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OCR for page 62
TRENDS IN WORLD TRADE:
IMPLICATIONS FOR
U.S. MARINE TERMINALS
RICHARD KING
The subject of this address is the competitive climate of interna-
tional trade, the role of Pacific Basin countries in this competitive
atmosphere, the role of the U.S. market, and strategies to main-
tain the U.S. competitive position in the home market. To cover
this subject it is necessary to discuss as well the export and import
factors that industries face, the tactics that foreign governments
and companies adopt to compete, and trends in trade through the
next 5 years.
TRENDS IN INTERNATIONAL TRADE
The international business environment is going to be far more
uncertain and far more competitive in the future than it was in
the past. IYade between the United States and its competitors
in the European Common Market and Japan will grow much
more intense; there will be more conflict and antagonism among
Richard King, who presented this keynote address at the symposium, is
president of Richard King International, advisers to American and foreign
executives on international business strategies, with emphasis on the Pacific
Basin.
62
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63
trading partners because of trade imbalances. Real trade imbal-
ances will be compounded by political perceptions of unfair trade
practices. Europeans and Americans in particular are entering
an era of retaliatory practices. Some very important industries
that affect marine terminal operations and affect my business as a
consultant for example, agriculture, aerospace, and computers-
are going to have a tough time in Europe this year because of
retaliatory trade practices.
There will also be increased friction in Asia and the Pacific.
These conflicts are escalating today because, in my opinion, the
United States is trying to increase protection of its domestic mar-
kets. At the same time the Asian nations are still pushing their
exports to carry their own economies. A decline in the value of the
dollar against the yen will help to an extent to lessen competition,
but it does not offer a long-term solution.
Another trend in international trade is likely to be decreased
tracle between the less-developed and the developed countries,
primarily in basic commodities and natural resources. Despite the
fact that the less-developed countries need to earn export revenues
to service debts, these particular markets are becoming saturated.
It's happening already in oil, tin, rubber, and other areas. Prices
are down; it's a very unstable situation.
The newly industrialized countries Hong Kong, Taiwan, Sin-
gapore, and Korea have had greater access to U.S. markets in
the past. They still have great access to European markets, but
they're going to have to restructure their own strategies to make
up for the protectionism sentiment that will hit them in their basic
commodities.
What does all this mean to U.S. industries? We are moving
into an era of "managed trade. There will be more voluntary
agreements concerning trading practices as opposed to unilateral
protectionism. There will be many more bilateral agreements be-
tween countries, with respect to specific products and services. A
bilateral free-trade-zone agreement was concluded last year with
Israel. Similar arrangements are under discussion with Canada
and with Mexico and other Latin American countries. Other bi-
lateral talks are under way concerning trade in specific products
and services. At the same time, the general system of interna-
tional trading practices and preferences embodied in the General
Agreement on Tariffs and Trade (GATT) is under review.
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64
While all of these things are going on at the government-to-
government level, at the business level countries are seeking to
take advantage of comparative advantages by means of bilateral
agreements and unilateral trading practices.
So, at one level we have a lot of talk about a new GATT round,
new international trade associations, and new international trade
agreements. At another level, countries are working bilaterally to
get the best deals they can before new international regulations
go into effect.
There are important developments in international finance as
well. In less than 3 years, Japan has become the world's leading
creditor, and the United States has become the world's leading
debtor. It is likely that countries are going to continue to borrow at
record rates. The United States will have to find new mechanisms
to finance that debt. Deliberate development of countertrade of-
fers a partial alternative to increased debt. The implications of a
countertrade strategy for marine terminals would be better baI-
ance between eastbound and westbound cargoes.
Another element of countertrade is being asked to take back
products and services in lieu of credit or currency. Very few Amer-
icans know much about countertrade, yet the Japanese, Chinese,
and Europeans have been doing it for centuries. U.S. companies
will have to learn rapidly how to do business on a countertrade
basis and to make a profit in doing so. Some of the huge markets
for U.S. firms in the years ahead, such as China, Mexico, Brazil,
Indonesia, and India, have very little cash to pay for what they
need, so they're going to insist on countertrade.
THE ROLE OF THE U.S. ECONOMY
IN THE WORLD TRADING SYSTEM
With this understanding of trends in international trade, I
would like next to review the role of the U.S. economy in the
world trading system. There's a trend in the United States to slow
down exports from the rest of the world. This has come about as
a result of readjustments in primary industries and as a response
to political protectionism. Those most likely to get hurt by this
are the high-volume, successful exporters in textiles, automobiles,
and other areas. The facts of life are that the U.S. market simply
cannot sustain the growth of these imported products.
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65
The U.S. economy must respond to this with structural changes.
New coproduction arrangements are already being pursued to give
importers a domestic production base. This, in turn, will affect
the character of trade passing through U.S. marine terminals.
There will be more offshore sourcing to the U.S. market through
Canada or through joint ventures. The United States will remain
the strongest market in the world for the foreseeable future, but
the way the product is brought into the market from other parts
of the world is changing. There is an unprecedented movement
toward mergers in transportation as well as in manufacturing.
Resulting economies of scale are already being realized in ocean
freight transportation.
