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Copyright © 2004 Global Insight, Inc.
International Trade Outlook
Paul Bingham
Principal, Global Trade and Transportation Practice
Global Insight Outlook Seminar
May 27, 2004
San Francisco, California
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 2 02/2004
Factors Affecting Trade Outlook
Exchange rates changing export competitiveness
Doha round of world trade talks not over
New bilateral U.S. Free Trade Agreements (FTAs)
EU expansion, leading to changes in trade treatment
Asian trade growth driven by China as trading power
WTO accession by China
Highlights of commodity trade forecast
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 3 02/2004
-12
-8
-4
0
4
8
12
16
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Real Exports Real Imports
(Year-over-year percent change)
Top Line for U.S. Trade: Real U.S. Exports and Imports Rebounding with Global Recovery
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 4 02/2004
Asian Currencies Have Remained Most Stable
-5 0 5 10 15 20 25 30 35
AustraliaChina
Hong KongIndia
IndonesiaJapanKorea
MalaysiaPhilippinesSingapore
TaiwanThailand
Euro
(Percent appreciation in 2003)U.S. export growth is up; European export growth is slower
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 5 02/2004
World Trade Liberalization Delayed
The World Bank estimates that the Doha agenda could boost world income by $270-520 billion and lift 140 million people out of poverty. Developing countries receive 60% of the benefits.
The Sept. 2003, Cancún setback resulted from unfulfilled expectations on agricultural subsidies, excessive caution of developing countries, and deep divisions on the Singapore issues (trade facilitation, investment, competition, public procurement)
Cancún stalled, but did not end, the Doha round.
Agriculture is key; developing countries have failed to penetrate agricultural markets of developed countries.
New European Union proposal to end agricultural export subsidies was welcomed by the U.S. but offers less than it seems in the way of true reductions in farm subsidies.
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 6 02/2004
E.U. & U.S. Trade Policy Affects World Trade Talks
Europe Union has imposed tariffs on $4 Billion in selected U.S. exports in dispute over U.S. Foreign Sales Corporation and Extraterritorial Income tax breaks for U.S. exporters.
Real impact will be limited as tariffs cover only 1% of U.S. – European Union trade and tariffs are phased in over 12 months.
Election year politics stalling needed Congressional action.
U.S. Trade Representative’s focus is now on FTA’s with Australia, Central America, Chile, and many other countries.
Global momentum is now with bilateral and regional trade agreements, not with the WTO.
Bilateralism is not a valid alternative for developing countries, which have relied too much on trade preferences.
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 7 02/2004
European Union Accession Schedule
Countries joining 2004
Poland
Hungary
Czech Republic
Slovakia
Lithuania
Latvia
Estonia
Slovenia
Cyprus
Malta
Countries recommended to
join in 2007
Bulgaria
Romania
No starting date recommended
Turkey
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 8 02/2004
European Union Geography Affects Trade
Expansion of the European Union continues, with 10 new countries just joined and more hopefuls awaiting membership (and benefits).
The U.S. has reacted to EU expansion with changes in trade treatment for the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia as beneficiary developing countries, ending duty-free treatment of designated eligible exports under the Generalized System of Preferences.
Other countries are also aligning their trade rules for the new EU members to match existing European Union trade treatment.
New accession countries will continue to attract foreign direct investment and two-way trade with Western Europe, somewhat at the expense of trade with the rest of the world.
