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 Wisconsin Worldwide

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Volume 4, Issue 6: November 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

• Farewell Issue
• Governor's Mission to China

• Export Markets

• Global Outlook
• Wisconsin Exports up 10.86%
• China: The White Hot Center of Global Trade Focus
• Wisconsin Exports to UK Up Sharply
• Russia: More Good News
• Selling to the Mineral Producers
• Export News
• The Dollar
• Shipments to Chile
• EU Retaliation: Foreign Sales Corporations & Steel
• EU: New Bankruptcy Laws in the Works
• China: Telecommunications/Motor Vehicles
• Online Exporter Update

• Export Events, Seminars & Conferences

International Business Information on the Web

Contact Us

Subscribe/Unsubscribe

After four years in e-print, an executive decision has been made to discontinue Wisconsin Worldwide. I have enjoyed providing you, our 4,000 readers with news and insights on international trade. Many of you will receive a new newsletter providing a broader range of Wisconsin business-related news that will include some international content. My thanks to those of you who provided information, comments and critiques and told your friends about our publication. Lou Janowski

Governor Doyle will lead a business mission to Beijing, Shanghai, Nanjing and Hong Kong from March 19-30, 2004. While in Shanghai the Governor will formally open our new Wisconsin Trade Office. For further details please contact Jennifer Winner in our Madison office.

Although there are plenty of "ifs" and "maybes" out there, the global economy seems to be turning a corner towards the better. Although analyst opinion is mixed, it may well be that 2004 will be the best year for global growth since 1996. We certainly hope so. Economic conditions appear to be improving in almost all geographic areas including Asia, Japan, the United States, Central and Eastern Europe, Australia and to lesser extents Western Europe and South America. Combine this with our competitive "low" dollar and 2004 looks like a potentially excellent year for Wisconsin exporters.

Wisconsin exports for the first eight months of 2003 were over $7.5 billion, up 10.86% over the same period in 2002. By contrast, total U.S. exports grew by 2.36% during the same period. All of our top ten markets are up by more than 10% (see articles on China and the UK which follow). With the exception of instruments, which started the year slowly, Wisconsin's six key export sectors (74.5% of all Wisconsin exports) performed well above the national average.

Sector % of WI Exports WI Export Growth US Export Growth

Industrial Machinery 35.3% +15.9% -1.4%

Instruments 13.6% + 1.8% +3.7%

Transportation Equipment 8.9% +27.5% +3.4%

Electrical Machinery 7.4% + 7.9% -2.3%

Paper & Paper Products 5.2% + 8.0% +2.4%

Plastics & Plastic Products 4.2% +10.6% +5.3%

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China has recovered from the SARS outbreak and its economy has returned to white hot. In 2002, 60% of the world's growth in exports was attributable to China. Wisconsin exports to China for the first eight months of 2003 totaled $320.6 million, up 43.4% over the same period in 2002. China has passed Germany and is now our fifth largest export market. It could conceivably pass the United Kingdom by year's end or sometime in 2004 and become our fourth largest export market after Canada, Japan and Mexico.

China's economy grew by 9.1% for the year ending September 30 and growth for calendar year 2003 is now projected at 9.5%. The Chinese government has begun efforts to cool the economy by curbing lending and easing infrastructure spending. That being said, the Chinese money supply is 177% of GDP and the ratio of investment to GDP is 42% - levels last seen in Thailand and Malaysia just before the 1997 Asian financial crisis. China's banking system is weak, and there are an exceptionally large number of bad loans (45% of all loans?) on the books. Chinese import levels have been rising dramatically, and China's trade balance with the world is now close to even.

Don't expect to hear anything dramatic from China in terms of revaluing its currency. If the Chinese make such a move, they won't say much in public. Maintaining "face" remains an important cultural value in China, and no Chinese Government could be expected to be seen as buckling to external foreign pressure. Even if China does revalue its currency upward, this will not radically change the global competitiveness of Chinese products. Even if it did, the strongest probability is that imports of other low-cost offshore producers would replace Chinese imports to the U.S. market. More than 70% of the U.S. trade deficit can be explained by strong U.S. consumption of imports, not weak currencies overseas.

