Foreign policy as economic drag

AT AN INTERNATIONAL CONFERENCE of parliamentarians in Strasbourg, France, with delegations from some 81 countries, and subsequently at the European Parliament in Brussels, I was invited to talk about population, food, water, climate change, and energy, yet the question-and-answer sessions, as well as individual conversations, invariably turned to U.S. foreign policy.

Elected representatives from other countries not only are bewildered by an American foreign policy that they cannot fathom, but increasingly angered. The America they now see is not the one they once knew. In fact, anti-American sentiment seems to be spreading throughout the world. The Pew Global Attitudes Project reported that "discontent with [the U.S.] and its policies has intensified rather than diminished." The Pew polls show that "the war in Iraq has undermined America's credibility abroad," and that "there is broad agreement in nearly all the countries surveyed ... that the war in Iraq [has] hurt, rather than helped, the war on terrorism."

Not only is the arrogance of U.S. unilateral decisionmaking deeply resented, but, in many countries, this nation no longer is viewed as trustworthy. Moreover, the repudiation of American foreign policy is translating into a rejection of products with U.S. brand names. Europeans are, in effect, holding an economic referendum on U.S. foreign policy, voting with their pocketbooks.

Worldwide, eight of the 10 leading product brands are American. More than half the sales of each are outside U.S. borders. John Quelch, professor at the Harvard Business School, maintains that "a deepening opposition to American foreign policy is threatening the long-term strength of these brands."

The Financial Times reports that some of the world's strongest consumer brands, such as Coca-Cola, McDonald's, and the Gap, are being hit hard. Coke sales in Germany have dropped 16% and the company has written off $392,000,000 "to reflect impaired business assets there."

McDonald's, a corporation with a remarkable historical growth record, has seen its sales come to a near standstill across Europe. The Gap has pulled out of Germany entirely, a move that has been responsible, at least in part, for a 10% reduction in international sales. Falling attendance at Disney's theme park outside Paris dropped revenues to where it had to be rescued by its parent company. Wal-Mart, the world's most successful retailer, is facing heavy losses in Germany, which is the world's third-largest economy after the U.S. and Japan. Sales of automobiles made by General Motors and Ford also are suffering in Europe. With losses of $236,000,000 in the region, GM is laying off 12,000 workers in Germany. Look for Ford to do the same. Even Microsoft, Nike, and Yahoo are feeling the pinch.

Not wanting to feed the anti-American backlash, companies typically blame economic conditions for their declining sales, but the International Monetary Fund projects German economic growth at two percent (reversing the prior year's negative-growth trend). In France, where U.S. products are taking a beating, economic growth looks to be about 2.6%, up from 0.5%.

The economic fate of thousands of U.S. companies operating internationally will be affected. The indirect effect of the war in Iraq on the U.S. economy could become a major issue. Quelch fears that "the cost to the American economy could be far greater than the cost of the war."

This downturn in sales abroad likely will touch all Americans in one way or another. Within the U.S., it will affect job creation and the stock market. It will influence the holdings of some 90,000,000 individual investors, the market value of mutual and pension funds, and the retirement income they generate. It also may reduce the cash flow of the endowments that foundations rely on to provide grants and that universities use to help cover operating costs.

I have been traveling abroad for nearly 50 years, ever since sailing from New York to Bombay to spend the last half of 1956 living in Indian villages. At no time during this period have I encountered the level of concern about U.S. foreign policy that exists today. While it is too early to see all the long-term effects clearly, some of the economic fallout is becoming disturbingly clear. The time has come for this country's leadership to fashion a new and better foreign policy, one that is responsive to the concerns and needs of the entire world. In today's integrated world economy, ending poverty may contribute as much to U.S. security as eradicating terrorism.

Lester R. Brown, Ecology Editor of USA Today, is president of Earth Policy Institute, Washington, D.C., and author of Outgrowing the Earth: The Food Security Challenge in an Age of Falling Water Tables and Rising Temperatures.

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