Wisconsin Worldwide

Volume 4, Issue 3: May 2003
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 International Trade Week 2003
• Export Markets
  -
Wisconsin Exports January/February 2003
-Potential Business in Iraq
-Canada
-European Roundup
-Asian Roundup
-Latin American Roundup

• Export News
  -
Wisconsin’s New European Trade Offices
- SARS and World Trade
-Airlines
-China Delays Implementation of New Standards
-India Enacts Single VAT Tax
-U.S. Firms Fined for Sanctions Violations
-Poland Buys U.S. F-16’s
-Ports Quiz

Symbol· Export Events, Seminars & Conferences

International Business Information on the Web

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The week of May 12-16 features major gatherings of Wisconsin’s International Trade Community. May 13 is the 39^th Annual Wisconsin International Trade Conference from noon to 4:15 p.m. at Milwaukee’s Italian Community Center. The event is co-sponsored by 19 major Wisconsin international trade organizations and is Wisconsin’s oldest and largest annual gathering of the international trade community. Go to: http://www.mwta.com/ for registration information and details.

The Directors of Wisconsin’s international trade offices in Canada, Mexico, Brazil and Europe will be in Wisconsin for international trade week. Ms. Kara Smith, our new director for Europe will be introduced to Wisconsin companies. The four directors and our Senior Trade Advisor from Japan will broadcast two videoconferences discussing the status of their respective markets to multiple locations statewide. The first broadcast will be from Fox Valley Technical College in Appleton from 1:00-4:00 p.m. on May 14 and will also be available at remote sites in Wausau, Eau Claire and Platteville. The May 15 broadcast Center from 7:45-10:45 a.m. will originate from UW Madison’s Pyle Center and can be viewed at remote sites in La Crosse, Whitewater and Mauston. For more information, go to: http://www.commerce.state.wi.us/mt/MT-PR03-0058.html.

Our Directors will also make presentations on international opportunities for medical devices and equipment at GE Medical System’s Educational Center in Waukesha on the afternoon of Monday, May 12 from 1:00 to 4:30 p.m. Information on Wisconsin’s new medical device cluster is available at http://www.commerce.state.wi.us/com-business.html

Wisconsin’s Directors will also discuss international credit conditions in their respective markets during the afternoon session of the International Credit Executives meeting on May 15 at Madison’s Concourse Hotel. Further details are available at http://www.icewi.org/event.htm.

On May 16, the Directors will lead an International Round-Table and Briefing Session for Wisconsin biotechnology companies at Promega’s Biotechnology Center in Madison from 7:30 a.m. to 10:00 a.m. Contact Christine Stamm at cstamm@commerce.state.wi.us or at (608) 264-7824 to register.

#ff00004Wisconsin Exports – January/February 2003

We took a quick look at Wisconsin exports to date for the first two months of 2003 and compared them to the same figures for 2002. Wisconsin exports were up 11.1% with exports increasing in all of our top 10 markets. Twenty of our top twenty-five markets showed increases with declines only in the Netherlands, Hong Kong, India, Brazil and Sweden. By contrast, U.S. total exports were up only 4.5% and up in only 7 of the top 10 and 18 of the top 25 export markets.

Wisconsin sales of industrial machinery, instruments, transportation equipment, and paper and paperboard were all up while exports of electrical machinery (-5.1%) and plastics (-4.1%) are down. Machinery exports were up 16.7% while exports of transportation equipment were up 33.8%. Both were well above the national average as was the 5.1% figure for growth in paper and paperboard exports.

The Commerce Department has activated a new website with information on business opportunities related to Iraq. At this point, many of these involve sub-contracting opportunities to larger firms that have been awarded government contracts by such agencies as USAID and the Army Corps of Engineers. It would appear that there should be good opportunities for medical equipment, water, sanitation, electricity, food processing, irrigation equipment and educational equipment to name a few. The website, which is updated on a daily basis.

As of this writing, United Nations and the U.S. Government sanctions against Iraq remain in place. Changes will be coming, and we suggest you check the Treasury Department's Office of Foreign Asset Control (OFAC) website at http://www.ustreas.gov/ofac/ for late breaking news.

