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Hello and welcome to World Business Report from the BBC World Service.
I'm David Harper and on this edition we're addressing that advert.
Everyone else is talking about Sydney, Sweeney and American Eagle for many different reasons.
So we thought it was time to ask whether it actually worked as a promotion.
Also coming up, have we got to sow if we want to grow?
We've been asking the chief economist of the OECD if companies are investing enough to promote global economic growth.
And Japan gets a big defence order quite a moment for a previously pacifist nation.
First, though, shares of an American denim company went up by 23% yesterday after Donald Trump became the latest person to weigh in on a debate surrounding their controversial advertisement.
The advert for the American company American Eagle features the actress Sydney Sweeney, who starred in Euphoria and The White Lotus.
Some criticised the Sweeney's wordplay in the commercial, which sparked debate over race and beauty standards.
Jeans are passed down from parents to offspring. often determining traits like hair colour, personality and even eye colour.
My jeans are blue. American Eagle has defended the advert, saying it's purely referring to the company's denim jeans.
Reports later surfaced that Sweeney is a registered Republican in Florida.
Shortly after that, Trump made comments about the row and expressed his support for her.
If Sidney Sweeney is a registered Republican, I think her ad is fantastic.
Now, Sidney Sweeney hasn't commented on the backlash or confirmed her political affiliation.
Sarah Banay-Weiser is a professor and dean of the University of Pennsylvania's Annenberg School for Communication.
When I first saw the ad, I think my reaction was kind of like resignation in some ways, that this is quite a familiar way to construct an ad using a conventionally attractive woman.
It also kind of recalls different ads in history, like the Brooke Shields ads with Calvin Klein, which people have commented on.
It's a little tongue-in-cheek and sort of self-objectifying.
So it recalls Sabrina Carpenter's album cover that also sort of broke the internet.
So in some ways, it's not a very unusual ad in the way in which clothing companies have often used women and focus on women's bodies as a way to sell their products.
Now, the part of this which has raised so many eyebrows, it's interesting you mentioned the Brooke Shields advert.
This, of course, is an advert from back in the 1980s, I think also similar aesthetically and highly sexually suggestive.
But the bit that has raised possibly the most eyebrows this time is this idea of that line of my genes are good.
Now, obviously, the play on words here between genes with a J referring to clothing and people's genetic makeup.
How intentional do you think that is, really?
I mean, I think that people who create ads are super smart people.
They have their finger on the cultural pulse.
They know what they're doing. I find it difficult to believe that something that is so easy to pun on from Gene to G-E-N-E would be an accident.
But I suppose the question is, would be, is it a simple play on words and people have then developed that to interpret more from it?
Or was it designed, do you think, from the very outset that it would appeal to a certain market?
I don't know how intentional it would be or it was.
I think ads aren't created in a cultural vacuum.
They're created within a wide and rich cultural context.
Right now in the United States, the discussion about genes and this idea about immigrants and migrants and nativism and that kind of thing, all of that is happening in culture right now.
We've got feminine ideal represented in Tradwives.
We've got lots and lots of discourse about nostalgic views of femininity.
All of that, I think, is part of the context in which this ad makes sense.
The suggestion being that this carries a different message because it's being said by a blonde-haired, blue-eyed woman, white woman.
Yes, I would say. I would say that it carries a very specific message.
She says it in the ad. She says, my DNA has been passed down through generations or something.
I don't know exactly the words, but, you know, she references genetics in the ad.
As an advert. I mean, I assume the fact that we're talking about it now and many other people are, it has worked.
Oh, I think for sure. You know, American Eagle said before the ad even was launched that this may be a controversial ad.
You know, this was not like, oh, look what happened.
You know, this hit some kind of nerve. Ads are created to get attention.
They are the thing that sells products, right?
They're the narratives and the stories and the images that companies use to sell their products.
Was it a success? I would say for American Eagle, 100%.
The question remaining, though, is that this has been controversial.
It's also been divisive. And they have, one way or another, they have attracted the attention of some more right-wing Americans, some Trump supporters.
Will they gain more from the people that they gain from that community than they will lose from the people who might want to turn away from them because of this ad?
I mean, I think that's sort of important and common question that all companies ask themselves.
