Politics of Exports

Yesterday’s WSJ article titled“Exporters Fear Credit Crunch” (reprinted here in a previous post) once again highlighted the debate on Ex-Im’s reauthorization and listed the pro and con issues from both sides of the political isle. As half of my immediate family is involved in financing international trade, the topic of the Bank’s reauthorization is ever present around our dinner table. Yesterday, we once again raised the question of why would a respected member of the US Congress so blatantly oppose  a proven export finance tool, which contributes real money to the US Treasury and supports countless jobs?

The answer is – because he can and because Ex-Im is an easy target for partisan politics. Export Import Bank of The United States (US Ex-Im, Ex-im) is one of the smallest agencies of the US Government, but one which has disproportionately high visibility. Certainly restructuring half a floor at the Department of Commerce (which probably employes about the same number of folks as the entire Ex-Im Bank)  would not garner the Good Congressman from Texas the same publicity and power. By blocking the reauthorization, Congressman Hensarling and his allies are able to deliver effective blows to the Presidential Administration and to the Bank’s leadership. Yet the hardest blow their efforts deliver are to the US economy.

I generally believe in government minimizing its involvement in business regulation and personally try to stay out of politics.  Yet it is not always possible, as politics and business are often intertwined and business is negatively impacted by actions such as those of the Good Senator and his supporters.  My sympathies certainly do not lie with the current Administration, whose list of missteps, fumbles and incompetencies is quite long. I did applaud the President’s National Export Initiative until it sort of sputtered, along with subsequent reset attempts. Yet given the phenomenal importance of exports to our (or for that matter to any) economy, it is gross malpractice for any politician(elected, or otherwise) to undermine exports, reduce their economic effect and interfere with the lives of real people who make those exports happen.

Let’s put some things in perspective. USA exports roughly $2.3 Trillion of goods and services annually. Of that amount, US Ex-Im Bank finances about $25 Billion annually, only slightly more than one percent of the total. Seemingly doing away with the Bank will not be a huge loss to the American economy.  Since some of the exporters dropped by Ex-Im would find financing in the private sector, net-net US will probably lose less than one percent of its exports. Not a big deal? Consider that just slightly under $5 billion of the exports financed by the US Ex-Im are financing small businesses just like companies mentioned in the WSJ article. Those companies represent tens of thousands of jobs, which would be lost, or not gained if Ex-Im were to close.

They call Ex-Im “the Bank of Boeing”.  TRUE.  That company is the biggest recipient of Ex-Im financing, but how many small businesses in its supply chain benefit from the aircrafts sold on the world markets, how many jobs are created in post sales service and support – hundreds of thousands. Politically, US image benefits when Boeing Airplanes and other American brands are seen around the world. Ex-Im is a large contributor to that global image building process.  If we close Ex-Im, European credit agencies financing Airbus planes will get an advantage and more Airbus planes will be sold in the world giving a financial and political edge to our European allies. “Better than going to China or Russia” some may say, but “better” is not enough to put food on the dinner table for a family of four in South Carolina, whose breadwinner has been laid off due to loss of international orders.

My experience working with Ex-Im Bank goes back over a decade, I have seen a lot of things at this Agency, which could use improvement and even structural change. Yet in the realm of Federal Government Agencies, Ex-Im is pound for pound among the most effective. Its 400 employees returned over $600 million into the US treasury, That is over $ 1.5 million PER employee, and is equivalent to productivity of many solidly performing companies of the private sector, and that is in the world where deficit, consumption and spending rule. Yet, Congressman Hensarling wants to close this small and profitable Agency down, WHY?  As part of reauthorization compromise, some in Congress want to saddle Ex-Im with new reserve requirements to cushion possible future defaults. Yet, high default rates have not been a problem at Ex-Im, whose rate of default is comparable with that of large commercial lenders taking similar risk. If anything, the bank has been too conservative in its underwriting. Problem with personnel turnover, yes, problem with defaults, not at all. I could and will make a case that because of the uncertainty in reauthorization Ex-Im has lost some of its best people over the last year. More senior people with decades of experience left in the last 12 months than in the previous five years combined.

It is ironic that the labor unions – one of the groups that benefited greatly from Ex-Im’s financing have also been behind the effort to dismantle Ex-Im. When Delta Airlines, bloated with uncompetitive and overpriced labor force, tried to block foreign sales of US made airplanes financed by Ex-Im, the Airline resorted to using political pressure to try and wreck export financing and destroy jobs of people at companies that could compete and deliver economic gain to the US. The absurdity of the situation cannot be understated. It is another example of politics undermining exports.

Of course, there are certainly positive effects of politics on exports. Chief among them are various trade partnerships and free trade agreements. When they work, these agreements are magical and provide fantastic economic benefits to US producers and exporters. Yet those agreements take years to negotiate and ratify, causing lost revenue and loss of competitive position in many markets where other countries outmaneuver US and pass their own agreements quicker. Thus rather than destroying a good and solidly performing Export Credit Agency, which benefits many thousands of people throughout the US, Congressman Hensarling and his colleagues should focus on making sure PTTs are negotiated and ratified faster, so US can produce and export more.

Afghan Business Tale: Don’t Try This

Take Earth’s Toughest Startup Conditions, Add Army Veterans, Then ‘Beat Your Head Against the Wall’

Dion Nissenbaum. WSJ.com

Matthew Griffin had an unusual swords-to-ploughshares business plan he hoped would help bring a measure of economic security to one of the least secure places in the world.

The shaggy-haired former Army Ranger wanted to hire scores of factory workers in Kabul to assemble flip-flop sandals from poppy-patterned soles and other Chinese-made parts trucked across Afghanistan’s unstable border with Pakistan. And, he wanted to decorate the straps with the butt ends of AK-47 shell casings, a detail he figured would appeal to trend setters in the U.S., where he planned to sell the finished footwear.

 

Afghan workers making the ill-fated first batch of Combat Flip Flops in 2012. Reuters

What could go wrong? For Mr. Griffin and his business partners at Combat Flip Flops, it turns out, just about everything.

The first batch of the flip-flops was a failure. The factory he hired on his second try went out of business before it could make a single sandal. Now, Mr. Griffin and his partners are setting up shop in Colombia, thousands of miles away from Kabul’s perch on the edge of the rugged Hindu Kush mountains.

“What a long, strange trip it’s been,” said 36-year-old Donald Lee , another former Army Ranger, who helped found Combat Flip Flops with Mr. Griffin, 34.

