An update from MGTA

March and April 2017 | View Online

Midwest Global Trade Association

World Trader | March and April 2017

From the President

Upcoming Events

Introducing Cray Inc., the MGTA’s 2016 Annual Importer/Exporter Award Recipient!

The Indian Cash Crisis

India Implements Import Service Tax on Imports Including Prepaid Freight

TPP’s Status Post US Withdrawal and China’s Step into the Spotlight

I, Robot or How Automation Will Impact the Logistics Industry in the Near Future

The Benefits of Global Trade

Trump Administration Appointees & Future U.S. Trade Policy

What does the rise of protectionist forces in the West mean when it comes to Global Trade?

Thank You, Newsletter Sponsor: Port of Seattle

From the President


By Anna Ouattara — MGTA President

Anna Ouattara

Good morning trade community,

It is a great honor to be the current President of a thriving and professional organization that takes pride in being an educational resource to our trade professionals. I would like to graciously thank Kylle Jordan, the outgoing president, for her leadership and accomplishments this past year, all our members for giving us the platform to be of service to you, the board members and committees for their time and commitment and all of our sponsors for their continuous financial support.

The world changes rapidly and 2016 was a year with quite of few changes. We have seen Great Britain removed itself from the European Union, which means trade renegotiations, former President Barack Obama visiting Cuba, which led to U.S airlines offering travel service to both countries for the first time in more than fifty years and the election of President Donald Trump who plans on making some changes to NAFTA and pull out of Trans-Pacific Partnership (TPP). Despite it all, we managed to keep up and provide our members educational lunches and seminars to address the changes impacts on global trade.

As we move forward, a few of our initiatives will focus on community partnership, education and communication. To strengthen our trade community, we will build genuine rapport with other trade organizations and collaborate on trade events to service our constituents. We will continue to provide hands on training in hope to sharpen our members’ skills so they can add value to their workplace and we will identify areas to best communicate our programs and events to our members in the most effective and efficient ways. To be successful, we will engage our members and welcome their input.

I am very excited for the journey and look forward to be of service to our trade community. Thank you again for your continuous support and for choosing me to serve as the 2017 President. As always, we are your resource so please visit our website for upcoming events at MGTA.ORG and feel free to email me at Anna.Ouattara@saintpaul.edu with questions and suggestions.

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Upcoming Events


MGTA/Greater MSP Networking Event

  • Date: Wednesday, March 22
  • Time: 5:00p.m. to 7:00 p.m.
  • Location: Urban Growler, 2325 Endicott St, St. Paul, MN 55114

MGTA members, you're invited to a networking event co-hosted by Greater MSP. This is an excellent opportunity to meet your peers and learn more about the services Greater MSP has recently added.

There will be live music starting at 7:00 p.m. if people want to stick around!

This event is complimentry and there will be a door prize.

urban growler logo

register now btn


Save the Date! 2017 MGTA Golf Tournament

  • Date: Wednesday, August 9, 2017
  • Time: Noon to 7:00 p.m.
  • Location: Crystal Lake Golf Course, 16725 Innsbrook Drive, Lakeville MN 55044

Crystal Lake Golf Course boasts a quality first-class facility, maintained to country club standards, on a daily fee basis open to the public. Conveniently located just twenty minutes south of Minneapolis and St. Paul in Lakeville, Minnesota, Crystal Lake features stately pines, pristine wetlands and is beautifully accentuated with seven ponds, which create challenging water hazards. Using the rolling terrain and beauty of this 160-acre property, designer William Gill & Associates was able to select spectacular natural settings for the tee boxes, fairways, and greens. This combination makes Crystal Lake one of the finest golf experiences in the state.

