EMERGING NEW EXPORT MARKETS

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As U.S. shoppers stay thrifty, Companies are looking to increase exports , betting that consumers abroad will fill gap, as Americans hold tight to their purse string.

 

For 2012 , we are looking for a mild recovery in the developed economies, but in is State of Union address, President Obama set a goal of doubling U.S. exports over the next five years, which he said would create over two Millions jobs.

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Export to Emerging markets: Overseas consumers to the rescue!

The worst recession in a generation hammered the spending habits of Americans, and their new affection for thrift seems to be persisting. Amid high unemployment, lost wealth and tight credit, economists expect consumer spending to grow at an inflation-adjusted annual rate of 2.6% this year, far weaker than the recoveries that followed previous recessions.

U.S. Consumer spending rose at a 2% annual rate in the fourth quarter, down from 2.8% in the third quarter.

With U.S. consumers on the sidelines, the fledging U.S. economic rebound more than ever will need strength from exporters to power the economy to sustainable growth.

Exports, though, grew at an annual rate of 28% in the fourth quarter, which the National Association of manufacturers said is the fastest increase and the largest contribution to economic growth in 30 years. In the 5.7%growth in the fourth quarter, trade accounted for 0.5 percentage point, exports added 1.9 point and imports subtracted 1.4 point.

The goal set by president Obama will be tough to achieve. Doubling U.S. exports will be possible only if we both enhance the competitiveness of U.S. products., including investing in technology and basic research, and pursue ambitious market opening trade agreements.

The decline in the U.S. dollar value over the past decade makes U.S. products cheaper for foreign consumer and strong gains in productivity are making U.S. manufacturers more competitive globally. But an appreciating dollar could cut into exports. The dollar got pummeled for much of 2009 but has been rising lately as the Euro and British pound suffer under the weight of Europe's economic problems.

In November, U.S. goods exports represented 26% of U.S. manufacturing shipments, up from 19% five years earlier, according to Commerce department.

The most recent data showed exports rose 0.9% to $138.2 billion in November. Leading the way  were foods, grain and beverage exports.

The Big Emerging Markets -   Representing major export growth opportunities

The U.S. government has traditionally focused its international economic and commercial policy on Europe and Japan. While the industrial nations will continue to be the largest U.S. export markets for decades to come, another category of countries holds even more promise for large incremental gains in U.S. exports. Of all the world trade growth in the next two decades, almost three-quarters is expected to come from developing countries. A small core of those nations is likely to account for more than half of that growth. In fact, 10 countries are expected to account for over 40 percent of total global imports over the next 10 years, surpassing even Japan and Europe. These "Big Emerging Markets"  are: Mexico, Argentina, Brazil, the Chinese Economic Area(2), India, Indonesia, South Korea, Poland, Turkey, and South Africa. Given their potential, the BEMs are becoming a key element of our National Export Strategy.

Chinese Economic Area.  Composed of China, Taiwan, and Hong Kong. Since the mid-1980s, the growth of Gross Domestic Product (GDP) in the CEA has been among the fastest in the world. The CEA has the largest number and highest total dollar value (approximately $560 billion) of infrastructure projects on the drawing boards over the next seven years, and holds the world's largest foreign exchange reserves with which to pay for these projects.
 

Indonesia. A population of 188 million and a GDP projected to grow at seven percent annually through the end of the decade, make Indonesia a regional economic driver, whose growth will result in further economic expansion into neighboring markets. Demand for consumer goods, particularly in Jakarta, is expected to grow rapidly.  Private consumption, currently in the range of $75 billion a year, should exceed $100 billion by the year 2020.

India. Historically one of the world's most closed and difficult business environments, India has begun a measured but steady movement toward a more open, market-oriented system.  Indian imports from the United States rose by 44 percent last year to a record $2.8 billion. India's huge population of nearly 900 million, with a "consumer" class of over 100 million people, and its diverse and relatively developed industrial base (the world's 12th largest) make it a market with potentially unprecedented commercial opportunities.

South Korea. South Korea is our eighth largest trading partner, receiving $14.8 billion in U.S. exports  However, it is one of the most difficult destinations in Asia for exports of goods and services, and for foreign investment.  Potential rise in income levels, combined with Korea's 44 million people, could create an appealing and dynamic consumer market. 

Mexico. Mexico's 87 million consumers make it the 11th largest market in the world. Mexico's economy is growing rapidly, pulling in durable goods and industrial materials to modernize infrastructure and plant facilities. Almost all of Mexico's imports of these materials come from the United States. 

Argentina. The Argentine market -- 33 million people with the highest per capita income in Latin America and an advantageous agriculture and natural resource base -- has been the world's third fastest growing economy for the past  years. In addition, the integration of the economies of Argentina, Brazil, Paraguay, and Uruguay into the "Southern Common Market" (Mercosur) by 1995-96  created a broader potential market of 200 million people.

 

Brazil. In 1990, the Brazilian government began significant market liberalization efforts, lowering import duties from over 100 percent to a current average of 14 percent and reducing trade and investment barriers.  U.S. exports to Brazil amounted to $6 billion , placing Brazil among our top 20 export markets in the world. The United States continues to be the top supplier to Brazil, accounting for almost one-third of total Brazilian imports.

 

South Africa.  All the major political parties in South Africa have expressed a clear and unwavering commitment to encourage U.S. firms to return to the South African market. President Nelson Mandela himself has made several appeals to the American business community to explore commercial opportunities in South Africa. Currently, American firms considering trading and investing in South Africa face the fewest U.S. restrictions in more than 30 years. There are no longer any foreign policy export controls on U.S. shipments to South Africa. 

 

Poland. Starting in 1990, Poland adopted a "shock therapy" approach to economic reform, abolishing price controls and instituting tight monetary and wage policies. The reforms have led to an explosion of private entrepreneurial activity. By dint of its 38 million people, its 1993 GDP of $85 billion and its strategic location, Poland is easily the most important single market in Eastern Europe. Poland remains the United States' principal trading partner in the region, buying $1 billion of U.S. exports in 1993, and U.S. investment in Poland amounts to another $1 billion. Poland's GDP growth is expected to reach 4.5 percent in 1994. 

Turkey. Turkey has become an important market for U.S. firms. Real GNP growth has averaged five percent annually since 1981. Despite the worldwide economic slump, GNP grew by 7.5 percent  . Turkey's foreign trade sector has surged even faster than the economy as a whole.  The Turkish government strongly encourages foreign investment and has made major strides in the last decade to enhance the investment climate. Major infrastructure projects include the $30 billion Southeastern Anatolia 

The Big Emerging Markets will be the competitive battleground of the future. Japan, Europe, and several developing countries can be expected to be fierce rivals in these markets.