The global economy and table seating at the world business buffet

VentureOutsource.com talks with William G. Parrett, Chairman of the United States Council for International Business (www.uscib.org). Tapping into his current responsibilities and, previous experience as former CEO with Deloitte Touche Tohmatsu, Mr. Parrett shares with us his understanding of the challenges companies must deal with when facing a global economy.

In this exclusive interview, read what Mr. Parrett says about the impact changes in technology have on America and U.S. jobs; transparent business practices in foreign and emerging markets, his unique perspective on India and China, and more.

Transcripts from that discussion follow.

VentureOutsource.com: What do you see as the current, single most important threat abroad (e.g., law, rule, policy) that has significant potential of undermining American competitiveness? What, specifically, is the United States Council for International Business (USCIB) doing to help address this?

Parrett: As we enter turbulent economic times, there is a clear risk that many countries, including the United States, might slide back into protectionism. There are already numerous examples of countries erecting new barriers to foreign investment.

Some people are advocating ‘green' tariffs, to punish products from countries that don't commit to cutting their carbon emissions. And, of course, the U.S. election rhetoric on trade is very troubling.

USCIB works closely with business groups in other countries to forge internationally acceptable alternatives that keep markets open. For example, we're really urging the G8 governments to affirm their commitment to cross-border investments, in both words and deeds.

William G. Parrett Chairman United States Council for International Business (Image courtesy of BDI G8 Business Summit)

And we're working to rally support to wrap up the Doha Round of global trade talks with a meaningful, market-opening agreement. That's the single biggest thing governments could do to keep the global economy on track. A strong global economy should benefit all peoples and be a big step towards a global rule of law and order.

VentureOutsource.com: Open markets can help drive innovation and create better products and services. Such markets can also result in job loss and economic decay in regions / companies unable to develop or sustain a competitive edge which can lead to protectionism. What are your thoughts on protectionism when concern is voiced by states, industries and companies possibly facing a net loss of jobs due to offshore outsourcing?

Parrett: Because of changes in technology, the threshold for companies that can or must go offshore has come down a lot. It's not just big multinationals, a lot of smaller companies are now outsourcing abroad.

This obviously creates anxiety among some people about job loss, and we need to be able to deal with changes in the job market through better investment in training; education and skills, as well as improved trade adjustment assistance for those who do lose their jobs as the result of trade.

But interestingly, the fact that so many more companies are trading and investing overseas also means that one core source of support for protectionist policies, that is, manufacturers who produce solely in the United States, has gotten smaller.

Also, I think there's greater public recognition now about the nature of jobs in America. Very little of our job losses lately have come about as the result of trade or offshoring. Technology and changes in the marketplace account for most of job losses in America. But the benefits of open markets for U.S. exports, corporate payrolls, and overall economic success is enormous. Like it or not, the world truly is flat, and those who recognize it will benefit.

VentureOutsource.com: What do you feel U.S. companies can do to help create transparency / better business conditions when engaging foreign companies in emerging markets?

Parrett: One is to be a little selective, to the extent that you can, in choosing which countries to operate in, so that you avoid falling victim to corruption.

Investment seems naturally to flow toward countries with good governance and a transparent business culture.

Companies should also be aware of their legal requirements wherever they operate, including laws in their home country, against overseas bribery. And they should join together with other like-minded companies, through organizations such as USCIB, to collectively steer emerging markets toward the path of greater openness. Leading by example is at times difficult. But there is no alternative if we are to have a business world of universal principles.

VentureOutsource.com: What top three (3) challenges do you see facing US technology [manufacturing] companies wanting to do business in India?

Parrett: First, Indian infrastructure is a major headache for companies with long supply chains. Power shortages in India mean companies often have to invest in their own generating capacity, while getting stuff to port from the farm or the factory can be quite an adventure.

Second, finding and retaining qualified personnel is also troublesome. Employee attrition rates are running at 15 percent to 20 percent annually, and the workers they are getting may not be very qualified, forcing many companies to invest heavily in training.

Third, corruption is a serious problem, especially at the local level.
Remember, India is an emerging economy, and companies need to engage such economies leading by example. If they cannot compete on that basis, then stay home!

VentureOutsource.com: How about China? What top three (3) challenges do you see facing US technology [manufacturing] companies wanting to do business there?

Parrett: The legal and regulatory environment in China can be quite murky: companies may not know what's required of them until it's too late.

There is still discrimination against foreign firms in a number of important industries, too, and intellectual property theft in China remains a huge problem. USCIB is working to support a partnership between China and the Organization for Economic Co-operation and Development (OECD), which serves as a clearinghouse for best practices among the rich countries.

China has demonstrated a real willingness to learn and adapt the most advanced manufacturing and business lessons from the rest of the world, and this has made it an economic success story.

To continue that success, China needs to be equally open to adapting its regulatory climate and the way it enforces its rules at the local level.

VentureOutsource.com, May 2008