Afghanistan was once fertile ground for aspiring entrepreneurs who knew how to take advantage of the billions of dollars that flooded the country after the U.S. invaded in 2001. They succeeded in setting up Thai restaurants on military bases, beauty spas with armed guards and incense-scented yoga studios surrounded by blast walls. But making beach wear in a landlocked country?

While it isn’t uncommon to see Afghan soldiers or Taliban fighters wearing rubber sandals that they can slip off many times a day for prayer or before entering homes, a common courtesy in the region, Combat Flip Flops were aimed at a different clientele. The company’s slogan: “Bad for running, worse for fighting.”

“We wanted to take something 180 degrees from combat and make a product for people going to a beach and having a good time,” said Mr. Griffin. “Our flip-flops are weapons for change.”

Mr. Griffin got the inspiration for Combat Flip Flops in 2009 when he toured a Kabul boot factory run by John Boyer , a former U.S. Marine captain and Iraq war veteran who had no previous experience operating a manufacturing plant.

Mr. Boyer, 34, said he first came to Afghanistan in 2008 because he wanted to impress his then girlfriend with his sense of adventure. “I was young enough and dumb enough to go for it.”

Though he decided to help set up the boot factory, he said he thought that making boots for the Afghan army was a bad idea. Afghan soldiers kept their boots unlaced for easy removal at prayer times, and they didn’t really seem to like wearing them. So, Mr. Boyer helped design an alternative: flip-flops with combat soles from the factory line.

The U.S.-led military, which had invested millions of dollars in the local boot-making business, wasn’t interested in Mr. Boyer’s prototypes, but they were just the inspiration Mr. Griffin was looking for. Combat Flip Flops was born.

Mr. Griffin turned to China for cheap raw materials, but by the time the first supplies were ready to ship to Kabul, Pakistan had shut its border with Afghanistan to protest an errant U.S. attack that had killed more than two dozen Pakistani soldiers in November 2011.

Mr. Griffin had the shipment rerouted through Tajikistan into Kabul, where Mr. Boyer was preparing to produce the first 2,000 Combat Flip Flops.

Those flip-flops ended up being too poorly made to pass muster in the U.S. So Mr. Griffin gave them away in Kabul, got his money back and went back to the drawing board.

The second Kabul factory Mr. Griffin hired abruptly went out of business when it lost its major contracts with the U.S.-led military coalition.

After that Mr. Griffin had his flip-flop making supplies shipped from China to his home in Issaquah, Wash., where he spent hours with a hacksaw fruitlessly trying to cut thousands of AK-47 bullet casings for use on the flip-flops. He eventually resorted to using replicas.

Mr. Griffin and his friends then transformed his garage into a mini-factory that churned out 3,400 pairs of Combat Flip Flops. The flagship AK-47 style, which sells online for $65 a pair, features the replica bullet parts and a poppy design on the sole—a nod to Afghanistan’s reputation as a major heroin source.

For now, the company has given up on making flip-flops in Afghanistan and is instead pinning its hopes on a factory in Colombia, which Mr. Griffin says has “more security per square foot than any other country in the world.”

Despite all his setbacks, Mr. Griffin is willing to go to great lengths to promote his flip-flops. Earlier this year, he vowed to wear them for the traditional running of the bulls in July in Pamplona, Spain, if his company got 10,000 “likes” on Facebook. It got just 3,000, but he went ahead anyway, wearing the flip-flops for a short part of the run. Afterward, in the bull ring, he tried—and failed—to hang his sandals on a bull’s horns.

“Flip-flops are bad for running—and we proved it,” he said.

Combat Flip Flops is still looking to give Afghanistan a chance. The owners want to transform a shipping container into a mobile factory that they can set up in western Afghanistan. But the export route for the flip-flops would lead through Iran, which could be a violation of U.S. sanctions.

Mr. Boyer, whose factory in Kabul shut down last year after it lost its military contracts, is sympathetic to the company’s cause. “In Afghanistan you’ve just got to beat your head against a wall until you understand how things get done,” he said. “I’m just not sure whether flip-flips can happen anytime soon.”

A SEAT AT THE TABLE. (as BRICS crumble, is it CIVETS’ turn to shine?)

Indonesia tops many “fastest-growing” lists, but is it ready to compete with the world’s leading emerging markets? U.S. furniture maker Marie Albert thinks so. 

 

[By Warren Strugatch GlobalTradeMagazine]

 

Nearly a quarter century ago, Long Island businessman Tom Romano flew to Indonesia to acquire a factory in Semarang. The plant, in the middle of one of the world’s great timber expanses, would supply his Marie Albert furniture company with a low-cost workforce and easy access to mahogany, oak, pine and teak for its signature line of French country antique reproductions.

In the years since, Romano has shipped tons of American furniture—made by Indonesians in Indonesia—back to the U.S. Two years ago, lured by the booming Indonesian consumer market, Romano visited Jakarta for an international furniture show. Despite spending upwards of half of every year in Indonesia, Romano had never attended the expo.

He was glad he did. “I made sales,” Romano declares. “Last year I went back and made more sales.” In addition to reaching the growing Indonesian middle class, the show opened up vast markets in Asia and beyond. From the international seaport just down the road in Semarang, Romano now ships to new customers in India, Thailand, Brazil and other Pacific Rim markets. “There is more money now and people want good products for their homes,” he says. “Our furniture is made here by Indonesians. But it’s American furniture. It just happens to be made here.”

American companies, many of them fleeing rising Chinese labor costs on one hand and courting booming Asian consumer markets on the other, are following suit. Last fall, Furniture Brands International opened a case-goods plant in Tambak Aji, several miles from Romano. The factory, the furniture giant’s second operation in Indonesia, now manufactures and ships major volumes of Thomasville, Drexel, Maitland-Smith and La Barge around the world.

As more multinationals arrive and set up shop, Romano anticipates Indonesia’s long-neglected infrastructure will get a much-needed upgrade. Driving around various islands on business, Romano describes hair-raising rides on winding two-lane roads sandwiched between speeding semis. Dealing with the government can be just as harrowing, given the prevalence of corruption. “But things are modernizing,” he says. “It’s happening quickly.”