After a four-year slump, Wisconsin exports to the UK are up 25.7% this year. We have seen an exceptional growth in the sales of industrial machinery, transportation equipment and plastics. Growth is up in 19 of the top 20 export sectors. Sales have been spurred by the steady rise of the UK pound to a five-year high against the US dollar.

Russia's economic growth has exceeded expectations with GDP up 6.5% for the first three quarters of 2003. Most experts expect high growth to continue in Q4. Russia's international credit rating has been expanded to near investment credit grade. Wisconsin exports are up 224% to $27.3 million for the first eight months of the year. This places Russia as our 29^th largest export market just behind Israel, Thailand and Switzerland and just ahead of Denmark, Norway and New Zealand.

Global prices for minerals have increased sharply over the past year. This is in part due to increased demand from China, which now consumes 21% of the world's alumina, 24% of its zinc, 28% of its iron ore, 17% of its copper and 23% of its stainless steel. The rise in mineral prices means that markets in the mineral production areas of countries like Canada, Chile, Australia, and South Africa are looking up. The same is true for the markets of many hydrocarbon exporters including Russia.

At the close of October the value of the dollar versus major foreign currencies (monthly averages) stood as follows:

• Canadian dollar at highest point since January 1994.
• European Euro at highest point since January 1997.
• Australian dollar at highest since October 1997 (The early November decision by the Australian Central Bank to raise interest rates by one-quarter percent drove the Australian dollar still higher.).
• British pound at highest level since October 1998.
• Swiss franc has remained in a range of 1.3006 to 1.3825 in 2003. The last time prior to 2003 that the Swiss franc traded at higher levels to the U.S. dollar was in January 1999
• Japanese yen at highest point since October 2000 (despite Japanese government efforts to lower its value).

By contrast, the Mexican peso has returned to an all-time low against the U.S. dollar. The Chinese RMB, of course, is pegged to the U.S. dollar as are the Hong Kong and Singapore dollars. The Korean won, the Thai baht and the Taiwan dollar have remained in close bands to the U.S. dollar for several years. By contrast, the value of the South African rand has risen sharply in line with the rise in world mineral prices. In sum, your ability to compete in most major export markets on the basis of price is better than it has been for quite some time. It's time to start talking to those customers you lost during the years of the high dollar and to look for new opportunities in our major markets.

On January 1, 2004 87% of U.S. non-agricultural and 75% of U.S. farm products will have duty free access to Chile. If you're shipping goods to Chile between now and the end of the year, you might want to check with your representative or customer about the relative merits of your shipment arriving after January 1. Complete information about the agreement (including tariff schedules) is available at: http://www.ustr.gov/new/fta/Chile/text

On November 4 European Union Trade Commissioner Pascal Lamy announced in Washington that as of March 2004, the EU will apply a 5% retaliatory tariff on up to $4 billion in U.S. imports. He added that this levy would be increased by 1% each month for a year until the U.S. Government rescinds the tax benefits provided to U.S. exporters under Foreign Sales Corporation legislation. This legislation was found to be in violation of World Trade Organization rules three years ago.

The EU has also warned that it is considering sanctions on another $2.2 billion in U.S. goods in response to the March 2002 decision by the U.S. to impose tariffs of up to 30% on steel imports. The tariffs were placed after U.S. producers protested that foreign producers were dumping steel in the United States. The tariffs resulted in a rise in U.S. domestic steel prices. This, in turn, created a problem for U.S. metal fabricators, who found their sales falling due to increased competition from foreign fabricated steel parts. In fact, the US International Trade Commission has calculated that the tariffs reduced the earnings of U.S. steel-consuming firms far more than they increased the income of U.S. steelmakers. One Ohio company's solution: (a) import steel into Canada, (b) perform enough value added work to legally change the foreign steel to a U.S. duty-free Canadian steel product, and (c) do final fabrication in the U.S.

Europe's rigid bankruptcy laws have long meant that nine out of ten firms that declared bankruptcy simply disappeared. The European Union is in the process of developing new bankruptcy laws that will include provisions similar to those of Chapter 11 of the U.S. Bankruptcy Code. This will mean that there will be a convergence in practice.

