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Is Trump destroying $ 19.7 t brand USA?


Comments / {{hitsCtrl.values.hits}} Views / Thursday, 16 February 2017 00:00


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Tourism and exports are key pillars in the US, being a 19.7 trillion dollar brand. Seen here are US President Donald Trump and his former National Security Adviser Michael Flynn

 

 

Many people are not aware but the most powerful nation brand in the world is USA valued at $ 19.7 trillion and is deeply rooted to the world economy in the areas of tourism, exports, governance, sports, people and culture which is what President Trump seems to have missed out in his executive orders.

Whilst some can argue that ‘Making America Great Again’ must be the sole objective of the President in his first 100 days in office, he must also understand the bigger role he has in his new seat and if he does not, may be organisations like the UN and World Bank will have to mediate given that the world economy is just picking up after a downturn in the last couple of years. 

Trump must understand the changing role he takes whilst he sits in the most powerful job in the world and making statements like exiting the TPP and banning visitors from terror sourcing nations will not help the global economy pick up. In fact, these decisions will actually hurt the $19.7 trillion dollar brand which in turn will impact attracting higher FDIs, quality tourism and higher value export as per the latest research from global brand experts like Simon Anholt. Let me do a deep dive to this area and the impact to Sri Lanka.



Latest Fitch reportUntitled-188

What is alarming on this front is that the latest report by a leading credit ratings agency, Fitch, which says Donald Trump’s presidency poses a risk to the global economy. The report highlights Trump’s unpredictability, his administration’s aggressive tone and his break with established “norms” in international relations as the main threats to the global economy. The report goes on to say that the new US administration could damage rating scores which in turn affects sovereign ratings which is an alarming statement.

What is sad is that that US policy that has earned respect for predictability over the years is now diminished with executive orders like exiting the TPP with just a stroke of a pen striking away international communication channels and relationships, which is more damaging to brand USA than actually making it great again as per the Anholt Nation Brand Building Hexagon.

In my view the Trump presidency can cause possible disruptions to trade relations, limit migration that affects the amount of money foreign workers in the US can send home, and result in “confrontational exchanges” between policymakers that could spark swings in currencies which can have adverse implications on countries like Sri Lanka where also 70% of the exports in the apparel sector are consumed by the American consumer.

Fitch’s intervention comes after warnings from the leading think tank, the Organization for Economic Cooperation and Development, that policies of protectionism and trade tension risks can dent global growth, stoking inflation and harming living standards which will impact the overall poverty numbers that are in the border line which I guess needs greater focus by organisations like the United Nations that incidentally are strongly influenced by the US sadly.



Nation brand building components – Tourism

One of the key components in the nation brand building model as per Simon Anholt is tourism apart from the other pillars like exports, people, sports or culture that impact the overall attitude people have towards a country.

If I focus on the tourism pillar, the US Tourism Authority decided to invest in marketing a few years back on brand tourism USA for the first time in the last 273 years. After having never focussed on this area of the economy for driving revenue, the outcome was so positive that it shook the world of marketing with an amazing campaign themed ‘A land of dreams’.

But sadly, the blanket suspension by President Trump which was overruled subsequently banning travellers from Iran, Iraq, Libya, Sudan, Somalia, Syria, and Yemen to the US for a 90-day period from signing the executive order created a backlash for the 19.7 trillion dollar brand. I guess we will have to see how Brand Finance picks these vibes in the 2017 nation brand building computation.

A person I have personally met when I was Chairman of the Sri Lanka Tourism Bureau, David Scowsill, President and CEO, World Travel and Tourism Council (WTTC). A very straight-talking man issued a strong statement stating that the ban violated the fundamental right of Freedom to Travel as per the UNWTO values. He went on to say that it has created immense confusion among travellers and travel companies worldwide and the WTTC believes that all people have the right to cross international borders safely and efficiently for business and tourism purposes which was the first agitation that Trump saw from an worldwide policy making body.

