On September 11, 2001, terrorists destroyed the World Trade Center towers, stole the lives of thousands of innocent people, and tainted forever America’s sense of security. As a result of these horrific acts, the United States has implemented and continues to implement new security measures that will permanently alter trading practices and pricing strategies of companies involved in global commerce.

Looking at where things stand more than a year later, it appears that companies have made some changes. But what still remains unanswered is whether this new phase will have a significant negative influence on exporters, importers and world trade.

Questions and Concerns

Thus far, heightened security measures have, to some degree, decelerated the pace of international business. And long lines at airports, for example, have caused some travelers to stay home or not travel by air. Will this continue to be the norm?

Similarly, corporate supply chains that span the globe have been affected. Will the proposed and perhaps very necessary searching of the millions of containers that arrive at U.S. ports annually delay imports considerably? What impact will this have on prices? And what affect will this have on U.S. manufacturers who depend on supplies arriving “just-in-time” from their overseas suppliers?

Terrorism Tax

To cover the delays of importing and exporting goods, in addition to the new costs associated with stricter security measures, a “terrorism tax” has been created. While more time is needed to assess its full extent, it is already certain that companies large and small will have to develop new security measures that will, in turn, alter their logistics and pricing structures.

A Move from Air to Sea

The use of new security technologies involved in shipping goods across oceans has resulted in increased inventory, insurance and administrative expenses. Overall, airfreight costs have risen an estimated 10 percent since September 11, 2001, according to the Organization for Economic Co-operation and Development (OECD). However, the costs of shipping by sea have risen only slightly. Consequently, more importers and exporters are switching from air to sea transport.

Yet, if port authorities and ship owners are required to examine cargo more extensively, this will undoubtedly boost shipping costs, as well as delay delivery. Plus, these groups can expect another cost — more ports will require tugs to accompany ships as they enter the harbor, an action designed to prevent ships from being intentionally crashed into bridge foundations by terrorists.

Greater Truck and Rail Safety

Measured by value, nearly two-thirds of the goods transported between the United States, Canada and Mexico are hauled by trucks. Calculated by weight, trucks and ships each transport about one third of the total, according to the U.S. Department of Transportation.

To protect their shipments, trucking firms have begun to build fences around freight yards, conduct background checks on drivers, monitor truck travel with satellite-tracking systems, and install electronic devices to detect when a container is opened illegally. Train operators have begun more frequent inspections of tracks, switches, bridges, and tunnels, and have strengthened communications facilities.

An Opportunity and a Challenge

U.S. firms that view the new logistic systems as both an opportunity and a challenge will fare well. Firms that quickly learn how to use the systems to their advantage will gain a competitive edge. Of course, larger firms with tremendous shipping volumes and clout, vast capital and innovative personnel will have a head start on smaller firms, who will need to be creative and act quickly to compete.

Taking the Customs “Fast Lane”

A head start over competitors can be gained by companies that obtain the Customs-Trade Partnership Against Terrorism (C-TPAT) certification. This voluntary program, created by the U.S. Customs department, requires U.S. importers to assess the ability of their supply chains to meet security procedures and to make any necessary changes to boost security.

Companies with the C-TPAT certification can use the “fast lane” to cross U.S. borders in less time and with fewer inspections. This is a definite plus for keeping supply lines intact and running smoothly.

Scrutinizing Owners of Goods

Another change is the U.S. Customs Service request that details of container contents be provided 24 hours before cargo is loaded onto ships at foreign ports. Companies that don’t comply with this request can be subject to fines or delays in the unloading of their cargo in the U.S.

Companies of all sizes will no doubt have to adopt procedures that improve their databases so that accurate information about products, shipments and final customers can be easily retrieved and evaluated. Otherwise, further delays will be encountered at borders, creating disruptions in the supply line, and adding to the product’s final cost.

