international trade jade sims, outreach specialist international business center michigan state...

International TradeInternational Trade

Jade Sims, Outreach Specialist

International Business Center

Michigan State University

Jade Sims, Michigan State University

International TradeInternational Trade

• “Global” view• Trade balance• Components of trade

– Services/Goods– Region– Country

• Free Trade Agreements (FTAs)• National Export Initiative (NEI)

– Background, specific programs

• MSU resources• Online resources

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Benefits of Trade:Benefits of Trade:

• interchange of new ideas, technologies, shared platforms, emergence of “best of the best”

• lower costs, market efficiencies, development of core competencies (95% potential customers abroad)

• main source of economic growth (esp. manufacturing)

– exports make up 12.5% of gdp (11.2% in 2009)– exports make up ½ of the 2.9% gdp increase between 2009

and 2011– International trade represents _______% of most economies

• evidence suggests export-related jobs pay more– For every $1b in US exports, 6,000 jobs are created

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Differing Views on Globalization & TradeDiffering Views on Globalization & Trade

For Friedman, cheap, ubiquitous telecommunications have finally obliterated all impediments to international competition, and the dawning 'flat world' is a jungle pitting 'lions' and 'gazelles,' where 'economic stability is not going to be a feature' and 'the weak will fall farther behind.' Rugged, adaptable entrepreneurs, by contrast, will be empowered.

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The World Is Not FlatThe World Is Not Flat

Prior to NAFTA 1988: Canadian province 20x as likely to trade with each other than states

NAFTA 2010 : Canadian province still 5-10x as likely to trade with each other than states

-2% of phone calls transverse national boarders

-3% of population born in country other than that of current residence

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U.S. Trade Balance 2001-2011U.S. Trade Balance 2001-2011

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Average Domestic Crude Oil PricesAverage Domestic Crude Oil Prices

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U.S. Trade deficit vs. Average Domestic Crude Oil PricesU.S. Trade deficit vs. Average Domestic Crude Oil Prices

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Trade BalanceTrade Balance

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Source: census.gov


Trade BalanceTrade Balance

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Source: census.gov


What are we “trading”? (2010)What are we “trading”? (2010)

Goods Services Total

Exports 1,287,139 545,502 1,834,166

Imports 1,935,740 394,153 2,329,894

TOTAL-647,077 +151,349 -495,728

(in millions USD)

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Source: census.gov


Service Exports (2010)Service Exports (2010)

1. Other private services 47%

2. Travel 19%

3. Royalties & license fees 18%

4. Other transportation 7%

5. Passenger fares 6%

6. Transfers US military cont. 3%

7. US gov’t misc. 0%

Total: 545,502 million USD

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Source: census.gov


Other private services (?)Other private services (?)

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Source: census.gov


Travel and Tourism IndustriesTravel and Tourism Industries

• 2.8% GDP• $31.7 b surplus (surpluses since 1989)

– Canada, Japan, UK

• 11.6% of market (dominant, ahead of France & Spain)

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Source: Office of Travel and Tourism Industries


Service Imports (2010)Service Imports (2010)

1. Other private services 44%

2. Travel 19%

3. Other transportation 12%

4. Direct Defense Expenditures 8%

5. Royalties & license fees 7%

6. Passenger fares 7%

7. US gov’t misc. 1%

Total: 394,153 million USD

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Source: census.gov


Goods Exports (2010)Goods Exports (2010)

1. Capital goods 35%

2. Industrial supplies 31%

3. Consumer gods 13%

4. Automotive vehicles etc 9%

5. Foods, feeds, & beverage 8%

6. Other goods 4%

TOTAL: 1,278,139 million USD

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Source: census.gov


Goods Imports (2010)Goods Imports (2010)

1. Industrial supplies 31%

2. Consumer goods 25%

3. Capital goods 23%

4. Automotive vehicles etc 12%

5. Foods, feeds & beverages 5%

6. Other goods 3%

TOTAL: 1,912,041 million USD

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Source: census.gov

Jade Sims, Michigan State University 18 of 33

Manufactured GoodsManufactured Goods

In 2008, U.S. Factories Produced $5.18 TRILLION of These Products

Source: US Census Bureau


Manufactured GoodsManufactured Goods

The U.S. is the world’s largest manufacturer (20%)Source: census.gov


Trade by Region 2010 (mills USD)Trade by Region 2010 (mills USD)

U.S. Imports for Consumption for Selected

World Areas

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U.S. Domestic exports


Total Trade in goods by Country 2010 (mil USD)Total Trade in goods by Country 2010 (mil USD)

