#ff00006Wisconsin Worldwide
#0000ffVolume 4, Issue 2: March 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’s 2002 Exports at Record Levels
• Export Markets

The Middle East and the Muslim World in Case of War -- Oil Prices and World Economic Growth

-- Canada Raises Interest Rates – Europeans Lower Interest Rates -- European Economic Slowdown -- Venezuela – Strike Ends, Problems Remain -- China Briefs --Thailand: Back on Track -- Jordan: War Fears & the Jordanian Economy -- Korea: Uncertainty

• Export News

-- Airlines/Tourism -- Mexico – A Convention in your Future? --Egyptian Pound Floated, Falls -- Mad Cow Disease & the Global Economy --Nigerian Scams: Latest Twist

• Export Events, Seminars & Conferences
• International Business Information on the Web
• Contact Us
• Subscribe/Unsubscribe

Wisconsin’s exports for 2002 were up 1.86% to $10,684,271,079. This new record exceeded the previous record year (2000) by $175.9 million. This was all the more significant given the fact that U.S. exports for 2002 declined 5.17% to $780.4 billion - some $87.2 billion below the U.S. record total for 2000. U.S. exports were particularly hurt by low global demand for high-tech goods such as semiconductors, computers and computer accessories.

Wisconsin export growth to China and India was significant, as were the declines in sales to troubled South American markets. Sales to our NAFTA partners remain strong while sales prospects to Western Europe look to improve in 2003 given the pricing advantages created by the fall in the value of the U.S. dollar against major European currencies. The Australian market remains strong and we think it’s time to take a fresh look at Eastern European countries which will be joining the EU as well as Russia - now the world’s largest oil producer.

#ff00004Exports by Commodity
Wisconsin exports of both industrial machinery ($3.6 billion) and instruments ($1.6 billion) set new records. Given the poor state of manufacturing worldwide, the 5.3% growth in Wisconsin industrial machinery in the face of an overall U.S. drop of 5.2% was particularly significant. Highlights included exports of over one billion dollars in internal combustion engines and engine parts. In recent years, Wisconsin has come to dominate U.S. exports of outboard marine engines with 86.8% of all U.S. exports. Outboard engine exports were up 11.8% to $172.6 million. Exports of automatic data processing equipment (+32.4%) and parts, up 32.4% and 7.3% respectively, recovered to $453.6 million. Almost all of our exports are now digital equipment. HVAC exports were down, as were most categories of material handling equipment.

Instrument exports rose for the 15^th straight year and now comprise almost 15% of all Wisconsin exports. Wisconsin is the 7^th largest exporter of scientific and medical instruments among U.S. states and leads the U.S. in exports of x-ray, electrocardiograph, MRI (46.7% of all U.S. exports) and computer tomography apparatus (65.7% of all U.S. exports). Wisconsin is closing in fast on Texas for second place in the export of electro-diagnostic apparatus. In the last five years, Wisconsin production of electro-diagnostic apparatus has risen from $94.2 million to $210.2 million - a jump of 123% and an increase from a 6.4% to an 11% share of total U.S. exports of such devices.

Wisconsin vehicle (+6.7%) and paper exports (+5.9%) recovered, while plastics exports remained flat. Electrical machinery sales, a manufacturing area that appears to be in rapid transition, were off a disappointing 13.4%. More significant, of the 25 top export commodities in this category, 11 showed gains and 14 showed loses and, overall, 17 of 25 showed changes of more than plus or minus 25%. The six major export categories covered above account for 72.9% of all Wisconsin exports.

#ff00004Exports by Major Geographic Markets
Exports to Canada recovered in 2002 (+4%) but are still below 1999/2000 levels. Strong gains in vehicle and medical instruments lead the recovery. Given the rise in the value of the Canadian dollar and the strong Canadian economy, the Canadian market looks very good for 2003.

Exports to Mexico were up by 7%, with double-digit gains in all major categories except industrial machinery, which fell by 12.9%. Paper and paperboard sales to Mexico are up 222% in the past two years to $85.1 million and are now our third largest export to Mexico. Plastic sales (+27.5%) rebounded sharply to 93.7% of the record levels set in 2000. Sales to the Caribbean remained flat. Exports to Central America were up 9.7% based on a 151.1% rise in industrial machinery sales. Unfortunately, exports in every other major industrial area showed declines.

