Wisconsin Worldwide

Volume 3, Issue 5: September 2002
E-Newsletter of the Division of International and Export Development
Wisconsin Department of Commerce
http://www.commerce.state.wi.us

#ff00005In This Issue:

• Lead Article – Wisconsin Export Data for January-July 2002
• Export Markets

-- Latin America: Contagion
-- Europe: Slow
-- Japan: Slower
-- Rest of Asia: Looking Up
-- Australia/New Zealand: Economies Remains Sound

• Export News

• Export Events
• Upcoming Trade Shows & Missions
• International Business Information on the Web
• Contact Us
• Subscribe/Unsubscribe

Typically, statistical changes in exports of goods to particular markets tend to have a close correlation with the well-being of a particular economy or global sector. For example, Australia’s economy has been strong for some time and we should expect to see a rise in exports. This has been the case. Similarly, with the collapse of the world’s telecommunications bubble we should expect to see a dramatic fall in exports of electrical machinery worldwide. This, too, has been the case.

In most national markets, we normally expect to see relatively small changes in export levels with major fluctuations in some sectors - usually the result of a large one-time sale of a particular product or some other explainable phenomenon. This has not been the case for the first half of 2002. In most major export sectors, sales have been volatile with markets around the world showing very large swings –both positive and negative. Our interpretation is that significant events are occurring which have forced both buyers and sellers to changes traditional patterns – at least for the moment. Some of the factors involved may be: the fall in the value of the dollar (which has made our exports cheaper in many markets), changes in individual company decision making both in the wake of September 11, and the sharp fall in stock prices worldwide since the first of the year.

Wisconsin exports for the first six months of 2002 declined by #ff0000–2.81% as compared to the record high set during the first six months of 2001, but were still the second largest on record.

Please contact your regional outreach consultant if you need current market data for your products.

Nationwide, the U.S. fared less well with exports declining #ff0000-10.86%. A comparison of Wisconsin’s six largest export categories (which comprised 74.1% of our exports) with U.S. exports in the same categories presented Wisconsin in a very favorable light. Wisconsin outperformed the rest of the U.S. in five of the six sectors. Only in vehicles (where we had a 1.4% increase), did we fall behind the rest of the U.S. A comparison of Wisconsin’s performance in its top 20 markets with U.S. performance in the same markets saw Wisconsin outperforming the U.S. in 14 of 20 national markets. The five countries where we underperformed were France (#8), Australia (#10), Italy (#12), Singapore (#17), Sweden (#19) and Israel (#20). The figures:

To see a chart showing U.S. & Wisconsin Exports by Major Product Category from January through July 2002 click here.

Nationwide, machinery exports were down in 24 of the top 25 export markets with China being the sole exception. By comparison, Wisconsin had increases in eight of its top 25 markets. Wisconsin machinery exports to Canada and Mexico were off just under 5% with sales to Western Europe up by about the same amount. The Netherlands – a location for Europe-wide distribution centers - is now our second largest export destination. China (+51.2%) is now our fifth largest machinery market and has replaced Japan #ff0000(-14.68%) as our largest customer in Asia. Machinery exports to Thailand were up 115.1% and exports to India were up 152.5%.

Medical Instruments and Optics saw impressive gains in Japan, Canada, Germany, India, Taiwan and Korea and disappointing drops in France, China and Brazil. Wisconsin is the largest exporter of X-Ray and MRI apparatus among U.S. states and is a leader in the export of electronic diagnostic apparatus. India has become a very important market for our instruments in the past five years, moving from 23^rd to 17^th to 14^th to 8^th place and is now our 7^th largest market.

Canada (+12.5%) and Mexico (+20.23) account for about 70% of our exports of vehicles & vehicle parts. The vehicle market was extremely volatile during the first six months of 2002, with 98.5% of our export markets by volume showed gains or losses of over 12.5%.

#ff0000ELECTRICAL MACHINERY

U.S. exports of electrical machinery declined by #ff0000–18.16% in the first half of 2002 and by #ff0000–15.7% in Wisconsin. Wisconsin exports stagnated or declined in every major product area and in all significant markets.

#ff0000PAPER & PAPERBOARD

Canada and Mexico were responsible for 82.5% of all exports of paper and paperboard. Canada was off #ff0000–1.1% while Mexico was up 73.65%. Except for #1 Canada, extreme volatility was the norm. Eight of the top 20 markets were up between 10% and 81% while 11 were down from #ff0000–14.87% to #ff0000–61.55%.

#ff0000PLASTICS

Sales of plastics to Canada, which typically takes 45 to 50% of Wisconsin’s plastic exports, were off 5%. Export sales elsewhere were up 5.9%. Sales of plastic containers and adhesives and specialized sheets, films and other materials showed good increases worldwide. Sales to Germany, China, Taiwan, Singapore and Hong Kong showed exceptional growth.