As far as credit terms, you might think of Iraq as being in Chapter 11 with the U.S. as the de facto management. Contracts let by the U.S. Government and its principal contractors should be treated as essentially as domestic contracts. Iraq’s total foreign debt is not presently known, but, at a minimum, is $140 billion. In order to meet its existing liabilities, Iraq can hopefully expect to earn about $25 billion from annual oil sales. In short, there is a gap between what Iraq needs to recover and what Iraq can pay. Unless there is a significant contribution by others to the reconstruction of Iraq, reconstruction will either not happen or happen at US expense. Expect a very early effort to reschedule some or all of Iraq’s debts.

Within the Middle East, both Jordan and Syria will presumably see negative economic growth this year because of the war. The U.S. is eliminating its military presence in Saudi Arabia and reducing its military presence in Turkey, in part because of anti-American sentiment engendered by the war. Saudi Arabia is also implementing a new long-term policy to reduce the number of foreigners within the Kingdom with the intent of reducing reduce the number of foreign workers in the Kingdom by 3 million by 2013. As a first step, Crown Prince Abdullah of Saudi Arabia has ordered the replacement of 200,000 expatriate jobs in the Kingdom, phased over the next three years. The new policy is a reflection of growing Saudi concern about both the negative impacts of the large number of expatriates working in the Kingdom and a rise in unemployed Saudis.

#ff00004Canada

Canadian growth has been exceeding that of the U.S. and it will likely remain higher that that of the U.S. this year. Resource development has meant very good growth in Newfoundland, Labrador and oil-rich Alberta. All three will remain well above the Canadian average with retail sales and housing leading the charge. Ontario is expected to be below the Canadian average with developments in the North American automobile sector and the potential impact of SARS on Toronto key. Toronto’s retail market represents $33 billion or 14% of all Canadian retail sales.

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European Roundup

The fall in the value of the dollar against the Euro has made our products more price competitive in Europe and improved our competitive position compared to European firms in other parts of the world.

The dollar has fallen by more than 22% in the last year. Analysts are suggesting that the dollar will continue to fall over the next six months with the Euro rising to 1.15-1.20 to the dollar.

That being said, the economies of Western Europe continue to stagnate. In April the European Commission reduced its overall forecast for economic growth in the Euro-zone to 1% from an earlier estimate of 1.8%.

Germany:

The economy faces a third year of economic stagnation with near-zero economic growth (0.5%) down sharply from the forecast of 1.4% last fall. Unemployment is more than 11%. In March, Deutsche Telecom reported Europe’s largest-ever corporate loss of more that $27.1 billion and, on April 14, Grundig, one of Europe’s largest consumer electronics firms, filed for bankruptcy.

United Kingdom:

In April, the government lowered its growth forecast by one-half a percent to a range of 2 to 2.5%. The UK’s trade deficit has been growing significantly.

Italy:

Economic growth is now expected to fall well short of the government’s target of 2.3% and is unlikely to exceed 1.3%. GDP growth in 2002 was 0.4%, its lowest level since 1993.

France:

In April, the French government said it expected growth of 0.75% for 2003 as opposed to the 2.5% predicted last fall and the 1.3% predicted in mid-March. Vivendi Universal reported a net loss of 23.3 billion Euros for 2002 while France Telecom reported a loss of 20.7 billion Euros.

The Netherlands:

The Dutch, whose economy outperformed the rest of the EU throughout the 1990’s, saw economic growth fall to 0.2% in 2002. Growth estimates for 2003 are 0.6%. In early April, egg and poultry exports from the Netherlands came to a complete standstill after an outbreak of avian flu. The Netherlands is one of the world’s largest producers of poultry and eggs with exports valued at 1.8 billion Euros in 2001. To date, ten million chickens have been slaughtered at a cost of 150 million Euros in an attempt to contain the disease.

Other Eurozone:

Growth forecasts have recently been revised downward as follows:

Austria 1.0%; Belgium 1.2%; Denmark 1.5%; Spain 2.1%; Sweden 1.7%; Switzerland 0.8%.

 

Asian Roundup

China: SARS is the big news in China and not enough is known to predict the extent of the fallout. The impact of business decisions not made by executives awaiting a clearer understanding of the situation will slow China’s exceptionally high rate of economic growth. Tourist and business travel to China has plummeted. Last year, Beijing alone had 3.1 international visitors which accounted for $3.4 billion in income.