Hole 7 at Crystal Lake

This 18-hole, par 71 course has 3 sets of tees ranging from 4805 to 6306 in yardage and offers gently rolling hills and natural reclaimed Minnesota wetlands to challenge all levels of golfers. Crystal Lake Golf Course is honored to be one of 23 courses in Minnesota that has qualified for ‘Certified Audubon Cooperative Sanctuary’ certificate. This honor requires a high degree of demonstration in multiple areas including, environmental planning, wildlife & habitat management, integrated pest management, water conservation, water quality and outreach & education. View the Course Tour

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Introducing Cray Inc., the MGTA’s 2016 Annual Importer/Exporter Award Recipient!


By Thierry Ajas, CPC — Practice Director, Randstad Professionals

Amanda McDonald, Banner Engineering

Photo: Amanda McDonald — Banner Engineering

More accurate and timely global weather forecasts and warnings, safer transportation and better medicine: Researchers and engineers around the world improve people’s lives every day using Cray supercomputing and big data analytics solutions, which deliver unrivaled performance, efficiency and scalability.

Founded in Wisconsin in 1972 by visionary Seymour Cray, Cray Inc. is a publicly traded company (Nasdaq: CRAY) that employs 1,200 professionals around the world. Seymour Cray built R&D and manufacturing facilities in his hometown of Chippewa Falls, Wisc., and set up business headquarters in Minneapolis, Minn.

Although Cray is now headquartered in Seattle, Wash., it maintains its manufacturing in Chippewa Falls and administrative offices in St. Paul, Minn., as well as other engineering, R&D and manufacturing facilities throughout the United States. Bristol, England, is home to Cray’s EMEA headquarters and EMEA sales, service, training and operations, and it’s an important development site for the company’s worldwide R&D initiatives. The company maintains other sales and service locations across the globe.

In its early days, Cray supplied mainly U.S. government laboratories. Today its systems are also running in commercial, university and government facilities everywhere from Saudi Arabia to Australia to Japan and Norway. Cray provides innovative systems and solutions enabling scientists and engineers in industry, academia and government to meet existing and future simulation and analytics challenges with a wide range of applications in cybersecurity, earth sciences, energy, financial services, healthcare and life sciences, machine learning and deep learning, and manufacturing.

Cray's adaptive supercomputing vision is focused on delivering innovative next-generation products that integrate diverse processing technologies into a unified architecture, allowing customers to meet the market's continued demand for realized performance. What does that mean in real terms? Consider the first Cray®-1 system, which was installed at Los Alamos National Laboratory in 1976. It boasted a world-record speed of 160 million floating-point operations per second (160 megaflops). Fast-forward to 2015: “Shaheen II,” a Cray® XC4™ system at the King Abdullah University of Science and Technology (KAUST) in Saudi Arabia, was benchmarked at 5.5 petaflops – or 5.5 thousand trillion operations per second.

  • Recent performance related to international trade:
  • Q4 2016 – Announces results of a collaboration on deep learning with Microsoft and the Swiss National Supercomputing Centre
  • Q3 2016 – Delivers several supercomputer and storage solutions in Australia and Germany.
  • Q2 2016 – Announces significant customer acceptances in Germany and the U.K.
  • Q1 2016 – Delivers several supercomputer and storage solutions in the U.K., Australia and Germany.
  • FY2015 –Experienced one of its best years ever, growing by nearly 30 percent compared to 2014. Cray installs first petascale system in India, in addition to others in Germany, the U.K. and Norway.
  • 2015: Installs India’s first-ever petascale supercomputer at the Indian Institute of Science; welcomes weather customers in Australia, Denmark and Switzerland (today more than half the world’s global weather modeling centers use Cray systems)
  • International milestones:

1977 – Makes first international shipment (European Center for Medium-Range Weather Forecasts)
1978 - 2015: Opens subsidiaries and offices worldwide:
1978: U.K.
1979: Japan and Germany
1980: France
1983: Canada
1984: Italy
1985: Switzerland and Australia
1987: Spain
1988: South Korea and India
1990: Cray Europe
2009: India
2012: China
2015: Opens EMEA headquarters and research lab in Bristol, U.K.