Delay Costs Could Be in the Billions

Prior to last fall, the cost of delays in getting goods into the United States represented 5 to 13 percent of the final value of the goods traded, according to J. A. Leonard’s article in Manufacturers Alliance e-Alerts. If additional security measures add 1 to 3 percentage points to this, a figure projected by the OECD, Leonard estimates this could increase the cost of goods traded in the U.S. by $5.6 billion to $16.8 billion.

Although these estimates were made soon after the attacks, the new security requirements will undoubtedly affect product pricing. And companies likely will have to stockpile more spare parts — a move that will hike inventory costs.

Insurance Premiums Increase

Due to the September 11, 2001 attacks, insurance companies suffered their biggest loss ever, estimated as high as $50 billion. As a result, some insurers revoked policies covering airline’s liabilities, which in turn, forced many governments to step in with coverage. Additionally, ship owners sailing into countries considered high-risk either had their premium raised considerably, or their war risk coverage cancelled.

Commercial insurance premiums were on the rise even before September 11, 2001; the reduction of insurance capacity brought about by the billions in losses, accelerated these rate increases. However, insurance premiums still only represent a small portion of total shipping costs. As of 2000, the share of transport and insurance costs was 3.39 percent of the customs value of imported commodities, according to the OECD. While this figure may slightly increase this year, overall, it will not be a strong factor on the final pricing of goods.

But the considerable rise in workers’ compensation rates over 2001’s could influence the price of goods and services considerably. Insurers and reinsurers are now aware and concerned that a high concentration of employees in one building, especially a high rise, could produce losses similar to those they suffered from the collapse of the World Trade Center. As a result of this and other fee increases, companies need to reassess how they do business and accommodate the changes ahead.

This article appeared in Impact Analysis, November 2002.
Topic: Strategies
Comment (0) Hits: 2139



The horrific September 11, 2001 terrorist attack did disrupt global business temporarily. And now, a year later, it appears that the repercussions will force companies to permanently alter their trading practices and pricing strategies. Still unanswered is whether this new phase will have a negative influence on world trade overall.

One obvious and immediate reaction to the attack was tightened security measures by the United States and other countries for travelers and imported goods.

Questions and Concerns

The concern that heightened security measures would decelerate the pace of international business and slow the promise of globalization is valid. And the thought that long lines at airports could eventually persuade travelers to stay home or not use air travel has been legitimate.

Plus, many have come to realize that searching more of the millions of containers that arrive at U.S. ports annually could drastically slow down the flow of finished goods as well as increase their cost. And, this could affect the U.S. manufacturing sector that depends on supplies arriving “just-in-time” from overseas suppliers.

Terrorism Tax

To pay for the delays of importing and exporting goods, plus the added costs of implementing stricter security measures, companies have begun to shoulder a “terrorism tax.” While it is too soon to predict how much of a burden this tax will create, it is certain that all companies, large and small, will have to react to and assimilate these new security measures into their logistics and pricing structures.

Certainly, immediately after September 11, 2001, the supply chains stretching across oceans or land borders were seriously interrupted. Within a few months, however, U.S. firms began adapting new technologies to cope with the reduction of services from their usual carriers.

Switching from Air to Sea

Utilizing these new transportation technologies to ship goods across the oceans has resulted in increased inventory, insurance, and administrative expenses. In the general sphere of transportation expenditures, airfreight costs have risen an estimated 10 percent since September 11, 2001, according to the Organization for Economic Co-operation and Development (OECD). Yet, the costs of shipping by sea have risen only slightly. Consequently, importers and exporters are increasingly switching from air to sea transport.

However, if ship owners and port authorities are required to buy expensive equipment to inspect the millions of containers coming and going from U.S. ports, this will surely increase shipping costs, as well as delay delivery of shipments. Further adding to sea shipment costs is the requirement in some ports that a tug on each side accompany the ship as it enters the harbor. This is designed to prevent the ship from deliberately slamming into bridge foundations.

