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   Vol. 16 No. 28
Wednesday March 22, 2017

Trump Across The Pacific

Abe & The Donald supped at Mar-A-Lago. President Donald Trump, second from right, sat down to dinner with Japanese Prime Minister Shinzo Abe, second from left, in Palm Beach, Florida, last month.
The same type of meet & greet is planned with Chinese President Xi Jinping next month in the same place as the U.S. moves to lower the temperature in Asia trade and politics.
In the meantime, the rest of Asia waits.


     The Trump Presidency and, more specifically, what it means for trade and logistics, is befuddling analysts and industry insiders. Investors in U.S. stock markets seem certain that a pro-business government determined to boost exports, employment, and manufacturing and increase spending on infrastructure will benefit transport demand across the modes.

Viewing TPP Exit

      But for many, pulling out of the Trans-Pacific Partnership (TPP) was an open invitation from the U.S. for China to take its mantle as the leader of global trade policy. And policies (and tweets) that create uncertainty about the U.S.-EU relationship and the future of NAFTA, and raise the possibility of a trade war with China, are treated with incomprehension.
      “There are a lot of mixed messages,” said one regional trade association president who requested anonymity. “But when people aren’t laughing at this Presidency and its almost daily crises, they are very concerned.
      “It’s hard to factor in the risk of U.S. policy and how it will apply to global trade practices when it seems that policy is being made on the hoof. A lot of our members also have concerns about security and how this might impact trade flows and the political environment.
      “And no one really understands how the U.S. could benefit from taking on China in a trade war. It would just increase prices of consumer goods in the U.S.”

 

Peeking Through Fingers

      A leading forwarder based in Europe said he was watching the Trump Presidency “through his fingers.”
      “It’s painful to see. We manage a lot of Europe-U.S. business by air and sea, and our customers really don’t know what to make of it, or how to plan ahead and incorporate political risk into their supply chains. It’s a case of looking at all the many twists and turns that could be taken by this administration and then hoping for the best but preparing for the worst.”

 

Trying To Focus

      Ocean shipping analyst Drewry said it was hard to analyze the new administration’s trade intentions at this early stage, but predicted Trump would continue to make protectionist anti-FTA noises (digitally and verbally), and that the U.S. would backtrack from entering into any broad agreements like the Transatlantic Trade and Investment Partnership (TTIP).

 

No Shots Through The Foot

      However, Drewry said it was unlikely the Trump administration would introduce any legislation that might harm U.S. trade competiveness and risk job losses and higher prices at home.
      “Assuming we are correct and all that happens is a bit more symbolic relocating back to America, to satisfy Trump voters, there shouldn’t be too much change to the status quo, meaning little adjustment to our container forecasts will be necessary,” said Drewry.
      “If we are wrong, the likely losers will be the US.
      “Reports that China could replace the U.S. in the TPP agreement points to a future when the rest of the world moves on and simply trades more with each other.
      “If Trump does impose trade barriers and high tariffs, other countries will definitely retaliate and then U.S. exports will suffer.”

 

Cannot Win Trade War

Nigel Driffield      Nigel Driffield, (left) a Professor of International Business at Warwick Business School and a consultant and researcher for the World Bank, the European Commission, and several UK Government Departments, told FlyingTypers that a trade war with China was a conflict that President Trump could not win.
      “I don’t pretend to be an expert on what is shipped by air as opposed to sea, but what he is seeking to do is bring jobs back to the U.S.,” he said.
      “Well, let’s say that Apple stop using Foxconn. There is nothing to suggest that the factories of Ohio or Pennsylvania can deliver that capacity—at least in the short run. All that will happen is that Apple’s prices will go up, and maybe more people will buy Samsung phones.
      “If China retaliates, then certain U.S. exports will be hit, and I can see those declining as China can essentially switch to European or Japanese producers and dump U.S. government debt.
      “Basically this is a trade war Trump can’t win. Protectionism is akin to holding back the tide—one can do this for a while, but in the long-term it is not sustainable.
      “The current thinking by President Trump seems to be framed by the belief that trade barriers are a solution to job losses, particularly in the so-called rust-belt, which was one of his key constituencies. At the margin, there is no doubt that tariffs can influence both trade and investment decisions, but there is no evidence that in the long-term this is effective in protecting employment,” Nigel Driffield said.

 

Air Cargo Weathered Eye

 Adams Nager     Certainly, many in the air freight industry will hope Trump does not take the advice of Adams Nager, (right) Economic Policy Analyst at Washington-based think tank Information Technology and Innovation Foundation. He argued earlier this month that any trade war instigated by the Trump administration should focus on China—which generates major volumes of air freight—rather than neighboring Mexico, which does not.
      Nager claimed ‘losing a job’ to China was much more damaging for the United States than losing a job to Mexico because a) Mexico’s manufacturing sector is integrated with U.S. supply chains and success is shared; and b) Mexico generally abides by global rules and guidelines governing fair international trade practices, while China “aggressively” does not.
       “I don't think an ideal policy response to Chinese bad practices would invoke a true 'trade war’ or, because that term is amorphous, a sharp decline in the volume of trade between the U.S. and China,” he told FlyingTypers.
      “To me, increasing the amount of goods flowing from the U.S. to China would benefit shipping because now they can haul goods in both directions. U.S. goods to China represent just a fraction of Chinese goods going to the U.S. And U.S. goods may be less bulky as they tend to contain more knowledge-components.”
      But he concluded that if the federal government was to spend its political capital fighting Mexico, it would be much less able to mount an effective challenge to ‘Chinese innovation mercantilism.’
      “In short, the Trump administration needs to choose its battles carefully,” said Nager.
Sky King
To Read Part 1 of This Series, Click Here
To Read Part 2 of This Series, Click Here
To Read Part 3 of This Series, Click Here
To Read Trump Effect—India Walks Softly Carries Big Stick, Click Here
To Read Trump Effect—Implications Of A Trump Trade War, Click Here


Chuckles For March 22, 2017

FIATA Delivers The WorldBuilding New Membership Worldwide . . . Conference of International Federation of Freight Forwarders Associations (FIATA) President Zhao Huxiang, Chairman of the Board of Directors of SINOTRANS & CSC, President of China International Freight Forwarders Association (CIFA) is pictured with FIATA Immediate Past President and Member of the Board, Francesco Parisi.