Congratulations to Cray Inc.’s team for this well-deserved award and for being long-time supporters of the MGTA!

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The Indian Cash Crisis


By Kylle Jordan — MGTA Past President

Kylle Jordan

In November of 2016, Indian Prime Minister Narendra Modi made the decision to do away with 500- and 1,000-rupee notes in the country. His rationale for the move was to make India’s economy less dependent on cash – 68% of transactions in the country are done in cash - saying it will help it shrink the black economy and curtail tax evasion. The decision removed around 86 percent of India's cash almost overnight.

While e-payment companies are seeing their business boom in cities, the switch to plastic money is proving more difficult in rural India, where few villagers are connected to the internet. The cash shortage has slowed the economy and forced many people to form long lines at banks to get money. In one case, a mother gave birth while standing in line to withdraw money at a bank – she named the child Khazanchi, which means "treasurer".

The Reserve Bank of India has announced that an end is in sight - the final limits on cash withdrawals following demonetisation will be lifted on March 13.
In the meantime:

Some of Bollywood’s biggest stars have been making public service announcements vowing to support the move away from cash. The celebrities, as well as bankers, bureaucrats and even bikers, are pledging to use electronic payments to enable more cash in circulation to go to the poor.
Poor people – particularly in rural areas - who are unable to get online suffer financial exclusion, exacerbating their problems. Some have turned to recycling gold as a means of generating cash. A price hike of 6.68% in gold since January and low access to digital transactions are encouraging people to recycle their old gold in these areas.

Businesses have reported immense profit losses in the recent quarter. Tata Motors reported a 96 percent fall in its quarterly profits, with consolidated net profit for the three months ending December dropping to 1.12 billion rupees from 29.53 billion rupees a year earlier. At the same time, revenue fell 4.3 percent to 685.41 billion rupees. The drop in the profit and revenue was driven by a fall in demand for the firm's commercial vehicles.

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India Implements Import Service Tax on Imports Including Prepaid Freight


By Kevin Johnson — Best Buy

One result of India’s cash crisis has manifested itself in the form of a new tax. India’s Ministry of Finance announced on January 12th a 4.5% tax levied on the Ocean Freight charges of imports on a prepaid basis into India. This tax will take effect on January 22, 2017.

Currently India already has a 4.5% service tax on levied on Free-on-Board (FOB) shipments. Prior to this change, prepaid ocean freight charges were exempted from any service taxes. It is not known at this time how much revenue is expected to be generated from this tax but it certainly does speak to the level of concern this crisis is at within India’s Ministry of Finance.

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TPP’s Status Post US Withdrawal and China’s Step into the Spotlight


By Christopher James Broveleit — Navegate Logistics

Only a few days after entering office President Donald Trump followed through on campaign promises to remove the United States from the Trans Pacific Partnership (TPP). With the US’s withdrawal, TPP has to be completely restructured. Under its current format, at least 6 original signatories have to have ratified the agreement and of those six, they must represent 85% of the total GDP of the twelve original signatories. With the US accounting for roughly 16% of global GDP and 62% of TPP’s GDP, the withdrawal of the agreements largest partner makes the deal impossible to execute. The other 11 nations involved in the pact immediately began to not only examine ways which the deal could be redone sans the US, but ways in which they could regain the growth the partnership once promised.

Many countries had been looking to the trail blazing agreement as a major support to their economies’ growth in the coming years. By eliminating roughly 18,000 tariffs across 12 nations and reaching across 40% of global GDP- TPP had promised certain growth for all member states. (Jozuka, 2017) Japan’s Prime Minister Shinzo Abe is the international leader keenest to replace the deal that once promised an estimated $105 Billion USD in annual gains for his island nation whose economy has experienced decades of stagnation (Dollar & Bader, 2015). In January, after meeting with Trump, Abe told the country’s parliament “If T.P.P. doesn’t move forward, there’s no doubt that the focus will shift” (Harris & Bradsher, 2016). And while Canada and others have promised to revisit TPP and redraft the agreement, others have already changed their focus now that more than half of its economic reach has been removed.

