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World Trader - July 16
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An update from MGTA

Midwest Global Trade Association

World Trader

From the President

By Kylle Jordan, MGTA President

Happy summer MGTA community!

‘Tis the season for sunshine, golf and strategic planning! Our Professional Development committee is meeting to discuss topics and timing for our events in 2017. The Communications committee is updating our website content, and the membership committee continues to work with our members to bring timely topics to our educational luncheon series. We welcome input from our members on topics for upcoming seminars, speakers, and social events! And we’re always open to new committee members – please contact me if you’d like to learn more.

Have you signed up for our golf tournament on August 10th? This event sells out, so be sure to register soon! And have you attended any of our recent educational luncheons? May’s lunch on sanctions updates and June’s lunch on SOLAS were also full – so be sure to register for July’s ROHS luncheon ASAP!

Finally, MGTA will be partnering with Cargo Logistics America for their October conference in Long Beach, CA. I hear it’s a fantastic event! If you're a member and plan to attend the show please let me know, we may have some free tickets…

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Upcoming Events

Member Networking Lunch

Tuesday, July 12, 2016
11:30 am to 1:00 pm

Cooper Irish Pub
1607 Park Place Boulevard
St. Louis Park, MN 55416

View Details and Register Online


14th Annual Golf Tournament

Wednesday, August 10, 2016
Noon to 7:00 pm

Crystal Lake Golf Course
16725 Innsbrook Dr
Lakeville, Minnesota  55044

View Details and Register Online

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The Trans-Pacific Partnership Trade Agreement

By Rebecca Rouse and Todd Vollmers - JUX Law Firm

Full analysis available at http://jux.law/trans-pacific-partnership-trade-agreement-analysis/

I. SUMMARY

Increasing numbers of U.S. companies, from Small and Medium-sized Enterprises (SMEs) to large multinationals, rely on exports and/or imports as an important part of their business. although large companies are often associated with doing business internationally, SMEs actually make up the vast majority of U.S. firms engaged in international trade.  SMEs with fewer than 500 employees accounted for almost 98% of U.S. companies that exported goods in 2013.  Of the SME exporters, 92% did business from a single U.S. location, with only 18% of SME exports transported to an affiliate of the SME overseas.  Furthermore, 94% of the U.S. companies that both exported and imported goods in 2013 were SMEs.

The U.S., along with Australia, Brunei Darussalam, Canada, Chili, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam concluded negotiations on the Trans-Pacific Partnership (TPP) Trade Agreement on October 5, 2015, and consistent with the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (“Trade Priorities Act”) the President entered into the TPP agreement on February 4, 2016.  The specifics and process outlined in the Trade Priorities Act is beyond the scope of this article, but it is worth noting that the TPP promises to create the single largest export market for goods and services for U.S. companies.  The TPP countries include some of the fastest growing economies in the world, and currently account for about 40% of total Gross Domestic Product (GDP) worldwide.  In 2015 the U.S. exported $680 billion to TPP countries, and imported $842 billion from the TPP countries.

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Cargo Logistics America - Oct. 11 & 12, 2016

REGISTRATION IS OPEN FOR AMERICA’S ONLY MULTIMODAL SHOW!

The wait is over -- we have officially opened registration for Cargo Logistics America Expo + Conference, happening in Long Beach on October 11-12, 2016!

NEW FORMAT BRINGS THE ENTIRE SUPPLY CHAIN UNDER ONE ROOF!

New at CLA 16! All conference content, featuring 20+ cutting edge industry sessions in breakout areas, are directly connected to our intimate exhibit hall showcasing 100+ exhibits. The show floor is an open-concept networking hub optimizing traffic flow, exposure and face time!

CLA 2016 will be held in downtown Long Beach, within proximity to the largest U.S. port infrastructure and one of the largest air cargo airports, while being on the doorstep of substantial distribution, warehousing, manufacturing, retail, agriculture-food, and a robust life sciences cluster.

INDUSTRY LEADING SPEAKERS

Hear from industry leading experts on a wide range of topics, including port productivity, technology, distribution logistics, global trade, as well as opportunities and challenges across the North American supply chain. Check back often -- new speakers are added every week!