Since 1990, Chinese exports have grown about 15% a year and China is now the world’s fifth largest exporter. In 2002, China attracted more than $50 billion in foreign investment about half, of all investment flow to developing countries. Between 2000 and 2002 U.S. exports to China grew by more than $6 billion, while exports elsewhere fell sharply.

Japan: The economic prognosis for 2003 is continued stagnation. The Japanese stock market hit a 20-year low in April and the decrease in valuation will have a strong negative effect on banks, insurers and major corporations. Land prices continue their 12-year decline and fell at an average rate of 6.4% - the most since 1992. Commercial land in Japan has lost about two-thirds of its value since 1992. Japan is experiencing its fourth consecutive year of deflation.#ff0000

Korea: Korea’s 6.3% growth in 2002 was the highest growth rate of any major economy with the exception of China. Estimates of economic growth this year have been lowered to about 4% as opposed to about 5.3-6.0% at the end of 2002. Even with this cutback, Korea will have one of the highest growth rates of all major markets around the globe.

There are two major factors that could have an important impact on Korea’s economy. The first is the level of global tension about North Korea’s nuclear program and the second is the concern raised by the accounting scandal at SK Global, South Korea’s third largest company. Kookmin Bank, Korea’s largest lender, which has 448.7 billion won ($368 million) in loans to SK Global, has been hit hard by the scandal.

Singapore: The U.S. – Singapore Free Trade Agreement will be signed in Washington on May 6. The agreement is exceptionally comprehensive with respect to free trade in services. For a summary of the agreement go to: http://www.ustr.gov/new/fta/singapore.htm.

Brazil: The good news is that to date, the new da Silva government has taken a pragmatic approach to governing and after three months in office most of the fears about debt default and economic mismanagement have evaporated. The real has strengthened 31.4% since mid-October, greatly reducing the country’s debt load. The "leftist" government has raised interest rates to 26.5%, raised the primary surplus target to 4.25% of GDP, and frozen nearly $4 billion in public spending. These developments are good news for all of Brazil’s neighbors.

Argentina:

The Argentine economy shrank by 10.9% in 2002, the worst performance since the government began keeping records in 1900. The good news is that, although recovery is uneven, the bottom appears to have been reached and predictions are for economic growth this year. The remaining financial curbs imposed after the devaluation of the peso are expected to be removed soon.

Venezuela:

Troubles continue. Analysts predict a 30% decline in purchasing power this year and the government is facing a 7% deficit. Inflation, now at 31%, is expected to continue to rise.

Effective July 1, 2003, Taskforce Europe Services BV will serve as Wisconsin's trade representative in Europe. Taskforce Europe is headquartered in The Hague, the Netherlands and has offices in the United Kingdom, Germany, France, Norway, Spain, Italy, and Switzerland. The firm is part of the York Group, an international business development firm with 27 offices in 20 countries around the world. The primary contact for Wisconsin firms is founding partner Ms. Kara Hordlow Smith.

The senior staff of Taskforce Europe have an average of 15 years experience in direct commercial sales and export consulting. Many of Taskforce Europe's clients have been small companies that are export-ready, but with little international experience. Some of its larger, more well known clients include Airbus Industries, Compaq, Honeywell International, Lucent Technologies, and Mapquest. Taskforce Europe also represents the State of Oklahoma.

#ff00004SARS & World Trade

The outbreak of SARS (Severe Acute Respiratory Syndrome) was a serious enough development to transmit to our readers the World Health Organization’s early April warning on travel to Hong Kong and China's Guang Dong Province. Tthe WHO warning has been expanded to include Beijing, China’s Shanxi Province and Toronto. The warning on Toronto was lifted on April 29. As of April 29, there were 5,462 documented cases in 28 countries with 353 deaths reported. The vast majority of new cases are being reported in China. SARS is known to exist in 21 of China’s 31 provinces and is suspected in 4 others. To stay abreast of the latest recommendations, warnings and developments we suggest you go to the World Health Organization’s site at http://www.who.int/csr/ and the Center for Disease Control’s site at http://www.cdc.gov/ncidod/sars/. For specific information about traveling to areas where SARS has been reported, go to: http://www.cdc.gov/ncidod/sars/travel_advice.htm.

