Global trade banker spotlights latest trends
Business operators attending the World Trade Week 2009 Business Conference in Grand Rapids this morning heard something many undoubtedly already know: "Everybody's looking for working capital," and "lending is down worldwide."
But Martha I. Gabrielse, vice president of JP Morgan's Global Trade Services and the source of those comments, also delivered some fresh news — the top trading trends for 2009.
Mitigation of supply chain risk will receive increased focus this year due to several reasons: supplier financial risk; volatility in costs of energy, commodities, labor and in currency exchange; and the general inability for anyone to predict confidently if and when the economy is recovering.
"Currency markets are doing crazy things," said Gabrielse. Meanwhile, inventory levels are coming down, companies are tightening up their supply chain partnerships and ship dates are frequently being pushed back.
One thing being seen much more often now is the use of traditional letters of credit to facilitate financing of international trade.
Many companies are shortening the supply chain between producers and consumers.
"We've seen an up tick in people coming back to Mexico to produce," said Gabrielse.
There are more than 200 free trade agreements in place around the world, but with the new administration in Washington, there has been speculation about the future of FTAs.
"I think it's going to be a quiet year," said Gabrielse in regard to Washington. Now it is "hunker down time" with few industries seeking new partnerships abroad.
Meanwhile, China is clamping down on its oversight. The Chinese government's State Administration of Foreign Exchange has increased banking oversight and regulations. For instance, a foreign customer must pay a Chinese supplier in the customer's native currency, which Gabrielse said is "a symptom of a very controlling Central Bank" in China.
China also requires guarantees by foreign customers that they will pay Chinese suppliers in full, which Gabrielse described as a "non-tariff trade barrier."
Some of the new trends originate here, such as the amended Lacey Act which makes the U.S. the first country to prohibit the import, export, sale or trade of illegally harvested wood and wood products.
The U.S. also recently enacted the Consumer Product Safety Improvement Act, with new regulations affecting certain manufacturers and importers.
"That's not going away," said Gabrielse, due to the reaction of American consumers to Chinese products that were found to be unsafe.
For more coverage of World Trade Week 2009 activities, including a profile on Wolverine Worldwide Inc., the World Trader of the Year award recipient, see Monday’s Grand Rapids Business Journal.