Exports to all major markets in South America showed a sharp decline of –24.7%. Brazil, South America’s dominant economy, only grew by 1.5% in 2002 due to the devaluation of the local currency (i.e., the Brazilian Real devalued by 53% against the U.S. Dollar in 2002), high interest rates and the 2001 energy rationing, whose effects were still felt during the first six months in 2002. in 2002. Brazilian growth for 2003 is forecast at 2%. Both Wisconsin and U.S. exports to Brazil fell by approximately 22% in 2002, while overall Brazilian imports fell by 12.77%.

Exports to Japan were up 30.7% to an all-time record level of $957.7 million. However, this sharp rise can be explained by exceptionally large one-time shipments of piston engine spare parts to the new U.S. Marine supply depot on Okinawa. When shipments in this category are removed from the equation, exports to Japan decline by 2.4%.

Exports to China, our sixth largest market, were up 12.4% to $359 million. Twenty of our top twenty-five sectors showed gains. Two showed gains of less than 25%, seven showed gains of 25-50%, four showed gains of 50-100% and seven showed gains of over 100%. Elsewhere on the Pacific Rim, exports dropped to Korea (-2.7%), Hong Kong (-4.9%), Taiwan (-8.8%), Singapore (-8.1%), Malaysia (-4.4%) and the Philippines (-40.0%).

Australia remains a very good market with 5.6% growth. Exports in 2002 of $255.2 million surpassed the old 1999 record. Particularly strong growth was seen in areas such as outboard motors and lawnmowers. By contrast, exports to New Zealand were off 14.9%.

Exports to Western Europe overall were off 3.6%, but organic and inorganic chemicals and pharmaceuticals showed strong gains. Germany (+13%) showed strong gains in all areas except vehicles and electrical machinery where sharp drops occurred. Belgium was up 14.4% with good growth in industrial machinery and a sharp growth in motorcycles. By contrast, exports to the UK were off 9.9% while exports to Italy were off 6.6% primarily due to a fall in industrial machinery sales. Exports to France were off 7.1%, primarily due to lower sales of industrial machinery and instruments and a sharp fall in sales of motor vehicle parts. Despite impressive gains in industrial machinery (+17.6%) and instruments (+47%), exports to the Netherlands were off 9.3% due to sharp declines in shipments of essential oils, soybeans, and electrical machinery.

Exports to Eastern Europe were up 21.4% lead by Hungary, the Czech Republic, Russia, Romania and Slovakia. Exports to Poland were off sharply. Our impression is that there is good mid-term potential for Wisconsin firms in the region due to economic recovery, booming Russian oil exports and the expansion of the EU eastward. British Petroleum has recently committed to investing $6.75 billion in Russia, the largest foreign investment since the collapse of the Soviet Union.

India is one of Wisconsin’s fastest growing markets. Exports have grown 330% over the past five years to $124.6 million. Sales have increased every year and India is now our 16^th largest market.

Sales to the Middle East (-18.6%) and Africa (-21.3%) continued their decline. Wisconsin exports to the two regions now comprise less that 3.9% of all exports.

#ff00004The Middle East and the Muslim World in Case of War
Some thoughts if war breaks out:

-- Some Muslim countries may break diplomatic relations with the U.S. Understand that this may affect your travel insurance and the insurance you have on your goods. Check your war coverage clauses.

-- Be aware that some countries might choose to boycott U.S. goods or disavow contracts with U.S. firms. Are you exposed? Do you have goods in transit?

-- Remember that war will change the economic viability of many transactions, particularly in countries that are energy importers.

--Stay out of the Middle East and the Muslim world. If you do travel, check the State Department’s guidance (http://travel.state.gov/asafetripabroad.html and http://www.state.gov/travel/). Plan on extra time checking in at airports because of heightened security.

-- Keep a low profile and avoid obvious American-style dress. Use hotel cars or other registered vehicles. If possible, travel with known host country nationals in countries where tensions may be high.

-- Register at the U.S. Embassy or Consulate. Make sure family and office know your specific travel plans.

-- Rent a cell phone and know key local numbers (US Consulate, hotel, airlines, police). Make sure you have some traveler’s checks for emergency use. Stay out of public places and avoid political discussions.

-- Although we don’t expect you will face problems in Western Europe, you should know that the "911" number in Western Europe is 112 and can be dialed free of charge from phones including mobile phones. For a list of emergency numbers worldwide go to: http://www.healthcareland.com/sos/embassy_links.htm.

