Global Manufacturing Economic Update: October 2015

A Publication of the National Association of Manufacturers

MONDAY ECONOMIC REPORTNAM/IndustryWeek Survey of Manufactures Business Outlook by Quarter, 2012-2014

The International Monetary Fund (IMF) lowered its estimates for global growth for 2015, down from 3.3 percent in July to 3.1 percent in its latest World Economic Outlook release. This forecast mainly reflects slower growth in the emerging economies, from 4.6 percent growth last year to 4.0 percent this year. Indeed, the Markit Emerging Markets Manufacturing Index fell to its lowest level in September since March 2009, with a number of countries experiencing contracting activity for much of this year. The Chinese economy, in particular, has decelerated significantly, creating anxieties in worldwide financial markets. The IMF sees China’s real GDP weakening from 7.3 percent in 2014, to 6.8 percent in 2015, to 6.3 percent in 2016. With that in mind, the Caixin China General Manufacturing PMI edged down from 47.3 to 47.2, its lowest level in six and a half years and with activity contracting in nine of the past 10 months.

The IMF predicts growth of 2.6 percent and 2.8 percent for 2015 and 2016, respectively, for the United States. (My forecasts for both years are slightly lower at 2.4 percent and 2.5 percent.) Nonetheless, manufacturers in the United States are expected to continue facing global headwinds, including a strong dollar, moving into next year. Recent macroeconomic data, for instance, show how the sector has struggled of late, with the Institute for Supply Management’s Manufacturing PMI reflecting stagnant growth and zero net new hiring over the past eight months. Sluggish sales abroad help to explain much of this softness. The U.S. trade deficit widened again in September, and manufactured goods exports have declined 5.6 percent year-to-date relative to the same time period last year, using non-seasonally adjusted data.

It is not difficult to see why the exports numbers are so weak. Half of the top 10 markets for U.S.-manufactured goods experienced contracting levels of manufacturing activity in September, the same number as in August. Two of the five countries with contracting levels of manufacturing activity experienced some deterioration in conditions in September: Canada and China, our largest and third-largest trading partners, respectively. The Canadian indicator fell to the lowest level in the survey’s five-year history, primarily on weaknesses stemming from lower crude oil prices. The other nations with decreasing growth in the manufacturing sectors included Brazil, Hong Kong and South Korea, even as each saw some easing in the pace of decline for the month. Moreover, all five of the countries continuing to experience expansions witnessed slower growth in the latest month, including Germany, Japan, Mexico, the Netherlands and the United Kingdom.

In contrast to other regions, Europe has been trending in the right direction in recent months. The Markit Eurozone Manufacturing PMI was off marginally, down from 52.3 to 52.0, but the underlying data point to notable progress since the sector was essentially stagnant in November (50.1). On a year-over-year basis, the Eurozone economy expanded 1.5 percent in the second quarter, up from 1.2 percent in the prior quarter. However, Europe has not been immune to the current global economic headwinds. Retails sales were flat in August, and industrial production, which will be released on October 14, will likely show some easing. Meanwhile, the unemployment rate ticked back up to 11.0 percent after falling to 10.9 percent in July, the lowest rate since February 2012. Moreover, deflation has been a concern in recent months, spurring quantitative easing moves by the European Central Bank. The annual inflation rate returned to negative territory, down 0.1 percent in September, ending four straight months of positive growth.

In terms of trade policy, after years of negotiations, the United States and 11 of its Asia-Pacific trading partners announced the conclusion of the Trans-Pacific Partnership (TPP) agreement. Transatlantic Trade and Investment Partnership (TTIP) talks between the United States and European Union (EU) will take place midmonth. Trade legislation, including the reauthorization of the U.S. Export-Import (Ex-Im) Bank and a repeal of the crude oil export ban, may see action in the coming weeks. The United States hosted meetings with India and China this past month, which resulted in promises to work on key issues.

Chad Moutray
Chief Economist
National Association of Manufacturers

Global Economic and Trade Trends

The global economy continued to expand very slowly, with activity challenged in many key markets.
The J.P. Morgan Global Manufacturing PMI continued to reflect relatively soft levels of expansion (down from 51.0 to 50.7), with slowdowns in Asia and South America weighing heavily on some markets. Exports were essentially stagnant (unchanged at 49.9), just barely contracting for the second straight month. Other measures were mixed, but remained in positive territory. New orders (up from 51.3 to 51.4) were marginally higher, whereas output (down from 51.6 to 51.0) and hiring (down from 50.7 to 50.2) both pulled back somewhat. Growth in employment was at its slowest pace since September 2013.