Increased Truck and Rail Safety

Measured by value, almost two-thirds of the goods transported between the United States, Canada and Mexico are hauled by trucks. Calculated by weight, trucks and ships each transport about one third of the total, according to the U.S. Department of Transportation.

Trucking firms have begun to take steps to protect their shipments by building fences around freight yards, conducting background checks on drivers, monitoring truck travel with satellite-tracking systems, and installing electronic devices to detect when a container is opened illegally. Train operators have begun more frequent inspections of tracks, switches, bridges, and tunnels, and have strengthened communications facilities.

Gaining a Competitive Edge

It would be wise for U.S. firms to view adapting to and adopting the new logistic systems as both an opportunity and a challenge. Those firms that quickly learn how to use the systems to their advantage will gain a competitive edge in international business.

Of course, the largest firms with their enormous volume, staggering clout, considerable capital, and resourceful personnel may have an early start on smaller competing firms, who must be especially creative to keep up.

Taking the Customs “Fast Lane”

Companies that obtain the Customs-Trade Partnership Against Terrorism (C-TPAT) certification will have a head start over their competitors. This voluntary program, created by the U.S. Customs department, requires U.S. importers to assess the ability of their supply chains to conform to security procedures and to make the necessary changes to boost security, if necessary.

Companies that have C-TPAT certification can use the “fast lane” to pass across U.S. borders in less time and with fewer inspections. This is a definite plus for keeping supply lines intact and running smoothly.

Closer Attention to Owners of Goods

Besides monitoring goods coming into the U.S., additional regulations will require precise identification of the imported product’s specific use and end user. Heightened attention to reconciling the variances between trade documents and customs forms also are increasingly becoming concerns of U.S. Customs.

Additionally, the Bureau of Export Administration and other agencies are working with U.S. banks to develop procedures to closely follow the money trail of import and export transactions.

Companies of all sizes will no doubt have to adopt procedures that improve their databases so that accurate information about products, shipments and final customers can be easily retrieved and evaluated. Otherwise, further delays will be encountered at borders, creating disruptions in the supply line, and adding to the final cost of the product.

Delays Could Cost Billions

Before September 11, 2001, the cost of delays in getting goods into the United States represented 5 to 13 percent of the final value of the goods traded, according to J. A. Leonard’s article in Manufacturers Alliance e-Alerts. If additional security measures add 1 to 3 percentage points to this figure, a figure projected by the OECD, Leonard estimates this could increase the costs of goods traded in the U.S. by $5.6 billion to $16.8 billion.

These estimates were made soon after the September attacks, and since then, the long lines at borders and delays at ports have lessened. Still, the new security efforts measured in time and money will affect the pricing of the final product. To compensate for delays, companies will have to stockpile more spare parts, which hikes inventory costs.

Insurance Premiums Move Up

Due to the September 11, 2001 attacks, insurance companies suffered their biggest loss ever, estimated as high as $50 billion. As a result, insurers began revoking policies covering airline liabilities, forcing many governments around the world to step in with coverage. Ship owners sailing into countries considered dangerous either had their war risk coverage cancelled, or the premium raised considerably.

Even before September 11, 2001, commercial insurance premiums were on the rise. Today, the reduction of insurance capacity brought about by the billions in losses will accelerate the rate increases. U.S. commercial insurance premiums, according to Business Week, are forecast to rise from $148 billion in 2000 to $210-240 billion in 2002. However, insurance costs still represent a small portion of total shipping costs.

Not a Strong Influence

As of 2000, the share of transport and insurance costs was 3.39 percent of the customs value of imported commodities, according to the OECD. While this figure may increase slightly in 2002, proportionally, it will not be a strong influence on the final price of goods.

But the considerable rise in workers’ compensation rates over 2001’s could influence the price of goods and services considerably. Insurers and reinsurers are now aware and concerned that a high concentration of employees in one building, especially a high rise, could produce losses similar to those they suffered from the collapse of the World Trade Center towers.

