How will President-elect Obama affect your portfolio? Keep reading our special series for the lowdown.

Global reaction to Barack Obama's historic election as president of the United States was generally one of respect, admiration, and excitement for both American democracy and the new leader of the free world (though Russia was a notable exception). But when it comes to what an Obama administration will mean for the world's investment climate going forward, there are a few sticky and unresolved issues.

On the sticky side, we have free trade. On the unresolved side, there's China. We'll start with the former, and you can read on for the latter.

Free trade
Obama's stance on trade is a nuanced one. Though he noted in an October 2008 presidential debate that "Not only is it impossible to turn back the tide of globalization, but efforts to do so can make us worse off," he told the AFL-CIO in 2007 that "people don't want a cheaper T-shirt if they're losing their job in the process" and stated frequently that he will "eliminate tax breaks for companies that are moving jobs overseas."

This has caused some worry in India -- a country whose economic growth in recent years was largely built on the backs of outsourcing behemoths such as Satyam Computer Services (NYSE:SAY), Wipro Technologies, and Infosys (NASDAQ:INFY). Sixty percent of the industry's revenue comes from America, and the country's economy and burgeoning middle class are already suffering from a slowing global economy and increased competition for accounts from lower-cost locales such as the Philippines and Eastern Europe. 

If the American companies that outsource jobs -- and it's a really long list, including the likes of (NASDAQ:AMZN), Dell (NASDAQ:DELL), and Cisco Systems (NASDAQ:CSCO) -- are forced to bring those jobs back to the United States, the previously fast-growing Indian economy could see a significant near-term slowdown.

The Indian government and industry representatives, however, remain hesitantly optimistic. The country's finance minister told The Times of India that Obama "will realize that this is an inter-connected world," while others noted that Obama's support for an expanded H1B visa program will help more Indian engineers find work with American companies.

Elsewhere ...
Obama has also opposed free trade agreements (as currently negotiated) with South Korea and Colombia, and has said that he'd like to renegotiate NAFTA with Mexico and Canada. While Obama's campaign literature will tell you that his goals are fairer trade, more assistance for displaced American workers, and greater global environmental protections, there is some global worry that an Obama administration might impose and sustain protectionist policies in order to reward labor union support for his campaign and get our economy back on its feet.

Time will tell, of course, but if this were the case, then it would spell trouble for countries such as China, Japan, Canada, and Mexico, the largest sources of U.S. imports, as well as for the numerous countries for which the U.S. is the largest export market. The trouble wouldn't stop there, however. As we have seen with the subprime mortgage mess, which spiraled into a global financial crisis, knock-on effects can be a doozy.

Let's say, for example, that Chinese toy manufacturers continue to see diminished demand for their wares. That would cause more of them to go out of business, which would cause economic growth in Guangdong province (a manufacturing hub) to slow. That means lower demand for steel (since construction will slow as displaced workers cease buying new apartments and cars), which in turn hurts Vale's (NYSE:RIO) operations in Brazil and Rio Tinto's (NYSE:RTP) operations in Australia.

Got all that? Though we're skeptical that an Obama administration would end global trade as we know it (sorry, AFL-CIO), a scan of the world's newspapers showed that a number of Asian countries are concerned about U.S. protectionism, while Latin America discounts the notion that Obama and a Democratic Congress are a real threat to free trade in the region.

Getting back to China
The foreign reaction to Obama's election that matters most, however, is China's. That's because this country of 1.3 billion citizens and $1.8 trillion in foreign exchange reserves is poised to become a major global player over the next decade. Yet, as Foreign Policy noted here, China policy went largely unaddressed during the election.

China's leaders seem to be taking a wait-and-see attitude toward President-elect Obama. They sent a bland message of congratulations to the new president, and the state-run China Daily newspaper printed an editorial that reads as though most of it were written before it knew whether Obama or his rival, Sen. John McCain, would be elected.

Obama would like China to stop keeping its currency weak and start enforcing stricter quality standards on its manufacturers. China would like Obama to fix the U.S. economy so that we start buying more of their exports again. But it's hard to discern what exactly either side's plans are for our burgeoning relationship. This remains a crucial relationship for the U.S. to continue to develop, and one that international investors will want to watch closely.

As for the rest of the world ...
Indonesia is another emerging market that's been hit hard for the financial crisis, but its citizens were predictably pleased that Obama, a former resident of the country, won the election. The Jakarta Post reported that students at Menteng Elementary -- one of Obama's alma maters -- are waiting expectantly for "Barry's" triumphant return.

Folks in Vietnam, however, were not quite as pleased. It turns out the country has built a rather warm relationship with Senator McCain, the man it once imprisoned. Though not opposed to a President Obama, many thought a President McCain would have done a lot to further improve the relationship (economic and otherwise) between the U.S. and Vietnam.

Finally, there's Kogelo, Kenya, the place in the world that thus far has benefited most from Obama's election. The Wall Street Journal reported that the Kenyan government showed up in Kogelo -- Obama's father's hometown -- shortly after the news of Obama's election to hook the village into the country's power grid, and perhaps even pave the roads. Officals, according to The Journal, said the work was "previously planned," but we have our suspicions that in frontier markets like Kenya, there are no coincidences.

Our bold prediction for the future
Obama has been elected president at a fascinating time for the world. While it's clear that the U.S. remains the world's economic leader, globalization and global development are continuing rapidly. We believe economic growth abroad will continue to outpace growth here at home, and our position at the center of the economic universe will diminish more and more over time, giving way to China, India, and the many other emerging markets.

Obama's job, should he choose to accept it, is to make sure that the U.S. maintains and strengthens relationships with the emerging markets, such as India, Vietnam, and Brazil, that want the U.S. as a trading partner, a source for expertise, and a friend. In short, we hope that Obama does not embrace protectionism.

As President-elect Obama works to develop an appropriate foreign policy for our country's changing position in the world, we encourage all investors to develop foreign policies for their investment portfolios as well. That means getting invested abroad -- and doing so today.

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