Yes it is. Ranked fifth on the Global Intelligence Alliance list of Top 30 Emerging Markets for 2012-2017—behind Brazil, Russia, China and India—Indonesia tops many fast-growth lists. With a population over 251 million, it is the world’s fourth-largest country. Even before the 2008 death of longtime strongman President Suharto, Indonesia was shedding its protectionist shell. In recent years it has joined the World Trade Organization, entered regional alliances like the Association of Southeast Asian Nations (ASEAN) pact, and inked free trade agreements with the U.S. and other states.

Indonesia has become a key U.S. trade partner, supply-chain ally and portal into Asia. Fanned by growing consumer demand, surging industrial purchasing and expanding government infrastructure spending, Indonesia last year absorbed over $10 billion in goods and services from the U.S., up more than 40 percent over the past five years. Oil and gas shipments pace the rise; agriculture and livestock, apparel, second-hand merchandise and specialized manufacturers are also surging. As for furniture, sales of U.S. brands are up 75 percent since 2008. Romano has plenty of company.

Globally, Indonesia is increasingly making its presence felt. Jakarta officials and their surrogates dominate the Asia-Pacific Economic Cooperation (APEC) forum as well as ASEAN. This spring, Indonesia spurred the formation of the ASEAN Regional Comprehensive Economic Partnership (ARCEP). The world’s newest trade bloc embraces all 10 member states along with key trading partners South Korea, Australia, China, Japan, India and New Zealand. Before an international press corps this spring, Indonesian trade minister Gita Wirjawan taunted the West with a telling comparison: ARCEP with its three billion-plus consumers and a GDP of $15 trillion, versus the European Union’s 390 million population and $13 trillion economy.

Indonesia’s true economic impact, however, may lie with the CIVETS. This loose affiliation comprises Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa, states whose growth dynamic by most measurements outpaces all other markets save Brazil, Russia, India or China.

In the future, “Markets will be defined not by geographic boundaries but by mega-corridors and mega-regions,” declares Aroop Zutshi, global president of Frost & Sullivan and the consulting firm’s managing partner. Zutshi and other analysts visualize commerce networks stretching across continents and spanning oceans. Markets historically defined by trade barriers, language and local taste preferences are being transformed by supply-chain opportunities, logistics-driven deals and a surging, acquisitive, brand-crazy, shopping-bag-toting middle class.

Taking its name from the small wild feline whose dietary and digestive habits help generate a certain high-priced gourmet coffee bean, CIVETS countries grow on average nearly 5 percent per year, a rate twice to three times as fast as developed countries. These cats attract big foreign direct investment dollars, import at accelerating rates, and invest increasingly in their own infrastructures. With an average age of 27, their populations attract companies looking to hire, to move into new growth markets—or both.

It’s not all Indonesia. Colombia—closer to the U.S. geographically and more familiar culturally—plays a vital role in hemispheric trade routes. The Colombia-U.S. Free Trade Agreement, signed in 2006, made more than 80 percent of U.S. exports duty free; most of what remained has since been phased out. According to the U.S. International Trade Commission, passage of the agreement has spurred bilateral trade by nearly $1.6 billion per year, most of it north-south. U.S. brands like Nautica and Northface have expanded; Perry Ellis came back post-treaty after effectively pulling out.

Colombia has marshaled its resources in recent years to specialize in custom-made orders and products, a growing manufacturing niche. According to Juan Carlos Gonzalez, vice president at Proexport, Colombia’s foreign direct investment arm: “These characteristics have positioned our country as a supplier not only for Latin American countries, but internationally,” reaching “the 17 countries with whom Colombia has signed free trade agreements.”

Vietnam may well be the fastest-growing feline; annual growth approaches 10 percent. By 2050, Vietnam’s economy should equal 70 percent of the United Kingdom’s.

Vietnam, Egypt, Turkey and Indonesia are among the 19 emerging-market nations cited by Prabhat Vira, regional head of trade and finance receivables for HSBC, as ranking among the world’s Top 30 markets. In a report released earlier this year, HSBC forecast that these nations would experience a middle-class boom reaching three billion consumers by 2050. Vira estimated that today’s emerging markets will drive up to two-thirds of world consumption by this century’s midpoint. Through 2020, Egypt, Turkey and fellow CIVETS Vietnam and Indonesia will dominate emerging-market growth, along with China, India and Malaysia.

Surging populations in all six markets are a defining factor of these emerging markets, Vira observes. “Population growth reflects longer life expectancies (coupled with) increasing consumerism,” he notes. “That in turn fuels growth in infrastructure and is linked to changes in spending habits.” The HSBC report anticipates rising consumer expenditures in financial services, health care, housing and household appliances as the next wave of middle-class nouveaux behaves pretty much as their parents’ generation did in Brazil, Russia, India and China. Industrially, HSBC economists foresee continuing rises in imports of machinery, transportation equipment, scientific apparatus, chemicals and plastics through mid-century at least.

Financing deals in frontier markets is characteristically complex. Commercial banks generally steer clear, leaving the territory to niche lenders and specialized funds. Reluctant to burden customers with costly Letter of Credit obligations, manufacturers often finance and insure their own receivables through customer-friendly terms and through deals arranged with distributors. “In countries like Colombia, where we have a discretionary credit limit, we can offer our customers open account terms,” says Michael J. Byrne, credit and collections manager with Hollingsworth & Vose, an industrial-paper and filtration manufacturer in East Walpole, Massachusetts. “They prefer that.”

Insurers would like more of that business, but such issues as transparency rankle. “If you’re purchasing goods from a factory in Bangladesh or Cambodia, what assurance do you have that the goods are actually being made there, not somewhere else?” asks Conrad Foa, chairman of Foa & Son, an international insurance broker. “The risks to business continuity are significant.”

Larger emerging-market deals typically involve government officials, adding another layer of complexity, cost and opportunity for mishap, observes Alexander Gordin, president of Fluent In Foreign, a New York trade consultancy. Those putting together frontier market deals may want to look into the government’s Overseas Private Investment Corp., a source of insurance and last-resort funding whose target markets reflect Washington’s foreign policy stance. OPIC, quips Gordin, “is the thousand-pound gorilla in the room.”

Anticipating a gold rush, companies are swooping into unfamiliar markets with Western products, services and processes, often with scant market knowledge or cultural savvy. Market entry strategies run the gamut from savvy to clueless.

TAMING CIVETS The CIVETS affiliation—Colombia, Indonesia, Vietnam, Egypt, Turkey, South America—shares a name with a tropical forest-dwelling mammal that encompasses more than a dozen species.