In 1978, China had 1.9 million telephone subscribers. By 1988 that number had grown to 100 million. At the end of this September, the Chinese government announced that the number of subscribers reached 500 million - divided almost equally between fixed line subscribers and mobile phone users.

China's production of motor vehicles totaled 2.7 million units during the first eight months of 2003, an increase of 36%. Growth in passenger car sales was up 92% to 1.2 million units. However, inventory levels are on the rise due to this rapid increase in production. In short, we see something of a bubble in the motor vehicle sector and expect to see a turndown in the short to mid-term.

Shipping lines are beginning to introduce "smart" containers to improve security. The new containers contain stronger locks and sensors that indicate if the container has been opened. Containers using these devices will typically be routed through the "green lanes" at ports of entry. It seems to us that this practice will become standard in the industry and that there must be minds out there thinking of additional uses for sensors in containers whether it be temperature, salt water intrusion, monitoring ships roll to verify damage claims or just to allow us to know just where our container is.

The Wisconsin Department of Commerce is currently updating its database of Wisconsin exporters. The database currently contains information on over 2,500 Wisconsin firms that either export or want to start exporting. The database is used to distribute trade leads, arrange meeting with foreign buying delegations visiting the state, and alert Wisconsin's international business community to events or developments that could affect their business.

This year, firms can update their information online. A letter is being sent to all listed firms providing the instructions needed to update your company's record. If your firm does not receive a letter within the next two weeks and you would like to be included in our exporter database, please contact Stanley Pfrang at 608/ 267-0639 or spfrang@commerce.state.wi.us. You are not required to report information to us; participation in the Exporter Database update is voluntary.

Northeast Wisconsin Luncheon Global Speakers Series - December 9, Appleton (Globalization of the Paper Industry). For details and information contact Fred Monique at the Green Bay Chamber of Commerce at 920-496-2118.

Milwaukee World Trade Association - December 4, Milwaukee Athletic Club. International career education day for high school and college students. More info at www.mwta.com

Global Forest Products Workshop - February 24 Best Western Wausau. Lake States Lumber Education Inc. Global outlook for supply and demand for wood pulp, paper, pulp, fiber, veneer and furniture products. Update on markets worldwide including session on China market. For additional information contact Terry Mace 608) 231-9333 or LSLA Education Inc. at (906) 774-6767.

2^nd Annual Northeastern Wisconsin Global Trade Conference, April 5, Paper Valley Hotel. Appleton. Co-sponsored by Congressmen Mark Green and Thomas Petri. For details and information contact Brad Schnieder.

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

BioPartnering North America, February 8-10, 2004 Vancouver, BC, Canada

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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 executives. For further information contact Christine Stamm,
ph: (608) 264-7824.

Business Mission to Argentina, Brazil and Chile - April 26 -May 4, 2004. Contact Sue Dragotta for more information.

Shanghai International Building & Construction Fair - May 21-24, 2004. 42,000 buyers, 1,280 booths, 540,000 square foot exhibition area. See our July article at http://www.commerce.state.wi.us/IE/IE-NewsletterJuly2003.html#News4 for more information about this white-hot market. For information about displaying at the official U.S. Pavilion ($1,500 for a 97 square foot booth, catalog display space also available) go to: http://www.uschinabuild.org/Events/tradeshowflyer10_15_03.pdf

#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

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at http://www.commerce.state.wi.us/IE/IE-Int'lGuideForBusiness.html .

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Contact the International Division

Contact our outreach consultants:

Northwestern Wisconsin - John Konkel
Phone: 715-833-6441
E-Mail:

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Southwestern Wisconsin - Lou Janowski
Phone: 608-266-0393
E-Mail:

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Northeastern Wisconsin - Brad Schneider
Phone: 920-303-9353
E-Mail:

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Southeastern Wisconsin - Sue Dragotta
Phone: 262-691-5147
E-Mail:

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Contact our area specialists:

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Contact our offices around the world:

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If you have comments, please send an e-mail to

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