Seizing on the US’s withdrawal from traditional facilitator of globalization- China’s Xi Jinping appealed to the international community to engage China for the growth the TPP once promised. Speaking at the global economic forum Davos, marking the first time a Chinese President has ever been present at the event, Xi’s message was clear when he said:

The point I want to make is that many of the problems troubling the world are not caused by economic globalization…We must remain committed to developing global free trade and investment…through opening-up and say no to protectionism. Pursuing protectionism is like locking oneself in a dark room. While wind and rain may be kept outside, that dark room will also block light and air. No one will emerge as a winner in a trade war.

Starting with his address at Davos, China has been pushing the Regional Comprehensive Economic Partnership (RCEP). As it stands today, RCEP will incorporate 24% of global GDP but more importantly some of the fastest growing economies in the world and 46% of global population (Jozuka, 2017). RCEP has been in negotiations since 2012 between China and 15 other nations. While it currently is composed of Pacific Rim countries and members of the Association of Southeast Asian Nations (ASEAN), China is now looking to extend its reach by courting countries in Latin America. A deal that far reaching would turn the tables on the United States.

Once frozen out of TPP due to the agreement’s strict non-tariff conditions in the areas of Labor and intellectual property rights, environmental regulations, and adherence to commercial trade rules by state owned businesses; China has formulated RCEP to specifically exclude any conditions which would cause any reform within its own borders and focused solely on reducing tariffs. Throughout the Davos speech Xi was diligent to not use the term globalization loosely but to solely refer to “Economic Globalization”.

This has of course raised fears in Washington. By joining RCEP the South Eastern Nations, and possibly many more, are aligning themselves to China by tying their economies and growth together in a deal that gives great advantage to the emerging global power. Washington understands this mutual growth between RCEP nations and their increasingly interconnected economies may also result in future militarily alignments with China. This was of course also the goals of President Bush and subsequently President Obama under TPP. Senator John McCain has said the American self-exclusion and step back from global advocate for Free Trade was a “Troubling Signal...(when) we can least afford it... It will create an opening for China to rewrite the economic rules of the road at the expense of American workers.” Likewise, President Obama had warned “We can’t let China write the rules of the global economy... We Should write those rules.”

While TPP isn’t dead the pact certainly is not what it once promised without the US. RCEP looks to be the ready replacement for TPP signatories Japan and Australia and possibly more. It is under China’s lead that the deal looks to be a success. The success of RCEP will undoubtedly tie the economies and people of the signatories closer and also divert trade away from the United States, previously positioned to benefit from TPP. It is a clear opportunity for China to assert its authority and continue to challenge its western rival.

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I, Robot or How Automation Will Impact the Logistics Industry in the Near Future


By Jakub Kowalczyk — Purolator

In the 2004 film I, Robot, starring Will Smith, we see a world were robots serve humanity. One particular scene that interested me, being in logistics, was the delivery of a shipment via FedEx by one of those robots. While set 30 years in the future at the time of filming, the advancements over the past decade may make us closer to this reality than we may think.

Drone Delivery

You would be hard pressed to find anyone who has not heard of Amazon and the patents that the company has filed in regards to drone deliveries. Some these include, flying warehouses of goods supported by fleets of delivery drones. This would reduce cost of drones taking off and landing, provide flexibility that a ground based warehouse cannot, and faster delivery. Amazon has also filed patents for swarm delivery by drone, allowing many drones to work together to deliver larger items. And of course they would need systems designed to protect drones from physical and cyber-attack.
While Amazon may receive the most press, they are not the only company in the drone delivery space. 7-11 has beat them to the punch and made 77 deliveries in the US already. 7-11 has teamed with Flirtey to make regular weekend deliveries of items ranging from hot and cold food to medication. Customers make the order on a custom app, the goods are loaded in the drone and sent for delivery. Customers can track the order on the app and deliveries take an average of 10 minutes.