I would personally support his argument given that none of the shocking domestic incidents in the US since 2001 has been attributed to external terrorists who have specifically flown into the country to commit an atrocity. Hence this decision in fact was flawed to my mind.

Trump has forgotten that the ethos of travel and tourism is about building bridges between divides in cultures, fosters understanding across religious and geographic boundaries, and generates more peaceful coexistence. The tourism sector is responsible for the livelihoods of millions worldwide and is reported to give 1:11 jobs globally. It accounts for 24% of the GDP in some economies like Thailand and Malaysia. Hence, if President Trump is actually keen on making US great again, this industry will need more careful nurturing than just banning people visiting the country.



Tourism worth $ 247 b

Latest research reveals that travel exports to the US recorded a mammoth $247 billion whilst overall US exports declined by 2.3% in 2016. International travel also generated a trade surplus of $ 88 billion in 2016. US travel researchers noted that without the travel surplus, the overall 2016 US trade deficit of $ 502 billion would have been 18% larger. I guess President Trump may have not known of this fact when he intervened on policy on this sector in his first week in office.

Post 9/11 the US made a policy decision on the Visa Waiver Program that resulted in the creation of the Brand USA marketing organisation, open skies aviation agreements with many countries that propelled the 19.7 trillion brand USA to what it is today. But the real challenge is how the US is going to renovate and redo the ageing infrastructure of the US that can really boost tourism in the years to come.

Maybe it’s time that US tourism authority creates awareness among the key policymakers of the country including President Trump that international visitors create jobs. Recent studies directly reveal that it supported 1.1 million Americans have a livelihood and what the industry needs is increasing the per visitor earnings than create uncertainty, which was sad for not only USA but also for the tourism industry as a whole. Let’s hope the current decision by the US Judiciary to uphold the suspension of the travel ban is respected by the powers that be but to my mind the damage to brand USA has already happened and it will take time to rebuild this.

Nation brand building components: Exports 

The decision to move out of TPP by President Trump is the next challenge confronting the world. Sadly the a key pivot of the nation brand building hierarchy is exports and the TPP was the working by 12 countries for over 10 years and now it’s undone by just a stroke of pen, once again taking away the dream of the American farmers to penetrate the Japanese market which is currently on protection mode. The ramifications to countries like Sri Lanka are yet to be seen. 

The fact of the matter is that NAFTA countries are integrated 55% by the trade agreement whilst ASEAN is registering 35% integration. The SAARC countries’ integration on trade is at a low ebb of 5.3% even though South Asia is considered by many as the growth engine to the world. 

The world was banking on the TPP to make the world one and drive integration among nations specially linking the US economy to the world from January 2017. But now this has been undone and world is cracking their heads on how to manage this issue that sure will hurt brand USA values at $19.7 trillion as per the latest Nation Brand Index. I guess these facts were not known by President Trump or the implication to the world in the quest for making America great again. The million dollar question is, what does the world do?



Next steps

1) It’s time that organisations like the UN and World Bank engage personalities like President Donald Trump so that key decisions in tourism and trade will be taken with a world view rather than just America only.

2) The ambassadors of respective countries whose trade with the US is sizeable such as Sri Lanka must do relationship management so that policy will remain consistent.

3) Sports being another pillar in the Nation Brand Building Hexagon must be facilitated so that the US remains engaged with the world and thereby helps influence strategy from US policymakers, especially by Arab and Muslim countries where the tourism ban was made initially. The Olympic Council has a role to play too.

4) Poverty and the implications from tourism and trade need to be marketed in countries like the US so that peer pressure can influence foreign policy.

[Dr. Rohantha Athukorala was the 8th Chairman of Sri Lanka Export Development Board (EDB) and then Chairman of Sri Lanka Tourism Bureau. He has also served the UN as the Head of National Portfolio Development for UNOPS – Sri Lanka and Maldives when the country won the Best Global Project Award. Currently he is the Chairman of the largest retail in Sri Lanka, Lanka Sathosa. The thoughts are strictly his personal views.]


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