world trade - 08 aug 2009

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W W W . W O R L D T R A D E W T 1 0 0 . C O M 5

COVER STORY:

16 The Top U.S. Trade PartnersOur annual survey of the top U.S. trade partners and our leading imports and exports.

28 Taking Supply Chain Securityto the Next LevelMobile security is playing a big part, but it’s not a silver bullet.By Dan McCue

34 Staples Nails SustainabilityThe office company’s embrace of environmentalism is paying off.By Gail Dutton

38 Is Trade with Cuba a Reality?Recent developments in the Obama administration could open the door wider.By Dan McCue

REGION44 NAFTA: Two Sides of the Coin

Mexican manufacturing bounces back while Canada frets over U.S. protectionism.By Lara L. Sowinski

TRANSLATION47 Talk About a Tough Sell

Making the case for spending on translationservices in a slow economy.By Jeffrey Jorgensen

WORLD TRADE, WT100 Volume 22, Number 8 (ISSN 1949-9159) is published 12 times annually, monthly, by BNP Media II, L.L.C., 2401 W. Big Beaver Rd., Suite 700, Troy, MI 48084-3333. Telephone: (248) 362-3700, Fax: (248) 362-0317. No charge for subscriptions to qualified individuals. Annual rate for subscriptions to nonqualified individuals in the U.S.A.: $104.00 USD. Annual rate for subscriptions to nonqualified individuals in Canada: $137.00 USD (includes GST & postage); all other countries: $154.00 (int’l mail) payable in U.S. funds. Printed in the U.S.A. Copyright 2009, by BNP Media II, L.L.C. All rights reserved. The contents of this publication may not be reproduced in whole or in part without the consent of the publisher. The publisher is not responsible for product claims and representations. Periodicals Postage Paid at Troy, MI and at additional mailing offices. POSTMASTER: Send address changes to: WORLD TRADE, P.O. Box 2144, Skokie, IL 60076. Canada Post: Publications Mail Agreement #40612608. GST account: 131263923. Send returns (Canada) to Bleuchip International, P.O. Box 25542, London, ON, N6C 6B2. Change of address: Send old address label along with new address to WORLD TRADE, P.O. Box 2144, Skokie, IL 60076.

F E A T U R E S

16

August 2009Inside

V O L U M E 2 2 N U M B E R 8

10 Green Matters12 Supply Chain Watch13 Tradewinds

INSIDE WORLD TRADE8 Out with the Old,

in with the NewTurning the page at World Trade while entering a new chapter of world trade.By Lara L. Sowinski

SCI-FI50 The Cargo-Screening Robotic Ferret

Scientists at the University of Sheffield, England unleash a new ‘animal’ for screening cargo.By Jeremy N. Smith

C O LU M N S

EXE C UT I V E B R I E F I N G

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I N S I D E W O R L D T R A D E

As we turn the page at World Trade, you’ll notice that

aside from our new name—WT100—we’ve begun to make some editorial changes too.

Our Policy Perspec-tives column has been replaced with Green Matters—a column summarizing ‘green’ news in the logis-tics sector as well as

broader sustainability initiatives.Great Moments, which highlighted

historical milestones in world trade, has been swapped out for SCI-fi (the “SCI” standing for Supply Chain Innovations), a column profi ling cutting edge, radical, and in some cases ‘still on the drawing board’ developments and technologies that have potential for future supply chains.

In this month’s annual survey of the U.S.’ leading trade partners and biggest imports and exports, one thing stayed the same, however, and that’s Canada’s posi-tion as our top trade partner. We again consulted Coface for their assessment of the risk associated with these trade part-ners and also added several new indices, like the Heritage Foundation’s Index of Economic Freedom and the World Eco-nomic Forum’s Global Competitiveness Ranking, to see how our top 15 trade part-ners fared on other fronts.

It’s worth mentioning that our trade relationship with Canada isn’t entirely rosy at the moment, with the ‘Buy American’ provision contained within the American Recovery and Reinvestment Act causing a bit of friction with our northern neighbor.

Susan Kohn Ross, International Trade Counsel with Mitchell Silberberg & Knupp LLP addressed this issue recently, calling into question the three arguments that are typically used to defend Buy American provisions.

The fi rst argument states that most other countries have similar provisions. “But, since when did the fact that lots of folks do some-thing make it right?” she asks. Moreover, tax-payer money shouldn’t be spent on foreign products, and third, using American-made inputs supports American jobs, say support-ers of the Buy American provision. “Cer-tainly, we all want to see full employment, but there are four industries that the U.S. has historically protected through high tariffs and non-tariff barriers (such as quotas)—automo-biles, wearing apparel and textile products, footwear, and steel and steel products. How many of them are competitive in today’s world market?” Ross responds. She adds that, “As to spending taxpayer money for these infrastructure projects, shouldn’t the goal be to get the best return on our invest-ment? All things being equal, including the safety and effi cacy of the fi nished product, shouldn’t we use the cheapest inputs, even if they are foreign? Doesn’t the government have a fi duciary duty to get the best bang for the taxpayer buck?”

And yet, just when it looks like rising pro-tectionism is getting a foothold, our trade relations with Cuba are showing the earliest signs of reparation, as contributing editor Dan McCue reports this month. President Obama’s easing of family travel restrictions and remittances earlier this year has given hope to many in the trade community that the long-standing trade embargo will even-tually be dismantled too.

Administrations change. Trade policies change. World trade (and World Trade) changes.

As always, we welcome your view. Drop us an email or visit us on Facebook and let us know what you see.

LARA L. SOWINSKI

Out with the Old, in with the New

Lara L. Sowinski, [email protected]


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Grant BelangerFord Motor Company

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International CounselNational Retail Federation

Susan G. EssermanChair, International Department

Steptoe & Johnson

Beth EnslowGlobal Supply Chain Resiliency

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Port of Indiana Handling Equipment for Massive Wind Farm The Port of Indiana-Burns Harbor has begun handling shipments of wind turbines and blades, which will be used to construct one of the world’s largest wind farms in the north-western part of the state.

The Meadow Lake Wind Farm—a 26,000-acre “clean energy” project—could eventu-ally contain 600 turbines supply-ing power to more than 250,000 homes.

On June 1, the port received the fi rst shipment of generators and hubs built by Denmark-based Vestas Wind Systems. Later that month, 94 blades measuring 132-feet long by 10-feet high and 6-feet wide were unloaded at the port, along with more generators and hubs.

Cold-ironing for Crowley at the Port of LACrowley tugboats operating at the Port of Los Angeles have begun using newly installed shore-side electrical power when not on the job to cut fuel con-sumption and reduce carbon dioxide emissions. Shore-side electrical power, also known as cold ironing, is expected to reduce Crowley’s carbon dioxide emissions by more than 486,180 pounds in the fi rst year alone, while significantly saving on fuel that was previously used to run the tugs’ generators.

Crowley already has cold ironing capabilities in Seattle, Jacksonville, Pennsauken and Puerto Rico.

“We are very pleased to be a part of this important green ini-tiative with the Port of Los Ange-les,” said Frosty Leonard, Crowley manager of marine operations in California. “Using shore-side power is not only the environ-mentally friendly thing to do, it’s just good business.”

As an added benefi t, Leonard said shore-side power eliminates the constant noise from the engines that disrupts the crews’ rest periods and provides engi-neers a quieter engine room in which to work.

PepsiCo Opens First Green Beverage Plant in ChinaBeverage giant PepsiCo has opened the fi rst green beverage plant in China that complies with the Green Building Council’s Lead-ership in Energy and Environmen-tal Design (LEED) standards.

The beverage facility, located in the western city of Chongq-ing, “is important to the com-pany’s ongoing strategy to expand in emerging markets and broaden its portfolio of locally relevant products,” the company said.

Compared to the average Pep-siCo plant in China, the Chongq-ing plant uses 22 percent less water and 23 percent. To save energy, 75 percent of the plant’s indoor areas feature natural lighting, including a skylight in the packing area and warehouse, while a roof garden insulates the offi ce building and saves energy for cooling and heating.

Dow Chemical in Pilot Project to Create Fuel from Algae, CO2

Dow Chemical has announced plans to partner with Algenol Biofuels in a pilot project to use algae and carbon dioxide to produce ethanol fuel. The site of the project will likely be located at Dow’s Freeport, Texas facility.

The project will be based on Algenol’s technology, which mixes carbon dioxide and saltwa-ter with algae in photobioreactors to produce the biofuel.

Dow said the project aims for “a breakthrough process for etha-nol production” that does not use food sources such as corn.

The U.S. is the world’s top producer of corn-based ethanol, but critics say this diverts needed food supplies and land resources for fuel, while raising food prices on world markets.

NYK Vessel Gets its Power from SolarThe world’s first solar-assisted auto carrier, the NYK Auriga Leader, called the Port of Long Beach last month with a ship-ment of Toyota automobiles.

According to NYK Line execu-tives, the shipment represents the fi rst step towards a distant goal of developing a zero-emis-sion vessel.

The top deck of the NYK Auriga Leader is equipped with 328 solar panels. The panels generate 40 kilowatts of power that feed into the vessel’s auxiliary engine, which in turn supplies the ship’s electricity and other internal power requirements.

Although solar power accounts for only about 0.8 percent of the

vessel’s total electrical energy consumption, it can be combined with other energy-saving mea-sures to reduce energy consump-tion and limit the vessel’s carbon footprint.

Green Technologies to Comprise 40 Percent of Siemens’ OrdersGovernment economic stimulus plans are expected to result in 15 billion euros ($21 billion) in orders worldwide between 2010-2012 for Siemens, with about 40 percent of that amount for envi-ronmental or “green” technolo-gies, the company said recently.

Already, the company’s pro-duction of such products as low-consumption light bulbs and wind turbines accounted for roughly 19 billion euros in Sie-mens’ 2007/2008 fi scal year.

Meanwhile, in 2011, orders for green products are forecast to climb to 25 billion euros, Siemens said. WT

KCS Railroad Greens its LocomotivesKansas City Southern railroad is adding 27 locomotives to its fl eet that utilize Electro-Motive Diesel (EMD) technology. The locomotives minimize fuel consumption while maintain-ing emissions compliance, producing 25 percent fuel savings, 50 percent lube oil reductions, and 70 percent reduction in greenhouse gas emissions, which makes them U.S. Environ-mental Protection Agency (EPA) Tier II compliant and eligible for both state and federal funding as clean air projects.

Eleven locomotives will be in service on the Kansas City Southern Railway Company network, while 16 locomotives will be in service on the Kansas City Southern de Mexico, S.A. de C.V.

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Watch


AIR

Freight Demand Stabilizing, Says IATAThe International Air Transport Association (IATA) said recently that demand for airfreight has begun to stabilize, with May’s volumes posting a modest 3 per-cent increase over April’s fi gures.

According to IATA, the latest fi gures represent a “fi rst sign” of economic recovery in equity markets.

Nonetheless, the industry group says the long-term outlook for airfreight remains grim.

“Even if we look beyond the [economic] crisis, it is diffi cult to see a return to business as usual. This crisis is re-shaping the industry,” stated IATA director-general Giovanni Bisignani.

The impact of airline debt and low asset prices will also delay any recovery, according to IATA, which estimates the industry may lose $9 billion this year.

UPS, FedEx to Trim Fuel Costs

United Parcel Service (UPS) and FedEx have both announced fuel saving measures that will not only trim costs but boost sus-tainability efforts too.

For its part, UPS aims to cut its airline fl eet’s greenhouse gas emissions 42 percent from 1990 levels during the next decade by using less fossil fuel in its jets.

The company operates the world’s ninth-largest private air-line fleet with 228 jumbo jets in service and 314 more char-tered aircraft. UPS is planning to invest in more fuel-effi cient air-craft models, introduce biofuels, reduce runway idling and opti-

mize fl ight routes, among other things, to slash its fuel costs and emissions of carbon dioxide and other heat-trapping gases.

“Our customers are asking us to do this and are looking for green partners,” said Lynnette McIntire, a company spokes-woman. “We are a huge part of their supply chain.”

On the other hand, rival FedEx says it plans to get 30 percent of its fuel from petroleum alterna-tives by 2030. According to the company’s CEO Fred Smith, FedEx will soon switch from MD-11s to Boeing 777s for its long-range, international routes. The com-pany will also phase-out Boeing 727s for 757 models, which are 47 percent more fuel-effi cient.

Aviation accounts for about 10 percent of U.S. greenhouse gas emissions from transporta-tion, or about 2.7 percent of the nation’s overall carbon footprint, according to the U.S. Department of Transportation.

OCEAN

Major Shipping Lines Hike Asia-U.S. RatesThe 14 shipping lines of the Transpacifi c Stabilization Agree-ment (TSA) say they will hike rates by $500 per 40-foot con-tainer on the eastbound Asia-U.S. route to end a price war caused by slumping demand, overcapac-ity and “panic.”

The increase will take effect on August 10.

Average revenue per container dropped as much as $1,200 from October to May, the TSA said.

“The lines are taking the opportunity of the peak season to reduce losses,” remarked a shipping analyst. “That doesn’t mean demand has come back.”

Maersk to Open Chassis Pool in NY/NJ Region

Maersk Line is planning to open a chassis pool in the New York/New Jersey port region during the third quarter—the first in a number of sites the company plans to unveil.

The NY/NJ location will offer over 5,000 chassis, however Maersk will eventually make its total U.S. fl eet of 90,000 chassis available throughout the U.S.

The company said the new business model for its chassis fl eet will fundamentally change its carbon footprint. It estimates that the program will cut carbon dioxide emissions by over 4,000 tons a year when the program is rolled out nationwide.

The U.S. Environmental Pro-tection Agency’s SmartWay Trans-port Partnership recommends the use of common chassis to reduce the environmental impact of drayage. “According to SmartWay, common chassis pools can help trucking companies save fuel and reduce greenhouse gas emissions by minimizing unnecessary truck movements and idling associ-ated with switching chassis,” explained Lee Kindberg, Maersk Line’s environmental director.

RAIL

UP Investments Boosting Intermodal Union Pacifi c Railroad says that improvements on its network over the past few years are help-ing boost intermodal capacity and on-time performance, which is now at an all-time high.

According to the railroad, recent routing upgrades have

reduced mileage and prevented congestion in certain lanes, such as a northern California-to-Dal-las route that’s more than 1,000 miles shorter and takes 30 fewer hours to travel through compared with a previous route.

The Omaha, Nebraska-based railroad plans to invest $1.7 bil-lion during this year to strengthen the track infrastructure across its more than 32,000-mile system.

TRUCKING

Mexican Truck Ban Costly for Some U.S. BusinessesThe U.S. government’s decision this past spring to ban funding for a pilot program allowing Mexican trucks full access to U.S. highways prompted Mexico to impose retal-iatory tariffs on U.S. exports to Mexico, which is making it costlier for many U.S. businesses.

According to a report in the Dallas Morning News, eighty-fi ve of the 90 U.S. exports targeted by the retaliatory tariffs are made or grown in Texas. And one company, Dallas-based cosmetics manufacturer Mary Kay, says the tariffs are costing the company an additional $450,000 each month.

Mary Kay has joined with other companies to urge the Obama administration to fi nd a solution that would allow Mexican trucks back onto U.S. highways.

“Since the tariffs were imposed, we have worked non-stop to affect this issue,” noted Anne Crews, Mary Kay’s vice president for government rela-tions. “This is having a real effect on U.S. companies and needs a quick resolution.”

Transportation Secretary Ray LaHood has stated that he is optimistic that a solution could be found very soon. WT


Concerns over Russia’s red tape and weak legal system has hampered U.S. investment in recent years, but a recent busi-ness summit that coincided with President Obama’s meet-ing with Russian President Dmitry Medvedev resulted in several high-profi le deals.

PepsiCo said it would boost investment in Russia by $1 bil-lion, bringing the company’s total outlay in Russia to $4 bil-lion. It also opened a new bot-tling plant south of Moscow over the summer.

