Exports picking up?
Commerce Secretary Gary Locke (the first Chinese-American governor and Commerce Secretary in the US)
One good thing about our new administration is that they are putting more effort than previous administrations into promoting exports from the U.S.
According to Commerce Secretary Gary Locke, it has become a “full- time preoccupation instead of the part time focus it has garnered in the past”.
Exports during the first quarter of this year rose 17% from the same period last year. What is actually happening is that the Commerce Dept is helping to facilitate credit, connect U.S. Companies with overseas buyers, guide exporters through all of the learning curves towards knowing the rules of foreign countries and negotiate away trade barriers.
It is apparent that even though the U.S. Economy is sluggish, the world economy as a whole is seeing some improvement. So let’s face it, as long as there is people in this world that have money, they will for the most part consume. Which is one reason why the Logistics business continues to grow regardless of economic downturns. So when we have a president that promises to “double our exports in 5 years”, I for one would say this is one of those promises that will be kept. The Obama administration is also working to keep the Doha Round talks open by advancing negotiations on a Trans-Pacific Partnership Agreement with seven other countries and working to resolve issues that have stalled implementation of a free trade agreement with World Trade by all modes of transportation (Sea, Air ,Land) are forecast to grow 8.1 % in ’10 and 6.9% in ’11. This after a 7.2 % decline in ’09. This is according to the latest forecast from HIS Global Insight’s World Trade Service. The containerized cargo volume specifically is forecast to grow 10.6% over the coming two years. One of the big reasons is because importers from ASIA in the U.S. and Europe held back in ’09 because of the dramatic slowdown globally had drastic depletions of inventory this year and had to scramble to get all of those imports flowing again. It reminds me of a famous quote “If you want to be successful, observe the masses and do the opposite”. So any importer that kept healthy inventories in the past 12 months was definitely ahead of the pack. Obviously a difficult balancing act if you have low customer orders or poor cashflow. Nevertheless, the cargo volume is expected to produce banner years for Ocean Freight Container Carriers worldwide in the coming two years. Statistics also show that bulk shipping are also increasing after a poor year in ‘09
In regards to exports into China, the problem is that they still maintains several policies including state-sponsored subsidies that have the goal of investment, exports, and employment. Those policies have a direct role in increasing the U.S.-China trade imbalance and negatively affect our domestically based manufacturers, service providers, and farmers. When China became a member of the World Trade Organization in ‘01, everybody was saying that this was a new age of opportunity and would expand market opportunities for U.S. companies. Unfortunately, China continues to follow a policy of export-led growth to build up its own manufacturing base at the expense of everybody else. About 60 % of China’s exports come not from Chinese firms, but from foreign-invested enterprises. Many of these companies set up operations hoping to sell to the Chinese market, only to find a web of red tape that limits their opportunities, and instead pushes them to export their products back to their home countries. As of now, China is not showing any signs of changing their policies. China has also provided massive subsidies to its companies to give them an advantage over American farmers, labor, and businesses trying to sell their products to China, as well as flooding our market with their products. However many subsidies have been cancelled in the past few years, so at least we are seeing China bend to the pressure of the U.S. and the rest of the WTO.
Trade statistics released July 13 by the Dept. of Commerce show that the monthly goods and services trade rose $2 Billion in May to $42.3 Billion. Exports rose $3.5 Billion from April to $152.3 billion while imports climbed $5.5 billion to $194.5 billion. That’s a $26.4 Billion gain over this time last year (21%), and imports were up $43.8 billion (29.1%) from this time last year.
So while exports are up, imports are still climbing faster. But once the inventory is in around Oct-Nov, and the nation holds its breath to see if consumers will not only spend for Christmas, but get jobs, if the economy doesn’t have a sustainable recovery, imports will go down dramatically, especially with the ridiculously high freight rates on the eastbound trade lanes in the Pacific Rim where they are. Eventually companies in this country are going to find a way to be competitive with China with or without the U.S. Governments help, thankfully more likely with. Because that is what Americans do, we innovate, we fight, we lead. What I have noticed about our culture even with all of its faults is that we have a certain ability to influence other cultures whereby they want to emulate us. This can be and is often a negative occurrence, however when we do business in countries like China who see us first as an opponent, and learn their ways, and teach them what we know, a magical thing happens when we see progress in a social environment that was once plagued through decades , or centuries of oppression, being slowly transforms not only into a vibrant community where people have jobs, knowledge and hope but also relationships with Americans that are based upon trust and true friendships. I say all that to say, if we are going to break through the wall of China and truly do business with their culture where they are buying our goods, we have to play upon our strengths and immerse oneself into the local Chinese culture.
Devin Burke
Universal Cargo Management CEO