#ff00006

Wisconsin Worldwide

#0000ff

Volume 2, Issue 3: May 2001
E-Newsletter of the Division of International and Export Development
Wisconsin Department of Commerce
http://www.commerce.state.wi.us

#ff00005In This Issue:

4

• Lead Article - Annual Overseas Trade Directors Visit
• Export Markets
  
-- The U.S. Economic Slowdown & the Global Economy
-- Mexico
-- Telecoms, Dotcoms & High Tech Export Markets
-- Turkish Economic Crisis Continues
-- Russian Far East
-- Indonesia - More Bad News
-- Vietnam - Bilateral Trade Agreement Delayed

4

• Export News
  
-- Summit of the Americas
-- World Dairy Expo
-- United Airlines Announces New Flights
-- Argentina: The Return of Don Cavallo
-- Canadian Customs - "Work to Rule" Protests
-- Mexico - Help with Mexican Standards Issues
-- OECD Labor Costs & Purchasing Power Parity

4

• International Business Information on the Web
• Upcoming Trade Events
• Contact Us
• Subscribe/Unsubscribe

Every May we bring our overseas trade office directors back to Wisconsin to participate in international trade events statewide and to meet with Wisconsin companies. The Directors (Canada, Mexico, Brazil, Chile, Southern Africa, Europe, Eastern Mediterranean, Korea, China, and Southeast Asia) will be joined this year by Gregg Baker, Director of the U.S. Agency for International Development's Chicago Office. If you need or want to meet with any of our directors, please contact Jennifer Winner at 608-266-0413 or e-mail her at jwinner@commerce.state.wi.us to set up an appointment.

#ff0000

8:00 a.m. International Trade Conference, Gateway Campus, Chippewa Valley Technical College, Eau Claire (Interactive TV sites at Wausau, Ashland & Appleton) - Call Dennis VandenBloomen at (715) 232-2311

7:30 a.m. Northeast Wisconsin World Trade Day, Fox Valley Technical College, Appleton - Call Stan Kline at (920) 303-2266

9:00 a.m. Global Opportunities in the Environmental Market, Hefter Center UW Milwaukee - Call Nikki Bulgrin at (608) 267-0587

8:15 a.m. Wisconsin International Trade Conference, Italian Community Center, Milwaukee - Call Michele McFarland (414) 287-4141

9:30 a.m. International Credit Executives Meeting, Milwaukee River Hilton Inn (Latin Directors Only) - Call Diana Rowinski (262) 827-2880 x225

12:30 p.m. Wisconsin World Trade Center, SE Wisconsin Chapter Briefing, The Meadows Restaurant, Franksville - Call WWTC (414) 274-3840

#ff00004The U.S. Economic Slowdown & the Global Economy

4 

It should take no great leap of logic to understand that when the U.S. economy slows, it has an impact on all parts of the global economy. February 2001 trade figures showed a 4.4% decline in U.S. imports, the largest one-month decline since the U.S. Government started tracking monthly trade flows in 1992. In Asia, countries such as Korea, Malaysia and Singapore who are important exporters of electronics and computer components to the U.S. will be hurt, but all Asian economies will be negatively effected to some extent by the U.S. slowdown. This includes China, Taiwan, Hong Kong, and Japan. Japan's stagnant economy -the world's second largest - is also having a negative effect on growth elsewhere, particularly in Asia. The UN's most recent forecast projects global economic growth to slow from 4% to 2.4% worldwide this year and the growth of international trade to slow from 12% to 6%. The OECD's latest projections call for a fall in developed country growth from 3.3% to 1.7%.

With NAFTA, Mexico and Canada's economies have become more closely entwined with the U.S. What happens in the U.S., therefore, is bound to have major repercussions for our neighbors. This is particularly true with Canada's automobile industry and manufacturing plants in Mexico which supply the U.S. market.

Surprisingly, the U.S. dollar has actually increased in value against almost all major currencies since the first of the year despite the fall in U.S. stock prices, the slowdown in the U.S. economy and the continued actions by the U.S. Federal Reserve to cut U.S. interest rates. This, of course, makes our export products more expensive. Even odder has been the fact that the Mexican Peso has noticeably appreciated against the U.S. dollar during the same period. Standard economic theory would suggest that, in both cases, just the opposite should have happened. But then, they don't call economics the "dismal science" without reason.