Farm equipment manufac-turer Deere & Co. plans to expand its operations in Russia by early 2010 with the support of the Russian government. The company already employs

about 2,000 people in Russia and has a presence in the coun-try for 130 years.

Nonetheless, U.S. Secretary of Commerce Gary Locke said U.S. investment in Russia is “a fraction of what it could be” because of excessive bureau-cracy, which hampers trade. That’s the reason cited by Swedish furniture manufacture for deciding to postpone any new investment in Russia while also shelving plans to open an additional 30 stores there.

Locke also said that Moscow should lift its restrictions on U.S. poultry and pork imports to encourage the U.S. Congress to repeal the Jackson-Vanik amendment, a point of conten-tion between the two countries.

The 1974 law limited trade with Communist nations that restricted the emigration of Soviet Jews, but remains on the books due to lingering post-Cold War disputes on trade and other issues.

Even still, Russia represents a potential goldmine for U.S. businesses and investors in the health care, information tech-nology, and energy conserva-tion sectors, among others, said Locke, adding that improved commercial relations could help mend political differences between the U.S. and Russia.

Russia has also been trying for years to join the WTO, and while negotiations have moved forward somewhat with the U.S., talks with the EU and

other WTO member-nations have a ways to go.

Bilateral trade between the U.S. and Russia amounted to $36 billion last year, just 1 per-cent of all U.S. trade..

Paying for the Highway Trust FundSENATOR LOOKS TO ‘HEAVY USERS’

California Senator Barbara Boxer wants ports, railroads, and trucking companies to be the primary source of funds for the Highway Trust Fund, which is expected to run out of money as soon as August.

“I’m not going to keep going back to the American public on a gas tax. Let the heavy users like the truckers step up to the plate, and we can work together,” Boxer said during a recent Senate Environment and Public Works hearing.

In June, the Obama admin-istration asked Congress to extend the current highway program for 18 months to allow time to fi nd money to replenish the Highway Trust Fund.

The federal Highway Trust Fund was created in 1956 to ensure financing and mainte-nance for the U.S. Interstate Highway System and certain other roads. Money for the fund is raised indirectly via a federal fuel tax and related excise taxes.

NAM Warns Customs’ 10+2 Will Cost BillionsRULE SET TO TAKE EFFECT NEXT JANUARYA survey conducted by the Cus-toms and Border Coalition, a group launched by the National

June111.5

July112.9 August

110.8 September108.0

October109.1

November103.2

December100.3 January

97.8

February99.1

March95.6 April

94.6

May94.0

The Freight Transportation Services Index (TSI) fell 0.6 percent in May to a level of 94.0 (2000=100), declining for the third consecutive month to the lowest level in 12 years, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS) offi ce.

TSI is a single seasonally adjusted index of the month-to-month changes in the output of services provided by the for-hire transportation industries, including railroad, air, truck, inland waterways, pipeline, and local transit.

JUNE 2008 – MAY 2009

Transportation Services Index (TSI)

Thawing U.S.-Russia RelationsAMERICAN FIRMS SEEING SOME BUSINESS BREAKTHROUGHS

T R A D E W I N D ST H E L A T E S T T R E N D S I N T H E W O R L D O F T R A D E


T R A D E W I N D S

Association of Manufacturers (NAM), fi nds that U.S. Customs and Border Protection’s (CBP) 10+2 rule will end up costing the U.S. economy more than $20 billion annually.

“The potential impact of this rule is huge,” warned John Engler, president of NAM. “To put the cost in perspective, it is virtually the equivalent of doubling the import tariffs that manufacturers now pay to bring

products and components into the United States.”

CBP’s Importer Security Filing rule, known as 10+2, requires importers to provide 10 data elements and ocean carriers an additional 2 ele-ments to CBP no later than 24 hours before ocean cargo is laden on board a vessel des-tined to the U.S.

The rule will be fully imple-mented on January 26, 2010.

At that time, CBP plans to enforce the rule with penalties of $5,000 per violation.

U.S. Logistics Costs DroppingFIRST TIME IN 6 YEARS, FINDS CSCMP REPORT

The latest “State of Logistics Report” released by the Council of Supply Chain Management

Professionals (CSCMP) reveals that logistics costs fell to 9.4 percent of U.S. gross domes-tic product (GDP) in 2008—a stark contrast to the previous 5 years that saw logistics costs rise 50 percent overall.

Inventory-carrying costs experienced a 13 percent drop in 2008, and were the driving force behind the year’s decline in logistics costs. The decrease in carrying costs was due to both a 2.2 percent drop in inventories and an 11.2 percent decrease in the inventory-carrying rate.

Since 1988, the report has tracked and measured all costs associated with moving goods through the U.S. supply chain. The report benchmarks key metrics in logistics, such as trans-portation and inventory-carrying costs, freight volumes, and reve-nues, giving practitioners a big-picture view of the performance of the supply chain process.

Commenting on the report, Rick Blasgen, CSCMP president and CEO, said, “The economy will eventually recover, and when it does, those companies that use the statistics and industry insight contained in this report will be better prepared for the busi-ness boom ahead. This research details ways that company lead-ers can capitalize on the recovery when it occurs, such as restructur-ing their distribution networks to maximize effi ciency and minimize miles, investing in technologies to facilitate ‘green’ transportation, and improving real-time data flows to increase visibility and enhance productivity.”

Asia-Pacifi c Primed for SaaSSTRONG GROWTH FORECAST FOR ON-DEMAND APPS

A survey by Springboard research shows that the Asia-Pacifi c market for Software-as-a-Service (SaaS) will grow from $35 million in 2008 to $193 million by 2012.

Kurz, Widdows Receive AwardsThe United Seamen’s Service (USS) 2009 40th Annual Admi-ral of the Ocean Sea Awards (AOTOS) will be presented to Donald Kurz, President and CEO of Keystone Shipping Co., headquartered in Philadelphia, and to Ronald Widdows, Group President and CEO of NOL (Nep-tune Orient Lines) of Singapore, parent company of American President Lines (APL).

The maritime industry’s most prestigious honors will be awarded at a gala industry dinner and dance to be held at the Sheraton New York Hotel and Towers, New York City, on November 13, 2009.

Echo Global Logistics’ Waggoner RecognizedEcho Global Logistics, a technol-ogy-driven transportation man-agement fi rm, has announced that CEO Douglas Waggoner received the Ernst & Young Entrepreneur Of The Year® 2009 Award in the Emerging Compa-nies category in the Midwest region. According to Ernst & Young LLP, the award recog-nizes outstanding entrepreneurs who are building and leading dynamic, growing businesses.

MOL Appoints AnMOL has appointed Andrew An to the position of assistant vice president North America China sales. An joined MOL’s Atlanta offi ce in 1997 as an account executive, and has since served in various sales assignments throughout the country.

Ryan in New Role at CEVA LogisticsCEVA Logistics has appointed Matthew Ryan to the newly cre-ated position of Chief Operat-ing Offi cer. This role will focus on ensuring CEVA continues to provide industry leading opera-tional and supply chain service excellence.

Chipman Next CEO for Grant Thornton Stephen Chipman will assume the CEO spot at accounting fi rm Grant Thornton on Janu-ary 1, 2010. Chipman was most recently chief executive offi -cer, Greater China Management Corporation, responsible for leading the development and growth of services for Grant Thornton in China.

TMCA Awards AbernathyThe Transportation Market-ing & Communications Asso-

ciation (TMCA) has awarded George Abernathy, executive vice president and chief oper-ating offi cer for Transplace, as the “2009 TMCA Transpor-tation Marketing Executive of the Year.” This honor was awarded June 2 at TMCA’s Annual Conference in San Diego, Calif.

Freese to Succeed Newsome at Hapag-LloydHapag-Lloyd, the German ocean container carrier, announced that Wolfgang Freese will suc-ceed Jim Newsome as president of Hapag-Lloyd (America) on September 1.

Newsome will leave the com-pany after 12 years to take a new job as president and chief executive offi cer of South Caro-lina State Ports Authority.

Sky-Trax Chooses McDonnellWilliam H. McDonnell has been hired by Sky-Trax Inc. to serve as the company’s Chief Finan-cial Offi cer. McDonnell will be responsible for the company’s financial controls, financial reporting, financial plan-ning, day-to-day management of financial operations, and human resources.

Names News&


The survey revealed that 35 percent of the respon-dents intended to purchase SaaS-based ERP (enterprise resource planning) in the next 12 months. Around 20 percent of those surveyed were already using SaaS ERP.

Analysts predict the SaaS market to grow faster in Asia, especially in the markets of China and India, than in U.S. or any Western market.

SaaS is a model of software deployment whereby a pro-vider licenses an application to customers for use as a service on demand.

Japan to Recognize U.S. Trade Security ProgramsMUTUAL RECOGNITION WILL HELP EXPEDITE CARGO CLEARANCESOffi cials from Japan and the U.S. have agreed to mutually recog-nize their respective trade secu-rity and facilitation programs to expedite bilateral trade.

The U.S. trade security and facilitation program is the Customs-Trade Partnership Against Terrorism program, or C-TPAT.

According to Japanese offi -cials, the mutual recognition agreement is the second of its kind for Japan and the fi fth of its kind in the world. The coun-try already has a similar pact in place with New Zealand, while the U.S. has established agreements with New Zealand, Canada, and Jordan.

Tightening Security at India’s Top Box PortRECENT SNAFUS HIGHLIGHTED LAPSESCustoms officials at the Port of Jawaharlal Nehru—India’s biggest container port—have issued new security regulations to improve container-screening procedures.

The move follows a string of incidents where containers, specifi cally those identifi ed for scanning, evaded the customs agency’s scrutiny. “It has been noticed that sometimes con-tainers, which are selected for scanning, are not presented for scanning and are being taken directly to respective freight stations without scanning. This non-reporting of selected containers to the scanners is defeating the very purpose of scanning in the heightened security scenario,” customs offi cials explained.

The new procedures stipu-late that once a container is selected for scanning, it will not be exempted from the process.

India’s Port of Jawaharlal Nehru handles nearly 60 per-cent of India’s container traffi c. In fi scal 2008-09, total volume handled by its three terminals was 3.95 million TEUs, com-pared with 4.06 million TEUs the previous year.

Seizures of Fake Goods Up 125% in EUMORE THAN HALF FROM CHINAThe European Commission says the number of counterfeit seizures jumped 125 percent between 2007 and 2008, with over half coming from China.

Customs offi cers seized 178 million counterfeit items last year that were headed for the 27 nations in the European Union, including CDs, DVDs, cigarettes, and clothing.

In fact, CDs and DVDs accounted for 44 percent of confi scated items followed by cigarettes at 23 percent and clothing at 10 percent.

The Commission found that more than half of the fake goods confi scated in 2008 came from China. Furthermore, a signifi -cant portion of the confi scated products were potentially dan-gerous for European consum-

ers, the governing body said.Fake medicine came from

India, forged food and drink products were from Indone-sia, while the United Arab Emirates was listed as the main source of counterfeit cigarettes, said offi cials.

EU, U.S. Challenge China’s Export RestraintsWTO CALLED IN TO INVESTIGATETrade officials from the EU and U.S. have requested inves-tigations from the WTO over China’s export restraints on several important raw materials, including bauxite, coke, fl uor-spar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus, and zinc.

China is a major global pro-ducer of these raw materials.

According to U.S. Trade Representative Ron Kirk, his agency “is very concerned that China appears to be restricting the exports of these materials at the expense of U.S. industries that need these materials, and their workers. This appears to be occurring despite strong WTO rules designed to disci-pline export restraints.”

For her part, EU Trade Com-missioner Catherine Ashton said, “The Chinese restrictions on raw materials distort compe-tition and increase global prices, making things even more diffi -cult for our companies in this economic downturn.”

Athens Airport Improving Customs ClearancesOLYMPIC GAMES PROVIDED THE PUSH

The Athens Airport is working with the EU to improve cus-toms clearances and automate the cargo system to bring it up to par with other European airports.

“It is vital that we provide a fast and flexible service to encourage more freight traffi c at this airport,” said Vasiliki Kalamara, who took over as head of Airport Customs some eighteen months ago.

Since the Olympic Games four years ago, Athens Airport has gradually introduced more fl exible procedures and oper-ating hours, particularly for freighters, which mostly oper-ate at night. WT

SCOPE WestLas Vegas, NevadaAugust 19-21www.scopewest.com

Third International Conference on Energy Solutions for TransportReykjavik, IcelandSeptember 14-15www.drivingsustainability.org

CSCMP Annual Global Conference 2009Chicago, IllinoisSeptember 20-23http://cscmpconference.org

Cool LogisticsHamburg, GermanySeptember 28-30www.coollogisticsconference.com

MARK YOUR

Calendar

World Trade Magazine will be publishing announcements of forthcoming global supply chain events in every issue. For inclusion, please forward event details to [email protected]


COVER STORY

While the downturn in the global economy is affecting trade partners across the board, some have higher risk factors than others.

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Trade PartnersTop U.S.

The Outlook for the

For this year’s snapshot of the risk factors associated with the top U.S. trade partners, we again turned to Coface, a world leader in trade-credit information and protection, for their expertise and analysis. The sobering news is that the 2008-2009 credit crisis, defi ned as a sub-stantial rise in corporate defaults stemming from an economic shock, is quite serious, with simultaneous recessions in the world’s three major industrialized regions: Japan, Western Europe, and the United States. Furthermore, dwindling demand coupled with a credit crunch brought on by the banking crisis is a vicious cycle that can only be broken by a restoration of confi dence, according to Coface. On a better note, the credit crisis should end by late 2009, Coface believes, and if the global economy has indeed reached the proverbial ‘bottom’ and has begun to stabilize, then we can say with assurance that we are setting foot on the path to recovery. –Lara Sowinski, Editor


CanadaThe economy sagged slightly in the second half of 2008, a trend expected to continue in early 2009 before giving way to a period of stabilization and then a modest recov-ery toward year-end. The economic decline is attributable to persistently poor export performance—with a quarter of Canada’s growth dependent on economic conditions in the United States—and the downturn of investment. Although consumption has shown some strength, it has not suffi ced to reverse the negative trend.

Exports will continue to decline due to weaken-ing demand from the United States for manufactured products, the Canadian dollar depreciation against the U.S. dollar notwithstanding. Amid falling world prices, meanwhile, raw material sales will decline more sharply in value than in volume.

Investment will in general also trend down. Corporate investment will suffer from both sluggish demand and less favorable credit conditions. The downturn will be sharper in the western provinces—especially Alberta—which have suffered most from the bursting of the raw-materials speculative bubble. The collapse of oil prices will moreover likely jeopardize several oil shale explora-tion and exploitation projects.

Households are expected to invest slightly less on housing but that trend will be unlikely reach the pro-portions observed in the United States thanks to a more tightly supervised system of fi nancing and the absence of past excesses. Sharp declines could nonetheless develop in major western urban areas.

Consumption by households will likely manifest some strength refl ecting their generally good fi nancial health and limited indebtedness, the continued growth of real wages, and an unemployment rate that, although rising, remains at historically low levels. Public spending is sim-ilarly expected to remain an anchor of economic stability thanks to the public sector’s good fi nancial health.

ChinaAfter peaking in 2007 with 11.9 percent annual growth, the Chinese economy cooled in 2008 amid a slowdown of exports and domestic demand. Export growth slowed somewhat mainly as a result of sagging demand from industrialized countries, which absorb 46 percent of total sales abroad. Consumption declined, meanwhile, essentially as a result of growing infl ation in 2008 and rising unemployment. Furthermore, a slowdown of investment is partly attributable to the narrowing of cor-porate margins, particularly in sectors with overcapacity (steel, car industry, real estate, etc.).

