Transcript Trade Outlook Presentation May 2004

International Trade Outlook
Paul Bingham
Principal, Global Trade and Transportation Practice
Global Insight Outlook Seminar
May 27, 2004
San Francisco, California
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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
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Top Line for U.S. Trade: Real U.S. Exports and
Imports Rebounding with Global Recovery
(Year-over-year percent change)
16
12
8
4
0
-4
-8
-12
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Real Exports
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Real Imports
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Asian Currencies Have Remained Most Stable
U.S. export growth is up; European export growth is slower
(Percent appreciation in 2003)
Euro
Thailand
Taiwan
Singapore
Philippines
Malaysia
Korea
Japan
Indonesia
India
Hong Kong
China
Australia
-5
0
5
10
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20
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30
35
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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.
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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.
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European Union Accession Schedule
Countries joining 2004
Countries recommended to
join in 2007
 Poland
 Hungary
 Bulgaria
 Czech Republic
 Romania
 Slovakia
 Lithuania
No starting date recommended
 Latvia
 Estonia
 Turkey
 Slovenia
 Cyprus
 Malta
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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.
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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
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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
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China’s Progress Under Market Reforms
1980
2002
Real GDP (2002$ billions)
169
1,239
Relative GDP (% of U.S. level, 2002$)
3%
12%
5.3%
9.3%
Population (millions)
981
1,285
Real Per Capita GDP (2002$)
171
964
15%
55%
1
35
Agriculture’s Share in GDP
30%
15%
Urbanization
20%
32%
Real GDP Growth in Previous 10 Years
Trade’s Share in GDP
Current Account Surplus ($ billions)
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China’s Big Structural Problems
State Owned Enterprises
Financial Intermediation
Highly inefficient
State-owned banks dominated
(no lending to private sector)
Soft budget – stealing
(profit privatization;
loss nationalization)
No well developed
bond market or marketbased interest rates
Money losing
Huge non-performing loans
(official: 25%, unofficial: 50%+)
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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
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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%
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Tariff Reduction Already Substantial
(Average tariffs, percent)
60
55.6
50
43.3
40
43.7
44.1
43.2
39.9
35.9
30
23.0
20
17.0
16.4
15.3
9.7
10
0
1982 1985 1988 1991 1992 1993 1994 1996 1997 2000 2001 2005
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China’s Manufacturing Wage Competitiveness
(Manufacturing wages, $ per hour, 2001)
Japan
United States
Europe
Singapore
Korea
Taiwan
United States: $16.14
China: $0.61
Mexico
Brazil
China
0
2
4
6
8
10
12
14
16
18
Sources: U.S. Bureau of Labor Statistics, China’s National Bureau of Statistics
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Greater China’s Expanding Role in World Trade
(Percent share of world manufacturing exports)
15
12
9
6
3
0
1980
1995
1990
China* Hong Kong* Taiwan*
2005
2000
Intra-Regional
* Export totals from China, Hong Kong and Taiwan exclude trade with each other.
