Presenter: Karen L. Kurek- National Manufacturing & Distribution Practice Leader, McGladrey LLP...

Presenter: Karen L. Kurek- National Manufacturing & Distribution Practice Leader, McGladrey LLP

MVITA World Trade Day- Sponsored by Battelle & Battelle

Outward bound: Global strategies and exporting

May 16, 2013

Source: Bureau of Economic Analysis, NAM calculations using Moody’s Analytics simulation model

2

Real gross domestic product(Chained 2005 dollars)

Source: Bureau of Economic Analysis3

Percentage growth in real GDP and contributions to real GDP of goods and services

Source: Bureau of Labor Statistics4

Employment situation

Source: Bureau of Labor Statistics

5

Manufacturing sectors with the largest net employment gains

Source: U.S. Census Bureau, National Association of Home Builders6

Housing market situation

Housing starts, permits (in thousands of units)

NAHB Housing Market Index

7

Global manufacturing output

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009

United States China (World Bank) Japan Germany Republic of Korea

Italy United Kingdom France India Mexico

How is that possible?

“But I never see any American products in the stores.

how can America be the world’s largest manufacturer?”

In 2010, U.S. factories produced $5.02 TRILLION of products, including:

- Chemicals, excl. Pharmaceuticals $526 Billion

- Computing Equipment $397 Billion

- Motor Vehicles $360 Billion

- Metal Products $327 Billion

- Industrial and Other Machinery $298 Billion

- Steel and Other Primary Metals $239 Billion

- Pharmaceuticals $186 Billion

- Plastics and Rubber Products $185 Billion

- Aircraft $147 Billion

- Electrical Equipment $115 Billion

9Source: U.S. Census Bureau

Source: Institute for Supply Management 10

ISM manufacturing indices

Manufacturers’ shipments, inventories and orders

New orders for manufactured goods in February increased $14.5 billion or 3.0 percent to $492.0 billion.

Shipments increased $4.3 billion or 0.9 percent to $489.3 billion.

Unfilled orders increased $9.3 billion or 0.9 percent to $999.7 billion.

Inventories increased $1.1 billion or 0.2 percent to $620.0 billion.

11Source: U.S. Department of Commerce – February 2013 – Census Bureau

Source: Bureau of Economic Analysis, 2011 Annual Input-Output Tables

13

U.S. manufacturing is the world’s most productive

14Source: McKinsey Global Institute

Manufacturing contributes to exports, innovation and productivity growth

Manufacturing and business R&D

Source: National Science Foundation

16

Manufacturing generates 2/3 of all U.S. exports

17

Made in America: The Top 10 Manufacturing Sectors that Export

Source: Business Insider - March 8, 2012 / Brookings

Transportation Equipment

Share of U.S. manufacturing exports: 18.5%

Share of manufacturing export growth: 17.0%

Total growth rate: 13.2%

Total revenue: $175.8 billion

The top 10 manufactured products in America's $2 trillion export industry

18Source: Business Insider - March 8, 2012 / Brookings

Chemicals

Share of U.S. manufacturing exports: 18%






Machinery







Computer and Electronic Products


Share of manufacturing export growth: 13%





Petroleum and Coal Products







Food







Primary Metal







Medical Equipment, Sporting Goods and Miscellaneous







Fabricated Metal Products







Electrical Equipment






27

0

40

80

120

160

200

240

2 4 6 8 10 12 14

Canada

Mexi

co

Chin

a

UK

Germ

any

Japan

Bra

zil

Kore

a

Neth

erlands

Bill

ions

of D

olla

rs

Sin

gapore

Fra

nce

Hong K

ong

Belg

ium

Taiw

an

Aust

ralia

15 ECONOMIES ACCOUNT FOR 75% OFU.S. EXPORTS OF MANUFACTURED GOODS

Half of major U.S. markets are developing economies

Source: Markit

PMI for Top 10 Export Markets

-800

-600

-400

-200

0

1998 2000 2002 2004 2006 2008 2010

U.S. TRADE BALANCE IN GOODSB

illio

ns

of D

olla

rs

Source: Census Bureau

The U.S. has a huge trade deficit…

29

. . . which many say was caused by NAFTA and other U.S. trade agreements.

30

-120

-80

-40

0

1998 2000 2002 2004 2006 2008 2010

MERCHANDISE TRADE BALANCE WITH U.S.FREE TRADE PARTNERS

Bill

ions

of D

olla

rs

Balance w ith the 17 countries w ith w hich the United Stateshas Free Trade Agreements


It is true there has been a large increase in the trade deficit with free trade partners

31

But the increase is because of our oil imports from NAFTA . . .