To deal with the slowdown, the government has adopted a more expansionary monetary policy. Since late 2008, offi cials have similarly shifted gears on exchange rate policy to foster stabilization or depreciation of the yuan and bolster export sectors in diffi culty. And with the leeway afforded by low public sector debt (15 per-cent of GDP) and a high savings rate, the government has decided to implement a $586 billion fi scal stimulus plan devoted to major infrastructure projects—with invest-ments in transportation and electricity, reconstruction of areas devastated by the earthquake, among others—and

social measures (education, subsidies to rural populations, housing aid, etc.). The plan is intended to avert a severe-slowdown scenario that could cause a significant upsurge of payment defaults and an increase in social unrest.

Despite the fi scal stimulus, the risk of payment failures in particular sectors will nonetheless remain substantial. Low-end export sectors with tight margins, like textiles, shoes, and toys, suffered from the acceleration of the yuan appreciation in the fi rst nine months of 2008, the rise of wages, and problems with product quality. Sectors like automotives and property where sales transactions are commonly made on credit have also been in diffi-culty. According to Coface monitoring records, payment behavior has been deteriorating—a trend likely to worsen in 2009 as the economic slowdown tightens its grip.

MexicoAffected mainly by the economic recession in the U.S. along with the international fi nancial crisis, Mexico is expected to suffer a severe economic downturn in 2009, despite fi scal stimulus measures taken by the govern-ment. Monetary authorities will also experience diffi cul-ties in controlling infl ation, attributable mainly to the peso depreciation and pessimistic expectations.

Public debt remains moderate with its foreign com-

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Country Value

Canada1. $596.9

China2. $409.2

Mexico3. $367.5

Japan4. $205.8

Germany5. $152.3

United Kingdom6. $112.4

South Korea7. $82.9

France8. $73.2

Saudi Arabia9. $67.3

Venezuela10. $64.0

Brazil11. $63.4

Taiwan12. $61.6

Netherlands13. $61.4

Italy 14. $51.6

Belgium15. $46.4

TOP 15 U.S. TRADE PARTNERS (total goods imported/exportedin 2008; US$ billions)

Source: U.S. Census Bureau


COVER STORY

ponent in decline. But improvement in public fi nances, still dependent on oil revenues, will

require further efforts on reform of both the tax system and the state-run oil company PEMEX. It will thus be a very slow pro-cess. With a steady decline in oil produc-tion compounded by the fall of oil prices

and the downturn of exports to the U.S. and transfers from emigrant workers, the

external account defi cit will widen. To cover its very large and strongly growing financing

needs and also to compensate for a signifi cant drop in foreign direct investment, Mexico will have to turn not only to international fi nancial institutions, but also to fi nancial markets, though at a high cost. But the stable and moderate level of short-term debt and the fl exibility of the exchange rate will tend to mitigate, albeit increas-ing, liquidity crisis risk. The relatively modest size of the banking sector has moreover sheltered it from exposure to risks resulting from the sub-prime crisis in the U.S.

After the adoption of a limited reform of PEMEX in 2008, modernization of the economy continues to come up against strong social and political resistance. Too, the climate of insecurity and violence resulting from the organized criminal activities associated with narcot-ics traffi cking moreover constitutes a challenge to the

authority of President Felipe Calderon, whose success will partly depend on improvement in this area.

In this context, the business environment leaves room for improvement and the credit crunch handicaps com-panies. Large private fi rms are faced with the drying up of international liquidity. The diffi culties faced by the textile, clothing and shoe industries are, however, the traditional ones and result from an inability to compete with their Asian rivals.

JapanThe spectacular fall of economic growth during the fi rst quarter of 2009 (down an annualized 14.2 percent quarter-on-quarter and down 9.1 percent year-on-year), resulting from the decline in both exports and invest-ment, bears out that of all industrialized countries Japan will likely suffer the most severe recession this year with GDP contracting by 7 percent. The lack of reaction by companies in failing to reduce their stocks and costs in the fourth quarter of 2008 paved the way for the fall of corporate profi ts to their lowest level since 1983. They will therefore have to revise their investment projects downward and adjust production. But production could, however, benefit temporarily from a technical recovery: The vast economic support plan implemented by China and focused chiefl y on investment will likely

Country Value% of Total Imports

China1. $337.8 16.1%

Canada2. $335.6 16.0%

Mexico3. $215.9 10.3%

Japan4. $139.2 6.6%

Germany5. $97.6 4.6%

United Kingdom6. $58.6 2.8%

Saudi Arabia7. $54.8 2.6%

Venezuela8. $51.4 2.4%

South Korea9. $48.1 2.3%

France10. $44.0 2.1%

Nigeria11. $38.1 1.8%

Taiwan12. $36.3 1.7%

Italy13. $36.1 1.7%

Ireland14. $31.6 1.5%

Malaysia15. $30.7 1.5%

Total, Top 15 Countries $1,555.8 74.1%

Total, All Countries $2,100.4 100.0%

Country Value% of Total Exports

Canada1. $261.4 20.1%

Mexico2. $151.5 11.7%

China3. $71.5 5.5%

Japan4. $66.6 5.1%

Germany5. $54.7 4.2%

United Kingdom6. $53.8 4.1%

Netherlands7. $40.2 3.1%

South Korea8. $34.8 2.7%

Brazil9. $32.9 2.5%

France10. $29.2 2.2%

Belgium11. $29.0 2.2%

Singapore12. $28.8 2.2%

Taiwan13. $25.3 1.9%

Australia14. $22.5 1.7%

Switzerland15. $22.0 1.7%

Total, Top 15 Countries $924.2 71.1%

Total, All Countries $1,300.5 100.0%

TOP 15 COUNTRIES FOR U.S. IMPORTS (total goods imported in 2008; US$ billions)

TOP 15 COUNTRIESFOR U.S. EXPORTS (total goods exported in 2008; US$ billions)


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Commodity ExportsVehicles1. $32,341Electrical machinery 2. $27,752Airplanes, engines, and parts 3. $27,443General industrial machines4. $17,995Specialized industrial machines5. $17,340Petroleum preparations6. $14,704Scientifi c instruments 7. $14,007Chemicals - plastics8. $13,586Chemicals - organic9. $12,007Chemicals - medicinal10. $11,619Power generating machines 11. $10,711ADP equipment and offi ce machines12. $9,746Metal ores and scrap13. $8,836Chemicals - n.e.s.14. $8,454Gold, nonmonetary15. $8,196TVs, VCRs, etc. 16. $8,145Soybeans17. $6,434Metal manufactures, n.e.s.18. $6,145Iron and steel mill products19. $5,641Corn20. $5,110Paper and paperboard21. $4,774Vegetables and fruits22. $4,196Textile yarn, fabric23. $4,011Chemicals - inorganic24. $4,006Wheat25. $3,931Chemicals - cosmetics26. $3,712Meat and preparations27. $3,543Plastic articles, n.e.s.28. $3,158Pulp and waste paper29. $2,668Animal feeds30. $2,618Basketware, etc.31. $2,474Gem diamonds32. $2,292Coal33. $2,112Aluminum34. $2,085Printed materials35. $2,032Artwork and antiques36. $2,015Chemicals - dyeing37. $2,006Metalworking machines38. $1,954Mineral fuels, other39. $1,951Natural gas40. $1,946Records and magnetic media41. $1,734Furniture and bedding 42. $1,653Toys, games, and sporting goods43. $1,620Jewelry44. $1,605Cotton, raw and linters45. $1,593Chemicals - fertilizers46. $1,503Cork, wood, and lumber47. $1,419Copper48. $1,327Fish and preparations49. $1,309Rubber tires and tubes 50. $1,261

Top 50 U.S. Goods Exports

Commodity ImportsCrude oil1. $110,014Vehicles2. $69,829TVs, VCRs, etc. 3. $40,719Electrical machinery4. $37,171ADP equipment and offi ce machines5. $31,965Petroleum preparations6. $28,539Clothing7. $23,834General industrial machines8. $22,672Chemicals - medicinal9. $19,434Chemicals - organic10. $16,254Power generating machines 11. $15,954Natural gas12. $12,798Specialized industrial machines13. $12,368Scientifi c instruments 14. $12,250Iron and steel mill products15. $10,856Furniture and bedding 16. $10,789Metal manufactures, n.e.s.17. $9,783Airplanes, engines, and parts 18. $9,222Toys, games, and sporting goods19. $8,056Vegetables and fruits20. $7,346Textile yarn, fabric21. $7,275Gem diamonds22. $6,699Chemicals - plastics23. $6,319Footwear24. $6,292Paper and paperboard25. $5,835Chemicals - inorganic26. $5,052Plastic articles, n.e.s.27. $5,043Aluminum28. $4,269Chemicals - n.e.s.29. $4,256Fish and preparations30. $4,002Basketware, etc.31. $3,924Copper32. $3,603Rubber tires and tubes 33. $3,270Chemicals - cosmetics34. $3,099Artwork and antiques35. $3,052Metal ores and scrap36. $2,931Jewelry37. $2,868Platinum38. $2,861Metalworking machines39. $2,860Wood manufactures40. $2,819Chemicals - fertilizers41. $2,644Gold, nonmonetary42. $2,495Lighting and plumbing43. $2,385Travel goods44. $2,296Records and magnetic media45. $2,181Cork, wood, and lumber46. $2,039Liquefi ed propane and butane47. $1,751Optical goods48. $1,711Printed materials49. $1,704Meat and preparations50. $1,596

Top 50 U.S. Goods Imports

TOP 100 U.S. IMPORTS & EXPORTS(goods traded in 2008; in US$ millions)



COVER STORY

enable Japanese mechanicals and metal processing sectors to limit the deterioration of their busi-

ness activity. That temporary relief from the overall trend will, however, remain marginal since Japanese exports to China correlate with Chinese exports to the U.S. and Euro-pean Union.

The improvement in consumer con-fidence recorded in May was largely

attributable to various stimulus measures implemented by the government in the second

quarter, particularly for purchases of vehicles and home furnishings. Despite these measures, household consumption—already relatively fl at before the crisis—will decline in 2009 (down 2 percent), undermined by the rise of unemployment (5.9 percent) and the decline in disposable income (with fi nancial assets constituting 70 percent of net wealth), and savings are expected to increase to 7.6 percent of disposable income.

GermanyUndermined by the marked weakening of exports, the German economy slipped into recession in spring 2008, a trend expected to continue until autumn 2009 with a timid recovery possibly developing thereafter. Persis-tently sluggish household consumption will provide little backup support to the economy.

In the context of a severe slowdown of the world econ-omy and trade, exports, which had been the main growth engine (41 percent of GDP) until early 2008, are now proving to be the main vector of the recession. Half capi-tal goods (including automotive vehicles) and half con-sumer goods, the export trend refl ects both the end of the investment boom in emerging and raw material producing countries and the downturn of household demand from the major European and American trading partners.

Faced with stagnating exports, eroding margins, and

tightening credit, German industry will likely put its invest-ments on hold. Nonetheless, household consumption will make a slightly positive contribution to growth despite the drop in capital goods purchases like automotives.

In this context, corporate payment behavior, while sat-isfactory in 2008, could deteriorate in 2009 particularly in sectors heavily dependent on exports, like automotive and aeronautical subcontracting, textiles and clothing, mari-time and river transport, and,to a lesser extent, metallurgy, chemicals, and industrial capital equipment.

United KingdomWith the growing impact of the fi nancial and property crisis on household and corporate spending, the eco-nomic downturn will intensify in 2009.

Households have been facing a rapid decline in home prices, which could ultimately fall 30 percent, and tight-ening credit conditions with their debt representing 170 percent of disposable income. A slumping employment market and the concomitant rise of unemployment—not only in fi nancial services and construction but also in other sectors—will also be a drag on the economy.

Only foreign trade is expected to make a slightly posi-tive contribution to GDP growth, thanks to the drop in imports. Exports, meanwhile, are also expected to decline, but to a lesser extent, due to the sluggishness of foreign demand despite a weakening pound sterling, since a high proportion of sales abroad involve special-ties, like pharmaceuticals, software, and IT services that are by nature relatively insensitive to price fl uctuations.

In a deteriorating environment, corporate health has been weakening, particularly in construction, property services, transport, machinery rental, distribution (home furnishings, automotives, consumer electronics, cloth-ing), and outbound tourism: all sectors suffering from the defection of consumers. The highly competitive retail sector has been the riskiest of all. Greater London,

Water Value

Los Angeles1. $180.2

New York-New Jersey2. $165.2

Long Beach3. $147.1

Houston4. $114.6

Charleston5. $60.9

Savannah6. $49.6

Norfolk7. $49.5

Baltimore8. $42.0

Seattle9. $37.6

Oakland10. $34.8

Air Value

New York (JFK)1. $161.2

Chicago O'Hare2. $86.6

Los Angeles3. $79.6

San Francisco4. $61.6

Anchorage5. $45.3

Dallas-Fort Worth6. $41.5

New Orleans7. $41.1

Atlanta8. $35.4

Miami9. $34.5

Cleveland10. $27.3

Land Value

Detroit, MI1. $136.6

Laredo, TX2. $110.4

Buffalo-Niagara Falls, NY3. $78.6

Port Huron, MI4. $77.1

El Paso, TX5. $49.1

Otay Mesa, CA6. $30.7

Hidalgo, TX7. $21.9

Champlain-Rouses Pt., NY8. $21.5

Nogales, AZ9. $18.2

Blaine, WA10. $17.9

TOP 10 U.S. FOREIGN TRADE GATEWAYS (by Value of Shipment, in US$ billions)

Source: U.S. Department of Transportation, Bureau of Transportation Statistics

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with the preponderant role played by fi nance and con-struction, will be the hardest hit metropolitan area. The positive factors are few in number but nonetheless noteworthy: the pound sterling depreciation benefi ting exporters, public sector support for short-term fi nanc-ing, the ongoing preparations for the 2012 Olympic Games, and an acceleration of public infrastructure and housing programs benefi ting construction.

South KoreaDespite adoption of expansionary monetary and fi scal policy, economic growth slowed in 2008 due mainly to sagging domestic demand affected by the rise of infl a-tion, deterioration of the labor market, and bursting of speculative bubbles in the stock, property, and credit markets. The rationing of credit also undermined investment by smaller companies. The chaebols, South Korea’s family-controlled conglomerates, remained solid, however, benefi ting from suffi cient resources to continue investing. Exports decelerated to industrialized and Asian countries—which represent, respectively, 35 percent and 47 percent of sales abroad.

In 2009, the economic slowdown could intensify, with domestic demand remaining fl at. Consumption could

decline again amid a negative wealth effect linked to the collapse of the property and stock markets and the rationing of credit, with household debt representing 140 percent of disposable income. Moreover, compa-nies also burdened with heavy foreign currency debt will suffer from the credit crunch. Construction, automotive, and ship owners will again be the sectors to suffer most. In addition, the export slowdown is expected to con-tinue, particularly in electronics. Therefore, corporate payment behavior could deteriorate in 2009.

