An Obama presidency and international business

By Charles R. Kennedy Jr.
Associate Professor of Management
Babcock Graduate School of Management

From a broad historical perspective, international business has rapidly expanded and flourished when international relations were relatively peaceful and stable. Great bursts in international trade occurred when order was imposed or heavily guided by a great power democracy, namely Athens, the Republic of Rome, Great Britain or the United States.

Scholars of international relations have discussed three systemic risks to an international order now characterized by three interrelated factors: globalization, policies that promote relatively open markets and an American system of alliances.

Either nuclear terrorism, a major economic crisis or a Vietnam-type quagmire could erode domestic political support for a vigorous and global-oriented set of foreign and economic policies. The contours of Barack Obama’s presidential campaign have been inconclusive as to the likelihood that the U.S. will sufficiently pursue a transformational foreign policy that is needed to significantly reduce these risks.

Nuclear Terrorism

If a nuclear nightmare were to occur, the disruption to international business would obviously be immense. The U.S. intelligence community most fears the smuggling of a nuclear device on a ship container. International trade patterns and flows would be radically altered as security regulations and procedures would tighten to an incredible extent.

The only sure way to significantly reduce the risk or probability of nuclear terrorism is to achieve tight international control over all fissile material and nuclear bombs; only a genuine commitment to the goal of nuclear disarmament will give all nuclear powers the needed incentive to implement and oversee such a system.

For the first time in the nuclear age, both presidential candidates embraced nuclear disarmament as a serious goal. Both Obama and John McCain have been influenced by a shift in mainstream thinking about the role of nuclear weapons in securing American interests, as dramatically evidenced by a January 2007 Wall Street Journal editorial by George Schultz, Henry Kissinger, William Perry and Sam Nunn. The editorial said the threat of nuclear terrorism was serious enough to warrant the resurrection of President Ronald Reagan’s vision to banish all nuclear weapons from this earth.

Unfortunately, both McCain and Obama have failed to support Reagan’s complementary and necessary notion that this goal can only be achieved if America is willing to stop “Star Wars” or missile defense systems. Additionally, it will be more difficult to persuade Russia’s leaders to take major steps toward nuclear disarmament if they feel threatened by the West, particularly on their border. Thus, Obama’s position on the extension of NATO membership to Georgia is not helpful in reducing Russian security concerns.

Furthermore, Obama, like McCain, also supported the nuclear deal with India, presumably facilitating the increase in India’s nuclear arsenal and causing Pakistan to respond in kind.

Economic Crisis

In terms of an economic crisis causing Americans to end their support for an activist and global-oriented foreign policy, there was no sign that Obama was tapping into or was overly influenced by a more isolationist or “Fortress America”-type of thinking. Both Obama and McCain generally support the greater globalization of markets, although Obama is more likely to oppose some free trade agreements, like the one with Columbia, on political grounds.

As to the regulatory impact of the 2007-08 financial crisis, Obama may be inclined to actively seek a multilateral agreement that would establish a new “Bretton Woods” international monetary system.

War

As to the possibility of a Vietnam-type quagmire occurring, an attack on Iran in order to stop their nuclear program would loom large given Iran’s program is now producing enough enriched uranium for a nuclear bomb by 2010. Both Obama and McCain have supported the notion of preventive war to stop the Persian bomb.

In fact, had McCain won the presidency, the preventive war decision in Iraq would continue to be embraced and defended, with this doctrine having a strong possibility of being applied to Iran. Many Americans continued to support these views, and considered McCain to be a better choice than Obama in terms of who could best manage American national security in a crisis. In essence, most Americans have soured on the Iraq war because of the negative consequences that developed after the invasion, not because the decision itself was viewed as wrong.

Under an Obama presidency, on the other hand, the decision to invade Iraq will be seen as a serious mistake. Obama took this position in part because Saddam Hussein did not pose an imminent threat to attack the U.S., whereas al-Qaeda in the Pakistan-Afghanistan area did.

However, Obama has also stated that the military option to strike Iran must remain “on the table,” making it unclear if he would attack that country simply out of fear of what might happen with regard to their nuclear program.

On a more positive note, the president-elect has also declared his intention to engage Iran in direct bilateral negotiations. It is unclear if diplomatic efforts could convince Iranian leaders to curtail their nuclear development activities over the next year or two, and whether or not Obama would allow Iran to develop a nuclear-weapons capability during that time.

Only time will tell if Obama is more like recent American presidents from both political parties or more in the mold of great leaders like George Washington, John Adams, John Quincy Adams, and Franklin Delano Roosevelt, who never compromised moral duty in the pursuit of American national security.

Kennedy is the author of two books, “Political Risk Management: International Lending and Investing Under Environmental Uncertainty” and “Managing the International Business Environment: Cases in Political and Country Risk.” He is completing another book, “International Politics and Moral Choice: American Foreign Policy in the 21st Century.” He won the Babcock Educator of the Year award in 1992 and a teaching award for the Charlotte evening MBA program in 2002.