Where We’re Importing and Exporting

A glance at two maps – top import and expert country for each state in 2016 – reveals some interesting observations:

  • On the export side, Canada is the leading destination from 33 states (including Indiana and 25 of the other 31 east of the Mississippi River)
  • Mexico (six states) and China (four states) were next on the list
  • Among the more intriguing partnerships: Nevada’s exports are going to Switzerland
  • On the import side, nine countries are represented with China (23 states) and Canada (14 states) leading the way
  • Indiana and Oregon are the two states in which the lead importer is Ireland (Happy St. Patrick’s Day, by the way!)
  • Of Indiana’s four neighbors, China is tops in Ohio, Kentucky and Illinois, while Mexico (think auto industry) is the top partner with Michigan
  • Hawaii stands alone with its top partners of Indonesia (imports) and Australia (exports)

According to the American Enterprise Institute:

Last year, American companies sold $2.2 trillion worth of goods and services to buyers in other countries, and American companies and consumers purchased $2.7 trillion worth of imports from trading partners all around the world. Seven states – Michigan, Louisiana, South Carolina, Tennessee, Kentucky, Washington and Texas – have their international trade represent more than 30% of their economic output.
Together, that volume of international trading activities represented 26% of the value of America’s $18.5 trillion in GDP in 2016. In terms of employment, more than 27 million American workers, about one in five, have jobs that are directly supported by trade with the rest of the world. Some states like California and Texas have more than two million jobs that are directly supported by international trade.

Global Woes Could Haunt U.S.

GKiplinger projects 2% economic growth for the United States in 2016. While not outstanding, there could be a sudden shift in the other direction if trouble occurs elsewhere. These are identified as the countries worth watching:

  • Venezuela: “Its economy is near collapse, as is its political system. If its oil flow stops, even for a short time, global prices will spike, putting pressure on major industrialized nations that need imports (including the U.S.) and likely shaking the confidence of investors.”
  • Brazil: “South America’s largest economy is in the second year of recession, its government is in disarray and its burgeoning middle class is being squeezed. A full meltdown isn’t likely but a less-than-spectacular Olympics and the spread of the Zika virus could unnerve trading partners and investors.”
  • Saudi Arabia: “Like others, the Saudis were stung by falling oil prices. But the big unknown is how the ruling family will respond if Washington decides that the kingdom can be held legally liable for the Sept. 11, 2001 terrorist attacks. One possible Saudi response: Selling off as much as $750 billion in U.S. Treasuries and other assets as a form of political retribution.”
  • China: “Slowing growth there causes ripples in everybody’s pond, threatening to slim trade in Europe, Asia and the Americas. China won’t be derailed, but its stumbles will keep global expansion muted.”

Kiplinger: Heavy Load for the BRICS

The economic engines of the BRICS (that's South Africa added to Brazil, Russia, India and China) countries are slowing down a bit, according to analysts from Kiplinger. Of course, there is still growth expected in each of the countries.

(By the way, our latest BizVoice magazine features a story on international business but skips the BRIC contingent. South Africa is included in a much larger look at business prospects in all of Africa. Check it out online or in our interactive version).

Back to the BRICS, here's what Kiplinger has to say:

  • Brazil: 2% growth this year and not much more in 2014, partially due to reduced exports to China and continued union protests
  • Russia: About 2.5% this year, maybe 3.5% next. A $14 billion investment in infrastructure and small business lending will help, but hostile climate toward overseas capital is a long-term problem
  • India: 5%, a drop from the 8% annual growth for much of the past decade. High inflation (10%) and decreases in investment and savings rates are troublesome
  • China: 7% this year and slightly more in 2014. Wage increases will make it difficult to maintain massive government investment
  • South Africa: 2%, a drop from 2.5% in 2012, with a similar outlook for 2014

Guest Blog: Reset Africa; Obama Tours the Continent

The following is a guest blog by Asoka Ranaweera, managing partner of Grid2Grid LLC, a company based in Washington, D.C. that advises investors on structuring investments and developing projects in West, East and Central Africa. Ranaweera penned this back in July, and was a source in our upcoming BizVoice story, "Africa Under Construction," set for release in the new edition next week.

I am sitting in a hotel in Dar es Salaam Tanzania. The town is buzzing with anticipation and excitement. Any day now, President Obama will touch down and thousands of Tanzanians will be out to greet him. Everywhere you go and almost everyone you speak to will have something positive to say about our President and Michelle Obama.

By some remarkable coincidence, President George W. Bush and Laura Bush are also in town. President Bush is on a regional tour, and is fondly remembered by many Africans for providing billions of dollars in funding for combating AIDS and for starting the Millennium Challenge Corporation (MCC), which has had a significant impact in countries like Tanzania.

