US Reputation under Trump Tanking, Costing Economy Billions

By Daniel Korschun, Boryana V Dimitrova, and Yoto V. Yotov | (The Conversation) | – –

U.S. News and World Report recently published its annual “Best Countries” ranking, based on how thousands of people around the world perceive other nations. Switzerland topped the 80-country ranking, followed by Canada and the United Kingdom. The Conversation

One big surprise was that the United States fell three spots, from fourth to seventh. The U.S. received poor marks for business friendliness, respect for human rights and democracy, and educational quality. These results align with another ranking from Forbes showing the U.S. in decline.

Reputational rankings and similar “best of” lists surely make for interesting dinner conversation, but they do beg an important question: Does a country’s reputation really matter?

The three of us, an economist and two marketers, decided to examine how a change in a country’s reputation might affect its trade relationships. The results were astounding.

How a country earns its rep

A country’s reputation is, in essence, the perceptions that people elsewhere hold about its standing in the world.

There is no uniformly correct way to measure reputation. The U.S. News survey asks respondents to rate countries on categories from “adventure” and “power” to “quality of life” and “citizenship,” while Forbes focuses on business. And a country’s reputation can vary in different parts of the world.

People form those opinions based on the totality of their experiences involving the country, from the products they’ve bought to the people they’ve met while traveling to the images they’ve seen in movies.

Another major factor in a country’s reputation is politics and diplomacy. And in that department, the election of Donald Trump may be contributing to the problem.

Pew surveyed citizens of 10 European Union countries last year and found that 85 percent of respondents had no confidence that Trump would do the “right thing” in world affairs. And since the election, 75 percent of those surveyed around the world for the Best Countries ranking – which came out in April – said they had lost some degree of respect for the U.S.

As a result, experts predict the U.S. will receive 4.3 million fewer visitors in this year than in 2016, in part because changes to immigration policy are making tourists feel unwelcome.

Of additional concern is that relations between the U.S. and some key trading partners have taken a turn for the worse. For example, the U.S. exports more to Mexico than any other country but Canada. Yet the president’s insistence on a proposed border wall has probably harmed the United States’ reputation among Mexican citizens and businesspeople.

Opening a window

Our recently published research (sponsored in part by the Oxford University Centre for Corporate Reputation) provides a window into how intangible perceptions such as reputation can produce very tangible consequences.

Our measure of country reputation was the Anholt-GfK Nation Brands Index, which is based on a global survey of more than 20,000 respondents across 20 countries. We used the results from 2008, the last year for which data are publicly available. Respondents in those countries rated the country reputation of the other 19 countries as well as 30 additional countries around the globe, creating a matrix of country-pairs (Canada’s reputation among Germans, Germany’s reputation among Brazilians, etc.).

To measure various dimensions of country reputation, the surveys included ratings both for the quality of a country’s products and the trustworthiness of its people.

To capture export volume, we pulled data from the United Nations Statistical Division Commodity Trade Statistics Database for each country-pair. We wanted to make sure we were seeing only the potential impact of country reputation on exports (and not the other way around) so we downloaded trade data for 2010, two years after the reputation data were collected.

Combining the export figures with the reputation data resulted in a unique dataset of 861 country-pairs (e.g., Italy’s reputation among the French and Italian exports to France two years later).

We then applied what has been described as “one of the most successful empirical models in economics” (economists call it the structural gravity model of international trade) to test whether this relationship panned out on a global scale. Essentially, the model enables us to test the effect of reputation on exports for each specific trade relationship.

To exclude alternative explanations, we also accounted for a host of other factors that are known to influence trade between countries, such as the size of each market, geographic distance and having a common official language.

How reputation affects trade

We were amazed at what we found.

Each ranking drop in a country’s reputation is associated with a decrease in export volume of 2 percent. As an illustrative example, if the U.S. were to drop one reputational rung among Canadians, we would expect – all other things equal – a corresponding 2 percent decrease in exports to Canada. If we apply the results to 2016 exports, that would mean a potential loss of more than US$5 billion.

From another perspective, the effect is roughly equivalent to an importing country raising tariffs by 3 percent. For a large exporter like the United States (about $1.5 trillion in exported goods per year), a uniform drop in reputation could put tens of billions in manufacturing exports in jeopardy.

Of course, the relationship works both ways. If reputation improves, our model predicts the same corresponding increase in export volume.

Ignore at your peril

The Trump administration has made stimulating exports a priority and argues that “international trade can be used to grow our economy, return millions of jobs to America’s shores and revitalize our nation’s suffering communities.”

Yet, in his efforts to do this, he appears to be ignoring a meaningful ingredient: reputation.

Our research makes one thing clear: Countries ignore their international reputations at their peril. If Trump is serious about increasing exports, a good place to start would be improving America’s – and his – standing in the world.

Daniel Korschun, Associate Professor of Marketing, Drexel University; Boryana V Dimitrova, Clinical Professor of Marketing, Drexel University, and Yoto V. Yotov, Associate Professor of Economics, Drexel University

This article was originally published on The Conversation. Read the original article.