Look at Nike. Nike went in a very specific political direction, knowing full well that they were going to lose part of their audience.
I mean, I think that we've long since passed a time where. advertising or advertisements are trying to reach a broad swath of people, right?
We are broken up into different consumer niche groups.
We buy through our politics. And so I think American Eagle probably took a gamble.
Who are we going to resonate with? Who are we going to alienate?
And what's going to be the ultimate cost of that?
I just want to ask you finally and quickly in terms of Sydney Sweeney herself.
She's a star in the ascendance. And this has brought her a lot of recognition.
A lot of people who wouldn't perhaps previously have been aware of her from maybe older groups, other groups are now aware of her existence because of this.
But will it do her any good? I think Sydney Sweeney is also a smart, savvy celebrity, and this isn't the only thing that she's done.
She's also selling her own product. She's on hit streaming shows.
She's getting a lot of exposure. Whether or not this will sort of damage her reputation among some people who don't agree with her politics or don't agree with the politics that people say are implied by this ad –
Probably that will happen. But I think, again, it's just more exposure for her and she knows what she's doing.
And the fact that this ad led to her voter registration being made public is also something that is going to add a different layer to her celebrity, I think.
Sarah Banay-Weiser from the University of Pennsylvania's Annenberg School for Communication, dissecting some of the points of that advert.
We're joined today on World Business Report by Bill Dinning, the chief investment officer at W1M.
Bill, thank you very much for joining us.
We mentioned before that shares in American Eagle are up 23 percent.
I mean, in some ways, in the short term, at least, hasn't done them any harm, has it?
No, but they needed something because the share price is half what it was 15 months ago.
The company hadn't been doing particularly well.
So great example of all publicity is probably good publicity.
If people are arguing about an ad, that makes it probably even more powerful.
I think it's also quite interesting that actually at the end of that ad, she gets into a Ford Mustang and apparently she's an old car collector.
So there we go. We know all about Sydney Sweeney now too.
Something her and I have in common, in fact, probably the only thing her and I have in common.
Let's just move on, because we were talking this morning about figures from Diageo conflicting reports on whether their latest figures have been have been good or not.
But it is an interesting position at the company as they're awaiting some new keyboard level staff.
Yes, indeed. And obviously, we've got an interim CEO, but the board is going to make a determination on the permanent one.
Yeah, I mean, I don't think those numbers were particularly brilliant, but organic sales growth was a little bit better than expected, but still pretty tepid.
There was also some interesting stuff in there about tariffs, I thought.
They reckon now there's a $200 million annual tariff hit for them.
They were $150 million before. It's not 100% clear how much of that they're going to have to eat.
But overall, I think, you know, the company's clearly been having a very rough time.
And there's a possibility of a bit of a turnaround there.
And particularly if they do the cost savings, then that's always going to be, I think, popular with shareholders who've seen the company struggling in recent times.
Bill, thank you for your thoughts. We'll try and come back to you again a little later in the programme.
Let's move on for a moment, though, because we've heard governments around the world tell us that growth is the answer to driving the economy forward.
It's easy to say. It's a lot less easy to make it happen.
Now, the Organisation for Economic Co-operation and Development, the OECD, has warned that weak corporate investment could be a significant threat to global economic growth.
It says that corporate spending in most developed economies has not recovered to where it was before the financial crisis or the COVID-19 pandemic.
But why? Alvaro Santos Pereira is the chief economist of the OECD.
First of all, it's important to say that if you look at before and after the global financial crisis around 2008, there was a huge hit on investments.
Investment went down in advanced economies by 22% and by 33% in emerging market economies.
And this was due because of a decline and not only in business investment, but also in public investment and also in housing investment.
And then with COVID, there was a second hit in which investment went further down by 8% in advanced economies, about the same in emerging markets.
What this means is that investment is really doing a lot poorly than they used to do.
And so this has massive consequences for job creation and has massive consequences for growth.
So the question we need to ask, I suppose, is why?
Is it just as a result of the financial crash and then the COVID pandemic after that?
Or are there other factors at work here?
There are other factors at work as well.
So obviously, these big shocks had an impact, especially in terms of uncertainty.