7-11 hopes to expand the service this year while Flirty has made a name for its self by making the first FAA approved urban drone delivery, delivering Domino’s pizzas in New Zealand and textbooks in Australia.

Drone Delivery Canada (DDC) has recently entered an agreement with UAP Inc. (NAPA) for testing of drone delivery for auto parts in Canada. DDC has recently worked with Transportation Canada for drone testing in Alberta, Southern Ontario, and Quebec. They are also developing Beyond Visual Line of Sight (BVLOS) capabilities which is key as the FAA currently requires all drone to be within the operators sight.

What if you didn’t need an address to receive your shipment? That’s what South Africa’s WumDrop has launched with its Deliver2Me service. The service takes the GPS coordinates from a phone rather than physical address. The company has boasted 100 percent accuracy for delivery in the test phase since November. The UN estimates that four billion people worldwide don’t have a proper address, and we be approaching a point where more people globally have access to a phone than a physical address. Combine this technology with, let’s say, Amazons flying warehouse deployed over parts of the rural US and worldwide, there may not be a consumer they cannot reach. One area that may also benefit is that of humanitarian aid to these locations or areas impacted by natural disaster.

Self-Driving Trucks and Cars

Mercedes Benz showcased two concepts during the Consumer Electronics Show in Las Vegas, Vision Vans and Vans and Robots. Mercedes has teams with Starship Technology to deploy their ground based delivery robots with Mercade’s Sprinter which has been transformed to mobile depot. The long term vision is to have the Mercedes van serve as the “Mothership” for Starship’s robots which will make autonomous deliveries. Mercedes has also begun testing of driverless long haul trucks on the Autobahn.

Uber purchased a self-driving truck company, Otto, for $680 million in August. In October one of the companies autonomous trucks made a delivery in Colorado using the self-driving technology. Uber AI labs is working on not only improving ride-hailing software but also the companies self-driving car. Companies such as Google, Apple and Tesla have also been developing self-driving car technology.

Impact

70 percent of all goods in the US are moved by truck, 10 billion tons. Transportation and delivery are Amazon’s largest expense, approx. $1.7 billion per year. The irony is that to reach peak efficiency we need to eliminate the driver entirely. While there is shortage of drivers nationwide, truck driving is still the most common job in 28 states. Self-Driving trucks could eliminate over 1.6 million American trucking jobs, many in red states. There are an additional 1.7 million taxi, bus and delivery vehicle drivers in the US, will we replace those jobs in time as well. Many in Silicon Valley are counting in years, not decades, when we will see these changes on a larger scale.

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The Benefits of Global Trade


By Jim Glassman — Head Economist, Commercial Banking, Chase

Recent sentiment notwithstanding, the benefits of international trade likely outweigh its associated costs.

International trade has recently become the villain to many Americans and U.S. politicians. But the resulting protectionist movement may be shortsighted. Focusing on the workers left behind by international commerce may be good politics, but today’s trade deficits are rapidly creating a more prosperous world for everyone. Free trade opponents tend to ignore the rise of what could eventually become a $100 trillion consumer market in the developing world.

In light of this, it can be helpful to focus on policies that have the potential to help workers who lost jobs as a result of trade without sacrificing the tremendous upside of a more interconnected world.

An Uneven Playing Field?

Free trade critics often point to America’s trade deficit as evidence of unfair practices. If trade is two-way street, why aren’t Chinese consumers buying more American exports? The answer should be clear: Chinese consumers are poorer than their American counterparts. Per-capita income in the US is more than three times the average in China, so it should be no surprise that America’s demand for imported goods is significantly stronger.

From this perspective, the global playing field is incredibly uneven. America is the world’s richest nation; consequently, it runs deficits with most trading partners. Uneven wealth is the true driver of trade imbalances, not currency manipulation or weak labor protections. Moreover, access to the US market is driving rapid industrialization throughout the developing world, and the growth of export-driven manufacturing in poor nations is lifting citizens’ living standards. America’s trade deficits are helping create what promises to be the world’s largest consumer market.