As I ponder the countless hours of traffic jams, security roadblocks and searches to come, my attention wanders toward the hotel bar. I see a large group of Chinese businessmen and women enjoying a drink and chatting animatedly. Dar es Salaam is abuzz not just with Obama’s visit, but also by the sounds of an economy growing at an average of 7% per annum.

Wherever you might look in Tanzania, you will find Africans, Chinese, Indians, Malaysians and Arabs vying for a slice of Tanzania’s economic growth and business. Meanwhile, as I left Washington, D.C. for Dar es Salaam, President Obama was getting some flak for embarking on a weeklong tour of Africa at the expense of U.S. taxpayers.

Rather than thinking about Africa as a place where development is now taking place rapidly, many in the American press still view it from a 1980s perspective. Meanwhile, Brazil, Russia, India, China, Turkey and many other countries are increasingly seeing Africa as a land of opportunity, a place to trade, invest and to develop bilateral relations with African people.

Africa is where all the economic action is taking place these days with 15 of the 20 fastest growing economies and approximately 300 million people attaining middle-class status in the last 20 years, according to the African Development Bank (AFDB). It’s possible that in the years to come, Africa will overtake Asia to become the fastest growing region of the world.

In 2009, President Obama visited Africa for about 20 hours. His election at the time energized many Africans into believing that his Kenyan heritage would lead to greater cooperation between Americans and Africans. Unfortunately, that never panned out; President Obama and his administration had huge domestic challenges to overcome such as the global financial crisis, which we are all still recovering from.

As we entered the recession, many Americans realized that Africa — a continent long associated with starving children, conflict diamonds and corrupt dictators — was growing and that altogether a new dynamic was shaping it. And we also came to the understanding that countries such as China had come to have a profound impact on the continent and that Africa was now a destination for business, trade and investment. Thus after more than four years of being primarily absent from the scene directly, President Obama is finally back, and this time his advisors say it is with the intention to “reset relations with Africa."

Afrophiles hope that this could be the beginning of a more concerted and directed engagement with the continent, especially in light of the fact that many people both at home and in Africa believe that this belated engagement has its roots more in economic competition than anything else.

Interestingly enough, from my experience America is more welcomed and viewed in higher terms in Africa than in any other part of the world. Africans feel a strong affinity for all things American and have been yearning for our support and partnerships. Africans in this generation are more likely to ask for investment and trade projects to promote bilateral investment than that dreaded term, "aid." And so the dynamic today is so much more different than it was.

As I get ready to leave the hotel for a meeting downtown, I hear a few Tanzanians discussing what President Obama will be doing in the country. It turns out he will be visiting Symbion, a U.S. company that is playing a significant role in the power generation sector. I am relieved to hear we as American business people are doing something constructive with the Tanzanian people.

As I am being driven through the streets of downtown Dar es Salaam, we almost collide with a high speed convoy. And I am told that we just saw Sri Lankan President Mahinda Rajapakse on his way to the statehouse. It turns out this is the first official state visit to Africa by a Sri Lankan leader; times have really changed and I hope we hit that Africa relations reset button sooner rather than later.

Predictions: Focusing the Crystal Ball on 2020

The year 2020 is creeping closer. But if you’re projecting economic forecasts and demographics for eight years from now, it seems like a lifetime away.

Neverthless, the fearless prognosticators at Kiplinger (the authors of weekly management decision-making letters and various other publications and products) consistently weigh in on future conditions. These are a few of their recent insights, in separate reports:

  • Don’t be shocked if inflation doubles, from 2% this year to 4% or a bit more by 2020. Higher interest rates will mean pricier mortages, about 8% compared to 4% now for a 30-year fixed rate loan. The homeownership rate will settle around 66%, higher than now but shy of the peak of 69% in 2006.
  • By 2020, health care will account for nearly one in nine U.S. jobs, adding more than 4 million jobs in the decade. Home health aides will be the fastest growth segment, but there will also be rising demand for registered nurses, physicians and surgeons.
  • Consumer spending in Africa will double by 2020 with the overall economy growing by 5% a year. Joining South Africa as growth hot spots will be Algeria, Egypt, Morocco, Nigeria and Kenya. Others to watch: Ghana, Tunisia and Botswana (with plenty of minerals and a stable government).
  • Staying global and extending the time out five more years (to 2025) will result in more megacities. Projected to have 20 million people within its borders by that time (no city today has reached that level) are Mexico City; Tokyo; Shanghai; Dhaka, Bangladesh; Sao Paulo, Brazil; and three Indian cities … Delhi, Mumbai and Kolkata. New York is listed as a possible ninth. Seven more Chinese cities will top 10 million each, according to the forecasters.

We might not remember to pull this or other predictions out eight years from now, but if we do I imagine the experts will be on target more than a few times.