But we concluded that can only attribute about half of the declining investment to further uncertainty and to lower aggregate demand.
So basically, the recession made us have less investment.
So this is only half. The other half has to do with structural factors.
And you ask me, what structural factors are we talking about?
Well, first of all, it has to do with the change in the way that we invest.
So we used to invest in factories and tractors and hardcore, what economists call capital.
And right now, capital became a lot more intangible.
What does this mean? Well, it means capital as software, as R&D, as data.
So things that, you know, right now are a lot more important for our digital economies.
So this is the first sector. What we know also is that this type of capital depreciates very fast.
It depreciates around 25 to 30 percent depreciation rate, which is much faster than the typical depreciation rate.
And on the other hand, also, this investment for many firms, they know that depreciation is high.
And also, financing is not so straightforward.
So, for example, if you want to have a financing of a factory, go to a bank, and you try to say, well, I would like to make this investment.
But if you say, well, I need to buy some data, or I need to buy software, or I need to buy other type of what we call intangible investments, then it's much harder for the banks to lend.
They see it as a more risky and less secure investment, basically.
Exactly. And firms start saving a lot more.
So, firms... Right now, they used to be borrowers.
Now they are also lenders because they save a lot more than they used to.
And so instead of investing, they're retracting part of the investment because of their savings.
The second part that is really important for us to understand why it's a downfall for investment is regarding housing investment.
As you know, in many countries, we have huge affordability issues for many families to buy houses.
Housing investment has been much, much lower since the financial crisis than it was before.
And there is a huge mismatch between supply and demand in many countries.
And this is causing a big hit on investment.
Because people who are more secure in their own home are more likely to put more money into the economy, basically.
Yes. And also because right now there's not been, for a variety of reasons, enough construction of housing.
So build has to be a top priority in many, many countries.
Why don't we have more construction in terms of houses?
Well, it has to do with either densification restrictions, some licensing restrictions in many countries, zoning restrictions, and also labor shortages in construction sector.
And this is having a massive impact on housing investment.
And this is an area where I think countries and governments have to pay close attention to decrease the housing affordability problem and to bring more investment in jobs to the countries.
Alvaro Santos Pereira, Chief Economist at the OECD.
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This is World Business Report from the BBC World Service.
Now, with security fears increasing across the world, in the Far East in particular, countries are taking defence more seriously.
And that's why Australia has committed $6.5 billion to purchase brand new warships.
And the contract to make them has gone to a Japanese company, Mitsubishi.
Japan has for decades been a nation which treads carefully on defence.
In fact, it's the first time that Japan will export major military equipment like this since World War II.
So how significant is this deal in the context of Australia's evolving defence relationships in the region?
I asked fisherman Yopan Tong. who is an associate professor and head of research at Deakin University's Centre for Future Defence and National Security in Australia.
It's the very first warship export deal that Japan has been able to broker.
And as for Australia, it's a major procurement.
This is a big contract that we're talking about here.
And it's also significant because it really is meant to meet the needs of Australia's navy, which is something that governments have been talking about for a while but haven't really... put a lot of effort to actually meeting those needs, I would say.
Because just to go into a bit of the backstory from the Japan perspective, defence exports is really not something they've done for a long, long time.
Exactly. They've had this self-imposed ban on foreign arms sale for a long time after the experiences of the Second World War.
And so to have this happen is really important, also because of the measures that were put in place by the Japanese government as well.
The setting up of a joint public-private promotion committee, for instance, where they had relevant government agencies working with companies to really support this project is something that's never been seen before.
And in terms of the significance for Japan, at a time of a lot of change in the international markets and change for Japanese industry, could defence potentially become a more significant part of their economy?
That is something to watch for sure. Looking at this particular deal, I think it's a good example of what Japan could be able to do going forward if it were to invest even more resources into bolstering its weapons export industry and to also encouraging public-private cooperation in this space.
I think they will also be treading very carefully just to make sure that they don't raise too much alarm in terms of exports and things like that, given the sensitivities within the region.
I was going to ask about that a little bit, because how much has growing tension within the region and globally fed into Japan focusing more on defence?