INTRODUCING NEW VIP SHIPPERS PROGRAM

Time Well Spent

New at CLA 2016! If you are an active buyer looking for new transportation/ logistics/ distribution/ warehousing providers, equipment and/or software, you may qualify for a VIP Shippers Pass ($1,000 value). Join this exclusive program that includes executives from the largest manufacturers, importers and exporters in America!

About Informa Exhibitions
Informa Exhibitions, a division of Informa, operates hundreds of trade and consumer events in countless cities across the globe. Each year we bring together more than 1 million professionals from every corner of every continent.
           
CONNECT WITH US
www.cargologisticsamerica.com

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Doing Business in Europe Symposium Recap (May 12, 2016)

By Thierry Ajas, Randstad Professionals

It took no less than 7 months to put this event together which ended up being a success:  190 registrants, including 22 visiting leaders of American Chamber of Commerce offices across the E.U., 23 speakers, 17 exhibitors and 11 sponsors.  This Symposium was unique in many respects since it truly was a concerted effort orchestrated by the Minnesota Trade Office and supported by the U.S. Commercial Service, the Minnesota Export Council, the MGTA, all of our local European Chambers of Commerce and Honorary Consuls representing Germany, France, Sweden, Norway, Finland, Spain and Russia.

And although Minnesota exports to Europe fell slightly last year, they were still significant enough not to dampen prospects for a region that state officials said remains one of the most promising trade destinations for MN-based companies.  Minnesota companies exported $4.6 billion in goods to European countries, down 2% from 2014 but roughly on pace with rates during the past 5 years or so.  Around $27 billion in exports from the State reached Europe over the past half-decade, according to the Trade Office.

This said, prospects for increased transatlantic export activity by Minnesota businesses remain bright.  “We need to celebrate how much bigger and better Europe has become in just the last few decades”, said Steve Riedel, an international trade representative for the State. 

European countries, particularly in the west-central part of the region, have some of the world’s most sought-after markets.  Several of them are widely considered to be among the most business-friendly nations in the world.  Plus, wealth across the region provides a cash-flush customer base and the growth opportunities that come with it, said Jake Slegers, the outgoing chairman of the European Council of American Chambers of Commerce, a network of business advocacy groups operating across Europe.  “[Europe] is a critical source of global profits for U.S. firms,” he said, especially when they lay down roots overseas. “U.S. foreign affiliates in Europe have been agents of growth in virtually every industry they operate in.

Many marquee Minnesota companies already have outposts and customers in Europe: Maplewood-based 3M Co., Little Canada-based St. Jude Medical, and Medtronic, whose operational headquarters is in Fridley, serve as some of the most prominent ambassadors for the state.  But there’s room for smaller companies too:  Minneapolis-based software and consulting firm MentorMate, founded in 2001 by Swedish immigrant Bjorn Stansvik, is anchored in the Midwest but has gradually expanded its operations into four Bulgarian cities.  It has also picked up clients in the U.K., France, Spain and Sweden. 
The company now has about 400 employees across the globe, but it still doesn’t have the cachet of a massive multinational.  Stansvik said overseas growth comes down to a scrappy approach to building connections and generating interest.

Looking at the diversity of our State’s economy, it is no surprise that several of the highest-demand markets in Europe, as determined by the federal government, align with Minnesota’s strongest industries.  European buyers want medical technology and machinery – two strongholds in the state’s manufacturing sector – plus telecom equipment and energy products. 

In addition, infrastructure upgrades in high demand in several European countries offer a gateway for Minnesota outfits – companies that produce components for rail systems and roadways, for example – to cash in.

Renewable energy and water quality area also in focus in Europe, where solar farms dot the southern part of the region and wind farms sit to the north.  Aggressive energy investment and renewables goals in Europe’s most developed countries underscore real demand for the equipment, components and technology to achieve them. 

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Will the UK vote to leave the EU, what you need to know about Brexit.

By Jakub Kowalczyk, Purolator, Inc.

At deadline, this issue had not yet been voted upon.

Brexit is the merging the words Britain and exit to get Brexit, a shorthand way of saying the UK leaving the EU.  A referendum is being held on Thursday, June 23rd, to decide whether Britain should leave or remain in the European Union.  This article is designed to be an easy to understand guide and background of Brexit and the possible impact.