To see a chart of Wisconsin Exports - Major National Markets from January through July 2002#0000ff5 click here.

#ff00005Export Markets#ff00004

#ff00004Latin America: Contagion
Argentina is in the fourth year of the worst recession in its history. Next door in Uruguay, the government is projecting that its economy will shrink by 11% this year with inflation up 40%. Although Brazil got a major $30 billion loan from the International Monetary Fund in early August, even that failed to persuade Moody’s from downgrading both Brazil’s foreign and local currency bonds a week later. U.S. exports to Brazil are off 24.7% since the first of the year and the Brazilian Real fell to a record low in July before stabilizing somewhat after the IMF loan. Further financial assistance came in late August, when sixteen of the world’s largest banks met and agreed to maintain current levels of trade and other credits to Brazil. Despite a sharp rise in oil prices, Venezuela saw its economy shrink by nearly 10% in the second quarter of 2002. Check our July issue for more information about these troubled economies.

#ff00004Europe: SlowArial, Helvetica4
Wisconsin exporters can profit from the fall of the value of the dollar to approximate parity with the European Euro since the first of the year. Our European friends, however, have not been spared by global economic problems. Since the collapse of the world telecommunications bubble in early 2000, European telecommunications companies (British Telecom, France Telecom and Deutsche Telecom) have lost about a half-trillion dollars in market value. Europe’s cell phone market is saturated, with 73% of all Western Europeans with cell phones.

The German economy - Europe’s largest - showed only 0.20% growth in the 1st quarter and 0.25% growth in the 2^nd quarter of 2002. UK growth was 0.1% in Q1 and 0.6% in Q2. Italian growth is expected to be less than 1% and the French Government has just announced that it is lowering its predictions for economic growth of 2.5% this year. Ireland’s growth has slowed to about 4%. The Netherlands and Norway continue to show very good growth.#ff00004

#ff00004Japan – Slower
Japanese forecasters estimate Q1 growth at 0.6% and Q2 at 0.2% and in late August, Japanese stocks fell to a 19 year low. U.S. exports to Japan are down -19.3% for the first half of the year and Wisconsin exports are down –9.7% for the same period. Most Wisconsin exports were off double digits, but a 31.1% rise in instrument sales (48.5% of our exports to Japan this year are instruments) kept us well above the overall U.S. decline.

#ff00004Rest of Asia - Looking Good
Elsewhere in Asia, the situation looks excellent. The Asian Development Bank is forecasting that the combined economies of Indonesia, Malaysia, the Philippines, Singapore, Thailand, South Korea and China are expected to grow by 5.8% this year following on 4.3% growth in 2001. Estimates for 2003 are for growth of about 6.2%.

Growth in China remains very high and the government is now estimating 7.8% for the first half of the year. Chinese estimates tend to be on the very optimistic side and probably should be discounted several points. China Mobile is now the world’s largest mobile phone network with 105.4 million users. China now has an estimated 45 million Internet users - a 72% rise over last year.

You may hear some voices saying that too much U.S. capital is being invested in China. At present, total U.S. investment in China (including Hong Kong) is less than U.S. investment in Ireland. Only about 1.9% of U.S. manufacturing investment abroad is in China proper.

All major Wisconsin export sectors had at least double-digit growth to India during the first half of the year. Exports were up 75% overall!

#ff00004Australia/New Zealand – Economies Remains Strong
The Australian economy remains strong and Wisconsin exports are up 6.5%. Australia is our 10th largest market. New Zealand’s economy has shown growth of 3% for the first seven months of the year.

#ff00004Trade Promotion Authority
On August 1 the U.S. Senate agreed to grant the President Trade Promotion Authority. The House had earlier granted its approval. On August 22 U.S. Trade Representative Robert Zoellick sent letters to the congressional leadership indicating the Administration’s intent to move forward on specific trade agreements with Chile, Singapore, Central America and Morocco. Discussions on the agreement with Chile and Singapore began under the Clinton Administration, but were effectively blocked by U.S. domestic opponents.

The proposed free trade agreement with Central America will involve the five members of the Central American Economic Integration System (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.) The administration apparently views this agreement as a precursor to the negotiation of the broader Free Trade Area of the Americas. We were somewhat surprised by the inclusion of Morocco, a staunch U.S. supporter in the war on terrorism.

#ff00004The Collapse of the Global Telecommunications Bubble
In the past several issues, we have made reference to the collapse of the world telecommunications bubble. The crash of the world telecommunications market is about ten times the magnitude of the dot.com bubble and may be the largest bubble in world economic history. Over 500,000 people in the U.S. alone have been laid off since the beginning of the year.

