HSL / Newsletter Sample
May 2003

Boycotts often backfire, can be a 2-edged sword, sometimes bring more damage to the boycotter than to their target. Much boycotting is going on of late. Most was in US against French & German goods. In retaliation, some Germans & French did the same to US goods though on a very much smaller scale as Europeans aren’t quite as flag-sensitive. But the US is far more exposed than any nation. There are tens of thousands of McDonalds, Burger King, Kentucky Fries (etc!) outlets abroad that can be boycotted, far more damaging than any boycotting of Euro goods in the US. Not to mention US hi-tech products, agriculture, films, hotel chains, Coke, Pepsi, Nike, aircraft builders, autos & US airlines.

And, as Midas website pointed out, “The political neutrality of gold is becoming a key factor. With trans-Atlantic relations currently strained it’s unlikely France or Germany will be overly keen to convert gold reserves into US$ currency, irrespective of one's view of economic balance. Need we remind U of HSBC bank’s 'weak-$' view?” In short the US$ itself is the most vulnerable target of all. If overzealous US patriots think a boycott is a 50-50 tradeoff, they’re acutely mistaken. It’s more like a giant vs a flea, with the US on the losing end 99-1.

Amusingly, no one in the US suggested boycotting Chinese goods, even though China also threatened to veto the US war plan. Is that because to boycott Chinese goods would dry up 80% of US imports, which is the main factor holding down US inflation? Also because the US no longer manufactures most goods it consumes. China does it for them. So US manufacturing firms (all the big ones) in China would be hit. And any selling of US bonds abroad would send US interest rates up sharply. In summary, the US is in no position to boycott anyone, & reverse-boycotting would be a real disaster for the US$ & economy. FT reports a new threat to US products: new alternative-to-US brands, due to global anti-war sentiment. Instead of a boycott, Americans should turn on their
considerable charm/warmth to coax foreigners to buy US products, from Boeings to burgers.

PS: After writing the above, an article appeared in 4/16 IHT by Jeffrey Garten, adviser to 4 US presidents, now a Yale dean. The situation is worse than I thought. JG says: “Massive boycotts are unlikely but in nations where govts have a say in awarding biz contracts, fewer could go to US firms, & the best local talent may shy from working for US firms abroad. If US biz suffers abroad, so will US economy. Many US firms have become dependent on overseas mkts for more than 30% of their revenues. US has also become central to global supply chains that service the US. Over 25% of products US imports come from foreign subsidiaries of US firms. We’ll never know the cost to US firms that decide not to invest abroad, not to expand existing operations due to perceived hostility to the US.”

He paints a bigger picture: “I worry that anti-Americanism is changing, from widespread public resistance to what the US did, to objections to what America now is. Note that anti- Americanism isn’t propelled by leftists & elites, as before, but encompasses a broader spectrum of society. I also worry that we could be seeing a huge counterforce to continued globalization, which has been led by the US. This could impede trade liberalization. I worry re the potential breakdown in the US-led multi-lateral system itself, wherein US foreign & econ policy are in synch.” He concludes with super gloom: “If the current paralysis of NATO & UN signals an end to post-WWII consensus re the role the US plays on the world stage, then over time, all bets may be off for the prospects for US business.” Pow! That would afflict global GDP. This desperately calls for harmony, not boycotts!


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