The country-by-country analysis also reflected weaker conditions. Manufacturing activity in half of the top 10 markets for U.S.-manufactured goods contracted in August, up from four in July. The additional country was Canada (down from 50.8 to 49.4), our largest trading partner, which continues to struggle with significantly lower crude oil prices. The other four nations remained the same: Brazil (down from 47.2 to 45.8), China (down from 47.8 to 47.3), Hong Kong (down from 48.2 to 44.4) and South Korea (up from 47.6 to 47.9). The deteriorating conditions in Brazil, China and Hong Kong were notable, with each reaching a multiyear low with their PMI values. 

In contrast, the other top markets continued to expand, but at differing rates of growth. European economies moved in varying directions, with expansions in the Netherlands (down from 56.0 to 53.9) and the United Kingdom (down from 51.9 to 51.5) easing, while Germany (up from 51.8 to 53.3) accelerated somewhat. The other two expanding nations were Mexico (down from 52.9 to 52.4) and Japan (up from 51.2 to 51.7). Note that each of these five countries, however, had moderate growth for the month.

Manufactured goods exports have declined so far this year.
Manufacturers have struggled against global headwinds through the first seven months of this year. Manufactured goods exports totaled $656.33 billion year-to-date using non-seasonally adjusted data, which is down 4.93 percent from the $690.36 billion in the same time period last year. This trend extends to the top four markets for U.S.-manufactured goods: Canada (down from $180.83 billion year-to-date to $166.56 billion), Mexico (down from $139.15 billion to $138.38 billion), China (down from $67.83 billion to $65.40 billion) and Japan (down from $38.65 billion to $37.44 billion).

Chinese manufacturing activity declined at the fastest rate since March 2009.
The Caixin China General Manufacturing PMI declined from 47.8 to 47.3, its lowest level in more than six years. Indicators were down across-the-board, including new orders (down from 46.9 to 46.6), production (down from 47.1 to 46.4), exports (down from 46.9 to 46.6) and employment (down from 47.2 to 46.7). Hiring has now contracted for 22 straight months. The official manufacturing PMI data from the National Bureau of Statistics of China also show a contraction in August, with its index down from 50.0 to 49.7. In that report, activity declined more for the smallest manufacturers (48.1) than for their larger counterparts (49.9).

Next week, we will get new industrial production data for August, which is expected to show a continued deceleration in activity for the sector. The most recent data have been consistent with that trend. For instance, year-over-year industrial production growth has eased from 9.0 percent in July 2014 to 6.0 percent in July 2015. Likewise, fixed asset investments have slowed from 17.0 percent year-over-year to 11.2 percent over that same time frame, with retail sales down from 12.2 percent to 10.5 percent. To be fair, each of these growth rates remains robust by developed country standards, but growth has fallen substantially from what markets have become accustomed to seeing. Recent challenges also cast doubts on real GDP growth, which is likely less than the 7.0 percent year-over-year rate that has been reported.

Beyond these economic statistics, the Shanghai Stock Exchange Composite Index has fallen more than 38 percent since June 12 despite government efforts to prop up stock values and even after increasing slightly over the past week. With sluggish economic growth in mind, the Bank of China devalued its currency on August 11, and the yuan has now depreciated by 2.5 percent since then. The government has said that it will let the market dictate where it sets the yuan relative to other currencies, which is a nod toward critics who have sought an exchange rate that more freely matches the market; yet, for now, this was likely a move to boost its struggling economy.

The emerging markets slipped further into contraction territory in August, led lower by China and Brazil.
The Markit Emerging Market Manufacturing Index decreased from 49.1 to 48.6, its lowest level since April 2009. New orders (down from 49.1 to 48.5), output (down from 48.7 to 48.2), exports (down from 48.6 to 48.3) and employment (down from 48.7 to 48.4) were all lower, with each reporting faster rates of decline for the month. However, manufacturers remained cautiously upbeat about the coming months, albeit with sentiment down for the sixth consecutive month. The forward-looking output index suggested decent growth ahead (down from 59.4 to 58.5), even as this measure was now at its slowest growth rate since being introduced in early 2012.

