Trade Tools

A different world of trade in 2010
By Bill Armbruster

Ouch! The Great Recession rocked global trade in 2009, with total volume down an estimated 12 percent, according to economist Paul Bingham of IHS Global Insight. The greatest pain was caused by the nosedive in U.S. imports, which plunged 31 percent in the first nine months of the year, according to Census Bureau statistics.

Despite the ascendancy of China and other emerging markets, the U.S. still accounts for 25 percent of the global economy. So export-oriented countries around the world that rely on the U.S. consumer will benefit as the U.S. climbs out of recession this year. Bingham expects U.S. imports to rise 9 percent this year, but at that rate it will take at least four years to reach 2008 levels.

High unemployment will remain a drag on U.S. consumer spending, and that’s bad for imports. The weak dollar will hurt U.S. imports, too, but will provide a boost to U.S. exports. Bingham expects them to rise about 6 percent this year, but that follows a 23 percent decline in the first three quarters of 2009.

Difficulties in obtaining credit will be a major obstacle to the growth of U.S. exports, and global trade generally.

Here’s a look at key regions:

Asia
Asia will lead the road to recovery in 2010, spurred by strong growth in China, the global trade superpower. Fortified by a strong stimulus plan, China’s economy could grow as much as 10 percent this year following an estimated 9 percent increase last year. One of the key issues in the global economy this year will be whether China allows its currency to float, and if so, by how much. A stronger yuan will make China’s exports more expensive, while imports will be cheaper. Other Asian economies, including India, should experience moderate to strong growth this year.

Japan, however, will continue to struggle, with growth expected to rise a mere 1 percent this year, following a 6 percent decline in 2009.

Latin America
Latin America enjoys relative economic stability, and the long-term prospects are bright for countries attracting foreign investment, particularly Brazil, Chile and Colombia. Brazil, the economic powerhouse in Latin America, will grow 5 percent or more in 2010, according to Riordan Roett, director of Latin American Studies at the Johns Hopkins School of Advanced International Studies in Washington.

Frank Vargo, vice president-international of the National Association of Manufacturers, said trade with Latin America has been a pleasant surprise in recent years because of stronge-than-expected demand for U.S. goods.

Mexico will have a tougher time because its economy is so closely linked to the U.S., which will put a curb on its exports, Roett said.

Europe
Europe’s prospects this year depend largely on how the U.S. economy fares, according to Gary Litman, vice president for Europe and Eurasia, at the U.S. Chamber of Commerce.

As for trans-Atlantic trade, Litman stressed the importance of a strong manufacturing base in the U.S. “A rebound in the U.S.
appetite for innovative manufacturing is what would help spur exports to Europe,” he said. Litman said the weak dollar fosters
European acquisition of U.S. companies. “That tends to increase intra-company sales — and therefore boosts both imports and exports.”

Walter Kemmsies, chief economist for Moffatt & Nichols, said he expects U.S. trade with Europe this year will grow “in the low single digits.”

Canada
Exports account for more than a third of Canada’s economy, and about three quarters of them go to the United States. So Canada was badly hurt when sales to the U.S. fell 39 percent in the first three quarters of 2009.

Recovery in the U.S. auto industry will be a key determinant of cross-border trade growth. Frank Vargo of the NAM pointed out that the U.S. and Canadian auto industries are so interlocked that many components cross the border three or four times before they are assembled into a final product.

The weak U.S. dollar means a stronger Canadian dollar, which hurts exports to the U.S., but it’s good news for Canadian importers. “We’ll see whether Canadian manufacturers will use that to bring in new equipment and technologies that will improve productivity,” said Courtney Tower, an Ottawa-based trade observer.

Bingham of IHS Global Insight estimates that Canadian exports will be flat in 2010, following a 17 percent drop last year; he expects imports to rise 2 percent this year, following an 18 percent fall in 2009.

Middle East
The Middle East has been a strong market for U.S. exports thanks to its oil wealth. Top U.S. exports include capital goods for the energy and construction industries. That should continue in 2010, thanks in part to the weak dollar. If oil prices continue to rise, that will provide additional revenue to finance purchases of U.S. goods. However, Dubai’s financial woes could spell big trouble in the United Arab Emirates, the largest market in the Mideast for U.S. exports in the first nine months of 2009, followed closely by Saudi Arabia and Israel.

In This Issue

Up Front

News, Trends & Analysis
New Items

Transport Economics: Don’t be so gloomy

Capitol Watch: From cargo screening to
roadability equipment

Trade Tools: A different world of trade in 2010

Supply Chain
Chris Steele: The corner and what’s around it

Compliance Corner: Hot trade compliance issues for 2010

Tech Trends: Five trends for 2010

Commentary
David Bennett: Five predictions for 2010

Gateway Glance
Georgia

Vietnam

The Port Community
East Coast Ports 2010: Five things to watch for

West Coast Ports 2010: The future of West Coast port productitivy?

The Shipping Environment: Five sustainable trends for 2010

Product Review: Cranes

Casualties
Triple-deck trailer barge snaps towline, tankers leak,
Coast Guard ice breaker runs aground ... and much more

Final Say
Your supply chain dynamics: 2010 crisis? Or oppotrunities?