Essays on Implications of Transnational Terrorism on International Trade by McKenna Article

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The paper "Implications of Transnational Terrorism on International Trade by McKenna" is a good example of a marketing article.   John McKenna’ s paper (2005), which discusses both the short-term and long-term repercussions of terrorism in international trade, is divided into five (5) sections. He introduces his paper by succinctly explaining the phenomenon of terrorism. He writes that terrorism is the actual or potential use of more-than-usual violence; its aim is political; its intent is to influence the attitudes and behavior of the general public, with its immediate victims simply treated as collateral damage; and its consequences felt beyond national or state boundaries.

Terrorism results in loss of human lives; hence, it is imbued with intense emotions. Its aftermath is extremely vivid to the sense; thus, it effectively induces fear. Overall, it impacts profoundly on human – that is, individual and family units – well-being, outweighing even its economic impact. Its negative effect on domestic economies and international trade flows are in staggering fashion.   Surveying what he said to be rich literature on the subject, McKenna sketchily provides the meat of discussion on the issue of the impact of terrorism on international trade.

His basic premise is that the consequence of terrorism is the disruption of people’ s consumption and production preferences. As such, the industries that are primarily impacted are tourism, transportation and insurance. Consumption is down and exposure of fund portfolio becomes limited on account of higher assessed risks. Expectedly, the result is limited growth. Similarly, the industries that are laid waste by the terrorists minimize their activities. Notwithstanding the actions of the government to lessen the impact of terrorism, with the consumption patterns being adversely affected (even just in the short run), the domestic production in export and import substitution sectors negatively determines any country’ s capacity to maintain sustainable global trade.   McKenna cites as a concrete example in the case of oil.

He says oil-producing countries have to contend with loses in profits as a result of terroristic attacks on supply chains, pipelines, and distribution outlets. On the other hand, terrorism holds back oil-exporting countries’ ability to estimate tax revenues and increases the insurance premiums for multinational corporations and government-controlled-agencies operating in the petroleum sector.

In addition, terroristic activities – on account of the climate of uncertainty that they create -- cause the cost of doing business to balloon and the mobility of products to be hindered. Too, any investment by the government to improve its security spikes up the overhead cost of doing (international) business.   Terrorism is likewise affecting the capital account and equity market of any country. To address insecurity governments would normally divert investment from viable industries to military and security spending. This step normally entails higher borrowing from foreign governments and institutional funders.

For countries that have more stable economies, it at least increases the volume of foreign remittances. But for countries of developing economies, it triggers inflation as it would require the sale of foreign reserves and production of the domestic currency. Correspondingly, the financial markets incorporate the business premiums that are associated with terrorism, which lower down investor confidence. Especially in this age of information technology, information travels very quickly inducing quick decisions by capitalists. Hence, the terrorism easily triggers negative reactions from capitalists who tend to make their judgments no longer on the basis of current and future possibilities in a given country but on the basis of the country’ s capacity to cope with the reality and aftermath of terrorism.

References

Jones, P. (n.d.). Heckscher-Ohlin trade theory. Retrieved from http://www.econ.rochester.edu/Faculty/jones/Palgrave_Jones_on_Heckscher_Ohlin.pdf

McKenna, J. (2005). Implications of transnational terrorism on international trade. Retrieve from http://econ.duke.edu/dje/2006/McKenna.pdf

Persitz, D. (2007). The economic effects of terrorism: counterfactual analysis of the case of Israel. Retrieved from http://www.aeaweb.org/annual_mtg_papers/2007/0106_1015_1802.pdf

Raby, G. (2003). The cost of terrorism and the benefits of cooperating to combat terrorism. Retrieved from http://www.dfat.gov.au/media/speeches/department/030224_costsofterrorism_graby.html

Zimbardo, P.G. (2002). The political psychology of terrorist alarms. Retrieved from http://www.zimbardo.com/current.html

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