“CIVETS are no different than the BRIC countries in that you need a very specific strategy for each one,” says Babak Hafezi, chief of Hafezi Capital, a Beltway consulting firm. Surface similarities between markets are misleading, he says. While Indonesia, Egypt and Turkey share Islamic faith, their experiences in statehood, economics, trade and clerical influence on government are vastly different. Indonesia is characterized by vast size and Asian alliances; Egypt lists toward theocratic extremism; and Turkey thrives in part by reconciling modernization with Islamic values.

“Each of these countries,” says Hafezi, “consumes very differently and has different values based on cultural, political and economic experiences. Companies should approach them as heterogeneous economies.”

Sullivan & Frost’s Zutshi cites the example of a medical-device manufacturer that sought his firm’s advice after getting bogged down in Indonesian real estate. After opening a series of walk-in clinics scattered around the country, the company discovered—painfully—that geography and travel costs deterred potential customers. Zutshi’s team drew up a new plan, replacing brick and mortar clinics with a mobile staff and battery-powered devices. Employees fanned out across the country’s 17,000-plus islands, spanning 3,200 miles to see the customers who could not visit them.

The new approach is working, asserts Zutshi, who declined to name the manufacturer.

The medical-device firm’s experience offers a sound geo-cultural marketing lesson to Westerners willing to pay attention. “American businesses are late coming to the party,” observes Zutshi, himself born in India. “You have to be culturally sensitive. You can’t come in, flex your muscles and say, ‘Here we are,’ and expect it will work.”

Put another way: Taming CIVETS can be like herding cats. But given the size of payback, rest assured many will try.

International trade critical for small business, DHL study says

Fleet Owner Staff

A must have tool for anyone involved in international business

A recent global survey conducted for DHL Express by consulting firm IHS Global Insight posits   that International trade and cooperation are key drivers for small business success.

The study which surveyed 410 small and medium-sized enterprises (SMEs) in so-called G7 economies – the U.S., U.K., France, Germany, Italy, Canada, and Japan – along with firms in Brazil, Russia, India, China and Mexico (BRICM) revealed that companies engaged in international markets are twice as likely to be successful as those that only operate domestically, based on three-year compound annual growth rates.

Of the SMEs surveyed by IHS on behalf of DHL, 26% of those that traded internationally also significantly outperformed the market, while only 13% of domestic-only SMEs also outperformed the market.

DHL’s study also discerned that inadequate business infrastructure can constrain a company’s competitiveness due to the reduction of business efficiency.

For example, SMEs have to work harder to overcome infrastructure inefficiencies, particularly compared to larger companies with greater resources. The main challenges in this arena are: a lack of available information on foreign markets; high customs duties; the difficulty of establishing contacts with foreign partners; and ability to successfully generate an overseas customer base.

Other key survey findings:

• SMEs that were founded in the last five years are more likely to have international business operations than older SMEs, despite having had less time to grow their businesses
• U.S. SMEs benefit from a relatively efficient business environment, where labor productivity, for example, is higher than the G7 average. They also prosper from higher levels of research and development as well as innovation compared to the G7 average, but suffer from the bleak macro-economic backdrop in which they operate
• The majority of SMEs who had out-performed their markets over the last three years indicated that they also planned to increase the percentage of exports in their turnover over the next three years, despite the uncertain economic environment
• BRICM SMEs placed more emphasis on logistics as a positive influence on their international operations than their G7 counterparts, suggesting that they rely more on efficient transportation and customs processes to overcome infrastructure obstacles
• Most of the better-performing SMEs identified in the study employ over 50 people, underscoring the importance of resources in overcoming barriers to international trade.

“The strong correlation between improved business performance and cross-border trade suggests that there is a clear benefit for SMEs in going global,” noted Ken Allen, CEO of DHL Express.

“It not only opens up new markets for their products and services, but also gives them access to international best practices and innovations,” he added. “Perhaps most significantly, competing internationally forces them to sharpen their own internal operations and processes, which benefits their business in their home market as well as abroad.”

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Source URL: http://fleetowner.com/fleet-management/international-trade-critical-small-business-dhl-study-says

Keys to ABCs – “Your Company’s Keys to American Business & Capital”

Emerging Markets Business: Keys To America™

presents

Keys to ABCs 

“Your Company’s Keys to American Business & Capital”

Master Class Tour Across 42 Emerging Markets Kicks Off The Emerging Markets US$5Billion Business  Challenge!

As part of  the EMERGING MARKETS BUSINESS: Keys To America™ initiative to help emerging market countries create $5 billion of tangible economic value over the next two years, Fluent In Foreign Business, along with the Princeton Council on World Affairs and RSL Media are pleased to announce “Keys to ABCs”  – a 42-country educational tour beginning November of 2012 and continuing through May of 2014.

This unique tour is the first step of the Business Challenge program and will feature a series of 2-day comprehensive master class workshops titled:

• “Your Company’s Keys to American Business & Capital Markets”
• “Entering North American Business Markets”
• “Preparing Your Company for International Business”

 The sessions will be taught by me personally and a cadre of Fluent In Foreign Academy’s experienced instructors.   The unique workshops and comprehensive will provide qualified corporate participants in those countries with a unique opportunity to participate in the Emerging Markets:Unlocking America Challenge™, to diagnose their companies’ present “international business IQ” and to develop practical useable strategies to position their organizations for access to the International Financial and Strategic investments, Low-interest Loans, Technology Partners, World-renowned Franchisors and Lucrative Customers.

 (READ  MORE http://wp.me/P1iIhX-aa )

USTR NEWS ALERT!