FranceThe contraction of economic activity in 2008—down a marked 1.2 per cent in the fourth quarter—will continue in 2009 with a further decline of 2 percent expected. Industrial production will likely continue to fall, notably affected by the automotive sector’s diffi culties. To cope with the decline in demand from the main European trading partners (the EU provides a market for 65 per-cent of export sales and Germany 14 percent) and from domestic customers, companies will go on postponing investments and adjusti ng their costs. Explosive growth of unemployment, erosion of fi nancial assets, and limited increases in wage will prompt households to keep their

ON THE TOP OR IN THE TANK?Here’s How Our Top Trade Partners Stack Up on Other Indices

(Note: Hong Kong ranked fi rst on this index, and North Korea last) (Note: The U.S. ranked fi rst on this index, and Chad last) (Note: Denmark, New Zealand, and Sweden tied for fi rst on this index, and Somalia last)

Country Index

Canada1. Free

Japan2. Mostly free

Germany3. Mostly free

UK4. Mostly free

France5. Mostly free

Netherlands6. Mostly free

Belgium7. Mostly free

Mexico8. Moderately free

South Korea9. Moderately free

Saudi Arabia10. Moderately free

Taiwan11. Moderately free

Italy12. Moderately free

China13. Mostly unfree

Brazil14. Mostly unfree

Venezuela15. Repressed

Country Ranking

Germany1. 7

Netherlands2. 8

Japan3. 9

Canada4. 10

UK5. 12

South Korea6. 13

France7. 16

Taiwan8. 17

Belgium9. 19

Saudi Arabia10. 27

China11. 30

Italy12. 49

Mexico13. 60

Brazil14. 64

Venezuela15. 105

Country Index

Netherlands1. 7

Canada2. 9

Germany3. 14

UK4. 16

Japan5. 18 (tied)

Belgium6. 18 (tied)

France7. 23

Taiwan8. 39

South Korea9. 40

Italy10. 55

China11. 72 (tied)

Mexico12. 72 (tied)

Saudi Arabia13. 80 (tied)

Brazil14. 80 (tied)

Venezuela15. 158

Heritage Foundation’s 2009 Index of Economic Freedom

World Economic Forum’s 2008-2009 Global Competitiveness Ranking

Transparency International’s 2008 Corruption Perceptions Index


COVER STORY

buying in check and to replenish emergency savings. Exports will tread water, particularly in the automo-

tive and intermediate goods sectors. The current account defi cit will nonetheless narrow with sluggish household consumption and the drop in investment undermin-ing imports. The public sector defi cit will widen sig-nifi cantly, (to a negative 5.3 percent) as a result of the economic downturn and the rescue measures taken by the government: bank-fi nancing guarantees, support to companies and sectors in diffi culty, and public invest-ment spending. Public sector debt will grow meanwhile to nearly 74 per cent of GDP.

Saudi ArabiaDriven by booming oil prices, the revenues raked in these past years have facilitated implementation of vast infra-structure projects, an increase in oil production capacity, a reduction in government debt, and a build-up of fi nancial assets. The kingdom is now in a very strong economic and fi nancial position expected to allow it to cope with the consequences of the world economic crisis that began to appear in 2008 with the fall of stock market indices and capitalizations, the drop in oil prices from July on, in conjunction with a shortage of liquidity and a weak-ening of foreign demand. In this context, strong growth in the first half, buoyed moreover by a sharp increase in oil production, subsequently gave signs of slowing down, particularly in the petrochemical and oil sectors. The economic downturn and the credit crunch affected household consumption and prompted private investors to cancel or postpone some projects. With infl ation easing late in the year, offi cials took measures to increase liquidity and to stimulate the economy. Bank deposits, meanwhile, are guaranteed by the government.

The leading OPEC oil-producing country, Saudi Arabia will likely continue in 2009 to make the most

of the adjustment effort for the downward world-demand trend. Oil production could thus

decline compared to 2008. The business climate improved with

Saudi Arabia’s admission to the WTO late 2005. But, it continues to suffer from persistent weaknesses in governance terms.

The performance of companies could suffer from the economic slowdown with deteriora-

tion of their payment behavior, not unlikely in view of their traditional vulnerability to a downturn

of barrel prices.With barrel prices substantially below their average

levels in 2008, a decline in hydrocarbon production will likely result in a sharp drop in export earnings and fi scal revenues, which still derive mainly from oil.

VenezuelaGDP growth is expected to collapse in 2009 with world oil prices and national production falling. The priority given to redistribution of oil export earnings to the detri-ment of productive investment has moreover jeopardized growth sustainability.

Meanwhile, ill-advised fi scal and monetary policies, in conjunction with inadequate production capacity, have

kept infl ation very high despite price controls. In view of the resulting huge differential in inflation between Venezuela and its main trading partners in conjunction with falling oil prices, a devaluation of the bolivar in 2009 seems necessary. However, the government is still seeking to delay the timing of a move that will only fan the fl ames of infl ation even more.

The trade surplus is expected to shrink markedly as a result of the decline in oil prices, the stagnation of production, the slowdowns affecting the main trading partners, and the country’s dependence on imports of consumer goods.

In addition, the “21st century socialism” advocated by President Hugo Chávez has resulted in growing eco-nomic interventionism by the State, nationalizations, and increased barriers to private initiative in an unpredict-able business environment. The President’s victory in the February 2009 referendum reinforces his position in allowing him to stand again for the late 2012 presi-dential election. Before that date, the November 2010 parliamentary elections will be a new test for President Chávez, whose popularity could be undermined by a prolonged deterioration of the economic situation.

BrazilAfter remaining strong in 2008, (and exceeding the 5 per-cent rate targeted by Brazil’s Growth Acceleration Program), the economy will suffer a very sharp contraction in 2009, dragged down by the effects of the world economic and fi nancial crisis, despite government stimulus measures.

Weaker export performance attributable to the marked deterioration of the international environment, in conjunction with import vigor, is expected to exacer-bate the current account defi cit. Liquidity crisis risk will increase due to the very sharp growth of already large external fi nancing needs. Although foreign direct invest-ment should cover nearly half of those needs, Brazilian companies will experience greater diffi culty in obtaining fi nancing abroad in 2009 than in past years.

Overall, companies are being hampered by credit restrictions (particularly small- and medium-sized enter-prises) and/or the exchange rate trend in regular busi-ness transactions, or due to debt contracted in foreign currencies, and their payment behavior will likely suffer in consequence. Some sectors continue to face chronic diffi culties, such as garment and footwear industries, which are grappling with foreign competition. In other sectors, the more difficult economic conditions have taken their toll on agribusiness, the mining and steel industries, construction, automotives (car makers, parts manufacturers, dealers), and mass distribution (particu-larly in home appliances and information technology).

TaiwanAfter the strong 5.7 percent growth achieved in 2007, and even stronger 6.3 percent in the 2008 fi rst quarter, the Taiwanese economy slowed dramatically for the remainder of the year. This slowdown is mainly attrib-utable to the weakening of foreign demand, particularly from China, Hong Kong, and above all, the United States, the island’s main trading partner, considering that

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it is the ultimate re-export destination for about 70 per-cent of Taiwan’s exports to mainland China. Electronics exports, representing 76 percent of Taiwan’s GDP, and tourism have particularly suffered. Domestic demand has also sagged with several adverse trends undermining consumption: the upsurge of infl ation (with the island importing all its energy and food), the negative wealth effect associated with the fall of stock market prices, and the rise of unemployment. Meanwhile, tightening credit conditions and dimmer sales prospects have prompted companies to postpone investments. Despite adoption of more expansionary policies, both monetary (interest rate reductions) and fi scal, the slowdown will likely tighten its grip on the economy in 2009 amid weaker perfor-mance by industrialized and emerging Asian economies. Taiwan’s economic growth could thus be negative in 2009. In this context, corporate payment behavior has continued to deteriorate and the narrowing margins of Taiwanese companies will bear watching.

NetherlandsProduction and exports continued to deteriorate in the fi rst quarter of 2009 with full year growth expected to contract 4.7 percent. Given its open economy, the coun-try is very dependent on demand from its four traditional trading partners (Germany, Belgium, France and the UK). Exports and investment will continue to decline, down respectively16.2 percent and 14.7 percent. With wage growth remaining very moderate and unemploy-ment rising, the contraction of the disposable incomes of private individuals compounded by the erosion of their fi nancial and property asset values will prompt house-holds strained by very heavy debt (170 percent of dis-posable income) to cut back considerably on spending.

The plans for rescuing the banking sector and stimu-lating the economy in conjunction with a slowdown in revenues from gas will wipe out the fiscal surplus the country has run since 2005 and increase the debt, nonetheless expected to remain relatively low (nearly 60 percent of GDP). Bankruptcies accelerated these past months, surging 96.4 per cent in the fi rst quarter.

The global credit crunch will further undermine weaker companies in the manufacturing sector, par-ticularly electronics, information technology, and metal processing. Smaller companies that are reliant on the domestic market could be hurt by the slowdown in household consumption.

ItalyThe sluggishness that began to grip the Italian economy in 2007 has continued with growth likely to slacken for most of 2009 before giving way to a timid recovery.

Household consumption is expected to remain on even keel despite the large wage increases won in 2008 and the fall of prices for energy and, to a lesser extent, food. Nonetheless, households will be facing higher unemployment, refl ecting the stagnation of job creation and the growth of the working population. Although the government has provided underprivileged households with cards for making purchases at reduced prices and extended family allowances to wage earners with tem-

porary employment contracts, they should not expect signifi cant aid from a government that has made a com-mitment to Brussels to bring public sector fi nances back into balance by 2010.

Although the competitiveness of exports is expected to stop deteriorating thanks to the light weakening of the euro against the dollar and the moderate growth of the cost of labor in phase with productiv-ity gains, sales abroad will be unlikely to show any sign of recovery before end 2009. They will be faced with weak demand in developed countries, their primary market.

Investment will only grow in the public sector thanks to the accelerated use of European subsidies for infrastructure, research, and environmental protection. Companies meanwhile will make further reductions in spending amid sluggish demand, tightening credit, and a drop in profi tability.

Moreover, corporate payment behavior, already below the world average, has deteriorated further. The benefi t derived from the euro depreciation, if sustained, and the fall of prices for energy and raw materials, are being can-celled out by the drop in demand.

BelgiumThe economic downturn that began materializing during the fourth quarter of last year will continue in 2009 and growth will contract by 1.9 percent. The decline in demand from the main trading partners (with the Euro-pean Union representing over 73 percent of Belgium’s export market), under way since the third quarter of 2008, will continue to undermine the country’s exports, which have also become less competitive due to high payroll costs (and are above the euro zone average).

Industrial production will continue to fall, down about 4 percent, a trend that will only exacerbate the decline of the production capacity utilization rate, already down sharply in the fourth quarter of last year. Corporate investment will slow, also down about 4 percent, especially with the severe shocks that battered the banking sector in 2008, which prompted banks to tighten loan conditions.

On a positive note, Belgium is a highly multicultural and multilingual country that enjoys a unique geo-graphic location and the presence of European insti-tutions, which have been assets to attracting foreign companies and developing foreign trade. The country is also at the heart of a major economic region and serves as the crossroads of many channels, whether road, rail, or water transport. WT

Risk assessments were excerpted from the Coface Handbook of Coun-

try Risk 2009. Additional information is available online at www.

trade-safely.com.

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For reprints of this article, please contact Cindy Williams at [email protected] or 610-436-4220 ext. 8516.

©2009. OHL, the OHL logo and “Count on us.” are the trademarks of Ozburn-Hessey Logistics, LLC.

In today’s economy, reliability can take you places.

Reliability is the key to success in the global marketplace. As one of the most established logistics companies in the world, OHL leads the way, with locations in dozens of countries. From transportation and warehousing to import and export services, duty drawback and freight management, our team of skilled professionals can deliver your goods as well as peace of mind. We have the flexibility to adapt to any distribution needs, with dynamic solutions and innovative value-added services. Today more than ever, you need the reliability of OHL.

www.ohl.com/countonus or 800-401-6400

Taking Supply ChainSecurity to the Next Level

Mobile technology is playing a big part,but it’s not a silver bullet. BY DAN MCCUE


SUPPLY CHAIN SECURITY

echnology, mobile and otherwise, has had a pro-found effect on the transparency of supply chains on the local level.

With little effort, and real-time GPS technology, logistics managers and fl eet operators can easily see if a truck full of cargo has stopped for a suspicious amount of time, or been diverted from its planned route.

Using simple push-talk phone technology, the man-ager can then quickly determine whether a problem exists or whether the driver is either stuck in traffi c or gamely trying to avoid it.

As for the drivers themselves—a case in point being drivers for the Coca-Cola Bottling Company—wireless receipt printers help them avoid going back and forth to their trucks to complete a client’s order.

Some estimates suggest that simply cutting out that single trip to the truck allows Coke’s route managers to squeeze in as many as four additional stops per day.

On the other end of the supply chain spectrum, bar code and RFID technology has allowed major food com-panies to track dangerous or spoiled cargo back to its specifi c source, limiting their exposure to losses due to massive recalls.

“The applications and benefits of technology to supply chain management are endless,” said Mike Ter-zich, senior vice president of sales and marketing for Zebra Technologies, the Chicago-based manufacturer of thermal transfer bar code printers and related label design software.

But if such applications appear to have revolutionized supply chain management over the past decade, many experts concede much, much more has to be done in the realms of both technology and information sharing to truly ensure door-to-door visibility of the world’s goods and raw materials.

Key to understanding the true impact these technolo-

T


gies are having on supply chain transparency is to con-sider them as they exist in the real world: As both vast global networks and as more localized entities.

Scott Szwast, global freight services marketing man-ager for UPS, said regardless of how complex it becomes, a supply chain is always—in essence—goods in motion.

A key ingredient to real-time visibility“The ability to monitor these goods in real-time is criti-cal, both in terms of business planning and security,” Szwast said. “This real-time visibility would, of course, be virtually impossible without mobile technology, which has simplifi ed processes and allowed for greater supply chain optimization. And of course, the more simplifi ed your processes, the easier they are to secure,” he said.

What that means to people like Zebra Technologies’ Terzich, whose company has been expanding its portfo-lio to include RFID technology and software intended to addresses issues ranging from counterfeiting and diver-sion to food safety, is that they are constantly trying to fi ll a niche where people want to know more, and know it more quickly.

“Part of it stems from the fear of terrorism, part is borne of the desire of high-branded companies to pro-tect their corporate image—and in the process the jobs of their employees—from knockoffs, and part of it stems from retailers and end users of the goods in transit, who are seeking a higher level of confi dence in the quality of the products they receive,” Terzich said.

Between the terrorist attacks of Sept. 11, 2001 and the global economic crisis, which led to the current decline in world trade, some 48 million containers moved through global supply chains annually, Terzich noted.

Technological solutions have inspired governments and supply chain mangers in the private sector to look beyond the basic desire to understand what’s in a con-tainer, where it has been and where it is going, and to continually look for new ways to facilitate and expedite global trade.

UPS’ Szwast pointed to the Automated Commercial Environment (ACE) established by U.S. Customs and Border Protection as “a great example of government providing a framework for further connectivity and auto-mation” for supply chain processes.

ACE, which has been rolled out over several years, has transformed the processing of cargo from a ship-ment-by-shipment approach to an accounts-based system. At the same time, Customs has created a cen-tralized Web portal to connect the agency more directly with the trade community.

Over time, ACE has enabled the agency to compile profi les of all importers and exporters, as well as their shipment and payment activity.

“UPS pioneered a system in 2002—prior to ACE—called Target Search to assist the Customs officials inspecting shipments coming through Worldport, UPS’s largest international air hub in Louisville,” Szwast said. “Target Search provides electronic information to Cus-toms offi cials so that they can effectively target and select shipments for inspection ahead of time, expediting the customs clearance process.”

Of course, developing a synergy with Customs offi -cials is one thing, but what about sharing the cost? At the very least, what about spreading the cost of security across an organization?

Fortunately, Szwast said, many of the same technolo-gies are employed on both the security and operational side of the equation.

“For example, at UPS our small package and ground freight drivers both use a wireless handheld computer that is key to tracking the goods being moved,” he said. “The device—called a Delivery Information Acquisi-tion Device or DIAD—scans a barcode when the driver makes a delivery and, virtually in real-time, uploads that data to a mainframe where it is available to the customer for security and visibility purposes.”

Szwast adds, “The same is true of a comprehensive portfolio of visibility systems that UPS makes available to customers.”

Looking at the trade equation from a broader perspec-tive, Szwast said standardization of processes and tools in support of international trade has been a key enabler of the growth in international commerce.

“Incoterms are a great example of that,” he said, referring to the standardized international commercial terms promulgated by the International Chamber of Commerce.

