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Where to Invest? How About Where Not To?

Any properly diversified U.S. equity portfolio should have been up over 30% this year. Most multinationals (and their shareholders) are already benefiting from a global presence ("A world of opportunity overseas -- but keep an eye on the greenback" and "Where to invest in 2004," Cover Story, Dec. 29-Jan. 5). It seems "indirect" participation in the geographic sectors is as prudent, and arguably, as rewarding in the long haul, as direct investment.

For example, the same equity portfolio that would enjoy a 40% return for a U.S. resident would show a 16% return for a Canadian resident because of the difference in perspective (currency) reporting. So why venture out into currency-prompted adventures? Because the grass is greener? It looks like evidence of resurgent exuberance to me.

John Evdokias

Montreal Robert Kuttner makes an excellent point about how the U.S. trade deficit is unsustainable ("What's really feeding the trade deficit beast," Economic Viewpoint, Dec. 29-Jan 5). Kuttner gets it wrong, though, when he discusses the U.S. as "prime sponsor of the free-trade system." Witness the protection provided to most (if not all) U.S. industries that face tough international competition (e.g., agriculture, steel), decades of gamesmanship over China's status as a trading partner, U.S. noncommitment to the Kyoto Protocol, and the current policy of only negotiating free-trade agreements with countries that supported the "bombs for oil" exchange in Iraq.

NAFTA is the exception rather than the rule with regard to U.S. trade policy and it is a small-fry effort when compared to actions of other nations, most notably those in Europe but increasingly those in Asia.

Greg Denton

Sydney In "Outsourcing: Look who's out of sorts" (News: Analysis & Commentary, Dec. 29-Jan 5), you focus on the U.S. government's reexamination of outsourcing deals: The same is happening in Britain. Last week, the Inland Revenue (Britain's Internal Revenue Service) rejected Electronic Data Systems Corp., and Social Security rejected Accenture Ltd. Instead, both chose a 10-year contract with Cap Gemini Ernst & Young. The former suppliers had become too complacent, despite a poor track record, thinking that they would be irreplaceable.

Keith Appleyard

Brighton, England It has become accepted practice of some parts of the European press to rejoice in every little setback the U.S. is encountering in Iraq. Likewise you seem to be rejoicing in every little setback the European Union has encountered this year in its evolution ("Will Europe become a backwater?" International Business, Dec. 29-Jan 5). That is not the sign of a healthy relationship. And concerning the EU, it is beside the point.

The EU experiment is about peace, democracy, and prosperity, in that and no other order. It has definitely been very successful so far. If the experiment ever manages to seduce Russia, success will be even more complete. The U.S., then a smallish power in comparison, will have much less to show for its recent efforts on peace and democracy.

Jacques H. Thys

Wilrijk, Belgium American and Japanese auto makers are showing shameful disregard for the Chinese environment as they sell sport-utility vehicles in China ahead of fuel-consumption standards slated for mid-2005 ("They're huge, heavy -- and lovable," International Business, Dec. 29-Jan. 5). I dare the heads of the carmakers involved to travel to Beijing or Shanghai and spend a day walking along streets with heavy vehicular traffic. Even if their conscience does not bother them, their shortness of breath will. To sell anything but the most environmentally friendly vehicles in the developing world reflects the utmost in greed and environmental arrogance.

Bruce Rhodes

Richmond Hill, Ont. Despite disappointment in some quarters (often based on unrealistic expectations) and criticism from those who opposed it in the first place (such as the AFL-CIO), NAFTA has been an outstanding success ("Mexico: Was NAFTA worth it?" Special Report, Dec. 22). There is much unfinished business in all three countries to realize NAFTA's full potential, and you correctly point out some of those steps. Unfortunately, the recent vote by the Mexican parliament against President Vicente Fox's tax proposals will not make matters easier. On the U.S. side, we should go back to where we were on Sept. 10, 2001, and resume the process of creating conditions on both sides of the U.S.-Mexican border that will, over time, create conditions similar to those that prevail along our border with Canada.

Thomas M.T. Niles, President

United States Council for International Business

New York

Editor's note: The writer was U.S. ambassador to Canada from 1985 to 1989.

While revolving-door trade representatives were sequestered on Washington's K Street, and while obtuse investment bankers and the Wall Street press thought they had devised and sold to Congress the best trade arrangement ever, they all forgot to include Wal-Mart Stores Inc. (WMT) in their negotiations. Wal-Mart saw the immense openings the trade pact provided for export nations located outside the pact's geographical region to sell into the region.

The rest, as they say, is history. Wal-Mart has become the world's largest retailer, while manufacturers remaining within the confines of NAFTA are left fighting for scraps of whatever might fall from Wal-Mart's procurement table. Now, the same principals that devised NAFTA are working on a "free" trade zone for all the Americas. I don't know if they take their instructions from Wal-Mart executives or not, but I suspect the enlarged agreement will again mean little for manufacturers within the region itself while greatly increasing the market for manufacturers located outside, i.e., China.

Daniel Eliason

Santa Barbara, Calif. Re "Richard Branson: Winning Virgin territory" (News: The United States, Dec. 22): I was introduced to the value of Virgin Group Ltd.'s cell phones when my 80-year-old aunt bought one. Virgin's prepaid service seemed like a great deal for someone who rarely needs to use a cell phone but likes to have one available for emergencies. I canceled my account with Sprint PCS Group (PCS) and signed on with Virgin (as did several of my equally unhip middle-aged friends).

Virgin may find that its business model has the potential to develop a substantial market among aging baby boomers who find traditional cell phone plans overpriced.

Mike Carr

Toledo, Ohio The dollar's decline poses a threat not only to the U.S., if the decline becomes excessive, but to the stability of the Far East, the world's growth engine, mainly because of the yuan-dollar peg ("The incredible falling dollar," News: The United States, Dec. 22). It is probably the U.S. aim to force the Chinese to reflect on John W. Snow's message to allow a measure of yuan revaluation. Without it, Japanese and South Korean manufacturers and other exporters to China will find it hard to sustain their exports.

W. Eric Faber


You say, "the weak dollar is already pushing prices up." It is worth adding that free trade is driving wages down, which has started in the information-technology sector. Steel and other industries will follow. The U.S. cannot continue to live with its rising current-account deficit and ballooning budget deficit for very long. The greenback will continue to fall, while wages will drop, and prices will rise until a balance is reached.


Alexandria, Egypt In the long run, the U.S. economy will benefit from globalization. In the short term, nothing has been done to address the U.S. tech worker who shoulders the burden of globalization without any near-term benefit ("The Challenge from India, Readers Report, Dec. 29-Jan. 5, replying to "The Rise of India," Cover Story, Dec. 8). For the short term, I suggest, that for every tech job shipped offshore, the number of H1B and L1 visas issued to India (or any other country) be lowered by 1. Also, for every worker allowed to enter the country with a tech-sponsored H1 or L1, the sponsoring company must set aside $7,500 to be used to upgrade U.S. tech worker skills.

Terry Reiber


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