What is the European Union?
The European Union, or what is commonly known as the EU is an economic and political partnership involving 28 European countries, based in Brussels. Started after WWII to foster economic co-operation it has grown in to a “single-market” allowing goods and people to move as if the member states were a single country. It has a single currency, which 19 countries use, a parliament and now sets rules  on the environment, transport, consumer rights and even things like mobile phone charges. 

Why is there a vote now?
Prime Minister David Cameron promised in 2015 to hold the referendum if he was re-elected prime minister.  This was done in response to growing calls from his own Conservative party and the UK Independence Party (UKIP), who argued that Britain had not had a say since 1975, when it voted to stay in the EU in a referendum. In January and February Mr. Cameron sought an agreement to change the terms of Britain's membership. Critics say his deal made little difference and falls well short of what he had promised.

Why do Brits want to leave or stay in the EU?
Like many economic and political question this does not have an easy, one size fits all answer. 

In general those who favor leaving the EU have argued that since 1975, the EU has grown in size and the reach of its bureaucracy has diminishing British influence and sovereignty.

Those who favor staying argue that Britain leaving the EU would be too costly economically. That Britain, a medium sized island, to have any real influence and security in the world it needs to be part of a larger bloc of likeminded countries. 

Recent polls show the British public fairly evenly split - 45% leave, 42% stay and 13% don’t know. Mr. Cameron is in favor of remaining.  President Obama, Chancellor Angela Merkel of Germany and President Xi Jinping of China also want Britain to stay in.

Nearly half the Conservative members of Parliament favor leaving, which is the party of Mr. Cameron.  Members of the U.K. Independence Party also favor an exit.  Many anti-European parties in other counties, like the French National Front party support Brexit.

What could be the impact?
In reality, there has never been an institution like the EU, and no country has ever left the EU.  There are few, if any historical parallels to draw comparison to.  There would be more questions with a Brexit than answers.

Markets don’t like uncertainty.  Most expect Britain to remain in the EU, but a Brexit could scare off investors in Britain.  A Brexit could call into question the future of the EU which is still dealing with a decade long slump and issues such as the Greek debt crisis, which is not over yet.

In the US and globally, would a Brexit weaken support for increased global economic integration?  How would multinational firms manufacturing in the UK react if it were more difficult to export to the EU?  Would Scottish-independence advocates push for Scotland to leave the UK to remain in the EU, would other EU countries hold exit referendums?

If Britain votes to leave, there will be an initial two-year negotiation with the European Union, which is unlikely to be amicable. Brussels is expected to exact a steep price, in particular to discourage other countries from leaving.

Britain would have to negotiate new deals with the U.S. and other non-European countries that have trade deals with the U.K. through the EU.

London’s status as a world financial capital has grown to rival New York in importance due in part because of its status as a gateway to the rest of Europe.  Losing that status could take a major toll on the British economy.

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Update on Inland River Transportation

By Adam Redlin – TIMAB

According to figures published by MARAD and the Waterways Council, inland waterways moved 604 million tons of cargo in 2015, the equivalent of 58,000,000 truck trips annually.  The inland waterway network includes over 12,000 miles of commercially navigable channels and 240 lock sites. Over 60% of our Nations’ grain exports move by inland barge accounting for $8.5 Billion in exports. If inland waterway transportation were not available, the average number of trucks on our rural highways would increase by 33%, which would result in a significant increase in highway maintenance costs and fuel consumption. The impact on rail transportation could result in 25% greater tonnage, potential safety issues, as well as increased fuel consumption.

Despite the pivotal role of inland waterways, lock closures and shipping delays have been a persistent problem due in part to funding gaps to maintain or replace aging infrastructure. Most of Midwestern locks, originally constructed in the 1930’s, have been in use well past their planned 50-year lifespan.  A consequence of this has been a significant rise in the number of emergency lock closures, jumping 543% from 1992 to 2008.  The price tag to complete much-needed projects to update and replace lock and dam infrastructure currently stands at over $8 billion. 

Though funding has trickled in - $405 million was approved by congress in December of 2015 - the wisdom of investing in river infrastructure has been challenged. Groups such as Taxpayers for Common Sense have voiced their opposition to such spending even as river freight volumes have been in decline. Coal volumes on the river system have fallen. Though barge and towboat companies have been pursuing alternative cargos, such as grains and aggregate, volumes have not rebounded to their earlier highs.