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 9 02/2004
Asia – Strong Contributor to World Trade Growth
Asia is seeing above world-average domestic demand growth, making it a mini-growth locomotive for the world
Asia, especially China, has provided a huge boost to commodity exporters worldwide, using up supply and leading to higher prices
Asia was also one of the regions to first see inflation rising in the recovery, though this has not yet slowed trade growth
Being members of the de-facto “super-dollar-bloc” has helped Asia; therefore, barring a crisis, these countries will be in no hurry to let their currencies float more freely
High savings rates mean that these economies will continue to be capital exporters…
… However, rising domestic debt is a source of concern
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 10 02/2004
China’s Emergence as a Trading Power
China’s rapid expansion has been driven by exports, foreign direct investment, and public infrastructure spending – all were up about 30% in 2003, boosting world trade
Growth in investment is moderating in response to trade frictions, government actions to slow overheating, and mounting nonperforming loans in the banking system
WTO accession is forcing China to reform its inefficient state enterprises and banking system, raising unemployment
China will resist international pressures to revalue the renminbi until 2005, then gradually widen its trading band
China’s closed and rigid political system will become increasingly incompatible with its market-oriented economy
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 11 02/2004
China’s Progress Under Market Reforms
1980 2002
Real GDP (2002$ billions) 169 1,239
Relative GDP (% of U.S. level, 2002$) 3% 12%
Real GDP Growth in Previous 10 Years 5.3% 9.3%
Population (millions) 981 1,285
Real Per Capita GDP (2002$) 171 964
Trade’s Share in GDP 15% 55%
Current Account Surplus ($ billions) 1 35
Agriculture’s Share in GDP 30% 15%
Urbanization 20% 32%
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 12 02/2004
China’s Big Structural Problems
State Owned Enterprises
Highly inefficient
Soft budget – stealing(profit privatization;loss nationalization)
Money losing
Financial Intermediation
State-owned banks dominated(no lending to private sector)
No well developed bond market or market-
based interest rates
Huge non-performing loans(official: 25%, unofficial: 50%+)
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 13 02/2004
China’s WTO Agreement Summary
Reduce average tariff to 9.7% by 2005 (from 15.3%)Agricultural goods to 15% Industrial goods to 8.9%Most information technology equipment to 0%Agreed to bind all tariff schedules
Eliminate all quotas and other nontariff barriers by 2005
Open domestic service sector to foreign investment – telecommunications, distribution, financial services
Abide by international standards in intellectual property rights protection
Allow trading partners to restrict their Chinese imports
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 14 02/2004
China’s WTO Agreement in Comparison
Industrial Goods Tariffs
China 8.9%
Argentina 30.9%
Brazil 27.0%
India 32.4%
Indonesia 36.9%
New WTO Entrants 12.4%
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 15 02/2004
Tariff Reduction Already Substantial
55.6
43.3 43.7 44.1 43.239.9
35.9
23.0
17.0 16.4 15.3
9.7
0
10
20
30
40
50
60
1982 1985 1988 1991 1992 1993 1994 1996 1997 2000 2001 2005
(Average tariffs, percent)
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 16 02/2004
0 2 4 6 8 10 12 14 16 18
China
Brazil
Mexico
Taiwan
Korea
Singapore
Europe
United States
Japan
(Manufacturing wages, $ per hour, 2001)
Sources: U.S. Bureau of Labor Statistics, China’s National Bureau of Statistics
United States: $16.14
China: $0.61
China’s Manufacturing Wage Competitiveness
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 17 02/2004
0
3
6
9
12
15
1980 1990 1995 2000 2005
China* Hong Kong* Taiwan* Intra-Regional
* Export totals from China, Hong Kong and Taiwan exclude trade with each other.
(Percent share of world manufacturing exports)
Greater China’s Expanding Role in World Trade
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 18 02/2004
*
Value of U.S. Merchandise Trade with Asia, Billions of Dollars
U.S. Trade with Asia Stays Imbalanced
0
100
200
300
400
500
600
700
800
900
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Exports Imports
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 19 02/2004
*
China’s Share of U.S. Merchandise Trade with Asia, Percent
China’s Importance as U.S. Trade Partner Jumps
0
5
10
15
20
25
30
35
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Exports Imports
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 20 02/2004
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
TE
Us (
full
)
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
US Container Imports from World by Coast
US EC & Gulf US West Coast
U.S. Container Trade Coastal Shares Equalizing
Coastal Distribution More Balanced
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 21 02/2004
Growth of N. American Imports from the European Union Slowed Near-Term Due to Exchange Rates
0
20