There are a variety of concerns about SARS that impact business. On the macroeconomic level, SARS has the potential to cause important changes in economic growth in China and elsewhere in Asia. The World Bank recently cut its estimate of economic growth in East Asia from 5.8% to 5%. The first reaction by individuals to a threat of this nature is to avoid public places and to postpone decisions (particularly buying decisions) until the situation clarifies. Accordingly, we have seen a dramatic drop in business and tourist travel to and within impacted countries. Business travelers are minimizing travel to Asia and, within infected areas, people are minimizing trips to shops and public places. Many trade shows have already been canceled in the region. On April 17 the Singapore Government announced a $130 million aid package for its tourist industry after visitor arrivals to Singapore has dropped by 61% in the first 13 days of the month and retail sales were off as much as 50%. Hong Kong projects a 70% drop in visitors for April.

SARS has caused concern in computer, electronics, apparel and toy firms due to potential disruptions caused by the closing of assembly lines due to the quarantining of workers exposed to the disease. Motorola temporarily shut an assembly line in Singapore and Matsushita Electric (Panasonic brands) had to close an assembly line in Beijing. Many companies have limited their internal and interplant meetings.

Another concern is the cancellation of large numbers of flights within and to Asia. This makes it more difficult to ensure timely shipments of parts and components (e.g.; computer chips) to the world or for exporters to make timely air shipments into Asia. At last check, there appeared to be no major problem for Wisconsin exporters.

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Airlines

The bad news continues with the SARS outbreak and a drop in passenger traffic during the Iraq war. According to the most recent Gallup poll, about one in seven air travelers, 14%, have changed their minds about traveling as a result of SARS. "Air travelers," constituting 36% of the public, are defined by the Gallup Organization as those who flew in the past month, or had plans to travel by air in the next six months.

Air Canada filed for bankruptcy in April, the third of North America’s major carriers to file. Both American and Delta are also in serious trouble with American narrowly averting bankruptcy in late April and Delta’s Chairman referring to the corporation’s present situation as the "greatest financial crisis in Delta’s history". Like all but the low cost carriers, Midwest Airlines, the largest carrier at Milwaukee’s Mitchell Airport has been hurt by the situation. The Metropolitan Milwaukee Association of Commerce has asked members to buy prepurchased tickets from Midwest to help Midwest’s cash flow.

Most Asian airlines have been hard hit by SARS and have announced deep cuts in staff and service. These include Cathay Pacific, Singapore Airlines and Quantas. In Europe, Lufthansa has warned that a sharp fall in passenger traffic will lead to unexpected and deep operating loses in Q1 of 2003. KLM, Air France and British Air, as well as other European carriers, have cut routes.

China's May 1, 2003 deadline for full enforcement of the new CCC Standards Mark has been extended to August 1, 2003. For additional information, visit the U.S. Commerce Department's China Desk website at http://www.mac.doc.gov/China/Docs/BusinessGuides/CCCEnforcementDelay.htm.

All Indian states have agreed to a common value-added-tax (VAT) of 12.5%. This took effect on April 1. The tax was originally slated to be in place on April 1, 2002. The positive impact of the new tax will be to standardize VAT and sales tax within India and end inter-state competition.

On April 4 and April 11 the Treasury Department’s Office of Foreign Assets Control announced that it had fined 59 companies a total of $1.1 million for sanctions violations. Those fined included Amazon, Bank of New York, Caterpillar, ChevronTexaco, Citibank, ExxonMobil, the New York Yankees, Playboy Enterprises and Walmart. Announcements are now being posted on the OFAC website. OFAC’s decision to post the material was apparently made after Ralph Nader’s Public Citizen advocacy group sued the Treasury Department under the Freedom of Information Act for release of the information.

On April 16 Poland signed a $3.5 billion contract to buy 48 F-16 fighter aircraft. The sale, which also includes training, munitions, and spares also reportedly involves a compensatory investment program and loans for Poland worth $12 billion. This is the largest defense contract signed by a former Soviet Bloc country since the end of the cold war. The deal is also significant in that Poland is entering the EU and both the French and a British-Swedish consortium were bidding.