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U.S. Trade with Asia Stays Imbalanced
Value of U.S. Merchandise Trade with Asia, Billions of Dollars
900
800
700
600
500
400
300
200
100
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
*
Exports
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Imports
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China’s Importance as U.S. Trade Partner Jumps
China’s Share of U.S. Merchandise Trade with Asia, Percent
35
30
25
20
15
10
5
0
1999
*
2000
2001
2002
2003
2004
Exports
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2005
2006
2007
2008
2009
2010
Imports
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U.S. Container Trade Coastal Shares Equalizing
Coastal Distribution More Balanced
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Growth of N. American Imports from the European
Union Slowed Near-Term Due to Exchange Rates
(Millions of Tons)
140
35
Seaborne
Container
120
30
100
25
80
20
60
15
40
10
20
5
0
0
2000
2001
2002
2003
2004
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2005
2006
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2007
2008
2009
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N. American Exports Now Strong to Europe (EU)
138
(Millions of Tons)
Seaborne
136
18
Container
16
11%
134
14
132
12
6% drop in trade
130
4% increase
128
10
126
8
124
6
122
4
120
2
118
116
0
2000
2001
2002
2003
2004
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2005
2006
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2007
2008
2009
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North American Container Imports from Asia
Continue to Increase as Share of Total Tonnage
(Millions of Tons)
160
140
120
100
80
60
40
20
0
2000
2001
2002
2003
2004
Seaborne
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2005
2006
2007
2008
2009
Container
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Recovery in N. American Exports to Asia is
Primarily Not in Containerized Goods
(Millions of Tons)
180
160
140
120
100
80
60
40
20
0
2000
2001
2002
2003
2004
Seaborne
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2005
2006
2007
2008
2009
Container
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Transpacific Airborne Trade Growth Slows From
Very High Levels, with U.S. Exports Faster in 2005
Air Cargo Tonnage Growth
(Year-over-year percent change)
14
12
10
8
6
4
2
0
2004
2005
2006
Eastbound
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2007
2008
Westbound
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Asia – Europe Airborne Trade Growth Becomes
More Balanced Though Not Immediately
Air Cargo Tonnage Growth
16
14
Percent Change
12
10
8
6
4
2
0
2004
2005
2006
Eastbound
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2007
2008
Westbound
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Intra-Asia Airborne Trade Strong But Cooling Off
Air Cargo Tonnage Growth
(Year-over-year percent change)
12
10
8
6
4
2
0
2004
2005
2006
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2007
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2008
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Trade in Containerized Commodities Continues to
Grow Faster Than Trade in Bulk Commodities
Top Containerized Commodities
Synthetic Resins
Other Food
Vegetables, Fruits and Eggs - req Refrigeration
Paper and Paperboard and Products
Textiles
Non-Metallic Products, nec.
Non-Ferrous Metals
Metal Products
Chemical Products, nec.
Iron and Steel
2004
2000-2010
Tons
CAGR%
34,950,891
3.6
25,356,281
1.9
24,158,439
4.4
23,281,880
2.3
23,266,818
3.6
20,306,448
2.1
18,054,844
3.1
16,862,828
6.0
15,016,538
4.6
14,870,455
0.6
Top Commodities - All Modes
2004
2000-2010
Tons
CAGR%
Crude Petroleum
2,132,980,864
2.2
Petroleum Refineries
619,591,135
1.1
Ores and Scrap
613,249,339
2.6
Coal
598,230,698
1.0
Natural Gas
458,706,455
1.2
Stone, Clay and Other Crude Minerals
449,384,323
1.5
Iron and Steel
312,702,517
1.3
Grain
233,268,422
0.4
Cork and Wood
197,270,502
0.9
Non-Metallic Products, nec.
184,065,860
2.0
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Trade in Containerized Commodities Growing
Fastest is High-Value, Lower-Weight Goods
Top Containerized Commodities
Synthetic Resins
Other Food
Vegetables, Fruits and Eggs - req Refrigeration
Paper and Paperboard and Products
Textiles
Non-Metallic Products, nec.
Non-Ferrous Metals
Metal Products
Chemical Products, nec.
Iron and Steel
Top Growing Containerized Commodities
Semi-conductors, Electronic Tubes,etc
Office and Computing Machinery
Other Communications Equipment
Electrical Industrial Machinery
Furniture and Fixtures
Electrical Appliances and Houseware
Professional Equipment
Other Manufacturing, nes.
Electrical Apparatus, nec.
Plastic Products, nec.
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2004
2000-2010
Tons
CAGR%
34,950,891
3.6
25,356,281
1.9
24,158,439
4.4
23,281,880
2.3
23,266,818
3.6
20,306,448
2.1
18,054,844
3.1
16,862,828
6.0
15,016,538
4.6
14,870,455
0.6
2004
2000-2010
Tons
CAGR%
3,086,846
12.5
7,483,659
10.6
4,479,727
10.3
6,625,736
9.5
13,158,723
9.1
5,074,291
9.0
973,997
8.9
13,895,674
8.9
7,347,122
8.8
9,958,175
8.1
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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
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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
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Thank You
Paul Bingham
[email protected]
(202) 481-9216
www.globalinsight.com
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