The State of the Global Economy Trade Talk, held Jan. 11 in Fargo, drew exporters and businesspeople from around the region to discuss one of the most-significant topics in North Dakota today: the future of the global economy in 2012. Experts Thomas R. Hardy, U.S. Trade and Development Agency (USTDA), and Dr. Cole R. Gustafson, economist and chair of Department of Agribusiness and Applied Economics at North Dakota State University (NDSU), led the discussion while exporters and peers examined the assumptions underpinning recent changes in the economy through a panel discussion.
The luncheon and trade talk was kicked off by Washington D.C.-based expert Thomas Hardy. Hardy began the conversation by addressing what many view to be the root of the current global economic difficulties: the Eurozone Crisis.
According to Hardy, the Eurozone Crisis is greatly affecting the financial stability of modern, European nations as well as other large, developed markets – much more so than developing countries. Hardy suggested that U.S. exporters may have better opportunities focusing on emerging markets rather than those which are developed. Economic growth of industrialized countries is slated to drop from 1.6 percent in 2011 to 1.3 percent in 2012. The growth in emerging economies will fare better, falling from 6.4 percent growth in 2011 to 5.1 percent growth in 2012.
Hardy also discussed the USTDA Programs that could potentially benefit North Dakota companies. The USTDA’s mission is to help companies create U.S. jobs through the export of U.S. goods and services for priority development projects in emerging companies. The organization also supports sustainable infrastructure and economic growth in partner countries.
A Closer Look at North Dakota
Local economist Dr. Cole R. Gustafson took the closer look at the future of the global economy from a regional standpoint while honing in on the recent, dramatic changes in agriculture.
Gustafson pointed out that there will continue to be greater demand for food than the world’s farmers can produce as the world population is expected to exceed 9 billion by 2050 and consumption rates continue to grow.
Furthermore, productivity growth rates have become insufficient to meet food demands, and the added demand from biofuels puts added stress on the situation. Agriculture has become inextricably tied to energy. Today, 35 percent of corn acreage in the U.S. is now supporting ethanol production. Energy is an input into agriculture; agriculture is an input into energy via ethanol and biodiesel. Exporters should be aware that, as the U.S. dollar continues to deteriorate, oil prices will increase, which will in turn increase commodity prices.
In the U.S, however, the cost of food has not equaled inflation over time. As a percent of disposable income that U.S. consumers spend on food has been flat.
Regarding the global financial crisis, Gustafson reiterated Mr. Hardy’s statement that the economy will likely continue to be stagnant until there is resolve to the European debt crisis. U.S. banks and firms have large money reserves, and everyone is sitting on the sidelines, waiting for the financial crisis to subside. When the economy improves, the level of capital available for investment will dramatically rise.
Both Hardy and Gustafson advised participants that there will continue to be instability in markets around the world and exporters must keep a close eye on markets to minimize risk, however, there continues to be a global demand for products. Organizations such as the North Dakota Trade Office and federal resources have the most-current research and statistics available to aid North Dakota companies in making the most-sound exporting and international business decisions.
For more information on state and federal resources, contact the North Dakota Trade Office at (701) 231-1150 or email firstname.lastname@example.org.