It’s not one-size-fi ts-allBut not everyone agrees that the wider proliferation of technology over the past decade has made international logistics quite so supple.

Among those with a deep perspective and perhaps a dissenter’s view on the global supply chain is David Fairnie, director of security for DP World, one of the largest marine terminal operators in the world with 49 marine terminals and 12 new developments across 31 countries.

Zebra Technologies’ mobile printers work on-site and on-demand for increased fl exibility and effi ciency.

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“To be perfectly honest, in my opinion and experi-ence, I’m not sure technology has improved the visibility of global supply chains,” said Fairnie from his offi ce in Dubai. (DP World is part of the Dubai World, a holding company controlled by Dubai’s royal family.)

“While there are a wealth of technologies out there, we haven’t seen one technology emerge that’s been wholeheartedly embraced and adopted by logistics play-ers,” he said.

Fairnie believes one of the barriers to coming up with a one-size-fi ts-all supply chain technological solution is that there’s always more to using technology as a tool than simply taking it out of the box.

“Before you get to the point [of selecting a techno-logical solution to your supply chain challenges] you’ve really got to look at your people. ‘Do you have the appro-priate people in the right positions?’ And only then look at the technology itself to determine whether it is appro-priate to the environment, which in our case is heavy industry and dealing with trucks passing to and from our gates. The last step—before purchase and attempted implementation—is to then look at your processes.”

He continues, “In the latter case, what you need to look at is how we apply technology and our people in such a way that not only protects our assets, but adds to the value of our operations.”

As an example, Fairnie pointed to gate operations. In recent years, international legislation has mandated greater control over the access people and vehicles have to port terminals. Of course, a guard could check the ID of every individual who seeks access to the terminal, “but that’s a laborious process that would slow the fl ow of commerce,” he said.

Technology then must have a role, whether it’s a simple badge system or one that incorporates biometric information. But at a time when companies are striving to get everything they can from their supply chain dollars, is it worth the expense to go as high-tech as possible?

DP World didn’t just implement a biometric system at its gates and leave it at that. Its tech people realized that the cards could be a valuable tool for monitoring employee time and attendance.

“That’s what I think of when I think of security tech-nology having a value-added role,” Fairnie said. “You’ve implemented a security measure that also serves a pay-roll function, ensuring that you’re not paying individual employees too much or too little.”

Another example Fairnie pointed to revolved around security surveillance.

“Companies that make up the global supply chain spend an awful lot of money on health and safety,” he said. “They invest in education, safety equipment, train-

David Fairnie, director of security for DP World, likes technology, but doesn’t subscribe to the notion that any one tech tool will pro-vide complete transparency to a supply chain or even an individual facility.

Nor should it, he said.“Whatever individual technology you’re talk-

ing about, I think of it in terms of being part of what Michael C. Kostelnik, Commissioner with U.S. Customs and Border Control, described as the layered defense system for supply chain security and transparency,” he remarked.

“Yes, if a technology makes you feel that your supply chain is more transparent, use it, but also recognize that there are other layers, some of which you can put into place yourself, and others that for which you need to rely on others.”

In Fairnie’s view, true supply chain trans-parency and, by extension, security, can only be achieved through the combined efforts of the public and private sector.

“For instance, one layer is U.S. Customs using risk assessment engines to identify where the high-risk containers are and targeting those containers for inspection,” he said. “Now, that requires information to feed the engine, so another layer of protection for the global supply chain is the 10+2 rule that the U.S. has introduced, which requires importers and ocean

carriers to electronically submit to Customs a total of 12 data elements including manufacturer, seller, consoli-dator and buyer information, as well as the container staff-ing location and container status messages.”

The next layer is inspec-tions of cargo containers using X-ray and other screening that searches for weapons of mass effect. Then there’s the utili-zation of e-seals, RFID, and the like. Only then does the use of mobile devices, GPS, and other technolo-gies come into play.

“There is no silver bullet when it comes to protecting the world’s supply chains,” Fairnie said. “I think there needs to be a combination of several, and I also think there is a value to identifying solutions that not only meet requirements on security, but also add value in terms of velocity and transparency.”

While some still argue against revising their technology regime, citing fears that such investments will drive up shipping costs or slow cargo movement times, Fairnie said paying attention to what one’s actual needs are is the best way to ensure future invest-

ments are in line with the company’s goals.“The fi rst thing you have to do is analyze

your situation and determine what you really need to do,” Fairnie said. “One mistake people make is they throw money at technology and come away frustrated. Personally, I think it’s a poor choice to just automatically reach for a technology solution.”

He explained, “What we found at DP World is that it was not cost effective to just rely on technology,” he continued. “The most cost effective approach is to invest a bit in people and then to invest in technol-ogy as a tool, or extension of the human side, of your operation.”

A Layered Approach to Security

CBP Air and Marine Assistant Commissioner Michael C. Kostelnik advocates a multi-layered approach to supply chain security.

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ing, and yet many of them still have acci-dents, lost-time injuries and fatalities. It’s a byproduct of an industry where you are always trying to do things quicker and faster. And of course, it’s human nature to say, ‘Well, what is the chance, really, of that container hitting me on the head?’”

Nonetheless, “What we’ve found is that unless you truly follow up on this training, much of these investments are wasted,” Fairnie continued.

“What we did at DP World was to use our integrated security system as a means of advancing our health and safety objec-tives,” he explained. “From a security point of view, we need to know what’s happening at the perimeter of our facility, and so we have cameras and sensors that are looking for nefarious acts, and feed information to our command and control center.”

“However, we realized that this doesn’t have to be the focus of our system 100 per-cent of the time, and in fact, we could get more from the equipment by using it to identify when unsafe or unhealthy practices are occurring, and then reacting to it, by either contacting the person on his mobile device or actually responding to the scene.”

When an unsafe practice occurs, such as in the case of a worker wandering into an area restricted to heavy equipment, the individual will be briefed on what they’ve done wrong, and be asked to sign a note promising to not to do it again. The information is then turned over to DP World’s Health and Safety Department, which then schedules the individual for retraining.

“A single fatality can cost a company as much as $5 million, according to the insurance industry, and that’s not counting accident related delays and other intan-gibles,” Fairnie said.

But if a company’s failing to grasp the most compre-hensive and cost-effective applications of technology is one barrier to greater transparency of the global supply chain, it is not the only one.

“In simple terms, everyone is waiting for U.S. Cus-toms to make a determination on what it believes the desired technology to be, and that’s preventing their adoption in the private sector,” Fairnie said. “That’s because uncertainty over what the standard will be has a direct correlation to the ability of the manufacturer to mass produce it at the price that makes good business sense to those engaged in moving cargo.”

According to Fairnie, “Until somebody mandates the use of a particular technology, whether it is an RFID or some other e-seal technology, movement in this area is going to be somewhat slow.”

And, while the Automated Commercial Environment (ACE) might be working well in the U.S., at least for UPS, Fairnie believes that on a global scale there’s a lot of infor-mation that’s being generated by logistics operational pro-cesses worldwide that is simply being underutilized.

“If you could suck this information up and feed it into a global information hub, it could then be used in a

coordinated manner by governments and individual agencies to provide a better assessment of the risks that are out there,” he said.

At present, two separate consortiums—the Smart Container Management Transportation Consortium (SCMTC) and the Integrity Project—both funded by the European Union in partnership with China, are evaluating differently approaches to creating just such a common user platform or information sharing exchange for governments, trading partners or both.

The integrity project, for instance, is looking at sig-nifi cantly improving the reliability and predictability of door-to-door container chains through the development of a so-called “Shared Intermodal Container Informa-tion System.”

In concept, authorized companies and authorities would have access through the system to planning and status information of selected transports.

Research funded by the SCMTC is ultimately intended to overhaul the door-to-door container trans-port chain on a worldwide basis, creating a more effi cient, market-driven and secure cargo movement process.

But that’s not to say everyone is one board when it comes to the question of seeking a greater level of trans-parency in the supply chain through the implementation of technology.

In fact, Earl Agron, vice president of security at APL, a wholly owned subsidiary of Singapore-based Neptune Orient Lines, a global transportation and logistics com-pany engaged in shipping and related businesses, said there is little justifi cation from either a business or security perspective for real-time visibility at the container level.

“Today, ocean carriers, within hours of a container status change, record location data in their proprietary systems and make that data available to their customers,” Agron said. “The supply chain security benefi t of real-time container visibility is negligible.

Scott Szwast, global freight services marketing manager, UPS.

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Further, he said, security must be risk-based. “One size does not fi t all,” he emphasized. “People, pro-

cesses and training are the three keys that should receive initial focus,” Agron said. “We must also employ overlap-ping layers of security. Realizing the adversary is adapt-able, the private sector should not pour all of its resources into one expensive technological solution thinking it is the silver bullet. I have seen few technological security gad-gets that can be justifi ed solely on security benefi ts,” he continued, echoing the perspective described by Fairnie, that, “The ideal solution is one that provides an enterprise with dual benefi ts—a commercial return on investment and improved security.”

In fact, Agron believes that advocates for end-to-end supply chain visibility through technology or other means are missing the point.

“End-to-end visibility does not provide improved security in and of itself,” he said. “In addition to detection achieved through technology, response to any alert must also be possible to achieve improved security.”

“What security is gained if, for example, a gadget sends an alert that a container door is opened but no immediate response by law enforcement is possible?” he said. “Similarly, since containers can be breached in less than 15 minutes, what security benefi t is gained if a visibility gadget detects a 30-minute delay due to traffi c congestion?”

In addition, “Think of all of the nuisance alarms requir-ing attention that would be created,” Agron added. “If only 10 million of the world’s container fl eet send data once every hour that is almost a quarter billion messages every day that needs to be analyzed. I am afraid we would be making the haystack so large that the probability of missing a threat would actually increase. This is one of the biggest issues in applying technological security solutions at the container level.”

But, Agron was far from complacent. In point of fact, he does believe that since supply chains initiate and tran-sit through multiple sovereign nations, “an economic and interoperable international security standard is required. Without one international standard, the effectiveness of any technology would be undermined,” Agron said.

To get there, however, would be solving a whole host of daunting challenges. Agron, for instance, sees the prolifera-tion of mobile phone, GPS and other technologies as adding more risk to the global supply chain because as the use of technology expands, so too does the number of people who have access to sensitive commercial information.

“Information security becomes a critical risk that must be carefully addressed,” he said. “Passwords, computer viruses, stolen laptops and lost thumb drives can result in serious security breaches that could result in signifi cant direct and consequential damages.”

Keeping costs in checkBut even in light of those concerns, Agron said there’s a broader question that has to be addressed—how does one create greater supply chain security without substantially

driving up the cost of shipments and without slowing cargo movements?

“This is the million dollar question,” he said. “We always need to balance security with trade or we might cripple the economic system we are trying to protect. Probably the best means of improving security is increased collaboration between the private and public sectors at both the local, fed-eral and international levels.”

This again gets back to the concept of getting everyone on the same page when it comes to implementing technol-ogy and crafting an international technology standard.

Fairnie said without an international standard or a com-pliance requirement for a specifi c piece of technology, like e-seals on cargo containers, people simply don’t see why they have to go to the trouble of securing such items.

“As we’ve seen in the past,” he said, “when the U.S. gov-ernment says, ‘This is what we want,’ then the industry is quick to comply.”

To some, however, “mandate,” is a dirty word—a stick brandished without the industry having even been offered

a carrot as enticement.“Enticements?” Fairnie said.

“Actually, I think there’s a fairly good one: customs facilitation.”

Fairnie holds that in addition to transparency what people want most in their supply chains is veloc-ity, and one of the biggest inhibi-tors to making supply chains move faster is the requirement for U.S.

Customs checks in the name of national security, and U.S. Treasury checks, as a means to tracking what kinds of goods are coming across the border.

“If U.S. Customs could reward investment in technology and a demonstrated commitment to greater transparency with a faster transit time through the inspection process, that would be a big incentive,” he said. “At the same time, I think they’d have to respond to those who haven’t taken steps to make their supply chains more transparent by saying, ‘In your case, we need to check every box.’”

Despite all this, Fairnie grew somewhat introspective when asked if the proliferation of technology over the past several years has made the supply chain more secure.

“In my personal opinion? The answer is ‘No,’” he ven-tured fi nally. “No, we are not in a secure world. In regards to visibility, and speaking in general terms, as a terminal operator, we don’t know what’s in the box when we accept it—other than what’s listed on the manifest.”

“If you don’t have some electronic or other means to verify the contents, you can’t know, defi nitely, that some-thing else hasn’t been stuffed in the box. Right now, there’s still a lot of reliance on simple trust.” WT

Contributing writer Dan McCue lives in Charleston, SC where he

writes frequently on global trade, foreign direct investment, and

port-related issues.


International standards must be in place for

technology to be truly effective.

The office products company’s embrace of environmentalism is paying off. BY GAIL DUTTON


SUPPLY CHAIN SUSTAINABILITY

n 2000, Staples was picketed by the Dogwood Alli-ance and other forestry groups, which claimed it had insuffi cient recycled content in its paper products. The action left Staples execs surprised. Environmen-

tal responsibility, they believed, had always been part of their operations.

In an effort to bridge the disconnect, Staples sat down with non-government agencies, suppliers and customers to formalize its environmental and social responsibility stances and to fi nd ways to further improve them. The result has been a winning situation for all parties and, for Staples, a sustainability commitment that permeates every aspect of its $23 billion operations.

With operations in 27 countries, and an even larger supply chain footprint, ensuring sustainability through-out the enterprise is no small task. Nonetheless, “We’re trying to weave in sustainability ethics into the way we think about business,” emphasizes Mark Buckley, vice president of environmental affairs. Buckley focuses upon four key areas: increasing the availability of eco-friendly products, making it easier for customers to recycle, boosting energy effi ciency through renewable power, and providing environmental education for its customers.

Sustainable products“These values are important to us,” Buckley says. To instill these values throughout the organization, Staples looked fi rst to its own Staples-branded products, focus-ing upon paper and forestry products. Since deciding to increase the percentage of recycled paper used in its products, recycled paper content increased from below 10 percent to about 30 percent today.

Staples also involved the forest owners and the paper

mills in its efforts to increase sustainable practices. Although it doesn’t own timberlands or paper mills, it began buying products only from suppliers who do not accept old growth trees at their mills and are a member of the Paper Working Group, which is dedicated to con-serving forests by developing ways to evaluate the envi-ronmental performance of paper manufacturers.

Staples also is taking its message of sustainability to timberland owners. It is working in the southeast-ern United States with Georgia Pacifi c and the Forest Stewardship Council (FSC) to encourage small land-owners to certify their forests as sustainable by cre-ating a market for products from sustainable forests. The goal is to convince private tree farmers that they can increase their return on investment by certifying their forest practices as sustainable. One hallmark of the certification program, Buckley says, is selective logging rather than the clearcutting that is considered more effective in the western U.S. A pilot project is beginning now, with six or seven landowners and a few thousand acres of forest. “Our challenge,” Buckley says, “is being able to (extend sustainability) practices from the shelf to the stump.” Already, Staples offers nine Staples-brand products certifi ed by the Forest Stewardship Council. Its goal is to sell primarily FSC-certifi ed paper by 2010.

Staples’ commitment to recycled content extends to binders made with recycled plastic, furniture made with post-consumer recycled steel and nontoxic and bio-based cleaning products, both for its house brand and from outside vendors. The company now offers about 3000 products that it considers environmentally friendly, including recycled paper, non-toxic cleaners and Energy Star-compliant offi ce products.

Staples Nails Sustainability

I


Staples’ DC in Killingly, Connecticut boasts a 74,000-square foot solar photovoltaic system that produces enough energy to cleanly power 14 percent of the facility’s needs.

RecyclingInk cartridge recycling is available in all of Staples’ stores. “We work with two suppliers,” Buckley says, to collect and remanufacture cartridges. Remanufacturing involves extracting ink, reusing parts whenever possible, refi lling the cartridges, testing them to ensure they meet OEM standards, and grinding up failed cartridges for the secondary plastics market. “The goal is to minimize waste,” he stresses.