Adviser: Get Ready to Run with Bull Market in Near Future

Steven T. Goldberg, a Washington, D.C.-based investment banker, has a positive outlook for the American economy. Though I’ve heard other guesses that we shouldn’t expect a positive turnaround until 2015, he’s a bit more bullish. He recently authored a column for Kiplinger noting six reasons why he sees a "major bull market" in the next year or two:

1. The long decline in housing prices is nearing an end. The excess supply in housing is dwindling. When home prices finally bottom, it will mean more employment for construction workers, real estate agents and people in related industries. It will also staunch the bleeding in the mortgage and banking industries. Plus, it will help revive consumer confidence.

2. The U.S. is undergoing a manufacturing rebirth. Higher wages in China are prompting some companies to relocate factories to the U.S. Ford and Emerson Electric recently brought back some manufacturing to the U.S., and Intel is building three new plants here. Boston Consulting Group sees China’s edge eroding because many Chinese workers this year received wage increases of 15% to 20% and because of high transportation costs to the U.S.

3. The "echo" baby boom is ready to invest. The children of the baby-boomers will soon enter the 35-39 age bracket — the time in life when, Levkovich says, they get serious about investing. He has studied actions of that group from 1900 to the present and finds a strong correlation between the size of that cohort and the direction of the S&P 500. He says the echo boom will more than make up for the pressure their parents put on stocks by selling investments to pay for their retirement.

4. Technological innovation is still spreading. Increased adoption of smart phones by individuals and companies in developed and emerging countries will lead to increased spending on these products, as well as on technology infrastructure, including better security software, faster chips, longer-lasting batteries and more broadband spectrum. The U.S. still dominates tech.

5. The U.S. is becoming less dependent on foreign energy sources. New discoveries of oil mean a near-tripling of production in the Gulf of Mexico by the end of the decade. Meanwhile, fracking and other advanced drilling techniques are dramatically increasing natural gas production and lowering its price. Also helping are tougher standards for auto fuel economy, which means we’re using less gasoline. What little oil the U.S. will have to import, Levkovich says, will come from Canada and Mexico. Energy independence would help our trade balance.

6. A solution to our fiscal crisis is on the horizon. In 2013, Levkovich thinks, Democrats and Republicans will overcome their bitter differences and adopt a debt reduction plan that will include both higher taxes and cuts in entitlement programs. If that doesn’t happen, he thinks bond investors will force a resolution in 2014 by selling Treasury debt and forcing up bond yields. "We continue to think that investors are unwilling to pay up for equities while the continuation of budget deficits and growth of national debt erodes the foundation of economic progress," Levkovich says.

Levkovich finds a lot of skeptics among individual investors, who continue to yank money out of stock funds, as well as professional investors, many of whom have decreased their allocation to stocks. But that’s just dry powder for the next raging bull market.

Adding Up the Patent Numbers

Good news: The U.S. produced more global patents in 2011 than the year before. The not so good news: Our overall share decreased, while Japan and China recorded significant increases.

Over 181,900 international patents were filed in 2011, up 10.7 percent from 2010, according to estimated data from the World International Patent Organization (WIPO). China, Japan and the U.S. accounted for 82% of the total growth, the highest since 2005.

Estimated data was collected from the WIPO-administered Patent Cooperation Treat (PCT) system. The PCT system facilitates the process of seeking patent protection across its over 140-member countries by postponing the requirement to file a separate application in each country until after a centralized processing and initial patentability evaluation have taken place.

The U.S., with an estimated 48,596 filings (26.7 percent of all patents filled worldwide in 2011), remained the largest user of the PCT system. The U.S. was followed by Japan (38,888 fillings; 21.4 percent of all patents filled), Germany (18,568 fillings; 10.2 percent of all patents filled) and China (16,406 fillings; 9.0 percent of all patents filled).

However, the U.S. (0.7 percent decrease) saw a drop in its shares of total filings, while China (1.5 percent increase) and Japan (1.8 percent increase) each increased their share by more than a percentage point.

The report also looked at patent fillings in 35 technology sectors. Digital communication technologies (7.1 percent published applications) accounted for the largest share of estimated PCT applications in 2011. It was followed by electronic machinery (6.9%), medical technology (6.6%) and computer technology (6.4%). Electronic machinery (23.2%) saw the fastest growth between 2010 and 2011, and another 11 sectors experienced double-digit growth.

Going Global? This Day is For You

Does anyone today truly doubt that we live in a global society? More and more businesses not only survive, but thrive, due to their international connections.

To help even more organizations take advantage, the World Trade Club of Indiana is presenting World Trade Day on April 17. The 8 a.m. to 3 p.m. event at the Ritz Charles in Carmel features a number of educational breakout sessions, an exhibit hall, networking opportunities and more.