Global Commerce Coming Back

The global business community has reacted to the terrible destruction of September 11, 2001 with amazing resilience, proving that globalization is too strong to be crippled for long. Yet, world trade could become slower and costlier until it adapts fully to the threats of terrorism. While imports and exports fell in the last quarter of 2001, the setback seems to have been temporary.

For example, in May 2002, according to the U.S. Department of Commerce, U.S. exports of goods and services increased $0.6 billion to $80.6 billion, and imports rose $2.1 billion to $118.3 billion. This is far above year-end 2001 levels and is nearing the stellar highs of 2000. Also, U.S. imports from China at $9.8 billion were the highest since the $10.8 billion in October 2001. And U.S. exports to Canada were $14.6 billion, the highest since the $15.1 billion in June 2001.

These are encouraging signs. While overall economic growth is influenced by a variety of factors, it appears that global commerce has begun to succeed in its struggle to climb back from the appalling hit terrorism dealt it on September 11, 2001.

This article appeared in September 2002. (BA)
Topic: Strategies
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Exports are increasingly becoming more important to the success of both our economy and individual companies. And, if you’re responsible for any international activity, chances are your company’s success at exporting will impact your job performance and value in your organization.

Consequently, identifying, assessing and choosing the right foreign markets to pursue can result in your company exceeding its profit expectations. However, selecting the wrong markets can result in great expense and frustration. To make your job easier, consider the following factors.

Study Economic Indicators

Rank the potential countries’ markets by the dollar value of your product they import from the United States. (Data needed is available from the U.S. Department of Commerce). Then rank each market by its total demand (domestic production plus world imports) for the previous three years. This will determine each country’s market size, its rate of growth, U.S. market share, and whether that is increasing or decreasing.

If total demand for your type of product is increasing, look at the country’s rate of growth and per capita income. If indicators are positive, it’s likely that your product demand will continue to rise. However, if these indicators are stagnant or down, it’s likely that the growth in demand for your product will slow and may not provide the market potential you’re looking for.

Can You Be Competitive?

Identify each selected market’s trade barriers (tariffs, standards, regulations, quotas, labeling requirements, etc.). If excessive, these barriers may make your product too expensive and limit your exports. If manageable, investigate whether any vested interests can bar your product from the market.

Importantly, know your competitors’ products, prices, distribution methods, commitments to after-sale service, and target customers. If intense competition exists, look to smaller markets which may be unattractive for multinationals, but big enough for you.

Consider Currency Strengths and Risks

Importers from countries with soft currencies or insufficient reserves may find it difficult to pay you. Understand the risks, buy insurance or choose other markets. Should you accept the importer’s currency, guard against wide fluctuations. And keep abreast of political risks.

Should a military coup take place, a succeeding government may reverse policy; should social turmoil envelop a nation, the disruption of activities could put you out of business. New governments have been known to reverse policy with regard to a whole range of investment and trade issues. Additionally, follow the political relationship between the United States and your target countries. Warmer political relations may allow U.S. businesses greater access to the foreign marketplace. Cooler relations obviously can have the opposite effect.

Determine Infrastructure Needs

If your product requires a skilled support staff (human infrastructure) make sure it’s available in your target markets. If not, you may be forced to provide costly support from your home office.

The lack of physical infrastructure may also curtail exports. For example, the inability to quickly deliver perishables due to inoperable roads or inaccessibility to refrigerated storage can be a deterrent. The shipping costs of heavy merchandise to distant locations may also prove too expensive. In this case, you may wish to consider licensing your technology.

Understand the Culture and Adapt

Sensitivity to foreign cultures is not only polite, it’s good business. Become familiar with your customers’ cultures and study their tastes. If your products and designs don’t suit them, make changes or consider going elsewhere.

Products not adapted to suit cultural preferences may not be accepted. For example, Mexican women prefer bright, splashy prints on swimsuits that may not sell well in the U.S.