--Understand that U.S. actions will be misunderstood by many and that government officials in some countries will be less likely to give you the benefit of the doubt.

--Remember that in many countries "spontaneous" demonstrations are frequently tacitly sanctioned and in some cases openly organized and supported by the government. Don’t become a target of opportunity for highly agitated groups!

#ff00004Oil Prices and World Economic Growth
As we noted in our last edition, the overall impact of the rise of world oil prices to $40 a barrel is about a 1% decline in overall world growth. As a rule of thumb, a $5 rise in the price of a barrel of oil translates to about a half-percent fall in world economic growth. Imported oil is responsible for $93.2 billion - or just over 20% - of our record 2002 trade deficit. A rise in oil prices also means increased inflation and less money in the pockets of your customers, particularly customers with high energy bills.

Any sharp spike in world oil prices would have the most impact on major oil importing nations such as the U.S., Germany, France and Japan and on least developed country importers. In the past, the economic impact of a major rise in oil prices has been devastating and destabilizing for least- developed countries that must import oil and traditionally lack hard currency. For example, the price spikes of 1973 were the direct cause of the overthrow of Ethiopian Emperor Haille Selaisse.

On the other hand, a sharp rise in oil prices places very large sums in the hands of the world’s exporters. Russia, by the way, has surpassed Saudi Arabia as the world’s largest producer, but trails Saudi Arabia as the world’s largest exporter. Important non-Middle East exporters include Nigeria, Venezuela, Canada, Mexico, Norway and the UK. Based on potential increases in oil revenues, business climate and political factors, the most logical choices for increased export sales are Canada, Mexico, Norway, the UK and Russia. Oddly, the largest market for Iraqi crude is the United States, with almost half of all Iraqi production in 2001 destined for the U.S.

#ff00004Canada Raises Interest Rates
On March 4, the Bank of Canada raised its key overnight interest rate from 2.75 to 3% in view of persistent above-target inflation rates. Canadian Commercial banks promptly raised their prime lending rates from 4.5 to 4.75%. Canada’s overnight rate is now 1.75% above the U.S. rate. The Canadian dollar promptly reacted to the news by strengthening to a two-and-a-half- year high. Expectations are that the Canadian dollar will continue to strengthen and thus continue to make our products more cost competitive in Canada. As of March 4, 2003, the value of the Canadian dollar has fallen 8.4% since the all-time record high of 1.61.28 to the dollar on January 18, 2002.

#ff00004

Europeans Lower Interest Rates

There are two important trends to note in Western Europe. The first is the weakening of the U.S. dollar vis-a-vis Western European currencies, which has the net effect of making our products cheaper to European buyers. In early March the Euro rose to 1.10 to the dollar, the highest point since March 13, 1999 two months after the introduction of the then new currency. This is a 10% rise since last November.

The second important trend is the slowdown in most Western European economies. EU core countries are at or near recession while the UK and Irish economies - particularly their manufacturing sectors - are slowing. Also note that Western European economies other that the UK and Norway are oil importers and would be badly hurt by oil prices surges and/or shortages.

Accordingly, on March 6 the European Central Bank cut interest rates by a quarter-point to 2.5%. This was quickly followed by an announcement by the Swiss National Bank that it was cutting interest rates by a half percentage point, also to a new rate of 2.5%. UK interest rates were cut in February by a quarter point to 3.75% given the prospects of lower domestic and international demand and the lowest UK growth rates in over a decade.

#ff00004European Economic slowdown
Germany’s economy grew by only 0.2% in 2002, the slowest since 1993. Private consumption fell by 0.5% and unemployment, now at a four-year high of 11.3%, is expected to rise. We expect that mid-year statistics will show that Germany fell into a slight recession in the first quarter of 2003.

The Swiss economy is projected to grow by only 0.75% this year with most growth expected in the second half of the year. Growth in 2002 was only 0.1% with equipment purchases dropping by 13%.

France is also in the midst of a rapid slowdown in economic growth. Last year, GDP expanded only 1.2%, falling to only 0.2% in the final quarter of the year.

In February, the Bank of England lowered growth forecasts from 3% to 2.5% and warned that war would put "further pressures" on the economy. We interpret this to mean that UK growth will be more in the neighborhood of 1.5%. Manufacturing output fell by 4% in 2002 and is in its worst recession since the early 1990’s. On the bright side, unemployment is presently at a 27 year low.