Among the topics:

  • Making sense of China
  • Hiring for the global age
  • Best practices in global banking
  • The Export-import Bank, termed the best kept government secret since Area 51

Bill Adams, senior international economist for PNC Bank, will be the luncheon keynote speaker. Indianapolis Mayor Greg Ballard will offer welcoming remarks and Carmel Mayor James Brainard will discuss "Roundabout Carmel — A Look at Local Gowth and Global Expansion."

Full details and registration available online.

Hamilton’s Take on Our Nation’s Future

Lee Hamilton asked and answered a most important question to an audience of nearly 500 people at Wednesday night’s 2012 Indiana Chamber Legislative Dinner.

The presentation from the 80-year old former Indiana congressman and longtime statesman was titled “Can This Nation Long Endure?” It was the same question Abraham Lincoln posed 149 years ago in his famed Gettysburg Address. (Hamilton noted that the prayer opening that event was longer than Lincoln’s three-minute talk, a speech that Hamilton once had recited to him word-for-word in Beijing by the president of China).

Today’s response, according to Hamilton: “The answer lies with you and me. There are plenty of good reasons to get frustrated and angry. My guess, my hope, is that Americans will accept the burden and challenge and make the adjustments necessary to ensure that American long endures.”

Hamilton outlined the negatives. They include the polls (83% worried about our nation’s future and only 19% who believe the U.S. will continue to be the most powerful country in the world), the headlines from respected publications ("The End of Western Dominance"; "Is America Done?") and the scholars who question whether American is “coming apart,” among other concerns.

The path to the future, however, lies in our past.

“Our challenges are formidable but not unmanageable … our problems are discouraging, not crippling,” explains Hamilton, noting the durability of our Constitution for more than 200 years. “Our public institutions may be under some stress, but they have stood the test of time. We have a multitude of talented people dedicated to the public good.

“In return for our freedom is responsibility; in return for liberty is obligation. What’s more important than what we think about our nation’s future is what we do about it. We need leaders who give us straight talk about the true nature of our problems and solutions on how to deal with them.

“We don’t need a new system of government,” Hamilton concludes. “We need a renewed willingness to make what we have work.”

Hamilton, who represented Indiana in Washington from 1965 to 1999, is currently director of The Center on Congress at Indiana University, a non-partisan educational institution seeking to improve the public’s understanding of Congress. 

IU’s Kelley School Partners with Chinese University in Dual Degree Program

One of the state’s leading educational assets for the business community, IU’s Kelley School of Business, has now added to its impressive offerings by partnering with a leading Chinese University to offer dual degrees. A release from IU has more:

A new agreement between the Kelley School of Business and a leading Chinese university promises to open up new learning opportunities for students and faculty from both institutions.

More than two years in the making, the new Undergraduate Dual Degree Program between Kelley Indianapolis and the Business School, Sun Yat-sen University (SYSBS) continues the strong partnerships between IUPUI and one of the premier business and health science universities in China.

The alliance initially provides opportunities for Chinese students to enroll at Kelley Indianapolis for two years after completing the first two years of business school at Sun Yat-sen. Participating students then can graduate with degrees from both institutions and invaluable knowledge of both the Chinese and U.S. business cultures.

“Indiana University and IUPUI continue to expand these international partnerships tobetter enhance the global reputation of the schools and the programs,” said Ken Carow, associate dean for research and programs at Kelley Indianapolis. “The Kelley School of Business has been one of the leaders in creating these opportunities and looking for strong partners with an already strong reputation.”

Carow and Philip Cochran, associate dean of Indianapolis operations, visited China in June to attend a ceremonial signing ceremony with Sun Yat-sen administrators.

"This dual degree program will surely provide a precious and peculiar opportunity which will soon become popular to our top-talented students seeking the latest knowledge from the world-class, top-notch faculty at Kelley and IUPUI," said Zhongfei Li, executive dean and head of Sun Yat-sen.

Carow envisioned the alliance as benefitting Kelley and Indianapolis on several fronts.  Chinese students will gain important exposure to the U.S. business climate while also helping regional business partners better understand opportunities to expand business and talent into China. The IUPUI campus will become more internationalized, which will help students learn and appreciate the growing global connection between U.S. and Chinese business.

Finally, faculty at both universities will be afforded opportunities to serve as visiting professors and collaborate and expand research projects in the future.

“This will help create a better understanding of what will be the largest economy in world. It will be extremely helpful to the students,” Carow said. The growing relationships between Chinese and Indiana businesses will require future graduates to carry skills to effectively do business in China, and other global destinations, he added.

Kelley Indianapolis officials hope to expand the program to include study abroad opportunities in the future. The first Chinese students are expected to enroll for the Fall 2012 semester, and preliminary predictions are for 10-25 students to participate.

Sun Yat-sen University has been recognized as the official sister school for IUPUI and has similar alliances with other academic units on the campus.