32

1/3 of U.S. worldwide energy imports come from NAFTA

-160

-120

-80

-40

0

90 92 94 96 98 00 02 04 06 08 10

U.S. ENERGY IMPORTS FROM NAFTA

Bill

ions

of D

olla

rs

Source: Foreign Trade Division, U.S. Census Bureau, NAICS 2111, 2121, 3241

. . . not because of a soaring deficit in manufactured goods

33

-300

-250

-200

-150

-100

-50

0

50

1998 2000 2002 2004 2006 2008 2010

MANUFACTURED GOODS DEFICITWITH FTA PARTNERS

Bill

ion

s o

f Do

llars


In fact, U.S. manufacturers have now enjoyed a SURPLUSwith free trade partners for three straight years

But we don’t have enoughfree trade agreements

U.S. free trade agreements cover only about 40 percent of manufactured good exports– about 45 percent once Columbia, Korea and Panama are in effect

U.S. manufacturers face trade barriers in almost 60 percent of our overseas market

34

Source: U.S. Department of Commerce

Exports and export markets

38Source: McGladrey Monitor- Fall 2011


40

Industry sectors in the upper-tier produce highly engineered products, thus enabling them to distinguish themselves in foreign markets from locally produced products.

Source: McGladrey Monitor- Fall 2011

Emerging Markets: Which are important today and tomorrow

Brazil is rising quickly as an export market and South America in general is high on the list for U.S. companies.

41


Perceived barriers to export trade for non-exporters


Top strategic priorities for exporting

43

Thriving and growing

Holding our own

Long-term market growth 54% 37%

Served specific customer demand/key customer asked

52% 57%

Strategic decision 40% 30%

Opportunistic reasons (can include networking introduction)

15% 17%

Began a joint venture 7% 0%


How to build an export strategy

44Source: 2011 Fall McGladrey Monitor

45

Exporting best practices

It starts with your customers Then be strategic

Leverage your advisors

Resources

Needs

Source: 2011 Fall McGladrey Monitor

Ensure you have the right resources in place

46

Exporting best practices

Level the international playing field for your company

Leverage industry and U.S. government resources

Know your foreign markets

Know my

fore

ign mark

ets

Local Regulations

Regulatory Issues

Advisor

Client

Source: 2011 Fall McGladrey Monitor

U.S. halfway to Obama administration's five-year export-doubling goal

Obama set the five-year target in his January 2010 State of the Union address with the 2009 exports of $1.57 trillion

As of 2012 they've climbed to a record of $2.19 trillion

This is about 48 percent of his goal - $3.14 trillion a year by the start of 2015

47

Obama tells his export advisory council the nation was "well on our way" to his five-year export-doubling goal.

Source: AP- April 4, 2013

Direct presence in a foreign market


Off-shore production by large companies


Offshore supply chain procurement

43 percent say that foreign sourcing for their supply chain will increase in the coming 18 months .Nearly 60 percent say they are not going to increase foreign sourcing in next 12-18 months.


Why the optimism toward a manufacturing comeback?

Cheap U.S. natural gas and other increased energy production are helping to power U.S. factories more efficiently, with gas especially providing inexpensive raw materials for U.S. manufacturers of plastics, tires, certain pharmaceuticals and other petrochemical products.

Higher wages in China and other foreign export markets are making outsourcing less profitable to U.S. firms.

Congressional approval in 2011 of trade agreements with South Korea, Colombia and Panama and other agreements being negotiated now with Asia and Europe are promising to open more foreign markets to U.S. products.

High U.S. unemployment is relieving pressure on factory owners to increase wages, helping to make U.S. labor costs more globally competitive.

Major technology advances have steadily boosted factory efficiency and worker productivity.

51Source: AP- April 4, 2013

Experience the power of being understood.SM

www.mcgladrey.com

52

Contact Me

53

Karen L. Kurek

National Industrial Products Practice Leader, McGladrey

[email protected]

mailto:[email protected]

McGladrey LLP is an Iowa limited liability partnership and the U.S. member firm of RSM International, a global network of independent accounting, tax and consulting firms. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. McGladrey®, the McGladrey logo, the McGladrey Classic logo, The power of being understood®, Power comes from being understood®, and Experience the power of being understood® are registered trademarks of McGladrey LLP. © 2013 McGladrey LLP. All Rights Reserved.

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Presenter: Karen L. Kurek- National Manufacturing & Distribution Practice Leader, McGladrey LLP...

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