Related video added by Juan Cole:

The Ring of Fire: “Tourists Avoiding USA Because Of Donald Trump, Costing Us Billions
The Ring of Fire”

8 Responses

  1. As a Life Member of the Word Police, I feel I should tell you that “beg the question” does not mean “invite the question.” It is “invite the question” that you should have used.

    “Beg the question” means to “plead the question;” in other words it is a form of circular reason in which the question is answered with the question. It is a logical fallacy that fails to prove anything that is not already assumed. Example: “Why can’t Bernie Sanders be elected?” “Because he is unelectable.”

  2. For any business to survive, let alone thrive, there MUST be demand for the business products or services.

    If there is no demand, there is no reason for any business to hire any humans. And, as robots become exponentially more capable while at the same time drastically decreasing in cost, business can meet their demand with even fewer humans. Therefore even if the USA actually did increase its exports (it will not), fewer humans will be employed rather than more because business will “invest” in inexpensive robots rather than extremely expensive humans.

    As for demand . . .

    After WW2, the USA exported lots of stuff because the rest of the world was not capable of producing the stuff humans wanted. The USA reputation was high and had lots of stuff to sell.

    BUT . .

    In the 1960s -1990s, the rest of the world built new factories using the latest technology while USA businesses used their wealth to make the owners richer rather than rebuild their now ancient and inefficient factories. Now USA business were not only competing with each other, but with better products from around the world.

    BUT . . .

    Instead of investing in USA factories, they just closed them and had stuff made at the newer factories in other parts of the globe. Eventually people around the globe realized that the USA branded stuff was actually designed and made elsewhere and started buying directly from the non-USA maker with their funny sounding brand name (ie. Xiaomi or Lenovo [ex IBM]).

    NOW – every human on earth has a wide variety of sources for very high quality stuff (the stuff only the USA made 50 years ago), therefore the FEELINGS people have about a business and its country of origin becomes very important.

    Basically, the USA hubris is starting to catch up with the USA. The USA has treated the rest of the world with contempt for over 50 years and now people have a way to “punish” the USA for that contempt.

    Trump will NOT succeed in increasing exports very much because every country on earth wants to use exports to increase their wealth and the USA no longer has any unique products or services.

    Why buy a USA product when a product of equal or better quality can be purchased cheaper from a much friendlier country?

    If trump wants to succeed, he will have to have a personality transplant and be 100% less belligerent and 100% much nicer.

    • Spyguy, during the Bush Junior regime I felt the same way, that surely our lack of genuinely useful exports would catch up with us this time. But again and again, the rich of the outside world keep bailing out America by buying its $ and preventing its value from collapsing.

      I’ve come to think this is a rigged game. Specifically, the global capitalist elite need America as a hegemon, either temporarily or permanently, and they will shield us from our folly as much as they can.

      For instance, why hasn’t China used its vast pile of US$ and its reach in Central Asia to make our occupations of Iraq and Afghanistan far more painful? Here’s the cosmic joke: our leaders may subscribe to a belief that pacifying lawless lands and bringing them into the global economy is a net win for the US corporate empire. But in fact US entrepreneurs are effete cowards and won’t touch one of our quagmires. The Chinese can find hustlers willing to work anywhere at risk of life and limb, so they benefit when the US merely semi-stabilizes a country enough for others to march in and bribe all the local forces and set up shop. China does not want to disabuse us of our illusions in such places; it wants us to waste our last resources making the world safe for Chinese sweatshops.

      As for the global bailout we’ve gotten with the elites perpetually showing greater confidence in our currency than their own despite our foolishness, I can only speculate that this is the only way the global financial system can work and the global players need the USA to play the role Britain (and gold) once played. They won’t jump ship to the alternative system that Beijing is patiently developing until some crisis even bigger than 2001 or 2008. Until then, they’re mostly hedging bets, as are the Chinese themselves.

      A possible insight into this was the negotiations over Bretton Woods in 1944. The US delegation insisted that the new global currency convertibility system be tied to the US $. Keynes, from the declining empire, instead wanted a neutral currency basket as the standard of value – just as China is now arguing. But maybe the problem with a basket is precisely that because no one nation owns it, no nation will back it with all the powers at its disposal. As beneficial as Bretton Woods was in postwar economics, it gave the US unique powers and responsibilities that were a good match with its overwhelming wealth and military power. Even the rotten carcass of that mythic concordance seems to carry value with today’s oligarchs, who have systematically corrupted all the economic organizations that accompanied Bretton Woods in FDR’s Postwar World plans meant to prevent another worldwide trade war and depression.

  3. Academics from other countries traveling to Canada for conferences are trying their best to find direct flights, that don’t pass through the US, because of the very real fear of being delayed or refused entry or of having their electronics copied, seized or stolen if checked through.
    With Trump’s goons on the loose, no one feels safe anymore. That United has treated its customers so horribly only adds to this feeling.

  4. I wonder how this will work out within the United States.
    For example, I don’t want to vacation in Montana right now, despite having loved hiking in the Beartooth mountains in the past.

    White supremacist culture and hospitality don’t go together. Why vacation some place with hostile natives?

  5. My SO and I used to do 2-3 trips from Canada to US per year. No trip there have been planned this year. We even have stopped ordering from Amazon – they sell Trump products. The political climate will need to change before we reconsider.

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