A number of countries had contracting levels of manufacturing activity in August, many of which have been declining for several straight months. These included Brazil (down from 47.2 to 45.8), China (down from 47.8 to 47.3), Hong Kong (down from 48.2 to 44.4), Indonesia (up from 47.3 to 48.4), Russia (down from 48.3 to 47.9), South Africa (up from 48.9 to 49.3), South Korea (up from 47.6 to 47.9), Taiwan (down from 47.1 to 46.1) and Turkey (down from 50.1 to 49.3). The latter returned to negative territory, with contractions in six of the past eight months. Moreover, emerging market nations with expanding levels of manufacturing activity also experienced easing in the month, including the Czech Republic (down from 57.5 to 56.6), India (down from 52.7 to 52.3), Poland (down from 54.5 to 51.1) and Vietnam (down from 52.6 to 51.3). Nonetheless, manufacturers continue to report strength overall in the Czech Republic, the brightest spot among the emerging markets, with activity not far from July’s four-year high.

The drop in crude oil prices pushed Canadian manufacturing back into contraction.
The RBC Canadian Manufacturing PMI declined from 50.8 to 49.4, its lowest level since April. Reduced production (down from 51.6 to 49.4) and a further deterioration in hiring (down from 49.5 to 47.2) pulled the headline number lower. New orders (down from 50.9 to 50.3) and exports (down from 50.8 to 50.6) expanded slightly, with both easing for the month. As noted in prior reports, growth varied widely from region to region, with Ontario demand and production expanding at a decent pace, albeit with some deceleration in August, whereas Alberta and British Columbia continue to experience softness from lower crude oil prices.

Real GDP fell 0.5 percent at the annual rate in the second quarter, extending the 0.8 percent decline during the first quarter. Manufacturing output was stronger in June, up 0.4 percent, rebounding a little from the 1.6 percent decrease in May. Meanwhile, the unemployment rate inched higher, up from 6.8 percent in July to 7.0 percent in August, its highest level in 12 months. Manufacturers lost 3,200 workers on net for the month. More positively, retail sales increased 0.6 percent in June, rising in four of the past five months and providing some encouragement regarding consumer activity.

Growth in Mexico, our second-largest trading partner, eased once again.
The Markit Mexico Manufacturing PMI declined from 52.9 to 52.4, continuing a deceleration seen since measuring 56.6 in January. The largest decrease was in output (down from 53.3 to 51.2), which fell to its lowest level since October 2013. New orders (down from 54.8 to 54.6) and exports (down from 55.7 to 54.4) were also slower, but hiring (up from 52.4 to 53.3) picked up a bit. We will get new industrial production data on September 11, which is expected to reflect some of this easing. Manufacturing production rose 4.2 percent year-over-year in June, the highest annual rate of growth since February. Yet, even that figure remains weaker than we would like to see. For instance, output in the sector grew 5.8 percent year-over-year in December, and other sectors in the Mexican economy expanded in June at a much slower pace (e.g., electricity and construction both grew by 2.1 percent year-over-year).

In contrast to other regions, Europe has been trending in the right direction, albeit with some softness in August.
The Markit Eurozone Manufacturing PMI was off marginally, down from 52.4 to 52.3. Still, many of the key subcomponents of this index were higher for the month, including new orders (up from 52.2 to 52.8), exports (up from 51.5 to 52.4), output (up from 53.6 to 53.9) and employment (up from 51.8 to 52.0). As such, Eurozone manufacturers have reported modest growth in the sector, brushing off recent challenges in Greece and headwinds from China. Overall, manufacturing activity in Europe has now expanded for two straight years, which has made the region a bright spot in the world.

The improvement in the Eurozone headline number stemmed largely from better data in Germany (up from 51.8 to 53.3), with output rising to a five-month high and rebounding from springtime softness. In addition, Ireland (down from 56.7 to 53.6), Italy (down from 55.3 to 53.8), the Netherlands (down from 56.0 to 53.9) and Spain (up from 53.2 to 53.6) continued to experience decent demand and production growth despite several pulling back from strong numbers the month before. Austria (down from 52.4 to 50.5) and the United Kingdom (down from 51.9 to 51.5) continued to expand but at much weaker paces than in prior months. Yet, it was not all good news. France (down from 49.6 to 48.3) has contracted in 15 of the past 16 months, with August’s PMI reading a four-month low. While Greece (up from 30.2 to 39.1) has largely emerged from much of its political and financial drama, manufacturing activity continued to deteriorate, even as the pace of decline slowed.