40
60
80
100
120
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
0
5
10
15
20
25
30
35
Seaborne Container
(Millions of Tons)
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 22 02/2004
N. American Exports Now Strong to Europe (EU)
116
118
120
122
124
126
128
130
132
134
136
138
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
0
2
4
6
8
10
12
14
16
18
Seaborne Container
6% drop in trade
4% increase
11%
(Millions of Tons)
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 23 02/2004
North American Container Imports from Asia Continue to Increase as Share of Total Tonnage
(Millions of Tons)
0
20
40
60
80
100
120
140
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Seaborne Container
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 24 02/2004
Recovery in N. American Exports to Asia is Primarily Not in Containerized Goods
(Millions of Tons)
0
20
40
60
80
100
120
140
160
180
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Seaborne Container
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 25 02/2004
Transpacific Airborne Trade Growth Slows From Very High Levels, with U.S. Exports Faster in 2005
Air Cargo Tonnage Growth
0
2
4
6
8
10
12
14
2004 2005 2006 2007 2008
Eastbound Westbound
(Year-over-year percent change)
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 26 02/2004
Asia – Europe Airborne Trade Growth Becomes More Balanced Though Not Immediately
0
2
4
6
8
10
12
14
16
2004 2005 2006 2007 2008
Per
cen
t C
han
ge
Eastbound Westbound
Air Cargo Tonnage Growth
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 27 02/2004
Intra-Asia Airborne Trade Strong But Cooling Off
Air Cargo Tonnage Growth
0
2
4
6
8
10
12
2004 2005 2006 2007 2008
(Year-over-year percent change)
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 28 02/2004
Trade in Containerized Commodities Continues to Grow Faster Than Trade in Bulk Commodities
Top Containerized Commodities 2004 2000-2010Tons CAGR%
Synthetic Resins 34,950,891 3.6Other Food 25,356,281 1.9Vegetables, Fruits and Eggs - req Refrigeration 24,158,439 4.4Paper and Paperboard and Products 23,281,880 2.3Textiles 23,266,818 3.6Non-Metallic Products, nec. 20,306,448 2.1Non-Ferrous Metals 18,054,844 3.1Metal Products 16,862,828 6.0Chemical Products, nec. 15,016,538 4.6Iron and Steel 14,870,455 0.6
Top Commodities - All Modes 2004 2000-2010Tons CAGR%
Crude Petroleum 2,132,980,864 2.2Petroleum Refineries 619,591,135 1.1Ores and Scrap 613,249,339 2.6Coal 598,230,698 1.0Natural Gas 458,706,455 1.2Stone, Clay and Other Crude Minerals 449,384,323 1.5Iron and Steel 312,702,517 1.3Grain 233,268,422 0.4Cork and Wood 197,270,502 0.9Non-Metallic Products, nec. 184,065,860 2.0
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 29 02/2004
Trade in Containerized Commodities Growing Fastest is High-Value, Lower-Weight Goods
Top Containerized Commodities 2004 2000-2010Tons CAGR%
Synthetic Resins 34,950,891 3.6Other Food 25,356,281 1.9Vegetables, Fruits and Eggs - req Refrigeration 24,158,439 4.4Paper and Paperboard and Products 23,281,880 2.3Textiles 23,266,818 3.6Non-Metallic Products, nec. 20,306,448 2.1Non-Ferrous Metals 18,054,844 3.1Metal Products 16,862,828 6.0Chemical Products, nec. 15,016,538 4.6Iron and Steel 14,870,455 0.6
Top Growing Containerized Commodities 2004 2000-2010Tons CAGR%
Semi-conductors, Electronic Tubes,etc 3,086,846 12.5Office and Computing Machinery 7,483,659 10.6Other Communications Equipment 4,479,727 10.3Electrical Industrial Machinery 6,625,736 9.5Furniture and Fixtures 13,158,723 9.1Electrical Appliances and Houseware 5,074,291 9.0Professional Equipment 973,997 8.9Other Manufacturing, nes. 13,895,674 8.9Electrical Apparatus, nec. 7,347,122 8.8Plastic Products, nec. 9,958,175 8.1
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 30 02/2004
Methodology behind the trade forecasts
Trade forecasts from our comprehensive World Trade Service
Covers all commodities shipped via all modes of transport
Covers all international merchandise trade bilaterally between countries of export and import (over 4,800 trade routes)
77 individual global commodity trade models
Annual frequency forecasts driven by Global Insight’s world macroeconomic and industry forecasts as well as historic patterns of commodity trade, updated quarterly
Forecasts available to clients over the web using our Global Trade Navigator data interface
Copyright © 2004 Global Insight, Inc. www.globalinsight.com 31 02/2004
Conclusions
The strength of the U.S. and global expansions are driving continued growth in trade
Overseas demand growth and U.S. dollar depreciation leads to greater U.S. exports but dampens growth of European exports
U.S. trade grows fastest with Asian, especially with China
Asia - Europe and U.S. - European trade growth healthy but European exports to Asia will see only weak growth
Trade in lighter weight, higher value products will outpace growth in bulk commodity categories
Relative trade growth for transport modes will reflect underlying commodity growth rates, which will benefit air carriers and container vessel operators
Copyright © 2004 Global Insight, Inc.
Thank You
Paul Bingham
[email protected](202) 481-9216
www.globalinsight.com