It is clear that reduced reliability of the locks has taken a toll on the supply chains of agricultural firms. As shippers and importers have felt squeezed as they balance between these often competing requirements, they need reliable and cost effective shipping modes to gain a competitive edge in the global agricultural marketplace. Conversion from barge transportation, historically one of the cheapest modes, to trucking or rail transportation may reduce the competitiveness of U.S. goods in foreign markets.  Lock outages in an already slow mode of transportation raise questions about capacity to handle the agricultural shippers.  The growth of the freight market in coming years could create opportunities for inland waterways, but only if reliability improves. 

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TPP- Vietnam the Winner? China the Loser?US the Instigator?

A Look into the US step towards Asia and the Various Perspectives from South East Asia and China on the purpose and potential effect of theTrans Pacific Trade Partnership.

By Chris Broveleit – Navegate Logistics

The Trans Pacific Partnership (TPP) has been in the works for years.  First a mere side conversation between Singapore, New Zealand, Brunei, and Chile during the APEC (Asia-Pacific Economic Cooperation) forum; the TPP has now transformed into a large scale free trade agreement (FTA)since the inclusion of the US in 2008 and the eventually invitation and acceptance of Canada, Mexico, Vietnam, Malaysia and Japan .  Because of its quick expansion, US leadership, and potential impact on the global economy; it has hence gained a lot more attention and criticism.  Regional perspectives on the deal and motivation for its ratification differ greatly. So what does TPP really mean on a global scale and what are the various regional perspectives?

The US perspective has long been openly communicated as a move that creates mutual growth for all countries involved but most importantly “positions US businesses better to compete in the Asia-Pacific region, which is seeing the proliferation of preferential trade agreements among US competitors” per President Bush’s 2008 annual Report on the Trade Agreements Programme .  Since the beginning of the negotiations, and through the leaked TPP Documents, it has become known that the most obvious gains that the US is set to achieve are to reduce the role of the state in a nation development, raise very high standards of protection for intellectual property, as well as create a provision allowing a foreign investor to bring a claim of indemnity against a host state for losses allegedly suffered.  This clearly is paving the way for US big business to enter the economies of Asia and South America. Yet Washington is pitching the deal to the public as one with small to medium sized business in mind.  Its focused rhetoric on slashed tariffs and non-tariff measures (NTMs) argues that the manufacturing, agriculture and automotive sectors of the economy will see growth.  The Obama administration is also highlighting that the deal is the most progressive FTA in advancing environmental and worker standards.

For other nations in the agreement the pact would certainly provide growth via eliminating tariffs, NTMs, and in goods and services.  By 2030 TPP is projected to raise member country GDP by .4-10 percent according to the World Bank.  The consensus biggest winner in growth seems to be Vietnam who even prior to its ratification isluring manufacturing in the electronics and textile industry from China due to lower wages and the country’s quick advancement.  While the World Bank predicted a growth of 10% for Vietnam in GDP by 2030 due to TPP, some are predicting growth to be even higher due to, and more importantly, an increase in foreign reserves.  This would stabilize a currency with an extensive history of inflation. One so bad that the government famously started printing 200-1,000-2,000-and 5,000 notes in 1987; only two years after it had “reintroduced” the dong with denominations of 1-2-5-10-20-30 and on.  The strengthened currency would make the economy much more attractive to investors who will be more confident in the nation’s growth.

For many of the other developing countries in the agreement such as Malaysia and Brunei the pact offers much of the same.  While growth isn’t predicted to be as strong and immediate as Vietnam, the region’s countries are largely excited to be joining the pact with the US and advancing trade and cooperation with China’s biggest rival.  To them it’s guaranteed growth and advantage over their northern neighbors and historical regional power- all at a time when China is flexing its muscle and testing the limits in and around their borders.  For this reason many in China have become very critical of the deal.

Beijing doesn’t seem to be buying Washington’s communicated intention of simply advancing free trade.  It instead sees the move as a power play for the US to anchor down in the region both economically and militarily. To many, the US’s step towards Asia and commandeering of the structure and development of TPP seems to be a direct intent on limiting China’s growing influence both globally and more importantly in its historical backyard. Vietnam’s ruler of over 700 years;China clearly sees evidence of this strategy in Obama’s recent visit to Vietnam where the President announced the normalization of relations with the government the US once bitterly fought.  During the announcement, Obama sanctioned the sale of military goods to Vietnam as well as spoke to the people of Vietnam- reassuring them that US policy will be one of respecting nation states right to sovereignty and communicating the hope that the two nations grow together. China’s fear of lost industry, emboldened regional neighbors closely aligned to their global rivals, and the inevitable profit and advantage the US would experience via TPP all make the world’s fastest growing power hyper critical, sensitive, and aware of it’s advancement. 