Furthermore, behavior considered friendly in one country may be considered offensive in another. And be aware that many foreigners believe that to be polite means having to agree with you, not always considering the ramifications of doing so.

Investigate Intellectual Property Protection and Environmental Laws

Many countries claim to enforce intellectual property laws, but have a poor track record. If you sell software, investigate how piracy is handled. If protection isn’t a priority, you may want to avoid this market.

Environmental standards greatly differ from country to country. Certain machinery may not meet stringent foreign environmental pollution standards, which could prevent product importation.

On the other hand, some developing countries may not provide adequate facilities to treat or store toxic by-products generated by a manufacturing process, which could create a serious health risk and legal problems.

Understand the Legal System

In some countries, the accused is presumed guilty until proven innocent, and judges may unfairly favor domestic sales agents terminated over poor performance or consumers who are injured by the inappropriate use of a product.

One of the most pressing issues in doing business abroad is the lack of civil, commercial and criminal codes. And confusing and burdensome bureaucratic requirements can tie up valuable time. That’s why you must carefully assess each country’s laws and practices and determine if you wish to expose your company to them.

How Many Markets Should I Pursue?

Depending on your company’s level of resources, objectives and product competitiveness, the number of foreign markets to target simultaneously and the selection process used to determine what markets to pursue will differ considerably.

If your company is new to international trade and your staff and level of resources allocated to pursuing exports are limited, it may be wise to focus on fewer foreign markets (i.e., one to three). This will prevent spreading your resources too thin.

Determine the Criteria Right for You

Based on your product or service, export market considerations will differ. Understanding these differences will help you to pursue the markets with the highest returns and the least risk.

This article appeared in Impact Analysis, July 2002.
Topic: Strategies
Comment (0) Hits: 7859



When creating short and long-term global trade and investment strategies, it’s imperative to know where your target consumers will live, the goods and services they will buy, and how much they will be able to spend. Although this task may sound daunting, it isn’t — as long as you keep up on world demographic projections.

By studying world demographic shifts, you’ll learn where tomorrow’s major populations will be, their ages — an important indicator of tastes and needs — and their projected income levels.

Virtually All Population Growth Will Occur in Developing Countries

On January 1, 2002, world population had expanded to 6.2 billion people. It’s expected to reach 7 billion by 2013, and 7.5 billion by 2020, according to the U.S. Census Bureau. Although growth rates are decreasing, world population is predicted to rise by 77 million people in 2002 alone — that’s the population of France and Australia combined. Where will these people live?

According to the U.S. Census Bureau, 99% of world population growth now occurs in developing countries. Sub-Saharan Africa is projected to grow the fastest, followed by the Near East and North Africa, Asia and Oceania, Latin America and the Caribbean, and Eastern Europe. This is forcing many exporters and investors to reassess their global trade and investment strategies.

Can Developing Country Consumers Afford Your Products?

Compared to the United States, average per capita incomes in developing countries are low. For example, U.S. gross domestic product per person is estimated to be $36,566 in 2002. However, it’s projected to reach $985 in China, $517 in India and $2,560 in Brazil, according to the International Monetary Fund. At first glance, U.S. producers are likely to assume that consumers in these countries can’t afford their products. This is a mistake!

When considering the current and projected size of the middle class in developing countries, general per capita income figures are meaningless. For example, India is estimated to have a middle class of about 200 million people with the same purchasing power as the middle class in the United States. Compared to the entire U.S. population of 281 million, many would agree that an additional market of 200 million consumers with substantial buying power is worth pursuing.

The Needs of the Elderly Are Rapidly Increasing

Due to medical breakthroughs and improved diets, the elderly are living longer, healthier lives. As a result, this demographic group is becoming the fastest growing portion of the world’s population. In fact, through 2025, the number of those age 65 and over will more than double.

What does this mean for your business? As world populations shift, older age groups will make up an increasingly larger segment of the global market. As a result, travel and other leisure-related services, and purchases of second homes and furnishings will increase. This is likely to result in greater exports of U.S. products and services designed to satisfy these demands.