Real GDP rose 0.4 percent in the second quarter, the same rate as the first quarter. On a year-over-year basis, the Eurozone economy expanded 1.5 percent, up from 1.2 percent in the prior quarter. As such, this report reflects recent progress in the Eurozone as a whole. Retail sales also improved in the latest release, up 0.4 percent in July. The expectation is that industrial production will also rebound when new data are out on September 14. The unemployment rate reflects this progress as well, falling to 10.9 percent in July, the lowest rate since February 2012 even as it continues to remain highly elevated. Deflation has been a concern in recent months, spurring quantitative easing moves by the European Central Bank, but the annual inflation rate remained steady at 0.2 percent in August, the fourth straight month with positive price growth.

The U.S. trade deficit narrowed in July.
The trade deficit declined from $45.21 billion in June to $41.86 billion in July. This figure has been quite volatile so far this year, ranging from $38.54 billion in February to $52.16 billion in March, but the year-to-date average of $43.74 billion is only modestly higher than the $42.36 billion average for all of 2014. The smaller figure in July stemmed largely from an easing in goods imports (down from $192.35 billion to $189.61 billion) and a slight pickup in goods exports (up from $127.55 billion to $128.17 billion). The service-sector trade surplus was essentially unchanged for the month (down from $19.60 billion to $19.58 billion).

Shifts in the trade of crude oil could explain at least part of the goods trade balance, with the petroleum trade balance inching somewhat higher, up from $7.30 billion to $8.11 billion. Even with the increase, however, the petroleum trade deficit is less than half of what it was last year, averaging $7.69 billion year-to-date in 2015 versus $15.81 billion for 2014 as a whole. Breaking the August data down a little, petroleum exports declined from $9.43 billion to $8.96 billion, with petroleum imports rising from $16.73 billion to $17.07 billion.

The goods exports data were mostly higher for the month, but the gains were less than robust relative to past months. Automotive vehicles and parts (up $596 million), industrial supplies and materials (up $303 million), foods, feeds and beverages (up $178 million) and nonautomotive capital goods (up $179 million) each experienced better goods exports in July. In contrast, exports of consumer goods were off by $426 million.

Regarding goods imports, the decrease in the headline figure came from two main segments: consumer goods (down $2.61 billion) and foods, feeds and beverages (down $593 million). Reduced imports for pharmaceuticals and cell phones accounted for virtually all of the decline for consumer goods. Meanwhile, imports increased for industrial supplies and materials (up $370 million), automotive vehicles and parts (up $336 million) and nonautomotive capital goods (up $233 million).

International Trade Policy Trends

TPP negotiators conclude massive 12-country agreement, although details have not yet been released.
After nearly a week of negotiations in Atlanta, Ga., ministers for the 12 TPP nations announced the conclusion of a TPP agreement on Monday that will cover nearly 40 percent of the global economy. The 12 nations—Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam—will be finalizing the language of the deal and making it publicly available potentially in the next 30 days. The announcement was met with a variety of responses on Capitol Hill, including from Senate Finance Committee Chairman Orrin Hatch (R-UT), Senate Finance Committee Ranking Member Ron Wyden (D-OR), House Ways and Means Committee Chairman Paul Ryan (R-WI) and House Ways and Means Committee Ranking Member Sander Levin (D-MI). The Office of the United States Trade Representative (USTR) has released this general summary, indicating the TPP will:

    • Eliminate most tariffs on industrial products immediately, although some will be reduced over a slower period of time;
    • Eliminate or reduce nontariff barriers across substantially all trade in goods;
    • Enhance trade facilitation through new transparency and customs rules;
    • Set in place transparency and nondiscrimination standards for the development of technical regulation;
    • Require the protection and enforcement of intellectual property, including new disciplines on trade secrets;
    • Include new provisions providing for cross-border data flows and prohibitions on localization requirements for data centers;
    • Open up new government procurement markets for the U.S. industry;
    • Require the protection of investment and provide more opportunities for investment in the TPP countries; and
    • Put in place new disciplines on state-owned enterprises.

The precise details of the TPP agreement have not yet emerged publicly, including the precise tariff commitments, scope and level of standards, such as on intellectual property, procurement and investment, or the nature and extent of exceptions. The NAM issued this statement emphasizing the importance of opening the global economy to grow manufacturing in the United States, but noted that we will be examining whether the final TPP embraces the manufacturing-focused TPP priorities that the NAM has sought throughout the talks to address foreign barriers and enhance U.S. competitiveness. Please provide your input on how the TPP affects your organization and let us know if you need more information on the TPP by contacting NAM Vice President of International Economic Affairs Linda Dempsey and NAM Director of International Trade Policy Ken Monahan.

