If you’ve been paying attention to politics over the past year, you’ll have heard a great deal about the importance of foreign relations. Would we be better off staying in the European Union or negotiating independent treaties with nations around the world? How picky can we afford to be about dealing with regimes accused of human rights abuses or other misdeeds? What difference does it make when our leaders are popular or unpopular abroad, and how do other countries respond to the way we treat their representatives on state visits? If you’re a business owner, these questions should be important to you because foreign relations affect the health of your business. Here’s how.
General Economic Policy
No country stands alone and the state of our economy is impacted significantly by how it compares to other countries. If the economy is perceived as healthy and the government is sensible in its commitments and on a stable course, overseas buyers will be more willing to invest in the pound, raising its value and increasing the government’s buying power. If, however, the reverse is true, the value of the pound will fall – which, on the plus side, opens up the option for the government to borrow at lower rates of interest. In the short term, the primary way the government can mitigate the effects of a swing in either direction is to adjust interest rates, with an obvious impact on business. The value of the pound may also influence its decisions as regards tax and public spending.
Access to Foreign Markets
The Foreign Office and the Department of Trade and Industry both play a role in securing access to foreign markets to expand investment options for British businesses. Historically, many exchanges have limited access to their own citizens or those of neighbouring countries but that has changed in recent decades. An example was when Lady Barbara Judge worked with the US government to open up the Tokyo Stock Exchange to international investors, and the results have generally been beneficial for all involved. Even if your business doesn’t invest in this way, you can be impacted by changes in access indirectly, as it influences things like the way pension funds are managed and it can also affect the finances of companies you trade with.
Imports and Exports
If you do a lot of international trading, you’ll know that the cost of importing and exporting goods changes all the time as duties and tariffs change. While we’ve been in the EU that hasn’t been as much of an issue because internal EU trading has been massively simplified, but when we are on the outside it could get a lot more complicated. It also has an influence on supply chains for many companies that trade only within the UK. These additional charges affecting the import and export of goods are often adjusted for political reasons, as in the US’ trade war with China, which has had a significant negative impact on many businesses. In more extreme cases, one country may threaten to deny another access to one of its products altogether, as when Russia cut off gas supplies to Ukraine in 2006. Such extreme measures are generally short lived but they can have a significant effect on small businesses unable to cope with delays in supply.
Foreign relations also affect where it’s advisable to travel, which can have a major impact on businesses with franchises abroad, those working closely with foreign partners and those reliant on sending out sales representatives or other agents to ply their trade. The most obvious examples of this are when war or terrorism make a country unsafe for anyone to visit or puts citizens of wealthier countries in particular danger. There can also be risks to individuals in other situations. For instance, there are still countries where it’s difficult or unsafe for women to work, where people who can be identified as LGBT are at risk or where people with particular ethnic or religious backgrounds face hostility. This creates difficulties if you have a small business team and it means you’re unable to send out the best person for the job. Often a good inter-governmental relationship reduces such risks as special treatment is afforded to visitors from respected countries.
When domestic finances come under strain, the government is often criticised for continuing to spend on foreign aid. This spending, however, is about more than simple charity – it’s a diplomatic tool. Just because countries are poor doesn’t mean that they don’t have valuable assets, and securing friendly relations through the provision of aid can open up avenues for British businesses to access new and lucrative markets, whether by working there directly or by linking up with local businesses.
Keeping an eye on what’s happening with foreign relations can help you to plan for any problems likely to arise and lookout for opportunities that might be able to advantage your business. It’s something every business owner should be alert to.