EXPORTS IMPORTSTOTAL TRADE

% TOTAL TRADE

1Canada

248.8 276.5 525.3 16.5%

2China

91.9 364.9 456.8 14.3%

3Mexico

163.3 229.7 393.0 12.3%

4Japan

60.5 120.3 180.9 5.7%

5Federal Republic of Germany 48.2 82.7 130.9 4.1%

6United Kingdom

48.5 49.8 98.3 3.1%

7Korea, South

38.8 48.9 87.7 2.7%

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Source: census.gov


Total Trade in goods by Country 2010 (mil USD) con’tTotal Trade in goods by Country 2010 (mil USD) con’t

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EXPORTS IMPORTSTOTAL TRADE

% TOTAL TRADE

8France

27.0 38.6 65.6 2.1%

9Taiwan

26.0 35.9 61.9 1.9%

10Brazil

35.4 23.9 59.3 1.9%

11Netherlands

35.0 19.0 54.0 1.7%

12India

19.2 29.5 48.8 1.5%

13Singapore

29.1 17.5 46.6 1.5%

14Venezuela

10.7 32.8 43.4 1.4%

15Saudi Arabia

11.6 31.4 43.0 1.3%Source: census.gov


Free Trade Agreements (FTAs)Free Trade Agreements (FTAs)

• Agreements currently exist with 17 trading partners– $521,700m in US merchandise exports– $591,900m in US imports of merchandise– (+21,100m surplus in manufactured goods)

• Pending agreements (expected to increase exports by $13 billion

– Korea (June?)

• 7th largest trade partner (imports + exports = $87.7m)

• Korea-EU agreement to start July 1 (-8%)– Columbia

• 20th largest partner exports, 25th for imports– Panama

• Canal expansion

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Free Trade Agreements (FTAs)Free Trade Agreements (FTAs)

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Choosing Trade PartnersChoosing Trade Partners

• Gravity Theory of Trade Flows (1962) (<2/3 of variations)

– + relationship trade & economic size– - relationship trade & geographic distance

• Country Portfolio Analysis/CPA (1980s)– Comparison of 2 countries GDP, population, geography,

political stability– -ignores costs and risks

• CAGE Distance Framework (2000)– Cultural*– Administrative*– Geographic– Economic

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Choosing Trade PartnersChoosing Trade Partners

How do we choose our trading partners?

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Trade by NAICS Code (mills USD)Trade by NAICS Code (mills USD)

U.S. Imports

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U.S. Exports


National Export Initiative (NEI)National Export Initiative (NEI)

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NEI: Attainable?NEI: Attainable?

Positive trends:

1.Between 2002 and 2008, exports increased by 80%

2.Exports grew 17% in 2010 over 2009 (average over 5 years needs to be 14.5%)*

3.Export growth has outpaced domestic trade since 2005

4.From 2005 to 2008, >50% of manufacturing growth came from exports

5.From 2005 to 2008, the only increase in manufacturing employment came from exports (11%)

6.95% of potential customers overseas*



Challenges:•1% of American businesses export (12% in Germany)•18.4% decrease in value of exports 2008-2009•Almost 5% decrease in number of exporters 2008-2009 (esp. medium—100 to 499 employees)

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Current areas of emphasis:

•Free Trade Agreements– Pending agreements: S. Korea, Columbia, Panama (negotiated in

2007)• Current administration expects passage soon• May increase exports by $13 B

•State Trade & Export Promotion (STEP) Grant– $30 million from SBA

•Expansion of SBA programs– Increase from 1.7 M to 5 M

•Focus on expansion of exporters to 1 market*•Revision of structure of Commerce & other entities•Market Development Cooperator Program

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NEI: Worthwhile?NEI: Worthwhile?

• For every $1 billion in exports, an estimated 6,000 jobs are created (US Int’l Trade Commission)

• In 2010, exports supported nearly 10 million jobs, including 4 million for small businesses

• Jobs supported by exports pay as much as 18% higher than the national average (US Chamber of Commerce)

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MSU-CIBER INITIATIVES MSU-CIBER INITIATIVES

• Global Business Club of Mid-Michigan• Michigan Export Growth Program• Affiliate agreement with Department of Commerce

(Grand Rapids USEAC)• globalEDGE

– Country- and Industry-specific information– Online modules

• A Basic Guide to Exporting– Diagnostic tools—CORE*

• International Trade Center of Mid-Michigan

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RESOURCESRESOURCES

• http://ita.doc.gov/• http://export.gov/• www.census.gov

– www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf

• http://www.exim.gov/index.cfm• http://www.sba.gov/• http://www.districtexportcouncil.com/• 1-800-USA-TRADE• http://ghemawat.com/• http://www.thomaslfriedman.com/• http://globaledge.msu.edu/

Thank you!

Questions?

Thank you!

Questions?

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