U.S. Trade Representative Ron Kirk Calls for Swift Passage of Trade Agreements President Obama Formally Submitted Legislation for S. Korea, Colombia, Panama Agreements Today Washington, D.C. – United States Trade Representative Ron Kirk today called for swift congressional action on legislation for pending trade agreements between the United States and South Korea, Colombia, and Panama, along with renewal of Trade Adjustment Assistance reforms and expired trade preference programs. President Barack Obama formally submitted the legislation for the three pending trade agreements to Congress today. “Growing American exports to South Korea, Colombia, and Panama will support tens of thousands of jobs here at home. We must take every opportunity to get America back to work, and Congress should pass these agreements without delay,” said Ambassador Kirk. “The House should also support jobs for American workers by supporting targeted assistance and training for those who may be displaced by trade. Taken together, the pending trade agreements and Trade Adjustment Assistance advance a balanced trade agenda that opens new markets for our exporters and new opportunities for America’s working families.”  Under Trade Promotion Authority already granted by Congress, the legislation for the trade agreements may not be amended, and Congress has 90 days to hold up-or-down votes on each. Changes to the legislation would make it subject to normal rules and procedures, including amendment and filibuster. In 2010 and 2011, the Obama Administration worked with South Korea, Colombia, and Panama to successfully address outstanding issues related to each of the three agreements. In particular, the Administration secured: greater U.S. access to the South Korean auto market; significantly increased labor rights and worker protections in Colombia; and enhanced tax transparency and labor rights in Panama. The Administration has been clear that once approved by Congress, agreements will enter into force only if trading partners are meeting their commitments; for instance, Colombia must successfully implement key elements of the agreed Action Plan Related to Labor Rights before the U.S.-Colombia trade agreement will enter into force. Colombia has met all milestones to date as specified in the Action Plan, including enactment of several far-reaching reforms. Legislation for the U.S.-Colombia trade agreement also includes a renewal of the Andean Trade Preferences Act. ATPA was enacted in December 1991 to help Andean countries in their fight against drug production and trafficking by expanding their economic alternatives. Late last month, the Senate approved legislation to renew the Generalized System of Preferences and also to streamline and save costs on a renewal of Trade Adjustment Assistance reforms. The Senate has sent that legislation to the House, where the Speaker has committed to its consideration in tandem with the pending trade agreements. The Generalized System of Preferences expired in December 2010. It promotes economic growth in the developing world by providing preferential duty-free entry for products from designated beneficiary countries and territories; GSP also supports American jobs and improves American competitiveness as many American businesses use GSP imports as inputs to manufacture goods in the United States. TAA provides training and support for American workers who are negatively affected by trade and is traditionally in place as trade agreements pass. It is designed to help workers, firms, farmers and fishermen transition to alternative employment. The bipartisan compromise negotiated by Senate Finance Committee Chairman Max Baucus (D-Mont.) and House Ways & Means Committee Chairman Dave Camp (R-Mich.) is consistent with the goals of the 2009 law that improved the scope and effectiveness of the program – for instance, covering Americans employed in the services sector in addition to U.S. manufacturing workers. TAA is an essential component of President Obama’s balanced trade agenda.   ###     THE WHITE HOUSE Office of the Press Secretary IMMEDIATE RELEASE October 3, 2011 Statement from President Obama on the Submission of the Korea, Colombia, and Panama Trade Agreements “The series of trade agreements I am submitting to Congress today will make it easier for American companies to sell their products in South Korea, Colombia, and Panama and provide a major boost to our exports. These agreements will support tens of thousands of jobs across the country for workers making products stamped with three proud words: Made in America. We’ve worked hard to strengthen these agreements to get the best possible deal for American workers and businesses, and I call on Congress to pass them without delay, along with the bipartisan agreement on Trade Adjustment Assistance that will help workers whose jobs have been affected by global competition.” A fact sheet on the U.S.-Korea Trade Agreement is available HERE. A fact sheet on the U.S.-Panama Trade Agreement is available HERE. A fact sheet on the U.S.-Colombia Trade Agreement is available HERE. A fact sheet on Trade Adjustment Assistance is available HERE. ###

USTR.gov August 5th, 2011

12 Tariff-Rate Quota Allocations for Sugars August 5, 2011 Washington, D.C. – The Office of the United States Trade Representative (USTR) today announced the country-specific in-quota allocations under the tariff-rate quotas on imported raw cane sugar, refined and specialty sugar and sugar-containing products for Fiscal Year (FY) 2012.Tariff-rate quotas allow countries to export specified quantities of a product to the United States at a relatively low tariff, but subject all imports of the product above a pre-determined threshold to a higher tariff. On August 1, 2011, the Secretary of Agriculture announcedsugar program provisions for FY 2012.  The in-quota quantity for the tariff-rate quota (TRQ) on raw cane sugar for FY 2012 is 1,117,195 metric tons* raw value (MTRV), which is the minimum amount to which the United States is committed under the World Trade Organization (WTO) Uruguay Round Agreements.  USTR is allocating the raw cane sugar TRQ of 1,117,195 MTRV to the following countries in the quantities specified here.

Kirk Comments on Pending Trade Agreements, Trade Adjustment Assistance August 3, 2011 Washington, D.C. – U.S. Trade Representative Ron Kirk issued the following statement today regarding comments from Senate leaders on the pending trade agreements with South Korea, Colombia, and Panama, as well as a bipartisan compromise to renew key Trade Adjustment Assistance reforms. “I am very pleased that Senators Reid and McConnell have agreed on a path forward in the Senate for the pending trade agreements and Trade Adjustment Assistance. As the President has said, these agreements will support tens of thousands of jobs here at home, and the Administration looks forward to working with leaders of the Senate and House after Congress returns in September to secure approval of these important initiatives for America’s working families.”

USTR.gov HEADLINES Boon Edam: Trade Agreements Opening Doors to Increased Exports July 29, 2011 Boon Edam, located in Lillington, North Carolina, has been a leading manufacturer of revolving doors and turnstiles for over 100 years. The business is just one of many that rely greatly on exports to Colombia and Panama. “Colombia is the biggest market of the two,” said Business Development Manager, Martin Noble. “We started receiving inquiries from customers in both countries, and given [their] economic growth and demand for our products, we have identified both countries as key growth markets for our exports to Latin America.” Current sales to Caribbean and Latin American countries account for 10 percent of the company’s total exports. Of this amount, Colombia and Panama account for 10 to 15 percent of sales. Once the pending trade agreement with Colombia is passed and implemented, small American companies will be well-equipped to compete with foreign regional competitors. At present, tariffs and other non-tariff barriers pose competitive challenges for U.S. small- and medium-sized exporters. Read more

USTR.gov HEADLINES July 28th, 2011

Ambassador Kirk Discusses Importance of Trade with Omega Psi Phi Leaders
July 27, 2011

Today, Ambassador Kirk met with leaders of the Omega Psi Phi Fraternity during their Centennial Anniversary Celebration in Washington, D.C. to discuss the benefits of trade and the impact it has on our economy. Ambassador Kirk told the group that trade plays a vital role in winning the future by strengthening our economy and opening markets in other countries to U.S. goods and services. With 95% of the world’s consumers living outside the United States, our trade agreements with South Korea, Colombia and Panama will allow Americans to sell more products “Made in the U.S.A.”

