying value for Madonna in a way that demands restitution? Or do we simply say that Lady Gaga has simply added value by standing on the shoulders of what came before, as all ideas do? These are the hard questions that are beyond the scope of this discussion, but certainly interesting ones to think about.)

Agreeing that it is misleading to call copyright infringement theft doesn’t mean that copying is OK, or that copyright laws are bad, or anything like that. Nothing about this discussion takes a stand on that. It is just a question of what language is useful: calling these acts theft is not helpful, because it doesn’t correspond to our usual notion of theft. In a sense, calling a trespasser or a trampler of flowers a thief might be technically correct, since they have taken your right to exclude, or your right to enjoy untrampled flowers. But the language isn’t helpful, since we have other more specific words for what has happened, and a common use of the word theft that doesn’t include acts like trespassing, trampling flowers, or infringing copyrights.