Governments Will Provide More Products and Services to the Elderly

In the past, caring for large elderly populations was primarily the concern of the demographically older societies of Europe, Japan and North America. Their governments have provided and subsidized health-related products and services, housing, etc., for vast numbers of people over the age of 80.

But due to spiraling costs, some countries have raised the age of retirement and abolished mandatory retirement ages. According to the Organization For Economic Cooperation and Development, Japan has raised ages of pension entitlement, the U.K. has done so for women, and the U.S. is gradually raising ages, while Italy and Sweden are improving incentives to keep employees working longer.

But by 2020, two-thirds of the world’s elderly will live in developing countries, with the greatest concentration in Asia. Consequently, these governments will need to divert an increasing portion of their social expenses to the elderly and expand government procurement programs.

The Median Age Is Increasing

As the population of the elderly has increased, the world’s child population growth rate has decreased. From 1998 through the year 2025, the number of children under age 15 and age 5 will increase by 6% and 5%, respectively. This is the result of lower fertility rates.

Not surprisingly, the largest increases of the dependent population, those under 15 and over 65 years of age, will live in developing countries. And the global population of those age 15 to 64, referred to as working age, will increase by 48% in developing countries and only 3% in developed countries over the next 20 years.

As children become a smaller proportion of the total population and older age groups become more dominant, the world’s median age — the midpoint that separates the younger half from the older half — also will rise. In 1996, the age was 26 years. By 2020, it will rise to 31. Thus, over the next quarter century, the median population age of every global region will rise.

What Implications Does this Have for Consumer Spending?

According to Harry S. Dent, Jr., author of The Roaring 2000s Investor, on average, Americans enter the workforce at age 19. They get married at age 25.5 (27 for men and 24 for women), bear their first children two years later, and purchase their first homes at age 33 or 34. They trade up to the largest homes they’ll own by 44, and fully furnish them by age 46.5 or 47.

Interestingly, the average American also reaches peak spending at age 46.5 or 47, the same time the kids leave home. Dent observes that empty-nest couples then spend more on vacation homes, travel and leisure. They also become prospects for investment services and products as they approach retirement age.

Since American consumer spending patterns are similar to those of other developed countries, it’s reasonable to assume that as the median age rises in those countries, consumer spending also will rise. Depending on your products or services, closely targeting these consumers may be a sound strategic decision.

Reassess Your Export Strategy

As world population centers shift, exporters and investors must reassess which markets to pursue. For some, this may mean targeting the growing needs of the elderly in developing countries. For others, it may result in providing goods and services to median age consumers in developed countries — where incomes are rapidly increasing.

To achieve your goals, it may be necessary to eliminate, redesign or add new product lines or services. But before acting, consider all your options and the long-term impact of each.

This article appeared in Impact Analysis, March 2002.
Topic: Strategies
Comment (0) Hits: 2167



The terrorist attacks of September 11th and the possibility of additional acts here and abroad have exposed U.S. economic vulnerability. To regain economic strength and protect against future danger, U.S. companies must determine:

 

  • If their existing global sources of supply are vulnerable to political and economic instability, and
  • The pace at which their buyers are likely to continue ordering.

 

Since no one can predict if or where additional terrorist actions may occur, the implications of civil unrest abroad, and the level of world economic growth, obtaining answers to these questions is difficult at best. Consequently, it’s important for companies to prepare for possible disruptions in their supply chains.

Are Your Sources of Supply at Risk?

In 2000, the United States imported $38.9 billion in goods from the Middle East. This represented only 3.2% of all U.S. imports. Although this may appear to be minimal, the Middle East is a major supplier of oil-related products to the United States, Europe and Japan. In fact, Saudi Arabia alone possesses over one-fourth of the world’s proven crude oil reserves. Disruptions in this oil supply could have a significant impact on industry, especially in Japan.