To that end, Staples’ American stores also accept elec-tronic waste, including cell phones, mice, keyboards, printers, computer, monitors, fax machines, and simi-lar equipment. The small devices can be recycled at no charge, but printers, PCs and other large items incur a $10 fee. The items are bagged and delivered to Staples’ recycling partner, which then destroys the data on the hard drives and separates them into their component parts for reuse or recycling.

Its internal recycling program encompasses plastics, fl uorescent lamps, paper and cardboard, as well as the ink and toner cartridges and personal electronics col-lected from customers. In 2007, the internal program collected 34,000 tons of cardboard and mixed paper and 300 tons of plastic fi lm in the U.S.

TransportationDelivery truck fl eet effi ciency is an important part of business too, Buckley adds. “Mike Payette, manager of fl eet equipment, has taken a very proactive approach,”

Buckley points out. At Payette’s urging, Staples bought two diesel-electric hybrid trucks from Isuzu that are cur-rently being tested in the Staples fl eet. “He’s a pragmatic Yankee from Vermont,” Buckley summarizes. “Mike is very interested in alternative fuels and alternative drive trains. He wasn’t content to wait for production vehicles to come online, so he went to Isuzu in 2006” to add speed regulators to Staples trucks, limiting them to 60 miles per hour. “Mike wouldn’t take ‘no’ for an answer from Isuzu,” Buckley recounts. In the end, Staples got its speed regulators. Then, “We put a sign on the back of the trucks telling motorists the lower speeds weren’t the fault of the drivers.”

As a result of these efforts, “Staples saved 540,000 gallons of diesel, reduced its costs by $2 million and reduced greenhouse gas emissions by 12 million pounds,” Buckley declares.

Ocean freight and intermodal transportation are also on Staples’ radar, with the goal of enhancing transpor-

Staples’ Stats• 2008 Sales: $23 billion• Operations: 27 countries on 5 continents• 3000 products with recycled content• Nearly 24 million ink and toner

cartridges recycled in 2007• 2 million pounds of e-waste were

recycled in 2007• Electricity usage was cut 15 percent per

square foot between 2001 and 2007• 540,000 gallons of diesel was saved through

fl eet fuel effi ciency improvements


SUPPLY CHAIN SUSTAINABILITY

tation effectiveness while lowering costs. To do this, Staples encourages its stores to place larger orders and to accept deliveries three times per week rather than fi ve, and shares the savings with the stores, Buckley says. “We believe we all need to learn how to do business in a carbon constrained environment,” he says.

ElectricityEnergy effi ciency concerns aren’t limited to the fl eet. “Staples has twenty-four solar energy projects that pro-

duce 4.5 MW of energy, with 150 more projects in the pipeline,” Buckley elaborates. The projects were devel-oped in cooperation with Sun Edison, which installed turnkey solar systems on roofs of Staples’ buildings. “There is no capital investment,” by Staples, he under-scores, but the company has signed a 20-year purchase agreement, obligating it to buy energy from this system. From Buckley’s perspective, “This is a long-term hedge…” against soaring energy rates. Energy costs were lowered, he explains, because this arrangement “leveraged pricing through aggregated loads and more open competition.” And, he adds, the solar energy gen-erated correlates to peak demands, thereby reducing the energy purchased from conventional power sources in Staples’ own facilities. By shifting some of its load to solar, Staples is able to “…reduce its base building load, so we pay less for additional power,” he explains. In all, renewable energy accounted for 20 percent of Staples’ energy purchases in 2007.

Aside from lowering energy bills and reducing the load from conventional power generation plants, the solar program also benefi ts the accounting department. Some 200 energy bills and contracts are aggregated into one bill and one contract, streamlining bill paying and contract management, he explained at the World Resource Institute’s sustainable Energy Summit in 2004. The company broke ground on its fi rst LEED-certifi ed green retail store in 2008.

EducationStaples works closely with its suppliers and its facilities throughout the world to help them fi nd ways to opti-mize operations, given their own situations. Since 2000, Staples has formed numerous collaborations to further sustainability efforts across its enterprise, and regularly audits its suppliers to identify areas of their own opera-tions that Staples believes need improvement. Impor-tantly, Buckley says the company will also share its expertise to help suppliers achieve the desired results.

Business and consumer education is another point in Staples’ sustainability endeavor. Staples was a char-ter partner in “Earth 911 Business” to help its cus-tomers get the information they need to make better decisions and therefore improve their own sustainabil-ity efforts. The company partners with Earth Force to bring environmental education to teachers and stu-dents in several U.S. communities, in an attempt to enhance their engagement with environmental issues by deepening their understanding of the global envi-ronmental situation.

Staples also collaborates closely with the U.S. EPA on e-cycling, and with the World Resources Institute, the Green Power Market Development Group, and many other non-governmental organizations on other environ-mental and sustainability issues. Notably, the company has formed alliances with several environmental fi rms, including the two groups that organized the pickets nine years ago.

“We’re not alone,” Buckley points out. Its deep involve-ment with environmental causes has gone a long way to removing any doubts about the company’s sincere com-

Evans Network Finds ‘Green’ in Load MatchingWhat started out as a straightforward solution to reduce empty trailers for a customer has turned into a national environmental initiative for the Evans Network of Companies, a Pennsylvania-based logistics and transportation company.

It all began a little over a year ago, when Evans Network began looking into the containers being imported and exported through the Port of NY/NJ by Van Heusen. Simply put, the goal was to match up freight on both inbound and outbound moves to reduce empty containers being moved back and forth from Van Heusen’s facility in central Pennsylvania.

“We ended up matching about 43 percent of the loads, saving roughly 10,000 gallons of fuel, and reducing about 222,000 pounds of CO2,” says Gerard “Gerry” Coyle, Vice President, Marketing and Agent Development, for Evans Network. Naturally, this prompted Coyle and Evans Network’s president and CEO, Albert Evans, Jr., to think on a bigger scale.

The Export Coordination/Optimization-Match (ECO-Match) was the result, and it’s already underway at the ports of New York/New Jersey, Philadelphia, Charleston, and Savannah.

Thinking back to the fi rst load-matching program with Van Heusen, Coyle can’t help but ponder the impact on a national scale.

“There are about 22 million containers that come into North Ameri-can ports annually. Can you imagine if we were able to match 43 per-cent of those loads?” he asks. The answer: “We would save billions of gallons of fuel and billions of tons of CO2 in the atmosphere.”


mitment to sustainable business practices. “This is hugely important,” Buckley stresses. “The commitment to sus-tainability throughout the enterprise will give us a com-petitive advantage, and it’s also the right thing to do.”

EthicsThe result of this enterprise-wide emphasis on sustain-able practices affects more than environmental concerns and is reverberating throughout the supply chain. Buck-ley reports that Staples now gives preference to suppli-ers that can deliver goods with greater recycled content or that are proactively looking at their own operations to increase their own sustainability. For example, suppli-ers of large volume paper products, including copier and printer papers, are strongly encouraged to complete an environmental survey. That survey will become one of the criteria consid-ered, in addition to their bids, before contracts are let. It also means that Staples is looking for suppliers nearer their major distribution centers in an effort to minimize shipping costs.

Another key component of sustain-ability involves maintaining global ethical standards. Staples launched its worldwide anti-corruption focus in 2007. Expressed in simple language, the program clearly explains what is expected. As suppliers embrace these standards, personal and corporate exposure to corruption charges are reduced, and trust is enhanced among suppliers and between suppliers and their clients.

Much of that trust is built upon the relationships that are formed through face-to-face meetings and workshops, as well as Staples’ commitment to source products ethically. In 2007, the company conducted more than 375 social accountability audits at 300 fac-tories throughout the world to ensure that they meet the expected standards. “Staples will work with suppliers to help them improve,” Buckley empha-sizes, sharing best practices and work-ing as closely as needed.

The goal is to create a common lan-guage throughout the enterprise and the supply chain,” he explains. “IBM is a good example. It added Green Six Sigma consulting to its operations and lowered the defect rate and optimized productivity. That shows companies can do the right thing for the business and for the planet. They’re not dia-metrically opposed.”

Staples’ program is ambitious, but it all has to make business sense,

Buckley underscores. “It’s good if Staples’ sustainability and ethics programs move the market in the right direc-tion,” he says,” but the programs all have to pass the usual return on investment hurdles.” WT

Gail Dutton is a World Trade contributing editor. She is a veteran writer

who specializes in the intersection of business and technology.


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U.S. TRADE POLICY

ust days after President Barack Obama announced a minor thaw in the longstanding estrangement between the United States and Cuba, Jack Maybank Jr. stood before an audience of entrepreneurs gath-

ered at the College of Charleston in South Carolina and warned them not to misinterpret the opening as a newfound bridge to business relations with the United States’ most notorious neighbor.

Yes, he acknowledged, the Obama administration’s gambit may indeed have been the fi rst step in a long journey toward a normalization of relations—with all the implications of commercial exchange those relations imply—but the fact of the matter is that scores of U.S. companies have been doing business with Cuba for years. With the appropriate product, the opportunities are now, he explained.

“Right now, at least 150 companies in 35 states are doing business with Cuba, thanks in large part to a loos-ening of the trade embargo during the Clinton years with regards to agricultural products,” the president and CEO of Charleston-based Maybank Industries said.

In fact, it was the announcement of President Clin-ton’s decision regarding the embargo—a decision to allow the sale of products that fell into a very loosely defi ned category of “humanitarian” agricultural prod-ucts—that inspired Maybank’s late father, Jack Maybank Sr., to throw caution to the wind in 2000 and make a little history of his own in U.S.-Cuba relations.

For six years beginning in 2002, Maybank Shipping effectively cornered the market of moving goods (nomi-nally lumber and newsprint) to Cuba through a string of U.S. ports extending from Jacksonville, Florida to Corpus Christi, Texas.

From then until roughly two years ago, when the com-pany became Maybank Industries and the family sold off its shipping component, the family-owned business made nearly monthly trips to Cuba.

“Given the location of our operations, Cuba was a natural place for us to grow,” Maybank said.

A photograph taken the day Maybank’s first vessel arrived at the Port of Havana on July 11, 2002, reveals how extraordinary a relationship it was: An American fl ag

Is Trade withCuba a Reality?

Humanitarian shipments were allowed under the Clinton administration, now a new President could open the door wider.BY DAN MCCUE

J


fl ies over El Morro Castle, adjacent to the harbor; it was the fi rst time the stars and stripes had done so since 1961.

Seizing an opportunityThe elder Maybank fi rst learned of the slight loosening of the longstanding embargo over Easter weekend in 2000. Within days, and not knowing a soul in the Communist country, Maybank set out for Cuba and waited several days before finally connecting with Pedro Alvarez, chairman of the Cuban food import company Alimport and the gov-ernment offi cial in charge of trade.

Maybank’s decision to jump on the opportunity was a master stroke. Alva-rez, and Cubans generally, it turned out, place a tremendous amount of weight on personal contact and in doing business face-to-face.

“What we found was that when it comes to doing business in Cuba, everything revolves around friendship,” the younger Maybank said. “The folks at Alimport know their clients, know their clients’ wives, and remember birthdays.”

“The other thing is that you can’t do anything over the phone or through e-mail, in large part because the communications network is not the best there. They like to see you, and they love to negotiate,” he continued.

The forum at which Maybank spoke was co-sponsored by the College of Charleston’s School of Business and Economics and the South Carolina World Trade Center.

More than three dozen entrepreneurs ranging from property developers and entertainment industry con-sultants to, in one case, a retired Ph.D. considering the start of a second career, crowded a conference room at the College’s Tate Center for Entrepreneurship, for the day-long session.

Maria Conchita Mendez, another speaker on the day’s panel and director of Latin American trade and develop-ment for the Alabama State Port Authority, said she also sees Cuba as both a missed and future opportunity.

She spoke from a unique perspective: Born in Cuba, she came to the United States immediately after the revo-lution. Today, she regularly sees cargo leaving her port for her home country, as the island nation is already Ala-bama’s top customer for poultry products.

But its Mendez’s contention, given how close Cuba is to the U.S.—a mere 32 hours by cargo ship—that sev-eral more shiploads of goods could be making their way weekly through the Port of Alabama, if only the embargo was lifted and U.S. exporters could offer Cuba and its consumers a variety of goods.

Pointing to economic development successes Ala-bama and the entire Southeast has enjoyed in recent years—luring Hyundai, Kia, Nissan and Toyota plants, not to mention foreign-based companies making every-thing from agricultural machinery to fi ber-optic cable—

Mendez said the goods and infrastructure are already in place in the U.S. to slake pent up demand for new cars and other products.

Thus far, President Obama has lifted longstanding restrictions on family travel and remittances to Cuba—a significant shift in U.S. policy—but is waiting to see how Cuba responds to a host of human rights and other issues before making further changes with respect to the trade embargo.

“That saddens me, and it’s not just because I am a Cuban-American,” Mendez said. “I honestly believe that we are sacrificing our economies, jobs and eco-nomic development to a policy [the embargo] that has not worked.”

“Once the embargo is lifted there are going to be tre-mendous opportunities in textiles, construction materi-als, electronics, communications and appliances,” she added. “You’re going to see a country go through a mas-sive reconstruction process, and one for which they’ll need many goods and many products.”

Easier said than doneBut that’s not to suggest that getting involved in trade with Cuba—even under the auspices of selling or moving agricultural humanitarian aid—is easy now or will be easy later, when and if the embargo is lifted.

Maybank said despite President Clinton’s loosening of trade policy with Cuba, it was still enormously dif-fi cult for Maybank Shipping to actually carry out a trade transaction.

To begin with, U.S. banks were, and continue to be, forbidden from doing business with Cuba under threat of being cut off from access to the Federal Reserve. That meant that to do a transaction and deliver its cargo,

Jack Maybank, Jr., president and CEO of Charleston, SC-based Maybank Industries, shakes hands with Cuban leader Fidel Castro.


U.S. TRADE POLICY

Maybank Shipping had to work with third-party, inter-national banks, which added to the cost of the individual transactions.

Even then, U.S. rules forbid companies doing busi-ness with Cuba to extend credit to its trading partners. The U.S. government does not want any U.S. entity in a credit arrangement with Cuba because if there’s a dis-pute or disagreement over payment, there’s no way to enforce it through American courts.

Everything must be handled on a cash-on-delivery basis, and unlike traditional trade shipping, where ships ideally discharge cargo and pick up some more at each port of call, nothing can be moved from Cuba—even if it is destined for someplace other than the United States.

“There’s no question, you have to be committed,” Maybank said.

He then launched into an anecdote to illustrate his point. A Maybank barge had pulled into port in Cuba, and a Cuban inspector had come aboard and certified the cargo, a requisite step before payment is approved. But before payment could be handed over and the unloading of the vessel begun, it was learned that the bank handling the transaction had been blacklisted by the U.S.

“It’s something that happened from time to time, whenever the U.S. deemed that a bank was ‘doing busi-ness with the enemy,’” Maybank said. “Basically, it meant that we were left hanging, and suddenly had to scramble and line up another bank.”

While Maybank scrambled, his vessel was stuck at the dock and the clock was ticking on the fees it would be required to pay for its space at the wharf.

The hallmark of the Bush administration trade policy was the pursuit of new bilateral free trade agreements (FTAs) between the United States and other countries.

When the Administration took offi ce in Janu-ary 2001, the United States had FTAs with three countries: Israel, Canada, and Mexico. Over the course of eight years, the administration contin-ued or began negotiations with 24 countries. It concluded FTAs with 16 of those countries and brought FTAs into force with 14 countries.