     Just ahead of its annual Headquarters Session in Zurich on March 31, The International Federation of Freight Forwarders Associations (FIATA) announced 31 new members had joined the organization in February 2017.
      Ghana topped the list with the most companies added from one country.
      But the draw to join FIATA (founded nearly 91 years ago in Vienna) is increasing, as companies of all sizes large and small from more than 23 countries including Brazil, China, the United States, Cameroon, Finland, and elsewhere continue to join the diverse and global membership base of 40,000 forwarding and logistics firms, employing around 10 million people in some 160 countries.
      In 2017, FIATA is the largest freight forwarder organization in the world.
      FIATA has consultative status with the Economic and Social Council (ECOSOC) of the United Nations (inter alia ECE, ESCAP, ESCWA, etc.), the United Nations Conference on Trade and Development (UNCTAD), and the UN Commission on International Trade Law (UNCITRAL) as well as many other UN related bodies, e.g. the World Bank.
      IATA recognizes FIATA as representing the global freight forwarding industry, as does the European Commission (through CLECAT), the International Chamber of Commerce (ICC), the International Union of Railways (UIC), the International Road Transport Union (IRU), the World Customs Organization (WCO), the World Trade Organization (WTO), and others.
      Membership Info: www.fiata.com
Geoffrey

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The Flowering World Of AFKL

      A slew of factors helped elongate last year’s peak season and could bring further prosperity in 2017, according to one of Europe’s leading cargo airlines.
      As reported in FlyingTypers in several past issues, freight rates surged during the fourth quarter of 2016 after a poor first half year. According to a spokesperson for Air France KLM Martinair Cargo (AFKLMP), multiple factors combined to produce the resurgence after almost a decade of weak or short peak seasons.
      “What we experienced in 2016 is an outlying or non-traditional peak that has lasted much longer than in the recent past, and has belied most expectations.
      “This better than expected peak demand” resulted from the staggered launches of electronics products, most notably the Apple iPhone 7 in September and MacBook Air/Pro in October.

Charters Down But Business Up

      There was also less charter activities last year in key Asian markets such as Hong Kong due to a new air traffic control system that saw the Hong Kong Civil Aviation department reduce its granting of ad hoc charters, and in Shanghai where, in echoes of the last few ‘peak’ seasons, air traffic congestion saw supply reduced and some services were transferred to second tier cities such as Zhengzhou.

Hanjin Impact

      The spokesperson also said the impact of the bankruptcy of Korean container line Hanjin Shipping in August had prompted some ocean cargo to be shifted to air, while the devaluation of the Chinese Yuan also boosted exports.

Year 2017 Off To A Good Start

      Moving ahead to 2017, AFKLMP’s flights from Europe were “currently showing good load factors all across the board.”
      “Service from Europe, North America, Latin America and India has generated our biggest growth” and Asia services benefitted from increased load factors, although margin improvements were restricted due to excess capacity.
      The spokesperson noted that surging demand for e-commerce services, which “should sustain and increase” through 2017, helped the rise in volumes since summer 2016.

Flower Power 2017

      For example, in a five-week period (February - March 2017), around 5,000 tons of flowers originating from well-known leading production and export countries like Kenya, Ecuador, and Colombia were flown to Europe.
      In fact, these movements by AF/KL/MP represent the biggest share of the market.
      Amsterdam remains Europe’s logistics center for the flower market, with Schiphol clinging to its claim as ‘Preferred Flower Hub.’
      “Royal FloraHolland, located in Aalsmeer, the Netherlands, is the largest trading combine for flowers in the world and plays a crucial role in onward distribution,” AFKLMP said.

Love In Bloom

      In 2016, AFKLMP Cargo shipped more than 60,000 tons of flowers from Kenya, Zimbabwe, Ecuador, and Colombia to Schiphol, proclaimed Marcel de Nooijer, Executive Vice President AF/KL/MP Cargo.
      “With one extra full-charter freight flight, upgrading aircraft capacity and making full use of our extensive wide-body belly passenger network, AFKLMP Cargo is proud to show our ongoing commitment and dedication to the flower business,” he said.

Marcel de NooijerMarcel Works Well

      It’s worth noting that Marcel de Nooijer (48) was appointed Executive Vice President of Air France-KLM Cargo on December 16, 2016. Marcel has been with KLM since 1995 and has been EVP of KLM Cargo since 2013. He previously held various commercial and operational posts, including that of managing director at Martinair Holland.

Holland Flower Alliance

      “Last year AFKLMP Cargo was a driver that together with Amsterdam Airport Schiphol and Royal FloraHolland helped form the ‘Holland Flower Alliance,’” Mr. Marcel said, adding:
      “Our view is that we can be positively optimistic about 2017 overall, as quite a few new product launches are in the pipeline in the virtual reality sphere and in the world of remote controlled, reconnaissance, and surveillance vehicles—for example, drones.”

Final Word

      “While volumes will outshine 2016 numbers, the pressure on prices will continue and will further pressurize the declining airline yields.”
Geoffrey


Performance Not Promises

If You Missed Any Of The Previous 3 Issues Of FlyingTypers
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Trip Advisor For Air Cargo
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Letters to the Editor for March 13, 2017
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