Fifty exporters and local business professionals received a provocative, and sometimes humorous, insight into the massive change that is happening and will continue to happen in the global economy during the State of the Global Economy Trade Talk, held Jan. 15 in Fargo. Pete Mento, Director for Global Customs and Trade Policy at C. H. Robinson Worldwide, Inc. led the discussion and answered questions from attendees.
Mento said “Exporting and the world are changing before our eyes.” Some of the main areas that are contributing to these changes are energy, technology, education, and trade agreements.
Energy: During the most recent recession, larger countries/economies were “in the toilet”. Some smaller countries/economies were growing and becoming wealthier. What was the difference? Energy. Any county that has found an energy source controls more of their own destiny. Energy is the current ticket to wealth and growth. As the wealth in these countries grows, the middle class tends to grow. One thing that reflects the growth of the an economy is advertising. Once we see more advertising in growing economies, we know that the agrarian population is becoming more urbanized and “middle class”, which leads to more consumerism and the opportunity to export products to that country.
Technology: “Think about this…. In 2013 there were more iPhones sold in the world than there were babies born. And that doesn’t include all the other mobile phones,” Mento said. The adoption of technology is growing at a record pace and is stretching to all corners of the world. As an example Mento offered this:
The business model we have in the USA is not the model observed in other spots of the world. C.H. Robinson ships product to ports all over the world. Once there, how do they get it to customers? C.H. Robinson has an “app” for that. Drivers around the world can check their smart phone and see in real time what loads are available to deliver, accept the load with a touch of an icon, record it’s delivery, and receive payment…. All with a smartphone! No offices, no desks, no staff, just a driver and his truck conducting business. This is the model we work with around the world.
Education: In 2014, universities and colleges in the United States will grant 100,000 undergraduate degrees in engineering. This may seem like a large number, however, in this same time frame, China will be grant 1 million students undergraduate degrees in engineering and India will grant 1.2 million undergraduate degrees in engineering.
Currently, the U.S. is the leading developer of cutting edge technology. If we want to stay at the forefront of technology development, we need more students that are focusing on science and math. If not, we lose could that technology edge, which could lower our status in the exporting world.
Trade Agreements: Trade agreements can open new markets to exporters, providing reduced paperwork, lower (or no) duties or tariffs, and faster movement through customs channels. Recent negotiations in trade agreements are also considering options of “guest worker programs”. This program states that in select industries or jobs, foreign workers would not need a work visa.
A number of agreements are being worked on.
- US/EU (European Union)
- Upwards of 75% of products being covered under this agreement
- Agricultural trade is a stumbling block.
- Guest Worker Program being considered.
- US/JAPAN
- US/India
- Expansion of NAFTA
- Celebrating 20 years (January 1, 1994)
- Establishment of jobs south of the border to deter illegal immigrants
- Expansion includes potential common currency with Canada
- Canada has large currency exchange fees in converting energy revenues
- The Mystery of GSP (Generalized System of Preferences)
- Countries involved in the World Trade Organization will not impose duties/tariffs higher than those imposed on a most favored trading partner.
- Trans-Pacific Partnership (TPP)
- The goal of getting a large number of countries to come to an agreement on all items traded between each other could prove difficult.
- US/West Africa
- India/Russia
- India has technology and education, Russia has energy
- India/China
- India has technology, China has manufacturing capability. But China is catching up on the technology side.
Finally, one important thing to remember is that relationship goes a long way. “There has never been a war between two countries that have a McDonalds, ” Mento said. A rather humorous comment, but if you think about it there is a strong level of validity. If countries are willing to trade and do business together they are much less likely to fall into conflict. Business will keep countries “talking.”