Many counter this argument by pointing out China as part of APEC would have full right to join the agreement.  This of course would mean that the high standards and advantages of the US would also apply to them however.  Whatever the case,  TPP is an agreement that could have lasting effect on the region and inevitably the world.  Each nation has their own motivations, potential gains, and consequences. 


Resources:

The Origins and Evolution of the Trans-Pacific Partnership (TPP)

TheTrans-PacificPartnership

Potential Macroeconomic Implications of the Trans-Pacific Partnership-

K.C. Fung: The TPP means more than trade for Vietnam

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Country of the Month: United Kingdom

By Bryan Mulkerron, Euler Hermes

At deadline, this issue had not yet been voted upon.

Recently, many in the UK celebrated with delightful nostalgia as the Queen turned 90, in a long standing tradition honoring Great Britain’s storied past.  Perhaps it’s exactly the romanticized history that is now revealing itself as Britain’s are faced with the largest recent political decision.  Just like the tide off the nation’s coast, public sentiment has moved back and forth as the vote nears, and either the nation will remain as part of the greater European mainland community, or decide to leave in an isolationistic move and return to the island mentality with a Brexit vote. 

Seeds for a European Union first originated following World War II, where Britain previously held the position as defender and leader of the region.  The nation still carried influence and signs of post imperial dominance remained strong.  While the concept of unifying made sense to ensure no future self-destruction among the fellow continental countries, the experiment required Britain to begin following, which was a different role and transition.  This proved to be true with the delay of joining the initial country members of the European Economic Community.  Britain finally joined, but only after seeing the strong recovery from member nations such as Germany and France as they rebuilt their economies. 

As the move towards a more politically unified Europe continued, power moved to Brussels amid much resistance, including a vocal Margaret Thatcher.  Britain, however, ultimately signed the Maastricht Treaty in 1992.  While Britain still retained rights regarding an-opt out of the single currency, it did alter the parliamentary tradition, which did not sit well with a large contingent of the population.  The consensus however, was to continue to build a stronger Europe as times and prosperity continued for Britain.  Only until the recent global slowdown has public opinion begin to question membership and the benefits of the Union, which has led to the referendum.

The economic scenarios vary greatly if there is a Brexit, as the implications are dependent upon a settlement and unwinding process.  The largest issues would revolve around the single market access for duty free trade and financial services, as well as regulation requirements to continue trading with the bloc member countries.
As a base line, the UK has seen slowing GDP growth averaging .7% Q/Q during 2015 with an expectation of 2.0% in 2016.  Lower oil prices have benefited companies, however, total investment has been impacted by the contraction in the construction sector as well as the ongoing uncertainty of the referendum results.  Monetary policy has continued to remain accommodative as inflation targets by the Bank of England have yet to be reached.   Hardest hit industries, by a disruption in the vote, include automotive, agri-food, and the financial sector as well as chemicals and machinery.  Overall foreign direct investment would also be negatively impacted.

For more information on Euler Hermes Country Risk Reports:
http://www.eulerhermes.com/economic-research/country-risks/Pages/country-reports-risk-map.aspx

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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.

 

 

 

July –
August 2016

From the President

Upcoming Events

The Trans-Pacific Partnership Trade Agreement
By Rebecca Rouse and Todd Vollmers - JUX Law Firm

Cargo Logistics America - Oct. 11 & 12, 2016

Doing Business in Europe Symposium Recap (May 12, 2016)
By Thierry Ajas, Randstad Professionals

Will the UK vote to leave the EU, what you need to know about Brexit.
By Jakub Kowalczyk, Purolator, Inc.

Update on Inland River Transportation
By Adam Redlin – TIMAB

TPP– Vietnam the Winner? China the Loser? US the Instigator?
By Chris Broveleit – Navegate Logistics

Country of the Month: Britain
By Bryan Mulkerron, Euler Hermes

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