The Irish economy, the Celtic tiger, has been hit hard by the worldwide high-tech meltdown but still has some teeth. Growth is down to about 3%, unemployment has risen to 4.6% (still low by European standards), and inflation is at 5.6% and rising.

The Dutch economy has been stunned by the news that food conglomerate Royal Ahold, the largest food distributor in the world was found to have inflated its earnings by at least $500 million. The company’s share values plunged 65%, wiping out more than $5 billion in value. Standard & Poor’s has downgraded Ahold’s long-term bond rating to junk status.

#ff00004Venezuela: Strike Ends, Problems Remain
Although the general strike in Venezuela ended after two months and petroleum production is returning to normal, the political situation in Venezuela remains very tense. Rising oil prices will be helpful to the Chavez government. In February, the Government established foreign exchange controls and made clear that members of the business community who supported strikers would find it difficult to obtain hard currency. You may wish to talk to your representative in Venezuela about their status.

#ff00004China Briefs
As of May 1 manufacturers in 132 product categories will be excluded from the Chinese market unless they obtain the new China Compulsory Certification Mark. For specifics, go to www.mac.doc.gov/China?Docs/Business Guides/cccguide.htm. We will be co-sponsoring a half-day workshop on the morning of March 27 at the UW Madison’s Fluno Center on the new regulations. For further information or to register go to: http://www.commerce.state.wi.us/IE/IE-MITA.html.

In 2002 China imported 4.26 million tons of paper pulp to become the world’s largest importer. China also imported 6.33 million tons of paper and paperboard. Good opportunities also exist for paper machinery and environmental equipment for the paper industry.

While most Asian consumers are pessimistic about the current economic climate, Chinese consumers are bullish about the future. A recent study by MasterCard rated the Chinese confidence index as the highest in Asia (84.4) as opposed to 73.6 a year ago. Foreign investment in China in 2002 was a record $52.7 billion and China may soon surpass the United States as the world’s largest recipient of foreign investment.

In the past 20 years, more than 100 million Chinese have moved from the countryside into big cities and manufacturing zones. An estimated 200 million additional Chinese are expected to move to cities in the decade between 2000 and 2010. This exodus is one of the most dramatic migrations in history and means that labor costs are unlikely to rise sharply in the near future. At present only about 30% of Chinese are urbanized as opposed to 80% of Americans.

#ff00004Thailand: Back on Track
By all accounts, the Thai economy has fully recovered from its collapse in the 1997-1998 Asian financial crisis. The Thai Government expects to finish repaying the $17.2 billion it borrowed from the IMF during the crisis this July. Consumer confidence is at a record high and economic growth is at 5%. Foreign reserves are strong and the country is running steady balance of payments surpluses. Local interest rates are low and consumer spending is high. Remember, however, that Thailand depends almost completely on imported oil and continued economic success will depend in major part on world oil prices.

#ff00004Jordan: War Fears and the Jordanian Economy
Jordanian Government experts have warned that a war with Iraq could have disastrous impacts on the Jordanian economy. They estimate that the disruption of Iraqi oil flows to Jordan (Jordan presently gets 5 million tons of oil from Iraq annually, half of it free of charge and half at concessional rates) would raise the government’s deficit by $700 million, disrupt the transportation sector, further cripple the tourism industry and severely impact Jordan’s ability to attract new foreign investment.

#ff00004Korea:Uncertainty
In mid-January, the Kookmin Bank, Korea’s biggest lender postponed an $850 million overseas bond sale because many investors were demanding higher yields to compensate for what are being called "Korean-related risks". In early February, Moody’s changed its rating on South Korea from "Positive" to "Negative" in large part due to uncertainty about future events on the Korean Peninsula. Part of the uncertainty is also based on fears over the policies of the new South Korean Government headed by President Roh Moo Hyun. Investors will likely stay spooked until the situation vis-a-vis North Korea calms.

#ff00004Airlines/Tourism
United Airlines reported a record loss of $3.2 billion in 2002 after filing for Chapter 11 bankruptcy protection in December. AMR, the parent of American Airlines reported a loss of $3.5 billion for 2002 – the largest annual loss in aviation history. In Europe, Air Liberty, France’s second largest carrier, filed for bankruptcy in February.