Trade’s $100 Trillion Upside

The economies of China, India and Mexico are growing at three to four times the rate of the US, but tremendous potential remains untapped. If incomes in these three nations were to reach parity with the US, they would comprise a $125 trillion economy, 1.5 times larger than today’s entire global economy. If the world’s poorest 6 billion citizens were to achieve the living standards of developed nations, they would create a $100 trillion consumer market, hungry for American goods.
It's difficult to imagine the US economy suffering in a broadly prosperous world. Growing wealth abroad would likely create new markets for American exports, and the nation’s most dominant industries could produce more expensive products—such as jetliners, electronics and software—that would see stronger demand as economies abroad grow richer. Thus, policies that attempt to reverse the developing world’s growth could ultimately harm America’s economic interests in the long run.

What About the Workers?

The American manufacturing workforce has shrunk over the last few decades, but free trade is not to blame. Total manufacturing output is at an all-time high, and the real value of American exports has doubled since 2000. Employment, however, has steadily fallen as automation saps the demand for manufacturing labor.

Protectionist policies likely won’t do much to reverse this trend: even in the developing world, robotics and artificial intelligence are displacing humans. Instead of trying to bring back jobs that no longer exist, displaced workers should be taught new skills to help them adapt to the evolving industrial landscape. Roughly 5.5 million job openings are currently unfilled in the US, a sign that demand for labor is strong, but a skills mismatch may be keeping unemployed workers from taking advantage of new opportunities. Moving forward, policies should seek to secure America’s place in a more prosperous future, rather than making a futile attempt to reclaim a world of the past.

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Trump Administration Appointees & Future U.S. Trade Policy


By Todd R. Vollmers — JUX Law Firm

President Donald Trump has nominated Wilbur Ross Jr. to be the next Secretary of Commerce, and Robert Lighthizer to be the next U.S. Trade Representative. As of this writing, both are still undergoing confirmation by the U.S. Senate (Mr. Ross was approved by a voice vote of the Senate Commerce, Science and Transportation Committee on January 24th and a vote before the full Senate is expected on February 27th; and Mr. Lighthizer’s hearing has not yet been scheduled). However, regardless of any potential issues with confirmation, the selection of Mr. Ross and Mr. Lighthizer for these two critical appointments provides some indications about future U.S. international trade policy under the Trump Administration.

Wilbur Ross Jr., 79, has primarily been known for investing in, and helping to turn around, troubled companies in industries such as coal, steel, auto parts, and textiles. In 2002, for example, Ross created International Steel Group (“ISG”) by combining several troubled steel companies that benefited from significant import tariffs imposed in the early 2000’s by the administration of President George W. Bush. Ross later sold ISG to Netherlands firm Mittal Steel (now ArcelorMittal). Ross is the founder of private equity firm WL Ross & Co., which was acquired by AMVESCAP PLC and combined with its direct private equity business, INVESCO Private Capital, in 2006. Ross continued to run the combined company after the transaction was completed and said at the time that it would help the company expand in places like China. A former Democrat, Ross is a longtime associate of President Trump, who appears to share some of the president’s concerns about the effects on U.S. workers and industry from international trade agreements.

Robert Lighthizer, 69, is a prominent international trade attorney who served as a deputy USTR under President Ronald Reagan. While at USTR Lighthizer was active in negotiating “voluntary restraint agreements” with several countries accused of dumping steel into the U.S. market (including Mexico, the European Union, South Korea, and Japan), which all agreed to restrict exports in order to avoid potentially getting hit with steep U.S. tariffs. Most recently Lighthizer was a partner at the law firm Skadden, Arps, Slate, Meagher and Flom and represented several large companies, such as U.S. Steel Corp., in trying to protect U.S. markets from claimed trade violations by foreign companies. Lighthizer has a reputation for being a pragmatist when it comes to the effects on U.S. business and workers from international trade agreements, and his nomination has received support from progressive groups like Public Citizen’s Global Trade Watch, along with other groups such as the National Association of Manufacturers and National Foreign Trade Council.