The heavy emphasis on the pursuit of FTAs was signaled clearly by President Bush’s fi rst trade representative, Robert B. Zoellick, just two months into the administration. Thus, the annual Trade Policy Agenda issued in March 2001 announced, “[O]ther countries have been moving forward with trade agreements while America has stalled. We cannot afford to stand still or be mired in partisan division while other nations seize the mantle of leader-ship from the United States.”

To lay the groundwork for catching up in the trade agreement race, the Bush Admin-istration set as one of its “top priorities” in 2001 (which it achieved in August 2002) the establishment of new “trade negotiat-ing authority”—or what is popularly known as “Fast Track.” This was an understanding with Congress whereby the President would pursue particular objectives in trade agree-ments, and Congress would give legislation implementing the resulting agreements an ‘up-or-down’ vote, with no amendments, and within a set time period. (The lifespan of Fast Track legislation has passed; currently it is not operative and there has not been much mention of its revival).

Today, eight years later, the Obama Admin-istration has set itself on a very different course. Thus, the annual Trade Policy Agenda issued by the Offi ce of the U.S. Trade Rep-resentative on March 2, 2009 states, “[W]e will consider proposals for new bilateral and regional agreements when they promise to deliver signifi cant benefi ts consistent with our national economic policies. If new negotiating authority is required, we will seek that from Congress.”

The contrast—a certainty that if we don’t negotiate more FTAs we will lose “the mantle of leadership” versus an openness to “consider proposals” for new agreements—is stark, but not surprising. For at least two reasons, it would have made no sense for the Obama administra-tion to continue the steady pace of FTA negotia-tions that marked the last eight years.

First, the support of Congress (and, in particular, the House of Representatives) for new FTAs is weak. Legislation to approve the U.S.-Central America-Dominican Repub-lic FTA passed the House by only a single vote in July 2005—and only after a scene on the House floor that the Washington Post described as “resembl[ing] the wheel-ing and dealing on a car lot.” Two years later, Congress approved the U.S.-Peru FTA only after the parties amended the agree-ment (originally concluded in April 2006) to accommodate changes including worker rights, environmental protection, intel-lectual property rights, and port security, among others. And, in April 2008, when President Bush sent the U.S.-Colombia FTA to Congress, the House dispensed with the Congressional-Executive trade negotiating

authority deal altogether, amending House rules to make the implementing legislation ineligible for Fast Track treatment.

Moreover, even if the Obama administra-tion wanted to continue the FTA negotiation marathon, it is not at all clear whom it would negotiate with. FTAs are complicated deals. To comport with World Trade Organization (WTO) rules, they must eliminate barriers to substantially all trade in goods and services between the parties. The United States his-torically has gone even further in its FTAs. Among other things, it has insisted on open-ing markets for government procurement and investment, establishing detailed disciplines on the protection of intellectual property, and committing not to relax labor or environmen-tal standards in ways that might distort trade and investment.

A Change in the U.S. Trade Policy BY THEODORE R. POSNER


“The longer it took to line up another bank, the more expensive that delivery was becoming,” Maybank said. “And we couldn’t pass the costs on to Cuba, because the delay wasn’t Cuba’s fault.”

While some challenges could be resolved and con-signed to experience, others recurred. One of those was the matter of documentation. The United States has strict rules when it comes to documenting a shipment to Cuba, and requirements that reams of documents be fi led with multiple federal agencies.

Among the documents Maybank Shipping had to secure before sailing to Cuba was a temporary export license—not for the goods it was carrying, but for the ship itself, which technically, was being exported to Cuba as part of the transaction.

That license needs to be renewed every year. Then,

the shipping line had to secure a State Department license to cover the ship’s crew, and only then could it begin fi ling documentation for the voyage with the U.S. Department of Commerce and the U.S. Coast Guard.

“And you absolutely have to have all of your docu-mentation in order at all times,” Maybank said.

Jake Colvin, vice president for Global Trade issues at the National Foreign Trade Council, a Washington D.C.-based think tank and trade advocacy organization, said these requirements are part and parcel of “the most com-prehensive group of sanctions the U.S. places on trade with any country in the world.”

“And, so strident has the U.S. been in trying to enforce this embargo that it has even attempted to enforce it in other countries where it has no legal jurisdiction,” he said. “As a result, the EU and Canada, among others,

The universe of countries that are will-ing and able to negotiate an FTA with the United States that would provide commer-cially meaningful benefi ts and that would not run up against insurmountable obstacles is relatively small. Several negotiations that began during the last administration with high hopes on both sides are now in nego-tiation limbo. The fate of the negotiation of a Transpacifi c Strategic Economic Part-nership Agreement—an exercise begun last year involving the United States and Brunei, Chile, New Zealand and Singapore (known as the “P4”), and possibly other Asia-Pacifi c economies—also is uncertain.

A key question then for the Obama administration, and in particular, for U.S. Trade Representative Ron Kirk, is this: If the era of the FTA negotiating marathon is at

an end, what will take its place as the hall-mark of U.S. trade policy for the next four to eight years?

It is diffi cult to discern an answer from the current administration’s fi rst Trade Policy Agenda. That document says a lot about themes the administration will emphasize, but much less about concrete initiatives it will undertake. For example, it expresses a com-mitment to enhancing “social accountability and political transparency,” using trade as a policy tool for advancing energy and environ-mental goals, and being “a strong partner to developing countries.” However, it says little about steps the administration will take to fulfi ll these commitments.

Here are three possible trends (by no means mutually exclusive) to look for as the Obama administration’s trade policy evolves:

• First, look for a greater emphasis on reg-ulatory cooperation outside the context of formal trade agreement negotiations. Governments—particularly major trad-ing partners, such as the United States and the European Union—can provide a substantial economic benefi t to their suppliers of goods and services by recog-nizing one another’s regulatory schemes or by avoiding costly and unnecessary regulatory divergences in the fi rst place. Opportunities for cooperation may occur in areas such as consumer product safety, fi nancial services, and many others.

• Second, look for negotiation of inter-national agreements that focus less on market access (i.e., the elimination of tariffs and other barriers to trade in goods and services) and more on pro-

visions to bolster the enforcement of existing disciplines. A case in point is the Anti-Counterfeiting Trade Agree-ment that the United States and Aus-tralia, Canada, the European Union, Japan, Jordan, Korea, Mexico, Morocco, New Zealand, Singapore, Switzerland, and the United Arab Emirates began negotiating in June of last year. That agreement aspires to promote greater cooperation and stronger enforcement in the area of intellectual property rights protection, and building on disci-plines agreed to in the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights.

• Third, to the extent that international agreement negotiations do seek to expand market access, look for them to focus on individual sectors rather than broad swaths of the economy. An example is the U.S. and EU proposal on negotiation of an Environmental Goods and Services Agreement in the context of the Doha Round of WTO negotiations. While any market access negotiation will encounter obstacles, those obstacles are likely to be lower for a sector-specifi c negotiation than for a comprehensive free trade agreement negotiation.

Theodore R. Posner, former director of inter-national trade and investment at the National Security Council, is a Washington, D.C.-based partner with Crowell & Moring LLP’s Interna-tional Trade Group where he focuses his practice on international arbitration, strategic counsel-ing, and national security reviews.


U.S. TRADE POLICY

have adopted ‘blocking legislation’ to preserve the rights of companies within their border to trade with Cuba.”

Know the cultureBut if logistics and the teeth of the current embargo are daunting, Douglas Friedman, director of the College of Charleston’s Latin American and Caribbean Studies, said those still wanting to do business with Cuba need to overcome one more hurdle: the potential of misunder-standing Cuba’s history and culture.

And as anyone experienced in international com-merce knows, getting to know the culture of a new trad-ing partner is a key prerequisite to a successful business relationship.

While most businessmen and women today view Cuba through the prism of the Cold War and the nearly 50-year reign of Fidel Castro, Friedman said anyone traveling to Cuba will fi nd that the average Cuban on the street doesn’t quote Karl Marx so much as Jose Marti, the 19th Century poet and journalist who was a leading figure in Cuba’s bid for independence from Spain in the late 1800s.

Don’t be surprised either, he warned, to fi nd that resentment of the U.S. goes back equally as far. “Hard feelings toward the U.S., and particularly U.S. busi-ness interests, were not cemented with Fidel Castro; in fact, they go back to the island’s fi rst two wars for independence, a period during which U.S. interests began to take a very large stake in the Cuban economy,” Friedman said.

After the United States helped defeat Spain in 1898, Cuba’s independence leadership was ignored during the subsequent peace talks and the island effectively became a possession of the U.S., with its right to intervene in Cuban affairs being written into the country’s Constitu-tion, and the U.S. being given preferential treatment in the Cuban market.

“So, you’ll be dealing with a country where U.S. economic and political interests had an overwhelming infl uence for decades,” Friedman said. “That is, until the most recent revolution, which wasn’t a socialist revolu-tion, but rather a nationalist movement…it was a revolu-tion about sovereignty.”

Castro, of course, did embrace Socialism in the wake of his seizing control of the Cuban government in 1959, and that—as well as the early twists and turns in Cuban history—will lead to several complications as the U.S. begins to move further toward normalized relations.

The biggest complication will be property rights, Friedman said. The U.S. still recognizes the property and ownership rights—both commercial and private—of the individuals who held title to buildings and real estate prior to Castro’s revolution.

“That’s an issue that absolutely has to be addressed before full normalization of the relationship can occur,”

Friedman said. “Not that it should dissuade you from your interest in Cuba, but it’s something you should be aware of and pay attention to.”

Where there’s a will, there’s a wayJake Colvin said he believes that in many cases, untan-gling ownership claims will “ultimately come down to a matter of money.”

“If there is a political will, a way will be found to resolve those issues,” he said.

Colvin also said an immediate and full lifting of the embargo is too much to expect in any event. For the moment, it would be enough for President Obama to send a message to Congress that he wants to lift the travel ban.

“Cuba is an easy opportunity to show that there has been a change in U.S. policy, and the prospects for change have never been better,” Colvin said.

“Right now, we have people like Republican Congressman Henry Brown co-sponsoring a freedom-to-travel bill, and he’s not the usual suspect. In fact, he’s anything but…but the fact he’s more receptive to a thawing is a signal of the direction we’re moving in,” he continued, before adding, “of course, lifting the travel ban itself will be a major, major development in the drive toward an expanded trade rela-tion.”

“After all, the one thing we all want as Americans when we

travel is access to products and foods and the like that we are familiar with,” Colvin said.

Maybank said the fi rst step for anyone contemplating getting involved in the Cuban market is to secure a visa to attend the annual Havana Trade Fair, which is typi-cally held in late October or November.

“You’ll have to secure permission to attend through your state’s Department of Agriculture, but the Cubans really respond to the efforts you’ve made if you attend,” Maybank said.

“The other thing is, attending the fair will provide you with a real dose of reality,” he said. “It’s easy to romanti-cize a market that most U.S. companies have been shut out of, but the reality is, while the United States doesn’t have an open trade relationship with Cuba, many other countries do.”

“Our niche, if you will, is our proximity,” Maybank said. WT

Contributing writer Dan McCue lives in Charleston, SC where he

writes frequently on global trade, foreign direct investment, and

port-related issues.

Once the trade

embargo is lifted there are going to be

tremendous

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U.S. companies.


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wo years ago, it looked like Mexico’s domi-nance of low-cost manufacturing would be lost forever to China. But as transportation and production costs have risen, China has

become less of a bargain for many fi rms—Amer-ican and foreign—who are now taking a second look at the U.S.’ southern neighbor.

Last month, South Korea’s second-largest elec-tronics manufacturer, LG Electronics, announced plans to expand production at its Reynosa, Mexico maquiladora, creating 1,200 new jobs in the pro-cess. In addition, the company will invest $100 mil-lion over the next three years in Mexico to increase annual production to $4 billion by 2012.

LG currently operates three facilities in Mexico: a plant in Mexicali that manufactures LCD and plasma televisions, which will be con-solidated with the Reynosa plant, and another in Monterrey for manufacturing refrigerators and microwave ovens.

Other companies with maquiladora operations in Reynosa have also announced expansion plans this year. German medical products company BSN Medical said in April that it was moving 163 jobs from a facility in Florida to Reynosa; jukebox manufacturer Rowe International Corp. announced a relocation of 100 positions from its Michigan facility to the city; while Corning Cable Systems has also shifted some production there.

At the same time, Sony is boosting its work-force in Tijuana by 1,500 positions, although the news was tempered somewhat by the company’s decision to close an LCD television manufactur-ing plant in Mexicali—one of fi ve plants being shuttered worldwide. Nonethless, Mexican offi -cials are encouraged by the move, which repre-sents a $10 million investment for Tijuana and an expansion of the company’s workforce to 5,000 employees from 3,500 by year’s end.

Likewise, Mexican manufacturers are beginning to feel more hopeful about the economy as the steep declines in output have begun to level off.

“The most critical part of the slump has passed,” said the corporate treasurer for Mexico City-based Industrias CH SAB, the country’s largest steelmaker, last month. The company’s customers include Caterpillar, U.S. Steel Corp., and Honda Motor Company.

Rafael de la Fuente, an economist with BNP Paribas in New York, remarked that a recovery in U.S. manufacturing, which declined in June at its slowest pace since August, will dramatically help Mexican manufacturers of steel, petrochemicals, and other goods because the trade ties between Mexico and the U.S. are so deep: Last year, 80 percent of Mexico’s $291 billion in exports were destined for the U.S.

Ready for a recoveryThe current economy notwithstanding, there has been a noticeable rise in activity along the southern border as companies prepare for a return of robust business, while transportation providers and governments are at work making sure the infrastructure is in place to handle the long-awaited uptick in trade.

Grayling Industries, an Alpharetta, Georgia-based manufacturer of asbestos abatement equipment, such as gloves and decontamination units, assembles the majority of its products in a 60,000 square foot, ISO-certifi ed maquiladora in Juarez, Mexico. Most of the material used for its products comes from the U.S. and is shipped in full trailers and ocean containers, or by LTL, to its Juarez plant. Approximately 80 percent of the fi nished products are then sold to U.S. custom-ers, representing about 600 full truckloads that cross over into El Paso, Texas each year.

According to Carlos Rubio, director of fi nance and operations for Grayling, the company turned to technology enhancements to optimize its

NAFTA: Two Sides of the CoinMexican

manufacturing

is making a

comeback while

Canada raises

concerns about

proliferating

trade barriers.

BY LARA L. SOWINSKI

R E G I O N : N A F T A

T


supply chain and weather the recession. “We started asking ourselves, ‘How can

we use technology to increase cash fl ow, reduce costs, and create a win-win situa-tion for ourselves and our suppliers?’”

Grayling began with its freight company, ProLogistics, which rented a warehouse in El Paso, Texas to better manage Gray-ling’s freight and inventory under one roof. The next step, says Rubio, was to fi nd a Web-based system that could interact with Grayling’s ERP, “and I ended up fi nding SmartTurn.”

SmartTurn’s Web-based, on-demand inventory and warehouse management solution was a perfect fi t for Grayling and the payoff was substantial, resulting in real-time visibility of what was in the El Paso warehouse at all times, and overall cost savings for Grayling of $83,000 a month due to improved operations along with a one-time savings of $300,000 to $400,000, estimates Rubio.

In the meantime, key transportation arteries between the U.S. and Mexico are also getting upgrades. For starters, a new international bridge between Mission, Texas and Reynosa, Mexico is scheduled to open in October. The $168 million Anzalduas International Bridge will be one of the newest and largest southern border crossings, and equally important, will con-nect with I-69, which will eventually con-nect trade routes from Mexico and Latin America to the U.S. and Canada.

In order to strengthen its cross-border capabilities, C.H. Robinson, one of the largest non-asset-based 3PLs in the world, announced last month that it had acquired certain assets of International Trade & Com-merce (ITC), a U.S. customs brokerage company specializing in warehousing and distribution, headquartered in Laredo, Texas. The acquisition adds to C.H. Robinson’s presence in Mexico, where the company maintains offi ces in Mexico City, Guadala-jara, Monterrey, and Nuevo Laredo.