In addition, Ambassador Kirk answered questions and engaged in a discussion on the African Growth and Opportunity Act (AGOA) as well as intellectual property rights. Ambassador Kirk also discussed the importance of enforcing trade laws to level the playing field for American businesses, farmers and ranchers.

Weekly Trade Spotlight: Expanding Markets, Growing Businesses, Supporting Jobs

July 26, 2011

On Wednesday, Ambassadors Kirk, Sapiro, and Siddiqui will meet with the White House Business Council to discuss ways to support job creation. This week, USTR.gov takes a look at the job-building opportunities within the three pending trade agreements with South Korea, Colombia, and Panama.

When it comes to selling goods and services to customers abroad, American exporters can face barriers to trade in the form of high tariffs, regulatory barriers, and “behind-the-border” concerns. However, the pending trade agreements with South Korea, Colombia, and Panama have the potential to significantly open up these markets for “Made-in-America” goods and services, while supporting tens of thousands of additional jobs here at home. Read more

Guest Blog: American Small Businesses Succeeding in Emerging Markets

July 26, 2011

Don Williams, CEO and founder of Princeton Healthcare, Inc. (PHI), recognized the opportunity to connect American manufacturers of medical technology equipment to international markets. Based in Atlanta, Georgia, PHI is a service firm that provides export and financial advisory services to medical technology equipment manufacturers, and healthcare and hospital organizations.

“Hospitals and other customers in emerging markets around the world are trying to improve the quality of their medical services – and they are looking to medical technologies manufactured in the United States to meet this demand for quality and dependability. PHI is capitalizing on this demand, and we see many opportunities like this for other small U.S. service firms,” said Mr. Williams.  Read more

Ambassador Kirk and New Zealand Prime Minister John Key Discuss Job-Supporting Trade Issues 

July 22, 2011

Today, Ambassador Kirk met with New Zealand Prime Minister John Key to discuss priority, job-supporting trade issues, including the Trans-Pacific Partnership (TPP) negotiations, the Asia Pacific Economic Cooperation (APEC), and the World Trade Organization (WTO) Doha Development Agenda.  Read more

USTR.gov July 22nd, 2011

USTR Ron Kirk Announces U.S. Contribution to WTO Technical Assistance Efforts July 18, 2011 WASHINGTON, D.C. – U.S. Trade Representative Ronald Kirk announced today that the United States will contribute $1.2 million for trade-related technical assistance (TRTA) to the World Trade Organization (WTO). The WTO’s TRTA program provides training for developing countries that enhances their ability to analyze issues, assess their interests and participate effectively in the negotiations and other WTO activities. The program also provides these nations with assistance in meeting their WTO obligations and ensures they fully benefit from the results of being a WTO Member. “The United States is committed to work with developing countries as partners in the global trading system. This contribution reflects our commitment to ensuring that developing countries can participate effectively in all the activities of the WTO, including the Doha Round of world trade negotiations, and to ensure that they enjoy the benefits of being WTO Members” Ambassador Kirk said. “We continue to believe that working through the WTO to create meaningful new opportunities for farmers, manufacturers and service providers will help these countries meet their development objectives and improve the well being of their people.” The U.S. contribution, which was approved by Congress, will be part of a technical assistance fund that developing nations can use for assistance in analyzing issues, assessing individual country interests, and meeting their WTO obligations. This latest contribution will bring total U.S. trade assistance for the Doha Development Agenda to almost $11 million since the launch of negotiations in November 2001. Background The United States’ contribution to the WTO was appropriated by Congress as part of the funds it provides to the U.S. Department State for voluntary contributions to international organizations. It is just one part of much broader U.S. assistance efforts. Overall U.S. support for trade capacity building (or “aid for trade”) since the Doha Round began in 2001, has now surpassed $11 billion.

United States and Turkey Work to Strengthen Ties, Expand Trade and Investment Relationship at TIFA Meeting July 15, 2011 Ankara, Turkey – This week, Assistant United States Trade Representative for Europe and the Middle East L. Daniel Mullaney and Turkish Deputy Undersecretary of the Ministry of Economy Cemalettin Damlaci co-chaired the eighth annual meeting of the U.S.-Turkey Trade and Investment Council. The Council meets under the auspices of the 1999 bilateral Trade and Investment Framework Agreement (TIFA).   “The United States greatly values its economic relationship with Turkey, which is a key strategic partner in this region of the world,” said Mullaney. “These annual meetings allow us to work together to overcome obstacles to increased trade and investment and to pursue actions to improve economic integration. We are working hard to fulfill President Obama’s commitment to enhance our bilateral trade and investment ties and to seek out new ways to pursue with Turkey our mutual goals in the Middle East and North Africa.” During the Council meeting, held on July 13 in Ankara, Turkey, the United States and Turkey pursued various mechanisms for expanding their growing trade and investment relationship, including joint support for small and medium sized exporters, regulatory and intellectual property support for innovative industries, shared priorities in third countries, and deepened ties between the U.S. and Turkish private sectors. They also agreed to a fall inaugural meeting of the U.S.-Turkey Business Council, an important mechanism for ensuring private sector input into increasing trade and investment. The TIFA Council is also a key step in preparations for the second formal meeting, envisioned for later this year, of the U.S.-Turkey Strategic Economic and Commercial Cooperation (FSECC) dialogue. The FSECC was inaugurated in December 2009 by U.S. Trade Representative Ron Kirk and Secretary of Commerce Gary Locke with their Turkish co-chairs, Deputy Prime Minister Ali Babacan and Minister for Economy Zafer Caglayan. Mullaney was accompanied by Deputy Assistant Secretary of Commerce for Europe and Eurasia Juan Verde and other officials from the Office of the United States Trade Representative (USTR) and the Departments of Commerce, Agriculture and State. At the meeting, senior government officials discussed a full range of trade-related issues, including intellectual property rights, steps to enhance the investment climate, biotechnology, pharmaceuticals, and government procurement. BACKGROUND Two-way trade (exports plus imports) between the United States and Turkey was valued at $14.8 billion during 2010, representing the U.S.’s 35th largest goods trading relationship. While U.S.-Turkish trade was sharply impacted by the economic downturn in 2009, U.S. exports to Turkey increased by 51.5% to $4 billion in 2010. U.S. imports from Turkey in 2010 were $4.2 billion, up 14.8%.. Leading U.S. exports to Turkey include aircraft, iron, steel, machinery and fabric, in addition to a wide range of agricultural products. Turkey predominantly exports vehicles, machinery, cement, and tobacco to the United States. U.S. foreign direct investment (FDI) in Turkey amounted to $6.3 billion in 2009, mostly concentrated in the wholesale trade and manufacturing sectors, while Turkish FDI in the United States was $218 million in 2007 (latest figures available).