Worldwide, the tourism slump continues with no upturn expected before 2005. An estimated 6.6 million people in the tourism industry - or one out of every twelve workers - lost their jobs in 2001-2002. U.S. tourism revenues remain below 2000 levels and are still 30% below pre- September 11 levels.

On a more positive note, China Airlines, Taiwan’s largest carrier made history on January 26 by becoming the first Taiwanese carrier to land in Mainland China in over 50 years. The flight to Shanghai via Hong Kong reflects in part the growing links between Taiwan and the mainland. Taiwanese have invested over $100 billion in China and there are about a half-million Taiwanese on the Mainland on any given day. A very heavy concentration of this number is in Shanghai. Reflecting the times, the pilot for this historic flight was Chun Pei-pei, a woman.

#ff00004Mexico: A Convention in Your Future?
The Mexican government has announced that, starting in 2004, convention meeting space and guestrooms will be exempt from the 15% federal value added tax.

#ff00004Egyptian Pound Floated, Falls
On January 28 the Egyptian Government announced that it was abandoning its peg of the Egyptian pound and would allow it to float. The pound promptly fell from about 2.16 to about 1.8 to the dollar a drop of 16.7%. Egypt’s economic problems have been compounded by the sharp fall in tourism to the region in the face of September 11, the renewal of the Palestinian Intifada and the threat of war in Iraq.

#ff00004Mad Cow Disease & the Global Economy
Lest you fail to understand the realities of chaos theory and of global markets interlocked by instantaneous communications, reflect on the following. Wisconsin exports of beef were off 33.7% in 2002. Wisconsin’s major markets in 2001 were the rapidly growing Japanese and Korean markets. Because of the worldwide publicity about mad cow disease and foot and mouth disease, consumers in the two Asian countries stopped buying beef – even though the U.S. is free of both diseases. As a result, Snowbrands, Japan’s largest beef importer collapsed. Subsequently, Wisconsin’s Packerland Packing was forced to abandon the high value-added Asian market and was sold to Smithfield Foods of Virginia.

#ff00004Nigerian Scams: the Latest Twist
The most recent scams perpetrated by Nigerian (and other West African) scam artists involves their penetration into call centers employed by UK banks where they have access to account information which can be used to defraud customers. In the UK case, customers are issued secure passwords by their banks, but incoming telephone calls to the banks to make "secure" transactions are not handled by the banks but by contract call centers. Information obtained by gang members who have infiltrated into these call centers is then used by other members to gain access to customer accounts and drain funds.

8^th China International Environmental Protection Exhibition & Conference. June 5-8, 2003 - Beijing, China
CIEPEC 2001 had more than 50,000 visitors, 800 exhibiting companies, and 43 seminars. Wastewater and hazardous waste treatment, environmental monitoring, ecological conservation & agriculture, infrastructure, and more.

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/.

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.

March 13 Selling, Sourcing and Siting in China. Milwaukee Marriott West. Contact Diana Rowinski of the International Credit Executives Group at diannr@nacmwi.org or telephone (262) 827-2880 X225.

March 24 Northeast Wisconsin International Trade Conference, KI Convention Center, Green Bay. For information go to: http://www.weda.org/pdf/IntnlConference.pdf

March 27 China Certification Seminar (see our article on China!)

April 8 WWTC 15th Annual Meeting & Fundraiser, The Pfister Hotel, 5:30 p.m. - Keynote speaker: Mr. Jeffrey Bleustein, Chairman & CEO of Harley Davidson, Inc. In addition a silent auction, ethnic cuisine, cultural entertainment and more. Contact Craig Stevenson at 414-274-3840Arial.

May 12-16 Annual visit to Wisconsin by our trade directors worldwide. Contact jwinner@commerce.state.wi.us if your are interested in an appointment.

May 13 International Trade Day, Milwaukee

June 12-15 Europe 2003, UW Madison’s second international alumni conference in Oslo, Norway.

#ff00005International Business Information on the Web
The Canadian Government has placed on-line a new and improved version of the Canadian Importers Database. This product provides lists of the companies (with their geographical locations) importing goods into Canada. These data are compiled from customs documentation filled out by importers in the year 2001. The directory provides you with the ability to find which companies are importing a given product into Canada and to identify the top importers in any given Canadian city or nationwide. You also now have the ability to identify the top importers for a given product by country of origin. To use the directory, go to: http://strategis.ic.gc.ca/sc_mrkti/cid/engdoc/index.html?he=1

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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