U.S. imports from the entire Asian continent reached $484.7 billion last year. This represented 40% of all U.S. imports. Terrorist actions in Asia could affect your sources of raw materials, components, and finished products.

Certain Shipping Lanes at Greater Risk

Highly traveled Asian and Middle Eastern shipping lanes are especially vulnerable to terrorist attacks. Proximity to terrorist groups alleged to be associated with Osama Bin Laden in Indonesia, Malaysia, the Philippines, and throughout the Middle East present dangers to regional ports as well.

Indonesia, which has a population of over 200 million people and the world’s largest Muslim concentration, is currently on the U.S. State Department’s travel warning list. Radical groups have threatened to attack U.S. interests and expel American citizens. The Strait of Malacca, a narrow and highly trafficked shipping lane between Malaysia and Indonesia, presents a particularly vulnerable point.

U.S.-Southeast Asian Trade Vulnerable

In 2000, Singapore and Malaysia were ranked as the United States’ 10th and 12th largest suppliers. These two, combined with Indonesia, India, and the Philippines, the United States’ 5th largest production sharing partner, accounted for U.S. merchandise imports of $80 billion.

Importers that receive their goods by ship should prepare for possible disruptions in the supply chain. As a result, a larger “just in case” inventory may be wiser than a smaller “just in time” one. And the situation may also call for importers to place orders sooner, accounting for additional security measures. However, since much of the goods imported by the United States from these countries include computers and electronics which are primarily shipped via air, sea lane disruptions will have less impact.

Will Buyers Keep on Buying and Paying?

According to the World Trade Organization, growth in world merchandise trade is anticipated to slow from 12% in 2000 to 2% in 2001. A steep decline in information technology expenditures is believed to be a major factor. This drop in economic activity is likely to negatively impact companies’ global export projections. Importantly, more businesses will find greater difficulty in paying their bills. Consequently, open accounts may need to be reassessed in favor of letters of credit or other more secure methods of payment.

It’s also important to consider currency volatility, an important factor affecting international receivables. Currency volatility can have a negative impact on country risk which, in turn, can affect a company’s ability to collect payments. In addition, potential terrorist actions in Southeast Asia may further depress U.S. exports there. Singapore, a major importer, ranked as the 10th largest U.S. market in 2000, following France. Top exports to Singapore include electronic components, aircraft and parts, laboratory, scientific and testing equipment, industrial process controls, electric power systems, telecommunications, pollution control and construction equipment. U.S. exporters of these and other goods to the region may consider pursuing additional markets to compensate for a potential downshift in buying patterns.

Furthermore, don’t underestimate the need to reassess the short and long-term stability factors of countries in which you have foreign subsidiaries or investments.

Costs of Doing Business Are Rising

Transportation and insurance costs are anticipated to increase because of security surcharges on cargo in a riskier business environment. In fact, some reports indicate an increase in property and casualty premiums of 12% to 30%, or higher in various cases.

Some insurance companies have even increased the number of countries subject to “war risk” surcharges. This means shipping lines must notify marine underwriters before their vessels move into designated waters, as these vessels may be subject to significant additional insurance premiums. Customers will most likely assume the additional cost.

And with the added time needed to satisfy new airline security requirements, coupled with many travelers’ fear of flying, business people are seeking alternative forms of travel. To reduce overseas travel, more companies are considering the use of videoconferencing.

U.S.-Jordan FTA: A Good Start

The U.S. Congress recently passed the U.S.-Jordan free trade agreement that was initiated during the Clinton administration. This makes Jordan the fourth country after Canada, Mexico, and Israel to enter a free trade accord with the United States. U.S.-Jordan trade is small. In 2000, the United States exported $313 million and imported $73 million for total two-way trade of $386 million. However, it sends an important message that opportunities exist for other Middle Eastern countries interested in such an accord.

This article appeared in Impact Analysis, November 2001.
Topic: Strategies
Comment (0) Hits: 6696



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