The diversification and merger of U.S. companies will more and
more reflect a response to international and global strategy. We're
going to see American companies become more global in their
competitiveness. There will be more joint ventures and licensing
agreements between U.S. companies and foreign companies. To
an ever greater extent, U.S. companies will target specific interna-
tional markets and go after them with full resources.
The years ahead in international trade will be an era of inter-
nationalization. No longer can an American company compete in
a foreign market by just being an American factory and export-
ing its product. Position is becoming more and more important.
Decisions about labor, sourcing, plant location, transportation,
delivery, and distribution are being made on a global versus local
basis. A recent example involves a sewing machine manufacturing
business that spent a year looking at where a new plant should
be. It wound up with a manufacturing facility in Taiwan, em-
ploying Chinese and other labor, shipping to Asia and other parts
of the Pacific Basin, and finally reassembling in other countries
and shipping to the United States. The resulting product is very
competitive in the United States. So, truly, it is a globalization of
industry.
INTERNATIONAL TRADE IN THE PACIFIC BASIN
The Pacific Basin is probably the most exciting story in inter-
national business in the twentieth century. Over the last 5 or 7
years, the economies of the newly industrialized countries of the
Pacific Basin have grown 6 to 9 percent annually. California is an
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66
integral part of the Pacific Basin; in fact, California is the fourth
largest market in the Pacific, based on gross state product.
However, the tremendous growth rates of the Pacific Basin are
a thing of the past. Gross national product (GNP) growth in the
newly industrialized countries is likely to be 3 or 4 percent at best,
in some cases less. This slower, though still vibrant and highly
competitive, growth will force more selective investments. Japan
is likely to continue its strong growth, albeit with greater interna-
tional responsibility. Japan has finally realized that the status of
economic superpower comes with international responsibilities for
economic stability. Japanese overseas investment will increase as
an expression of this. Another development is that the Japanese
domestic market will be opened to a greater extent.
Hong Kong will continue to prosper as a regional center of trade.
The big news for Hong Kong and for all of us dealing in that trade
is the gateway to China. It appears that it's going to be business
as usual for 50 years after 1997. More important for world trade,
perhaps, is the influence of Hong Kong on the People's Republic
of China. That's going to be a very exciting commercial window.
European ant! American firms are going to increase their activities
and investment in Hong Kong. Hong Kong will continue as a
center of operations for East Asia and China.
Singapore has some current economic problems. High energy
costs, demand for high technology, and overbuilding have all hit
Singapore at once. Singapore will, in time, solve its current diffi-
culties. Its economy will be diversified, so growth will resume.
Those Pacific Basin countries who will have a tough time ad-
justing in 1986 and 1987 are the heavy commodity exporters:
Indonesia, Thailand, and Malaysia. Protectionism will hurt them
first. They're going to respond by looking for strong, bilateral
agreements between the United States and Europe.
To summarize, the Pacific Basin looks ahead at continued fast
growth, but the pace of growth will slow, particularly in electron-
ics, textiles, and basic manufacturing.
GOVERNMENT POLICY IMPACT ON WORLD TRADE
Changes in government policy affect international trade. U.S.
trade policies are becoming more aggressive. We're going to see
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many more efforts to support U.S. industries to be more competi-
tive, but ~ don't know if that's going to increase trade very much.
~ used to say I'm a free trader, but ~ finally realized there's no such
thing as free trade. Today I'm a fair trader. There's a tremendous
weight of protectionism in this country, which adversely affects in-
ternational trade. Those of us involved in international trade need
to do more to educate our national leaders on the importance of
fair trade.
CORPORATE STRATEGIES
What strategies are American companies adopting to compete
in the world economy? Joint ventures are increasingly important.
Companies are searching for imaginative ways to amass resources.
Industries, from auto to steel, chemicals to computers, have gone
global. Many American firms now are joining with Japanese or
European firms to work in yet another region of the globe. We're
going to see more of this important development.
There will also be a second wave of investment by Pacific Basin
countries in the U.S. economy. The large companies are already
here. Smaller companies with revenues of $100 million to $500
million are following. These companies want to establish a mar-
keting base. They want to take advantage of the research and
technological capabilities available in the United States, as well as
our educational resources. Accompanying these developments is a
trend towards the globalization of financing.
American executives have to cope with the internationalization
of the marketplace. This will involve:
. designing products for the broadest possible international
market acceptance;
. choosing marketing and manufacturing strategies that
combine worldwide least cost with best access to resources and
technology;
. choosing financial strategies that spread risk across countries
and include the ability to raise capital on a global basis;
~ using a worldwide work force that makes best use of com-
parative costs and technical expertise; and
~ developing global distribution systems and information net-
works.
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American executives, American companies, and the American
government must react to the new realities of international compe-
tition. The responses to those realities demand creative solutions.
Our ports must be built to provide best service over the long
run. We cannot return to a period of encouraging trade growth
by encouraging imports and exports. We must welcome foreign
investment, cater to joint ventures, look at the effect of user fees
and import surcharges on ports and international trade, and ask
ourselves, "Is this good policy in the long run?" The answers will
not come easily. We all must do our part.
Representative terms from entire chapter:
pacific basin