We bet that no one in your office can correctly identify the top ports around the world for exports to the U.S. and the top ports for the arrival of imports into the U.S. We certainly couldn’t. Here they are:

Top Foreign Ports - Exports to the U.S. U.S. Ports for Imports

41. Hong Kong 1. New York

2. Shanghai, China 2. Los Angeles

3. Singapore 3. Long Beach

4. Kaohsiung, China 4. Charleston

5. Rotterdam, the Netherlands 5. Seattle

6. Pusan, Korea 6. Norfolk

7. Bremerhaven, Germany 7. Houston

8. Tokyo, Japan 8. Oakland

9. Genoa, Italy 9. Savanna

10. Yantian, China 10. Miami

Showcase USA 2003 - June 3-5, 2003 - Montreal, Toronto, and Hamilton
Wisconsin companies: seeking a cost-effective way to promote or introduce your products to Canada’s key markets? If so, have your catalogs/small samples displayed in the Showcase USA event, June 3^rd, 4^th and 5^th in Montreal, Toronto & Hamilton. Best prospects include the following products: industrial, chemicals, HVAC, IT, automotive, pharmaceutical, aerospace, electronics & computer, consumer & household goods, processed food & beverages and hardware .

Canadian Manufacturers Technology Show, October 20-23, 2003 - Toronto, Ontario
Exports to Canada, Wisconsin's top international market, grew by more than 4% in 2002. Take advantage of Canada's strong economy and meet potential agents, distributors, and dealers at this matchmaking event. For further information go to http://www.cglg-canada.com/.

GLOBE 2004 8th Biennial Conference & Trade Fair on Developing the Business of the Environment, March 31 - April 2, 2004 - Vancouver, BC, Canada
9000 participants, more than 350 exhibitors, and 70 countries represented in 2002. Be a part of the Wisconsin pavilion for your company's access to global environmental markets and senior-level corporate and government executives3. For further information contact Christine Stamm, ph: (608) 264-7824.

For a list of 2003 events sponsored by the Department of Agriculture, Trade and Consumer Protection go to: http://datcp.state.wi.us/mktg/business/marketing/international/services/pdf/calendar.pdf.

To request a list of major international events in Wisconsin click here to e-mail the Wisconsin World Trade Center.

#ff00005Other Export Seminars & Conferences

• May 22 Structuring Import Transactions. It will be held at the Waukesha County Technical College from 7:30 a.m. to 4:30 p.m.. To register click here.
• May 30 Intellectual Property Rights - Trademark, Patent, Copyright seminar. Protecting product and company identity in the global competition for customers. It will be held at the Waukesha County Technical College, Dueco Rm C 206 from 7:30 to 9:15 a.m. To register click here.
• June 4 Export Regulations Seminar. The program is designed to inform exporters, freight forwarders, customs house brokers, carriers, and others involved in the export process about U.S. export regulations and requirements. It will be held at the Four points Sheraton in Milwaukee from 7:30 a.m. to 5:00 p.m.. To register please call Crystal Mackall or Chrstina Torres at (301)763-2237.
• June 12-15 Europe 2003, UW Madison’s second international alumni conference in Oslo, Norway.

#ff00005International 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 .

Contact the International Division

Comments about this newsletter#0000ff: ljanowski@commerce.state.wi.us #0000ff

Contact our outreach consultants:

Northwestern Wisconsin - John Konkel
Phone: 715-833-6441
E-Mail:#0000ff jkonkel@cvtc.edu

Southwestern Wisconsin - Lou Janowski
Phone: 608-266-0393
E-Mail:#0000ff ljanowski@commerce.state.wi.us

Northeastern Wisconsin - Brad Schneider
Phone: 920-303-9353
E-Mail:#0000ff bschneider@commerce.state.wi.us

Southeastern Wisconsin - Sue Dragotta
Phone: 262-691-5147
E-Mail:#0000ff sdragotta@commerce.state.wi.us

Contact our area specialists:#ff0000 http://www.commerce.state.wi.us/IE/IE-ContactingAreaSpecialists.html

Contact our offices around the world:#0000ff http://www.commerce.state.wi.us/IE/IE-WisconsinOverseasNetwork.html

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