We were fortunate to be able to visit our office in Mexico City in late March. We were pleasantly and positively surprised by economic and other conditions in the city. The city is humming and we visited a half dozen shopping centers which are as good as anything in-state. U.S. and Wisconsin goods were plentiful, readily available and remain at the top of the Mexican list. Wal-Mart is huge and growing. There has been exceptionally good progress on the air pollution front. Traffic remains bad despite new highways & roads, but lacks the suicidal flair one comes to expect in developing countries. On the political front, the capital seems to be waiting for more from the new Fox Government. For detailed comments on the Mexican market, click here .

The first obvious impact of the revaluation of the US stock markets and other stock markets around the world was on the dotcoms. Less has been said about the significant problem in the telecommunications industry. In the last five years, telecom giants around the world have raised over $650 million in debt and equity to fund expansion. The sudden contraction in the value of the telecoms has devastated the order books of suppliers such as Cisco, Nortel Networks and Lucent Technologies as well as created some major problems for lenders to the telecommunications industry.

For example, Cisco Systems sales grew from $2 billion to $20 billion in five years, with many sales going to start-up telecom and Internet companies, sometimes with credit being offered to finance purchases. Now many of these same customers have had to sell their equipment on the second hand market. In addition, sales levels had earlier been elevated by fears of Y2K problems. Cisco is cutting 8,500 jobs and sales are expected to fall 30% in the current quarter. Cisco CEO John Chambers described the situation by noting that "This may be the fastest any industry of our size has ever decelerated". Cisco, of course, is far from alone. Companies like Ericsson, Motorola, Intel, Phillips, Sprint, Eastman Kodak, Texas Instruments, Oracle, Hewlett-Packard, Dell and Marconi, to name a few, are also suffering from the financial squeeze. In short, there are huge carcasses working their way through these very big pythons and it will be sometime before things get back to normal. Also impacted will be foreign countries (Singapore and Malaysia immediately come to mind) where high-tech manufacturing has been concentrated. Come to think of it, perhaps its time to take one of your "new economy" friends for a cup of coffee.

The economic crisis continues in Turkey. In April the Government announced plans to cut public spending by almost 10%, to overhaul the banking system and to speed up privatization. The Turkish Parliament is also considering legislation that would increase the independence and transparency of the Central Bank, preventing the bank from bailing out state owned companies or providing unsecured credit to the Turkish Treasury. The Turkish lira has fallen over 40% against the US dollar since the beginning of the year, interest rates have soared and there have been over a half-million layoffs. This major devaluation has made imports much more expensive in Turkey and Turkish importers are finding it difficult to impossible to find domestic credit. There have been a plethora of anti-government demonstrations, some of which have turned violent. The Turkish Union of Chambers (of Commerce) has stated that "Trust and confidence in the Government has diminished, and it must now do the necessary thing and resign". In turn, Prime Minister Ecevit has stated that he has no intent to resign at this time. Wisconsin companies interested in information about the situation or needing help in the Turkish market may wish to contact our Eastern Mediterranean office .

#ff00004Russian Far East

We'd like to call your attention to the willingness of the U.S. Commercial Service in Vladivostok to put you on their mailing list for trade leads and local market intelligence. All too frequently, resource-rich Soviet Asia is overlooked when planning Asian strategies. Check out the website at http://www.cs.vladivostok.com/.

Congressional consideration of the U.S.-Vietnam trade agreement has been delayed. Press reports indicate that the Administration has decided to bundle the trade agreement with authorization of "fast track" authority to negotiate additional free trade agreements. The U.S. Chamber of Commerce in Vietnam has been critical of this decision, noting that fast track authority is highly controversial at this time and bundling will therefore slow approval of the Vietnam trade agreement.

Vietnam has just elected new, more moderate leadership that is expected to take a more open approach towards integrating Vietnam into the global economy.

The turmoil in Indonesia continues to have serious consequences. In March, Exxon Mobil halted production at three of its oil & gas fields because of security concerns. Indonesia's $2 billion shoe export industry has seen sizeable layoffs and lost foreign exchange earnings because of slowing world demand and concern that political instability could disrupt production. There has been growing pressure to impeach President Abdurrahman Wahid and, most recently, the UN condemned Indonesia for the short sentences given by Indonesian courts to six men convicted of killing three UN aid workers last September. The UN High Commissioner for Refugees stated that "The sentences make a mockery of the international communities insistence that justice be done in this horrific case". Indonesia is highly dependent on massive foreign aid and loans from donor countries at this time; the Indonesian court's decision will do little to encourage donor generosity.

