Barack Obama and the Welsh economy

After an enthralling few months in the political life of the United States of America, to say that the 5th of November 2008 was an historic day would be a gross understatement as Barack Obama became the first African-American leader of the world’s largest economy.

His election will surely bring political and economic stability after months of a lame duck president who had neither the leadership, nor the imagination, nor the energy to deal effectively with the financial crisis facing his country.

Most importantly, as I said on this blog last week, President-elect Obama’s victory may boost that most elusive of economic concepts, namely consumer confidence, among American citizens at a time when there has been enormous uncertainty within homes and businesses about the future.

It will be fascinating to see how the rest of the world reacts to the Obama win. Certainly, on Wednesday morning, it looked like the markets in the Far East had reacted positively, although share prices fell slightly in other markets later that day.

However, amid this general euphoria, there is potentially a small cloud on the horizon for the UK economy. In his economic manifesto, not only did President-elect Obama suggest that there should be tax penalties on US companies that relocate jobs overseas, but he also promised tax breaks for companies that create jobs in America.

In addition, he called for an end to tax laws that allow multinational corporations to defer paying taxes on the profit they make in foreign countries as long as they keep the money abroad. Instead, he proposed that the taxes created by any changes should be used to reward companies that create jobs in the United States by maintaining their headquarters in the United States.

Given his critical victories in blue-collar states such as Pennsylvania, Ohio and Michigan, there will be enormous expectations that he keeps to these election promises.

This could have a significant impact on the Welsh economy, especially as the USA represents the largest proportion of inward investing companies in Wales. For example, the recent £70 million investment by Ford showed the importance of American manufacturers to our economy and any move towards protectionism could have serious implications over the next four years.

Indeed, there are already concerns that Airbus in North Wales could miss out on a £4 billion military contract which US politicians believe should go to Boeing. With the decision on the contract being left to the new administration which takes office in January, this could be a bellwether as to the future business intentions of Obama’s presidency.

With such potential pressures on the new President to prioritise US jobs, it is vital the UK Government moves quickly and positively to strengthen the “special relationship” that includes strong bilateral trade links to benefit both countries.

It is also critical that the Welsh Assembly Government maintains its effort to keep American firms in Wales and, more importantly, supports the excellent International Business Wales team based in New York to get US companies to continue their investment into Wales.

Any such trade links should work both ways and the importance of Welsh firms proactively seeking opportunities in the United States cannot be overemphasised. The re-emergence of the Wales North America Business Chamber as a vibrant network and a source of expertise and information is therefore to be welcomed and their event on November 20th at the Hilton Hotel should be attended by every business which wants to look to create a long term relationship with the world’s largest economy.

The last Democratic president of the United States was elected on the slogan “It’s the economy, Stupid” and it can be argued that his party’s iconic successor was also swept into office on the back of the financial crisis which engulfed the incumbent administration.

Despite the election rhetoric, America will not miraculously recover overnight from its financial problems and the next few months will be a real test as to whether President Obama’s policies can, as he has promised, revitalise the United States and whether “the audacity of hope” becomes the slogan for the recovery of the global economy.

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