On the rail side, officials from Union Pacific Railroad and U.S. Customs and Border Protection (CBP) opened a new rail inspection building in Eagle Pass, Texas. The building will provide CBP offi cers with a one-stop location to process information and inspect incoming cross-border trains.

At the same time, Ports America offi-cials are hoping a new Pacer International service will boost business at the Puerta México Intermodal Facility in Toluca, Mexico. In May, Pacer launched six-day

a week direct rail service to and from the terminal to handle automotive, third-party domestic, and other trans-border traffi c.

The non-stop, in-bond service parallels Pacer’s existing PacerMex ramp points throughout the U.S. and eastern Canada.

Operated by Ports America, the Toluca terminal is designed to handle 150,000 containers and 2 million tons of cargo annually. The facility has direct access to Kansas City Southern de México S.A. de C.V.’s “N” line.

The benefi ts of shipping by rail are not lost on Steve Hamilton, CEO of Chem-Logix, who believes that intermodal inbond transportation is the best way to go when moving freight between the U.S. and Mexico, given the heightened safety con-cerns brought about recently by the illegal drug traders and cargo thieves, as well as customs delays and poor road conditions.

“Intermodal inbond transportation offers a safer, greener, and more cost-effec-tive alternative to trucking,” says Hamil-ton. “It basically means putting goods in a container and shipping via rail from a U.S. point to a Mexican point (or vice versa) without stopping at the border.”

Transit time via rail between Chicago and Mexico City is about four to six days,

says Hamilton, which ends up being about the same as trucking.

“For over a year, ChemLogix has suc-cessfully used this mode of trans-border transportation for bulk commodities in tank containers as well as traditional pack-aged freight in box containers. In addition to providing an easier option for transport-ing cross-border deliveries, intermodal inbond is much kinder to the environ-ment,” he explains.

Raising concerns in CanadaBy contrast, security issues like those expressed by Hamilton have not been a factor when it comes to trade between the U.S. and Canada, as experts emphasized in a recent report commissioned by the Brookings Institution that criticized the manner in which U.S. offi cials apply a “one size fi ts all” approach to border security.

“We need a constructive way to dis-tinguish Canada and Mexico in terms of policy,” stressed Christopher Sands, a senior fellow at the Hudson Institute.

There’s “no denying that the border is less efficient than it was before,” agreed David Bradley, CEO of the Canadian Trucking Alliance. Worse yet, the ineffi -ciencies are being masked by lower trade

Simply put, the current business environ-ment in Mexico remains tough, according to Atradius, the global trade credit insur-ance fi rm.

“Operating in an economy heavily dependent on trade with the U.S., busi-nesses in Mexico have been hurt both by the devaluation of the Mexico peso against the U.S. dollar and shrinking exports to Mexico’s main commercial partner. Sec-tors that are particularly affected include automotive components and assembly operations, as well as consumer electron-ics and similar segments undermined by weakening U.S. consumer spending,” said the fi rm.

Nonetheless, the future looks a bit more promising. “Mexico’s fi nancial posi-tion remains solid in the short-term as the government has run a prudent fi scal policy in recent years, refl ective of the country’s investment grade ratings and reinforced by a newly granted $47 billion credit line

by the IMF that was provided under very fl exible terms.”

Furthermore, “The Mexican government has injected substantial stimulus into the domestic economy, equal to a projected 1.5 percent of GDP for 2009, in order to dampen the impact of the slowdown. However, the longer economic conditions, and oil prices, remain depressed the more difficult the situation will become for Mexico’s fi nances.”

For more information, visit Atradius at www.atradius.us.

Mexico’s Economic Outlook


R E G I O N : N A F T A

volumes brought about by the global reces-sion, he said, and will resume full-force once trade volumes return to normal. “Cre-ating a more secure, effi cient, and fl exible border will require the restoration of a risk assessment focus, real value-added ben-efi ts from participation in low-risk trade programs, appropriate levels of inspectors, and strategic investment in infrastructure—and not just bricks and mortar, but systems as well,” Bradley explained.

And if concerns over tighter border security aren’t enough, the ‘Buy American’ provision contained within the American Recovery and Reinvestment Act (ARRA) has rankled trade interests on both sides of the border. In June, Canada’s 13 consul generals met with American reporters to express their growing anxiety about the legislation, which has already canned a number of Canadian contracts, partly over confusion about what’s allowable and what’s not under the provision.

Specifi cally, while the provision states that stimulus money can only be spent on American-made iron, steel, and manu-

factured goods, there is an exception for countries (like Canada) that have an inter-national trade deal with the U.S. However, the provision has caused some confusion for states and municipalities that, of course, aren’t covered by trade deals, and are there-fore left wondering if they can buy only wholly U.S.-made products. News reports state that in various U.S. cities, mayors have canceled contracts or questioned bids. At a Marine camp in California, for instance, wastewater equipment made by IPEX, a Canadian fi rm, was ripped from the ground.

“The last thing I want to do is start a trade war, but I’m afraid it’s already begun,” said the mayor of Halton Hills, a western suburb of Toronto. In June, Mayor Rick Bonnette convinced the Federation of Canadian Municipalities to pass a resolution saying that, in 120 days, towns and cities could begin barring materials from any nation that refuses goods from Canada.

Indeed, worries about the growing pro-tectionism in the U.S. are going to be high on the agenda when the “Three Amigos”—

President Obama, Mexico’s Felipe Calderon, and Canadian PM Stephen Harper—hold their traditional trilateral summit, which is tentatively scheduled for the second week of August in Guadalajara.

Nonetheless, the undeniable strength of the U.S.-Canada trade relationship under-lined by the massive exchange of goods and services between the two countries isn’t about to disappear anytime soon. As evi-dence, over the summer, Southwest Airlines took its fi rst step into international cargo operations with Canada’s WestJet, with ini-tial service starting with four cities: Calgary, Edmonton, Toronto, and Vancouver.

“While we eventually hope to be able to transport cargo throughout both airlines’ entire route network, this initial phase will only allow for the export of cargo from the U.S. to Canada,” stated Southwest. “West-Jet makes for a natural fi rst partner for our entrance into international cargo ship-ments given our positive working relation-ship and eventual plans to offer passenger code-share service with the Canadian air-line,” the carrier added. WT

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hy should we translate? Many market-ing executives, directors of business development, documentation manag-ers, and technical writers ask or are

asked this question. Although most technical writers and a growing number of marketing exec-utives are aware of compelling reasons to trans-late, communicating and justifying those reasons in budget meetings can be a challenge.

Given the current economic downturn, some companies are finding it more difficult to view translation of their materials as being cost benefi -cial. Every company has its eye on the bottom line and every penny must be saved. Translating a com-pany’s materials for its international markets may be viewed as a luxury that fails to escape budget cuts.

Not all English is the sameBecause English has become a widely spoken language in business, decision makers may assume that translation into the reader’s target language is not necessary. Yet even if your readers have a working knowledge of English, their level of comprehension of the language and range of vocabulary can vary widely from user to user.

Often when business leaders assume that cus-tomers or users speak English, they are referring

to a person with whom they conduct business and who is located somewhere within the Euro-pean Union. In such cases, these users generally speak British English, not U.S. English, and may need to spend considerable time looking up simple terms that are well-known in U.S. Eng-lish but that have an entirely different meaning in British English. For example, the “hood” of a car in Great Britain is referred to as a “bonnet,” while a “hood” in U.S. English is an article of apparel worn over the heading and not a piece of equipment that must be secured before operating a motorized vehicle.

Moreover, the customer contacts with whom business leaders generally communicate may have a higher level of understanding of English than the user of your technical documentation. Business leaders can often form impressions of the end user based on their interactions with upper management colleagues in the customer or distributor organization.

For example, assume your company has made a sale to a client in Germany who speaks excel-lent British English. It is not reasonable to expect that the customer contact who signed the sales agreement will be the person who will be read-ing your company’s technical manual. Rather, it is the machine operator who will use the docu-ment and that reader may have no knowledge of English. Or, if the machine operator is accus-tomed to speaking British English, the user may become confused by the many differences in terms between U.S. and British English.

Professionalism is keyA common misconception that some business lead-ers hold is that the customer or distributor organi-zation will have the time and resources to translate your company’s operating manuals. Not only do customers not have the time, skills, and resources to perform this task, but placing such expectations on the customer can demonstrate a lack of profes-sionalism on the part of your fi rm as well as a lack of concern for the customer’s needs.

In addition, if the customer or distributor does translate your content, they may choose to translate only the “high points” and miss important instructions that will ensure the correct operation of your product. In one case, such a translation resulted in a 350-page manual of important material being distilled into a document of roughly 35 to 75 pages for

Talk About a Tough SellMaking the case

for spending

on translation

services in a slow

economy.

BY JEFFREY JORGENSEN

T R A N S L A T I O N

W


T R A N S L A T I O N

use by the machine operator. The results of such abridged translations are that content is incorrect and incomplete, and your customer service department will see an increase in requests for support.

Other considerationsEven if you know that your target audience speaks English, be aware, too, that certain regulatory requirements may dictate that you translate your post-sales material into the target language for the countries into which you will ship your product.

For example, some members of the Euro-pean Union may require that a foreign man-ufacturer translate post-sales material and packaging into the local language in order to market their goods in those countries.

Meanwhile, experience has shown that customers make buying decisions based not only on the features of the equipment they purchase but also on their ability to properly use the equipment. For example, a customer may purchase your product over a competitor’s the fi rst time they decide to make such a purchase.

However, if the customer is unable to install or properly use the equipment because the operating manuals are not properly translated or are not translated at all, you can expect to lose their repeat busi-ness. The next time the customer wishes to purchase your product, they will recall their dissatisfaction with the guides that accompanied your product and choose your competitor’s offering instead.

Some companies will also ensure that their marketing materials are translated cor-rectly and are localized for the culture in the geographic areas where the product is sold. However, once the sale has been made, end users can become dissatisfi ed with the qual-ity of the post-sales materials if those docu-ments are not properly translated.

The result is that customers will form impressions about your company’s commit-ment—or lack of commitment—to customer quality and satisfaction and choose not to buy your product the next time around. To develop brand loyalty, it is important to evaluate whether you are offering not just a high quality of translated marketing materi-als, but also that you translate the materials you provide post-sales.

Cultural respect = increased salesIn today’s economy, retaining valued and established customers is vital to generating more sales and providing you with leads to

other companies that can use your goods or services. Taking care of your existing custom-ers on the post-sales side is critical to retain-ing their business in this highly competitive global market. When you consider the cost of translating your marketing or operational materials for international markets, be espe-cially careful not to neglect your post-sales relationship with your customers.

If yours is a manufacturing company that truly wants to penetrate, capture, maintain, and grow its market share in a foreign market, you should look carefully at creating brand loyalty by ensuring cus-tomer satisfaction. If you do not have your operational manuals professionally trans-lated for the target market, you may be fail-ing to demonstrate to your customers that

you understand and respect their culture. By making sure your materials are prop-

erly translated and that your customers in those foreign markets can use and maintain your equipment, you demonstrate the same respect for their culture that you demand for your own. When you provide complete and correct translations of your operational materials, you demonstrate that you appre-ciate your customers and begin to create brand loyalty.

Safety fi rstMore and more U.S. companies are realizing that for a safer work environment within their overseas operations they need to have their safety materials translated. In some cases, a senior member of the management team that is native to the local culture has performed the translations. However, even if the engi-neer within the local manufacturing facility is a native speaker, the industrial safety mate-rial in your documents may not be translated correctly and may not be easily or properly comprehended by the local worker.

The consequences of failing to translate such important safety material can be seri-

ous, from a personal injury viewpoint as well as a legal standpoint. Incorrect trans-lations, or a total lack of translations, can jeopardize the safety and lives of workers and leave your company open to litiga-tion that can have serious fi nancial conse-quences for your fi rm.

Even those materials you produce for distribution within your company should merit analysis for possible translation. For example, a U.S. construction company with a large Spanish-speaking work force recently elected to translate all of the safety materials they distribute to employees.

The benefits of investing in profes-sional translations of these materials was soon realized when the company reduced employee down time by 20 percent and signifi cantly increased productivity. Simple procedures that had been missed before because of a lack of understanding by the employees are now being performed when needed. Over time, with their employees having a better understanding of safety issues and procedures, the company should also expect to see a reduction in their insurance premiums.

The success this company has achieved has been so great that they are now in the fi nal stages of preparing all employee ben-efit guides for translation. The company believes that if its employees can read about their employee benefi ts and obligations in their native language, they can better under-stand the benefi ts and requirements, make greater use of the benefi ts available to them, and take greater ownership for their roles in the company. All of this equates to a more involved and more productive employee.

The bottom lineIn today’s economy, every company across the globe is looking at its bottom line and trying to fi nd ways to control and lower their costs. Before you decide to eliminate translation costs from your company’s budget, consider the consequences your decision will have on customer loyalty, compliance with regulatory requirements, worker safety, legal liability, increased calls to customer service, and overall customer satisfaction. The short-term savings of eliminating translations can have serious effects on customer perception and satis-faction and can ultimately cost your com-pany much more in the long run. WT

Jeffrey Jorgensen is National Account Manager for

International Communication by Design, Inc.

Proper translation of an operating manual assures safety and

a positive customer

experience.


NAME PAGE NAME PAGE

Advertisers’ Index

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Hyundai Merchant Marine ............. IFC

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Old Dominion ..................................... BC

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Regions Bank .........................................3

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Serec .........................................................9

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SMC3 ..................................................... 46

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Sprint ...................................................IBC

www.sprint.com/nextel

Verizon Wireless ...................................7

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>Good News!

Positive PerformancesThink Posit ive… Be Posit ive… Share Your Posit ive News

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PositivePerformancesHouseAd_0709.indd 1 6/30/09 11:25:18 AM


SCI-FIS U P P L Y C H A I N I N N O V A T I O N S

BY JEREMY N. SMITH

WHAT: Cargo-screening robotic “ferret.”

WHY: Smugglers use cargo containers to hide drugs, weapons, and even other human beings. Detection is costly, slow, dangerous, and often ineffective, combining sniffer dogs, explosives scanners, carbon dioxide probes, and heartbeat monitors. By contrast, the University of Sheffi eld, England-designed robot quickly, safely, and comprehensively “ferrets” out illegal items, often without the need to even enter or unpack containers.

HOW: Combining new laser and fi ber optic sensors for the fi rst time, the foot-long ferret attaches magnetically to a container’s interior, then automatically explores its contents for contraband. While current scanners suggest only a shipment’s shape and density, the robot will identify specifi c substances—e.g., ordnance, explosives, and pharmaceuticals. Key to the technology are probes that are able to detect even minute “fi ngerprints” of illegal goods—including the carbon dioxide that naturally accompanies human traffi cking. Funding comes from the United Kingdom’s Engineering and Physical Sciences Research Council (EPSRC), a government agency for practical scientifi c research and training.

CAVEATS: Prototypes will take three years to complete and test. The fi rst widespread deployment is not expected until 2014.

QUOTE: Project Leader Dr. Tony Dodd, Department of Automatic Control and Systems Engineering, University of Sheffi eld: “It’s essential we develop something which is simple to operate and which border agents can have total confi dence in.”

MORE INFORMATION: EPSRChttp://www.epsrc.ac.uk/PressReleases/robotferret.htm

Robotic

“ferret”

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“Fastest” claim based on initial call setup time. GPS: Requires GPS and Java-enabled phone. Environment may limit GPS location info. Coverage not available everywhere. Nextel National Network reaches over 274 million people. ©2009 Sprint. Sprint and the logo are trademarks of Sprint. MOTOROLA and the Stylized M Logo are registered in the U.S. Patent and Trademark Of ce. Other marks are the property of their respective owners.

world trade - 08 aug 2009

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