Traditionally USTR has taken the lead role in negotiating international trade deals, while the much larger U.S. Commerce Department, while providing support in negotiations, has focused more on handling enforcement actions including anti-dumping and anti-subsidy investigations. However, the Trump administration has indicated that the Commerce Department under Mr. Ross will be the lead agency for international trade policy. Together with Mr. Lighthizer at USTR and other Trump Administration officials and advisors (Peter Navarro to head a new National Trade Council; Jason Greenblatt who will generally be in charge of international negotiations; and Dan DiMicco, former CEO of steelmaker Nucor Corporation who has served as a senior trade policy advisor), it is likely that there will be significant changes in international trade policy from past Republican and Democrat administrations. In addition to the renegotiation of past trade deals such as NAFTA, the new administration will probably pursue significantly more enforcement cases to protect U.S. industry from foreign trade violations. Regarding new trade deals going forward, there will also likely be much more emphasis on negotiating bilateral agreements instead of the large multilateral trade agreements, such as TPP, that were favored by past administrations.

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What does the rise of protectionist forces in the West mean when it comes to Global Trade?


By Thierry Ajas, CPC — Practice Director, Randstad Professionals

Populism and Nationalism are the New Barriers to Global Trade

Over the past year, far right political parties have made major gains in divisive elections throughout the West. Although some of these movements enjoyed victories in previous elections in the 1990s and early 2000s, success of this magnitude across Europe has not occurred since before WWII. Grown from worldwide recessions and refugee crises, nationalism and populism are newly ascendant political forces to be reckoned with. While coverage of right-populist movements has mainly focused on Brexit and the rise of Donald Trump, the far right has been strengthening throughout the West. Austria almost saw the Austrian Freedom Party gain the presidency, the National Front is making great political strides in France, and the Party for Freedom is ahead in the Netherland’s presidential polls. Additionally, the Golden Dawn has been a strong force in Greece, while in Germany, the Alternative for Deutschland party is expected to gain seats in its state’s parliaments.

These right nationalist campaigns, including those of Brexit and Trump, have run on two fundamental ideas currently trending in many western countries: uplifting the poor working class in a crippling globalized economy, and constricting immigration from the Middle East. Although the political clashes in culture and economics seems to be the major driving forces of the rise of the far right, there is another factor at work. The economy and immigration concerns have only been political speaking points disguising the true catastrophe of modern politics: the loss of the general public’s trust in institutions. This has been largely a product of the left’s identity crisis, and the prioritization of political opportunities over the representation of the people in the political arena. The rise of the far right has also been possible because of widespread feelings of insecurity.

Going Back in Time: the End of Multilateral Trade Accords and the Return to Bilateral Trade Agreements

  • Following Mr. Trump’s election, the Transpacific Trade (TPP), lauded by globalists for its geo-political, as well as economic, significance, is no longer. What was it designed to do? Twelve countries that border the Pacific Ocean signed up to the TPP in February 2016, representing roughly 40% of the world's economic output.

    The pact aimed to deepen economic ties between these nations, slashing tariffs and fostering trade to boost growth. Members had also hoped to foster a closer relationship on economic policies and regulation.

    The agreement was designed so that it could eventually create a new single market, something like that of the EU.

  • The Transatlantic Trade and Investment Partnership (T-TIP) deal which was already controversial in the EU while Mr. Obama was still President, has come to a screeching halt following Mr. Trump’s election.

    T-TIP was designed to be a cutting edge agreement between the two largest economies in the world. It was aimed at providing greater compatibility and transparency in trade and investment regulation, while maintaining high levels of health, safety, and environmental protection.

