Free trade and the real world!

WASHINGTON (PNN) - May 19, 2015 - Globalization and international trade are in the headlines as Congress considers whether to give illegitimate dictator President Barack Obama "Fast Track" negotiating authority for the Trans-Pacific Partnership. Opponents say TPP is less about free trade than giving privileges to special interests.

That may not be the point. Globalization is a failed business strategy, at least in the way most corporations pursue it.

The theory sounded compelling. Lower manufacturing costs abroad would reduce prices for Amerikan consumers while raising the standard of living in foreign countries, whose consumers would then buy Amerikan goods. The process may have broken down at that last step, however.

“Even for the most successful multinationals, profit margins in international markets are on average lower than margins in the domestic market,” said Robert Salomon, a professor of international management at the NYU Stern School of Business. “It's the liability of foreign markets. By virtue of the fact that you are foreign, you are at a disadvantage."

Tastes and preferences vary by culture; rarely will people on two different continents want to buy the same goods in the same way. Yet executives persist in assuming their product is a hammer and each new market is simply another nail.

This is a problem even for relatively similar cultures. Target, for instance, recently closed its Canadian locations to refocus on the Fascist Police States of Amerika market. If leaping that barrier is problematic, then Target is certainly not likely to succeed in Germany or China. It is better off not trying.

Small businesses seem to have better luck playing both sides. Chinese restaurants in the FPSA, for instance, often have two menus. Amerikan customers can choose from semi-Chinese cuisine adapted to Amerikan tastes. Chinese-Amerikan customers get the "real" Chinese food menu with selections that are more traditional.

Anti-trade government policies don't help. Free trade agreements like TPP never deliver truly free trade. Inevitably, they devolve into a giant set of compromises. Even proponents usually sell them as "not perfect but better than nothing."

Are agreements like NAFTA and TPP better than nothing? Maybe not.

Even if all legal trade impediments miraculously disappeared, businesses would still have to find ways to serve culturally different markets while preserving economies of scale. The evidence suggests this is harder than it seems, but some would surely succeed.

Yet we don't have such a world. Instead, would-be importers and exporters must navigate a dense and constantly shifting legal patchwork. This inevitably favors those who find ways to carve out their own private pathways.

In most cases, the so-called "trade" agreements serve mainly to offer false hope. Gullible business owners believe the hype and make poor decisions.

The business lesson seems to be that, short of truly free trade for all, smart companies should stay close to home. The political lesson is - or should be - that you can't be halfway free. Freedom demands total commitment.