As expected, the Quebec Summit of the Americas saw agreement by the combined heads of state on the creation of a Free Trade Area of the Americas by January 1, 2005. If successfully implemented, the Agreement would link over 780 million people and create a common market of over $11.4 trillion dollars. The Agreement is no more than a statement of intent at this time. The ability of the U.S. Administration to get necessary "fast track" approval for negotiations from the Congress will be tested in the coming months.

Tom McKittrick, the director of World Dairy Expo has informed us that all present plans call for 35^th World Dairy Expo to be held as planned from October 3-7, 2001. In view of the major outbreak of Foot & Mouth Disease in Europe, the Expo is developing a new biosecurity plan to insure that the risks of transmission of all infectious diseases are minimized.

United Airlines has implemented new east to west and west to east round-the-world services. UA 1 and UA 2 will link New York, London, New Delhi, Hong Kong and Los Angeles. United has also implemented a new New York to Hong Kong Service - the world's longest at 7,339 miles as well as a new non-stop Chicago to Beijing flight. Planned flight time for NY-Hong Kong is 15 hours, forty minutes while the Chicago-Beijing flight is a mere 13 hours and five minutes. Just remember to get up every now and then between the movies and meals to keep the circulation going to your legs.

According to a report by the European Union's Statistics agency, labor costs are higher in both Japan and the European Union than they are in the United States. Average wages and benefits in Japan averages 21.9 Euros per hour as opposed to 21.5 Euros per hour in the EU and 17.8 Euros per hour in the U.S. This means that U.S. wage costs are 81.3% of those in Japan and 82.8% of those in the EU. Before you run in and complain to management, however, you need to take a look at purchasing power parity exchange rates. With parity prices for all Organization of Economic Cooperation and Development countries (which composes most developed countries) being ranked at 100, Japan ranked at 107, the EU at 99 and the United States at 151. The U.S. was surpassed only by Luxembourg at 189. Rounding out the top five were Switzerland (126), and Ireland & Denmark (119). Canada was 6^th at 118.  

Canadian customs workers have begun a series of "job actions" designed to place increasing pressure on the Canadian Government to come to terms on a new job contract. The union's contract expired last November and negotiations are presently at an impasse. Until agreement is reached, travelers and shippers should expect to see mounting delays as employees who cannot legally strike "work to rule" and refuse to work overtime.

You should know that the U.S. Embassy in Mexico City now has a Regional Standards Attaché. If you need help tracking down a Mexican standard, understanding the meaning of one or have more significant problems, we suggest you contact Dr. Ian Rios and his staff. He can be reached by phone at [011 (525) 140-2603], by fax at [011 (525) 566-1115 or by e-mail at Ivan.Rios@mail.doc.gov. Dr Rios advises that Mexican standards, tariff regulations and Mexico's harmonized tariff code can be found at www.economi-snci.gob.mx. The site is Spanish-only at this time.

Domingo Cavallo, the architect of Argentina's free market reforms of the early nineties and the man responsible for saving Argentina from hyperinflation and then the Mexican peso crisis in 1996 has been named Minister of the Economy and granted "extraordinary powers". Argentina has been in recession for two and a half years; Cavallo's appointment can be seen as an important effort to reassure overseas investors and to find solutions to Argentina's economic woes. Cavallo has already hinted at the possibility of repegging the peso against both the U.S. dollar and the Euro. Cavallo was responsible for the decision to peg the peso one to one to the U.S. dollar in 1991. That decision ended hyperinflation and assured investors, but made Argentine exports more expensive and made it impossible for the Central Bank to lower Argentinean interest rates.

#ff00005International Business Resources on the Web

See our lead item for contact information and a listing of events.

#ff0000JAPAN: A PROMISING MARKET SEMINAR

#ff0000CANADIAN CUSTOMS SEMINAR

#ff0000"BIO 2001"

#ff0000"New Products USA 2001" -

#ff0000"BioTechnica" -

#ff0000"Environmex/Watermex Asia 2001"

#ff0000

#ff0000"Environment Japan trade show"

For a complete list of our shows visit

#ff0000

#ff00005

Contact the International Division

Comments about this newsletter

#0000ff:

#0000ff

Contact our outreach consultants:

#0000ff

Contact our area specialists:

#ff0000

Contact our offices around the world:

#0000ff

#ff00005Subscribe/Unsubscribe