What happened? With the global Internet boom, major telecommunications companies began laying vast amounts of fiber-optic cable. In the process, they incurred very large debts to finance these new networks. Between 1998 and 2001 the amount of fiber optic cable worldwide increased by a factor of five while at the same time new technology increased the capacity of those cables by a factor of 100. Meanwhile, demand only increased by a factor of about four. When prices tumbled, Global Crossing and twenty-one other U.S. publicly traded companies with about $203 billion in assets filed for bankrupcy. Bank exposure to the industry worldwide is estimated at $1 trillion. Some estimates of company debt level include: WorldCom -$32 billion; Qwest - $26.6 billion; France Telecom -60 billion euros and Deutsche Telcom -70 billion euros.

The impact of manufacturers for the telecommunications industry has also been dramatic with orders falling throughout the industry as debt-ridden companies delay investment in new equipment. Two years ago the value of a share of Sweden’s Ericsson, the world’s largest wireless equipment maker, was about $24. Shares in the company today are about 64 cents. The company’s credit ratings were recently reduced to junk bond status.

 

Ericsson’s problems are shared by competitors such as Lucent, Nortel, Marconi and Motorola. By the end of the year, Canada’s Nortel will have cut its staff to 35,000 employees from 95,500 only two years ago. Nortel shares are now trading at about $1.25; in July 2000 they were trading at $85. Britain’s Marconi is in bankruptcy and, after reorganization, present shareholders are expected to receive one-half of one cent on every dollar of share capital.

#ff00004New EXIM Rep for Wisconsin
Holly Kirking has taken over responsibility within the Export Import Bank’s Chicago office for business development in Wisconsin. Holly can be reached by e-mail at holly.kirking@exim.gov or by telephone at (312) 353-8072. Information on Exim’s insurance, loan guarantee and small business programs can be found at http://www.exim.gov/ .

#ff00004BuyUSA.com Database
Over 100 Wisconsin companies have registered on the U.S. Department of Commerce’s BuyUSA.com database. For the moment, registration is free. Visit http://www.buyusa.com/ and for additional information contact the U.S. Department of Commerce’s Export Assistance Center at Milwaukee.Office.Box@mail.doc.gov or by phone at (414) 297-3473.

#ff00004Revised ISO Standards#ff0000
The new ISO 9001 standard, which replaces the old ISO 9001, 9002 and 9003 standard was published in December 2000. Since quality systems must be re-evaluated and upgraded every three years, December 14, 2003 has been set as the new deadline for organizations to implement the new ISO 9001 standard. For some good information on managing the changes, go to the American National Standards Institute site at http://webstore.ansi.org/ansidostore/find.asp?i and search for ISO 9001.

#ff00004World Trade Organization Approves Sanctions Against U.S.
On August 30, 2002 the World Trade Organization ruled that the European Union was entitled to impose $4.043 billion in sanctions against the United States. The decision is based on the WTO’s findings that U.S. Foreign Sates Corporation tax breaks for exporters contravene international trade rules. At the moment and at least through the November U.S. elections, it is very unlikely that the EU will impose sanctions. Instead it is expected that the EU will use this ruling to change existing U.S. law. In August of 2001, the CEO’s of 74 major U.S. exporters wrote President Bush to urge "a mutually acceptable solution". Both senior EU and US officials appear well aware of the potential dangers involved if this dispute should escalate. See our January, March, May, September and November 2000 issues as well as our September and November 2001 for background on this dispute.

#ff00004Nigeria Suspends Debt Payments
The Nigerian Central Bank announced on August 28 that the country is unable to service the country’s $33 billion in external debt. Nigeria has approached creditors for debt relief but has had little success given Nigeria’s reputation for corruption and economic mismanagement. Wisconsin exports to Nigeria in the#ff00004 first half of 2002 were less than $1 million and were primarily electrical generating sets, banknote dispensers and vacuum pumps.

#ff00004Kuwaiti Scams
The U.S. Embassy reports that there have been several recent instances of U.S. companies being scammed by individuals purporting to be representatives of the Kuwaiti Government or Central Bank. In some cases, these scams involve payment through offices in Madrid, Spain.