It's useful to note, right, that in 2022, Japan and Australia had signed this joint declaration on security cooperation, which was seen as a quasi-alliance between the two countries.
And in many respects, this helped set the stage for the collaboration and the closer partnership we see between the two countries now.
But in terms of what Japan has been trying to accomplish within the region at large, we've also seen Japanese government be much more proactive in deepening relations, especially on the defense and military sides with countries like Indonesia, the Philippines.
And they, in fact, were also involved in exporting some of its defense systems to the Philippines.
It marks a trend where Japan has been seeking to revise its policies in order to allow its companies to be more active internationally. foreign arms sales, defence exports.
And many analysts have said that this is indeed in response to, you know, the growing cooperation seen between its rivals like North Korea and China, but also the real risks that Japan feels from these neighbours as well.
We should also mention a significant number of these ships are going to be built in Australia and there are other defence companies involved in this contract as well.
Is this a further sign of this closening relationship?
Yes, indeed. This is an important point, the fact that eight of these frigates are planned to be jointly developed and produced here in Australia, in Western Australia, to be more precise.
And this is something that the Japanese had reportedly agreed to in order to assuage concerns about the transfer restrictions that are normally placed on their arms exports.
It also speaks to Australia's longstanding desire to enhance national resilience over all frigates.
So really, I would say that this deal is an example of the deepening ties between Japan and Australia.
It's also an example of Australia's own desire to become much more diversified in its defense procurements, but also much more resilient.
Pishaman Yopantong from the Deakin University Centre for Future Defence and National Security in Australia.
Bill Dinning from W1M, Chief Investment Officer at W1M, is still with us on World Business Report.
And I wanted to ask a little bit about this interview we've seen that President Trump has given with CNBC.
There's a lot of things to talk about off the back of that interview. not least the fact that he's claimed to have been denied a bank account by two large American banks.
I mean, this is a thing we've seen in the political sphere in other countries as well, but an interesting point nonetheless.
Well, indeed, and I believe he said that he wanted to deposit a billion dollars, but he's been called out before on slightly exaggerating, perhaps, when it comes to matters of finance.
But there's a serious point there because he does have the power to have an investigation into the bigger banks relative to what they might be doing in terms of their policies.
And so that could be a slight headache for some of the bigger banks in the short term, for sure.
And we should say that one of the banks you mentioned, J.P.
Morgan, have said that they don't close accounts for political reasons.
Just very, very quickly, we've also heard about a business review from BP.
Their profit's up, but they're still cutting costs.
Yes. And in fact, they've been saying they're going to cut costs, but it looks like they're going to do so more aggressively.
I think the new chairman seems to be having a bit of an impact early on.
And I think the market will like that. And I think some of that will probably be getting out perhaps of some of their sort of green energy initiatives, which haven't done very well and focusing on the stuff that has been doing well.
So I think that was probably good news for what's an important business for the UK and for the UK market.
An interesting one to look at. Bill, thank you very much for being with us.
Now, finally, if I had a dollar for every time we mentioned tariffs on World Business Report in the last few months, I'd even settle for 25 percent of a dollar, if I'm being honest.
As much as we might feel we've heard a lot about Donald Trump's changeable trade policies, it is important.
Tariffs can have a major real world impact on companies that trade with America.
And the latest country feeling the pain is India, this time connected to their purchase of Russian oil.
Now, President Trump hasn't specified exactly what the new tariff will be, but it comes just days after he unveiled a hefty 25% levy on India.
And even if the final figures were to remain there, it's a huge challenge.
Pankaj Agrawal is the chief executive of No Name Apparel, based close to the Indian capital, New Delhi.
The company makes clothes using sustainable fabrics, such as organic cotton, hemp and linen, and sells to big-name retailers in many parts of the world.
We last spoke to him at the beginning of April, when he said 50% of their products were exported to the United States.
I asked him if that had changed. That is pretty much still the case, David, although I can't say it will be in the near future.
See, David, I don't think supply chains change overnight.
They take time. You can't build an entire supply chain infrastructure and factories and qualified labor.
It doesn't happen overnight, much as Mr. Trump would like to believe otherwise.
It will, however, definitely change because the direction that it is kind of getting now, people will try and create alternatives.