USTR.gov HEADLINES

Pending Trade Agreements will Increase Opportunities for American Services Providers, Support U.S Jobs July 21, 2011 On Wednesday, Ambassador Kirk delivered the keynote address at the Coalition of Service Industries Global Services Summit in Washington, DC. Speaking to top policy makers and business leaders from around the world, he described how the Obama Administration’s balanced and ambitious trade policy supports American jobs and enables U.S. service providers to share America’s best services with the rest of the world. “Three out of every four U.S. workers are currently employed in a service-related industry, so it makes sense that service is part of our trade policy,” said Ambassador Kirk. “And connections between people – through electronic devices, over networks, and across borders – are becoming more critical to U.S. job creation every day. In many cases, when U.S. service companies expand into new markets through global supply chains, they can support additional service industry jobs here at home.”  Continued…  _________________________________________________  Pending Trade Agreements will Increase Opportunities for American Services Providers, Support U.S Jobs July 21, 2011 On Wednesday, Ambassador Kirk delivered the keynote address at the Coalition of Service Industries Global Services Summit in Washington, DC. Speaking to top policy makers and business leaders from around the world, he described how the Obama Administration’s balanced and ambitious trade policy supports American jobs and enables U.S. service providers to share America’s best services with the rest of the world.   “Three out of every four U.S. workers are currently employed in a service-related industry, so it makes sense that service is part of our trade policy,” said Ambassador Kirk. “And connections between people – through electronic devices, over networks, and across borders – are becoming more critical to U.S. job creation every day. In many cases, when U.S. service companies expand into new markets through global supply chains, they can support additional service industry jobs here at home.”  Continued…  _________________________________________________

Europe’s Economic Powerhouse Drifts East

Germany has long been a model export nation, successfully demonstrating to the entire world how a country with high cost of labor and very strong currency can consistently remain in the top three places among global exporters.

Apparently, Germany has been able to achieve its heavyweight status without even focusing on the fastest growing global markets. Recently, that trend has begun to shift and German industry has focused its attention on China, Japan, Russia and Brazil and begun to view those country as central to its expansion strategy.  What this means to the U.S. lawmakers and U.S. exporters is that in order to even stay in the race our country needs to bring its best game.  We currently have very favorable currency exchange rate – a huge advantage in helping our country maintain its strong export position. Yet, we also growing competition from China, India and other emerging countries. We have Germany – arguably the top overall exporter in the world, pursuing most lucrative global markets.  We cannot afford to slow down free trade agreements, produce goods that are not competitive in the global markets and have policies, which in any way hamper our country’s export capabilities. It is hard enough to compete. Competing with one had tied behind our back, is simply not prudent and fraught with peril.

As always, I hope you enjoy the article below and welcome your comments.

Ryan Pyle for the International Herald Tribune

The Trumpf factory in Taicang, China, which opened in 2009, has already been expanded.

By JACK EWING AND JUDY DEMPSEY   The New York Time

Published: July 18, 2011

DITZINGEN, GERMANY — Germany has long sat at the center of the European economy, but Europe is no longer as central to Germany as it used to be.

Branching Out

With large parts of Europe still in an economic rut and struggling to cope with a debt crisis, Germany is increasingly deploying its money and energy outside the euro zone to fuel its robust growth.

The shift in focus, while still in its early stages, could have profound economic and political implications because it comes at a critical time when the rest of Europe is counting on Germany to continue its traditional role as the locomotive of the Continent’s economy.

German companies, instead of concentrating their investment overwhelmingly on countries like France and Italy, are sending a growing proportion of their euros to places like Poland, Russia, Brazil and especially China, which is already the largest market for Volkswagen and could soon be for Mercedes and BMW.

The German government is following suit, committing more diplomatic resources to its growing trade partners, particularly China, whose prime minister, Wen Jiabao, brought an entourage of 13 ministers and 300 managers when he visited Chancellor Angela Merkelof Germany last month.

President Dmitri A. Medvedev of Russia brought a similar entourage with him Monday to Hanover for annual German-Russian consultations, including Alexander Medvedev, deputy chief executive of Gazprom.

The economic shift is already having important consequences inside Europe. As Germany becomes less dependent on euro zone markets, there are signs that it is becoming stricter with its ailing partners, like Greece, Italy and Portugal, adding to the pressures already straining European unity.

“It reinforces a shift that we have seen in recent years for Germany to become rather more focused on its own national interests rather than sacrificing for some defined European interest,” said Kevin Featherstone, an expert on E.U. politics at the London School of Economics. “Germany is not giving up on Europe, but it is certainly frustrated.”

German politics are in line with the interests of German businesses like Fresenius, a health care company in Bad Homburg, near Frankfurt. Last year, Fresenius recorded a sales increase in Asia of 20 percent, to €1.3 billion, or $1.8 billion. That compared with its sales in Europe of €6.5 billion, up 8 percent.

Fresenius’s chief executive, Mark Schneider, said he expected the trend to continue, noting that China was trying to create a universal health care system that would ensure its people access to kidney dialysis and infusion therapies — the sort of products that Fresenius provides.

Germany, of course, remains deeply entwined with the euro zone, which is still its largest source of trade by far. But Western Europe’s share in the German pie is shrinking as companies focus new investment on more vibrant markets.

“I’m not sure I would call Germany the locomotive” for Europe anymore, said Marc Lhermitte, a partner at the consulting firm Ernst & Young. “It’s an engine.”

Mr. Lhermitte was one of the directors of a study in May by the firm that looked at trends in cross-border investment around the world.

Last year, the euro area’s share of German exports fell to 41 percent from 43 percent in 2008, while Asia’s share rose to 16 percent from 12 percent, according to Bundesbank figures. During the same period, exports to Asia rose by €28 billion, while exports to the euro area fell by the same amount.