Export Events

September 9-12 Managing Innovative Manufacturing 2002 Conference (see article below) September 10 www.icewi.org

International Credit Executives in Kohler http://www.icewi.org/
September 16 Thai Ambassador, University Club, Milwaukee (see article below)
September 20 Wisconsin Export Trade Conference, Olympia Resort, Oconomowoc http://www.uww.edu/sbdc September 24 International Financial & Legal Issues, Chippewa Valley Technical College, Eau Claire http://www.commerce.state.wi.us/IE/IE-eauclaireworkshop.html October 1-6 World Dairy Expo, Alliant Center, Madison http://www.world-dairy-expo.com/
October 2 International Financial & Legal Issues, Fox Valley Technical College, Appleton http://www.commerce.state.wi.us/IE/IE-appletonworkshop.html October 4 Biomedical Perspectives- Japan and the Midwest, UW Madison (see below) October 8 Managing Risk in Latin American Economies, UW Madison http://wiscinfo.doit.wisc.edu/ciber/events/2002/LatinAmerica.html October 14-16 Wisconsin Economic Summit, Midwest Express Center, Milwaukee (see below) November 20 Doing Business with Mexico, Waukesha County Technical College, Pewaukee; see http://www.nafta-asociados.com/

Given the fact that manufacturing is Wisconsin’s export bread and butter and that prices of manufactured goods in international trade have fallen by 25% since 1995, you may wish to consider attending the 5^th International Conference on Managing Innovative Manufacturing which will be held in Milwaukee from September 9-12. The Conference is sponsored by the UW-Milwaukee’s Center for Intelligent Maintenance, the National Science Foundation and a core group of world-class Wisconsin manufacturers. The theme is e–manufacturing and e-business integration. Topics to be covered include strategies & best practices in managing global manufacturing and supply chain systems, e-manufacturing and e-factory, integration of ERP and e-business systems, agile and responsive production and e-business for small and medium enterprises. Additional information about the conference is available at http://www.uwm.edu/Dept/IME/IMS

His Excellency, Sakthip Krairiksh, Thai Ambassador to the United States will speak at a University Club luncheon in Milwaukee from 11:30 to 1:30 on Monday, September 16. Thailand is Wisconsin’s 23 largest market and Wisconsin companies have been able to sell a wide range of products into this market. In January, Thailand expects to pay back a year early the last tranche of a $17 billion stabilization loan from the IMF in 1997. Thailand expects about 4.1% growth this year and Wisconsin exports to Thailand are up 54% for the first half of 2002. Further information about this Institute of World Affairs program is at http://www.uwm.edu/UniversityOutreach/catalog/IWA/dialogues.shtml or call (414) 227-3183.

Join hundreds of leaders from business, labor, government, education and non-profit associations as they come together to promote Wisconsin’s economy and move forward. For additional information go to http://www.wisconsin.edu/summit.

On Friday, October 4, [8:30am-12:30] the Japanese External Trade Organization ( JETRO) will sponsor a symposium focused on the Japanese biomedical market, alliance building and joint ventures, and on building emerging biomedical companies into viable businesses. The symposium will take place at the UW - Madison Biotechnology Center Auditorium. You can obtain a full agenda and register online at http://www.jetrocgo.org/ or by fax at (312) 832-6066.

A gathering place for biotech specialists and corporations providing an international platform, as well as a forum for information exchange and investment opportunities. Options include exhibition space, customized appointment schedules, and more. Grant dollars available for this event.

October 23-24, 2002 - Montreal, Canada

Attention Wisconsin plastic processors, equipment manufacturers and innovators, walk the ExpoPlast show with us, October 23& 24^th. This is "the" plastics show in the Quebec market, held once every 3 years. The show consistently attracts key buyers, agents and distributors from Quebec, Ontario, the Atlantic Provinces and the North East U.S. The show includes an innovative conference program with a focus on traditional uses and new applications of plastics and biopolymers in the health sector.

 

Western Canada's premier agricultural show, Agri-Trade is the venue to explore innovative farm and livestock products. With more than 70,000 visitors from western Canada, this is an excellent opportunity for agricultural industry suppliers to gain visibility and meet potential partners. Catalog show and matchmaker appointments options available.

Select one or both of these trade days events for a cost-effective way to promote your products or to test the waters in Canada. An opportunity for all industry sectors with best prospects including energy, IT, electronic & computer, consumer & household, industrial, processed food & beverages, clothing, and textile products.

For Additional information contact Christine Stamm, Trade Show & Trade Mission Coordinator, Wisconsin Department of Commerce, Division of International & Export Development, 201 West Washington Avenue, Madison WI 535703; Tel: 608-264-7824, FAX: 608-266-5551; or cstamm@commerce.state.wi.us

 

#ff00005

International Business Information on the Web

We do our best to provide you with free international trade information available in our International Business Internet Guide#ff0000 at http://www.commerce.state.wi.us/IE/IE-Int'lGuideForBusiness.html . The guide is now in its fifth edition after being expanded and updated this summer.

You may also be interested in the U.S. Department of Commerce’s new international electric marketplace at http://www.buyusa.com/. Free Internet listings are available for qualified Wisconsin exporters and the site has a wealth of other features including trade leads and market research.

#ff0000Contact the International Division

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