Cross Border Trade to Keep Pace With Other Markets, Says Analyst
Luciana Suran, Senior Economist at CBRE EA
February 16, 2012
Are today’s shippers more likely to “go global” by starting in Canada and Mexico before exploring more far flung markets? According to one influential analyst, the answer is a resounding “yes.”
Luciana Suran, an economist with CB Richard Ellis Economic Advisors, a global real estate consultancy serving shippers with market intelligence on sourcing opportunities.
“Rising labor costs and unrest in China have in some cases made production in North America more competitive,” she told SCMR in an interview. She declined, however, to advise shippers to concentrate on cross border trade to the exclusion of shipping and sourcing elsewhere.
“When we talk of cross-border, we generally think of truck, rail, and intermodal,” she said. But shippers should be looking at sea and air options as well.”
According to Suran, air transport – while the most expensive option – is increasingly used by companies to save money.
“In some cases, companies can save money by flying in cargo to meet customer demand rather than spend the money warehousing their goods and distributing them throughout the U.S. and Canada,” she said. “Nike is a good example.”
At the same time, said Suran, shippers are becoming increasingly reliant on global trade management (GTM) systems in cross-border trade.
“While I don’t have exact numbers, we see that retailers are increasingly more likely to use software to manage their supply chains and inventories such as point-of-sale data to forecast stock replenishment and set pricing strategies,” said Suran.
As for a broader trade forecast, Suran shared observations made HSBC. Here are the highlights:
Overall global trade is projected to grow by $1 trillion year-on-year to 2015 despite the current global economic uncertainty
U.S. share of world trade will fall to 9 percent from 11.3 percent (2010) by 2025 even as total U.S. trade value continue to rise
China is expected to remain the U.S.‘s most important trading partner until at least 2025
China’s share of world trade will reach 13 percent by 2025 overtaking the U.S. as top exporting nation
- Vietnam is the fastest growing major U.S. trading partner
“And to end on a general observation on, we see cross border trade keeping pace with growth in overseas markets,” said Suran. “This means that U.S. seaports will need to upgrade their infrastructure and increase dredging to allow room for the larger ships once the Panama Canal’s expansion is completed in 2014.
Suran also suggested that the Caribbean Basin may be growing its infrastructure to become competitive with Mexico.
“Some U.S. sourcing sectors are looking into this,” she said. “It comes as a result of free trade agreements/trade preference programs, speed-to-market, and quality of infrastructure. Violence concerns on the U.S.-Mexico border have also been a cause of concern for manufacturers located there. But the auto and electronics companies that have established operations in Mexico will likely stay due to the high fixed costs associated with such operations.”
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