Fresenius is one of many companies that reflect the trend. Corporate investment in Western Europe is still rising in absolute terms, said Mr. Schneider, but “capital spending and employment is not rising as much as we are seeing in emerging markets.”

There are also signs that Germany’s prosperity is no longer helping the rest of Europe the way it did a few years ago. On the contrary, the rest of Europe, particularly its southern half, is falling further behind as the European Union struggles to deal with the sovereign debt crisis.

The Italian economy, for example, is no longer cruising in Germany’s slipsteam.

“Italy used to produce a lot of goods that would feed the German industrial machine,” said Jens Sondergaard, an economist at Nomura in London. But much of that German business is going to Eastern Europe or elsewhere, where costs are lower and companies are increasingly able to match Italian quality. Indeed, despite the strong German economy, Italian exports to Germany were €3.2 billion lower in 2010 than in 2008.

“That is bad news for Italy,” Mr. Sondergaard said.

Where Germany puts its money is crucial to the 17-nation euro zone economy. Germany accounts for nearly a third of the euro area’s exports. Germany has a trade surplus so far this year, while France, Italy, Spain and the region as a whole have large deficits.

With decades of European economic integration under their belt, German companies still exported much more to France last year than to China — €91 billion compared with €54 billion.

But the gap is closing fast. Exports to China rose 44 percent in 2010 compared with a 12 percent increase for France. Mr. Wen, the prime minister, predicted during his visit to Berlin last month that trade with Germany would double within five years.

Moreover, in 2009, German manufacturers for the first time invested more in China — €11.6 billion, a 50 percent increase from 2006 — than they did in France, which, along with Italy and Spain, is drawing markedly less German industrial investment than a few years ago.

This profound shift is visible at the Trumpf factory complex in Ditzingen, near Stuttgart. Not long ago, Trumpf was considered part of the Mittelstand, the midsize, family-owned engineering companies that power the German economy. But these days, Trumpf is a global powerhouse.

From humble prewar beginnings, Trumpf, a maker of machines that use lasers to work metal, has grown to the point where it now employs about 2,000 people in Ditzingen and 6,000 at other locations around the world. That is not counting the robotic lawnmower prowling outside the executive office building — a sign of the scarcity of labor in southwestern Germany, where unemployment is less than 5 percent.

There are a number of reasons for Trumpf’s growth from workshop to multinational, but one stands out: China. As at many other German companies, sales to China and other developing markets have made up for declines in traditional export markets that followed the recession in 2009.

“In three to five years, China will be our biggest market,” said Mathias Kammüller, a member of the company’s management board and head of the machine-tools division.

In 2009, Trumpf opened a factory of 15,000 square meters, or 160,000 square feet, in Taicang, near Shanghai. Less than two years later, the company ran out of space and expanded the plant by another 10,000 square meters. There are so many companies from southwestern Germany in that part of China that it is known as Little Swabia, referring to a region of Germany.

Trumpf has hired about 450 employees in China, more than half the number it has in the euro area outside of Germany, where by contrast employment has been flat.

“We are not producing in China to be less expensive or to export to Europe,” said Nicola Leibinger-Kammüller, the president of Trumpf, who is married to Mr. Kammüller. “We are producing for the Chinese market.”

Trumpf is by no means alone. China is by far the biggest market for Germany’s crucial machine-tool industry, as manufacturers abroad equip their factories with precision technology from Bavaria or the Ruhr Valley.

The success of German exports in emerging markets reflects its manufacturers’ strength in making things that go into the kinds of products that a modernizing economy needs, like trains, steel factories, and electronics assembly lines.

“Our newest plants are in Russia, China and India,” said Heinrich Weiss, chief executive of SMS Group, a company in Düsseldorf that builds and equips steel and aluminum plants. “Western Europe and the United States are very quiet — very quiet.”

Another example of a company that has prospered with the rise of emerging markets is Multivac, based in Wolfertschwenden, in southern Germany. The company makes machines for packaging perishable goods, a business that is possible only in countries where food can be kept cool from the factory to store shelves. So Multivac is something of an indicator of the advance of reliable electrical power and rising incomes.

Hans-Joachim Boekstegers, the president of Multivac, said he spent 150 days away from home in the last year, visiting new markets like Azerbaijan, Chile and Turkey.

Mr. Boekstegers said he still had plenty of business in Europe, even Greece. “People always need to eat,” he said. But that is not where the big growth is found.

“I can only recommend,” Mr. Boekstegers said, “that everyone not be dependent on European business and expand abroad.”

Even within Europe, there is a shift from west to east, with German manufacturers concentrating more of their investment in countries like Hungary and Slovakia.

Germany’s shift toward developing markets has been brewing for a long time, but it accelerated after the 2009 downturn, when Asia recovered much more quickly than Europe or the United States. “In China the crisis lasted only half a year, followed by extreme growth,” said Mr. Kammüller of Trumpf.

Germany’s lessening dependence on the euro area economy appears to have given Mrs. Merkel more leeway to be assertive with her European allies, clashing repeatedly, for example, with President Nicolas Sarkozy of France on issues like Greece and Libya.

When Mrs. Merkel was first elected chancellor in 2005, she rarely invited German executives to accompany her on trips to China, Russia — or anywhere else, for that matter. Now Mrs. Merkel frequently leads trips abroad, particularly to Asia. At the end of May, she made a three-day trip to India and Singapore, with a retinue of top executives in tow.

Mrs. Merkel has used her influence to open doors and help companies deal with the hazards of developing markets, which remain much riskier than Europe. Managers have urged Mrs. Merkel to criticize poor protection of intellectual property rights in China, and she has obliged. At one meeting with German and Chinese executives, she wondered aloud whether parts of a new Volkswagen model had already been counterfeited.

But Mrs. Merkel is not just an exponent for German business. She has annoyed executives by criticizing human rights violations by China. German managers were furious with her after she met with the Dalai Lama, the exiled spiritual leader of Tibet, in 2007. Despite threats by the Chinese authorities, there was no major effect on trade, however, and Mrs. Merkel has not said much about Tibet recently.

Some analysts warn that Germany is focusing too much on developing markets, and setting itself up for a shock if the Chinese economy slows down. China is also trying to build up its expertise in cars and machinery and become a competitor as well as a customer. Business people are aware of the risk.

Still, said Mrs. Leibinger-Kammüller of Trumpf, “it is riskier not to be there.”

Judy Dempsey reported from Berlin.

First in a series on Germany’s changing role in Europe and the world.