10 Bellwether Trends in International Trade
Here are 10 trends in international trade with high potential to change the course of U.S. import-export trade in the year ahead.
1. Shifting Currents in Global Energy Flows
The lifting of restrictions on U.S. oil exports together with the shale revolution have altered global flows of fossil-based fuels and recast the U.S. as an energy exporter after an era of dependence on imports. While the remaining a net importer of crude oil (HS270900), the U.S. is a net exporter of petroleum distillates (HS271019) and light oils (HS271012). The trade data through October 2017 shows U.S. liquefied natural gas (HS271111) exports surging 390% in value and 410% in volume year-over-year – thanks to four Sabine Pass liquefaction trains ramping up on the Gulf Coast, according to Platts. The domestic availability of shale-sourced feedstocks has also spurred investment in U.S. plastics production – as our blog reports. As more production comes on line in 2018, exports of such petrochemical-based plastics as PET (polyethylene terephthalate) are expected to climb.
2. China Pursuing a New Agenda
The world’s No. 2 economy and the United States’ No. 1 trading partner, China has chosen 2018 to launch a three-year campaign of “critical battles” against debt, poverty and pollution. Meanwhile, at December’s World Trade Organization meeting in Buenos Aires, the U.S., European Union and Japan agreed to target excess capacity in key industries and called for curbs on state financing, Bloomberg reports.
3. Renegotiating NAFTA
Last August, the U.S. Trade Representative laid out the Trump administration’s objectives in renegotiating the North American Free Trade Agreement with U.S. partners Canada and Mexico [see our blog’s summary]. As Reuters reports, the partners have vowed to continue talks through March, with negotiators under pressure to resolve differences before Mexico’s 2018 presidential campaign begins in the spring. Other U.S. FTAs will also be in play. Talks on amending the six-year-old U.S.-South Korea FTA began January 5.
4. U.S. International Trade Administration Taking the Initiative in AD/CVD Inquiries
The Commerce Department’s International Trade Administration (ITA) dusted off an enforcement power last used in 1991 and self-initiated International Trade Commission (ITC) antidumping and countervailing duty (AD/CVD) investigations into common alloy aluminum sheet from China on November 28. These inquiries are commonly opened in response to petitions by domestic industry representatives. The ITA-initiated cases brought the year-to-date total of new AD/CVD investigations to 79 – a 65% increase from 48 in the previous year. Commerce Secretary Wilbur Ross has promised stepped up enforcement of trade laws, including self-initiated ITC cases. We expect the list of AD and CVD orders in force, currently numbering 412, to lengthen in 2018.
5. Rising Protectionism (Or Is It?)
The U.S. is not alone in pushing back imports that threaten domestic industry by applying tariffs. Customs regimes are tools of national economic policy, and every national market and trade bloc has one. [For a sense of the extent and scope of classification and tariff-related changes, browse the Descartes CustomsInfo blog.] While warning against rising protectionism, the World Trade Organization reported encouraging news in December: WTO members showed restraint in trade restriction, introducing fewer new measures from mid-October 2016 to mid-October 2017 compared with the same period a year earlier.
6. Governments Employing Sanctions as Instruments of Diplomacy
Economic sanctions are increasingly being used by governments around the world to achieve diplomatic ends. The U.S. wound down 2017 by imposing new sanctions aimed at North Korea and implementing the Global Magnitsky Human Rights Accountability Act authorizing Treasury sanctions against malign actors worldwide. Barely a week into the new year, the U.S. has added five Iran-based entities (January 4) and four Venezuelan individuals (January 5) to the Office of Foreign Assets Control (OFAC) sanctions list. Large fines were issued in 2017 for sanctions violations according to our whitepaper that covers how sanctions are created.
7. Electric Vehicles Driving Demand for Li-Ion Battery Metals
Investors are betting that demand for electric vehicles and the lithium-ion batteries that make EVs go will continue to drive up the value of metals used in their manufacture, as the Wall Street Journal reports. The counter position is that key supplies will rise to meet demand and eventually lower prices. Our blog has followed lithium – the “white petroleum” that fuels EV batteries. We’ll be watching cobalt, copper and nickel supply/demand in 2018. But note that gas guzzlers are far from obsolete. Our U.S. import-export commodities ranking reports (regularly posted to our free report library) tracked the rise of last year’s best performing metal, palladium, a key ingredient in catalytic converters for gas-fueled cars.
8. U.S. Ports Pushing the Limits of Space
U.S. ports handled 7.8% more import TEUs (20-foot-equivalent units) during the 2017 peak shipping season than the same period a year earlier. The three-month run-up to the year-end holidays broke volume records, surpassing two million TEUs in August and in October. The pace of growth is likely to slacken in 2018 but, driven by neopanamax ships, volumes are expected to continue rising. With many unable to build out, ports are competing with projects and strategies that maximize use of the space they have (as Descartes SVP Brendan McCahill described in Supply Chain Management Review).
9. Carrier Alliances Aweigh! NVOCCs Taking on Bigger Share
Oceangoing transport will be feeling the full effect of carrier alliances launched last year in the year ahead. Globally, shipping consolidation pushed the combined capacity share operated by the top 10 carriers to a record 77% in 2017, according to Alphaliner, as reported in World Maritime News. Meanwhile, our preliminary maritime data indicates that NVOCCs (non-vessel-operating common carriers) handled 39.1% of U.S. import TEUs arriving at U.S. ports in 2017, edging past the 38.8% share achieved in 2016. More shippers are expected to outsource more logistics in 2018. Rule changes proposed by the Federal Maritime Commission will make it easier for NVOCCs to offer negotiated service arrangements (NSAs) and negotiated rate arrangements (NRAs) to beneficial cargo owners.
10. Keeping a Weather Eye out for Trade Disruptors
Inevitably, there will be disruptions in established trade patterns in 2018, no less than in 2017. Whether the cause is a government wielding trade sanctions or Mother Nature unleashing her destructive power, a game-changing new technology or an economic melt-down, there will surely be shifts in market demand and interruptions in the flow of goods. Our global trade content solutions can supply early indicators of emerging trends in international trade, timely notice of new market or regulatory conditions, reliable measures of the effects of disruption, and solid intelligence on which to build strategies for recovery, resilience and resurgence. To learn more about our global trade content, just ask us.
Date posted: January 10, 2018