It's not that the alternatives did not exist before. but they will scale up.
Here in India, we will probably see a decline, at least in that particular section of the market.
And yes, it will change over time. I just want to go back to something that we talked about a little while ago.
This is a little clip of that interview a couple of months ago, where you said you were conscious of some problems in the short term, but quite optimistic in the long term.
Obviously, we will have a short-term impact, which we are obviously seeing almost with immediate effect.
But in the long term, we remain optimistic and positive that things will pan out all right.
Do you think that is still the case? I 100% still think that is the case.
And let me just illustrate that with a couple of numbers.
The Indian garment and textile exports to the US comprises approximately $10 billion.
However, the Indian domestic market is close to about $100 billion today.
So we have a huge domestic economy and whatever impact we do feel from the US will definitely get absorbed in the domestic market, number one.
Is that domestic market recurring at the moment?
The domestic market is de-growing at the moment, but still it is very big.
And definitely there is a lot of potential in many markets which India typically has ignored in the past.
For example, the EU, for example, Japan, for example, Singapore, for example, UAE.
These are some of the markets that we've not probably focused as much as we should have.
I feel that we will now be forced to open those windows of opportunity, if I may call it, And we will have to continuously find new ways.
There is nothing else we can do. In terms of your trade with the United States, another thing that we spoke about in April, and we can hear a little bit of this now, is you were kind of confident that there would be some sort of negotiation on how the tariffs would pan out between manufacturers and some of the customers.
We are still to figure out, but there is some give and take here.
So something they will pass on, something we will absorb.
I don't think it's going to be a major difference for anybody at the end.
Is that something which has panned out in the way you expected?
No, that, David, unfortunately, has not panned out as I would have expected.
I had thought that better sense would prevail.
Up till now, there has not been a significant challenge, David.
In fact, since April, our business with the US has... sense of fear and paranoia everywhere.
The sense of tariffs being much higher in China and some other Asian countries, as well as a lot of political unrest, for example, in Bangladesh, led to a lot of business coming our way.
But we were always conscious of the fact that this was very short term.
Now, as we look at the future, a lot of that is going to probably disappear overnight.
The biggest risk that we carry with us today is a lot of these orders are currently under development and when the time comes to ship them sometime towards let's say the end of august or september probably we would see a lot of cancellations and that is going to lead to huge unsold inventory and a lot of trade receivables which is probably going to be the biggest short-term dilemma that the entire industry is going to face And of course, if these are orders which are tailor-made for particular retailers, they're not things that you can sell elsewhere.
Exactly. So in terms of the future, you say that the future for your industry is probably looking to new markets outside of the US.
I mean, that could be detrimental to the choices available to US customers.
I 100% agree, David. In the long term, I see the biggest sufferer of this whole predicament to be the US customer.
The suppliers will find other places to sell their wares.
But the US will find it very difficult to roll back this that they have started.
In terms of the negotiations that we've seen between Narendra Modi and Donald Trump, how confident are you that India is getting a good deal here, is able to fight for a good deal here?
No, David, I cannot comment on that. I am not the government.
I see what is happening. And all that I can see is that there is no sense to be made in these discussions.
As they say, which way the camel will sit, only the camel can tell.
So India is almost in an impossible situation in dealing with the US?
At this point in time, it does appear like that.
But international trade does not work on people's wins and fancies.
So 101%, there has to be some solution that comes out.
It is not a win or lose game. It has to be a win-win situation.
Ultimately, we cannot, for example, the deal that Pakistan has signed with the US, I am at least thankful that we haven't done that.
Only the camel can tell. With a line like that, he should be doing my job.
Pankaj Agrawal, chief executive of No Name Apparel, just updating us.
We spoke to him a couple of months ago, just updating us on how their position has changed in the light of further announcements on tariffs.
I just want to remind you briefly, we were talking about some of the reaction to the Sydney Sweeney advert earlier.
There is loads more online, bbc.com slash news, including Donald Trump's reaction to the carmaker Jaguar Land Rover ad. after they've named a chief executive, of course, in the face of a hugely divisive rebranding there as well.
Loads more to read. And of course, you can get World Business Report available as a podcast online as well.
But for now, that's it from us.