  • The North American Free Trade Agreement (NAFTA), described by candidate Trump as the “worst deal ever”, came into force between the United States, Canada and Mexico on Jan. 1, 1994. According to The Washington Post, U.S. total goods trade with Mexico and Canada — imports and exports combined — grew from $291 billion in 1993 to $1.1 trillion in 2016.

    If the United States withdrew from NAFTA, other trade agreements could kick in. Because the NAFTA countries are all WTO members, at worst each must apply the import tariffs they offer to all other WTO countries.

    New U.S. tariffs on imports from Canada and Mexico could increase to an average of 3.5 percent. For new trade barriers facing U.S. exporters, Canada’s import tariffs would increase to 4.2 percent and Mexico’s would increase to 7.5 percent.

Will Protectionism have a Positive Impact on the U.S. Economy?

Of course what is less visible is the damage such protectionism will inflict. Industries where America enjoys a vast advantage – software, finance, Hollywood and entertainment, high tech and aerospace, parts of agriculture and mining – will be less able to access these fast-growing markets in South America and East Asia. American firms will no longer have the protections, if I can use the word, offered by TPP – protection of patents and copyrights, a “level playing field” for environmental standards and labor laws, and the rule of law via an agreed arbitration system.

Thus, the U.S. won’t be able to crack Japan’s lucrative and, thus far, absurdly subsidized and regulated agricultural markets. Big pharma will find it trickier to stop “generic” copies of drugs that cost many millions of dollars to research stealing their markets away. Boeing and Pratt & Whitney will see orders go instead to rivals, old and new. So, America will lose business opportunities, create fewer jobs and see lower profits as a result.

Time to Speak Up

In a paper published recently by Lloyd’s Loading List, the Global freight forwarder association FIATA has responded to the recent rise in nationalist and anti-globalization rhetoric by highlighting the value of free trade, trade facilitation, and trade development − which will be the themes of the International Federation of Freight Forwarders Associations’ annual World Congress this year.

The association highlighted that international trade is “the fundamental building block of the development and prosperity of each state and nation in the world today”, noting that the most successful civilizations of the past have thrived and prospered thanks to their ability to create and facilitate trade both internally and with neighboring states and empires.

It said: “With free trade increasingly challenged on several fronts in recent times and in the light of recent trends observed in US trade policies (as well as in other countries), freight forwarders and logistics service providers have decided to speak up to reconvene (reinforce) the benefits of the open, liberal and global trading system which has been built in the last few decades and has ensured better living conditions to the vast majority of humanity. Economic globalization has sadly become the scapegoat to justify many internal shortcomings, but local and global problems are not caused by it.”

FIATA highlighted OECD evidence that open economies grow faster, adding: “Open markets matter, as trade openness can be tangibly measured in terms of economic growth, productivity and a higher standard of living. There is more: stronger institutions, better infrastructure, and even peace in the long run depend on well-functioning and unrestricted international trade.

“Concretely, the World Bank reported that per capita real income grew more than three times faster for developing countries that lowered trade barriers (5% per year) than other developing countries (1.4% per year) in the 1990s. There are concerns that undoing free trade agreement may actually work in the opposite direction,” the organization stressed.

“Free trade is an opportunity, not a risk, for all regions including developed, developing, landlocked developing and least-developed countries.”

Stressing that the forwarding industry’s services are “the backbone of international trade”, FIATA said: “Losing faith in international cooperation leads to futile contemplation and sterile fire-fighting from one insurgence to another. In the end social unrest prevails and this could jeopardize peace.

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Do you know an MGTA member who was recently promoted or hired to an import/export company? Know of a member who recently got married or had a new addition to the family? Share the good news with your industry colleagues by emailing Kylle Jordan.

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Neville Peterson, LLP






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Drinker, Biddle, and Reath


Silver
HMM


Silver
SBS Group of Companies








Bronze
Cassidy Levy Kent


Bronze
Chase/JP Morgan Logo


Bronze
Global Training Center


Bronze
Bennett Jones