House renews efforts to reauthorize the Ex-Im Bank.
On September 25, Rep. Stephen Fincher (R-TN) introduced a companion version to the Ex-Im Bank reauthorization bill that has earned broad bipartisan support in the Senate. The Export-Import Bank Reform and Reauthorization Act of 2015 (H.R. 3611) has more than 40 Republican cosponsors, and the bill is likely to garner bipartisan support. Rep. Fincher and his Republican colleagues have also started the process to force action on a reauthorization through a discharge petition, bypassing the House Financial Services Committee. H.R. 3611 is identical to S. 819 as introduced on March 19 by Sens. Mark Kirk (R-IL), Lindsey Graham (R-SC), Roy Blunt (R-MO), Kelly Ayotte (R-NH), Heidi Heitkamp (D-ND), Joe Manchin (D-WV), Joe Donnelly (D-IN) and Mark Warner (D-VA). By a vote of 64–29, the Senate in July added that bill as an amendment (S.A. 2327) to the long-term highway bill that passed the Senate before the August recess. The NAM continues to demonstrate to lawmakers that small businesses across the United States are suffering from the lapse in the Ex-Im Bank’s authorization, highlighting the reality that manufacturers face when competing against more than 60 foreign export credit agencies. A new animated infographic highlights the impact of the lapse of the Ex-Im Bank on small and medium-sized businesses like Nova Pressroom Products and Miss Jenny’s Pickles. If you need more information on efforts to reauthorize the Ex-Im Bank, please contact NAM Director of Trade Facilitation Policy Lauren Wilk.

OECD’s BEPS recommendations raise concerns for manufacturers.
Earlier this week, the Organisation for Economic Co-operation and Development (OECD) released the final package of measures under its Base Erosion and Profit Shifting (BEPS) project. BEPS began in 2012, when the G-20 asked the OECD to develop an internationally “coordinated and comprehensive” approach to address aggressive tax planning that resulted in inappropriate corporate tax avoidance. The final BEPS reports include recommended changes to tax policy, taxpayer reporting requirements and information sharing among governments that go well beyond that original objective. Some new information disclosure rules—part of an effort to establish standards for information reporting by multinational companies on income, business activities and taxes—raise serious concerns for manufacturers. These rules, if implemented, could impose substantial and unnecessary compliance costs on manufacturers and force disclosure of sensitive, confidential U.S. taxpayer information. The NAM raised concerns about these recommendations earlier in the process and believes that before the Treasury implements any of the recommendations, it is critical for Congress to fully vet the proposed changes and analyze their potential impact on U.S. global companies, our competitiveness and the broader U.S. economy. If implementation does move forward, the Treasury should do all it can to minimize the compliance burden of information disclosure and ensure that U.S. companies are not required to disclose sensitive, proprietary business information. For further information about the issue or to join the NAM’s Ad Hoc BEPS Task Force, contact NAM Vice President of Tax and Domestic Economic Policy Dorothy Coleman.

House to vote on lifting the ban on crude oil exports.
The House is expected to vote by week’s end on H.R. 702, introduced by Rep. Joe Barton (R-TX), which would repeal the federal ban on crude oil exports that was put in place 40 years ago before the many technological advancements that have created new growth in U.S. crude oil production and opportunities for exports. The U.S. ban on crude oil exports is viewed as contrary to U.S. international obligations set forth by the World Trade Organization (WTO) that prohibit quantitative restrictions on exports. The United States has long defended this global prohibition on export bans, including in its successful WTO cases against China on rare earths and raw materials. The NAM supports the repeal of the ban on crude oil exports in order to put the United States back into compliance with its international commitments and send a strong message to the global community that the United States intends to honor the basic rules of the global economy.

The NAM intensifies push for congressional action on customs modernization, enforcement and a new Miscellaneous Tariff Bill (MTB) process.
Despite progress this summer in both the House and Senate, Congress has not yet finalized its customs reauthorization bill, the Trade Facilitation and Trade Enforcement Act of 2015 (H.R. 644). Different versions of this legislation had passed the House and Senate earlier this year, and action is long overdue for a conference and passage. The NAM stepped up efforts in mid-September to push for congressional completion and passage of H.R. 644, with a letter to the chairmen and ranking members of the Senate Finance and House Ways and Means committees that emphasized that Congress’ failure to act on this critical legislation is costing “manufacturers billions of dollars a year in increased operating costs and unfair competition.” Among the top items the NAM is seeking through this legislation are new customs modernization provisions to eliminate red tape and unneeded border delays, new trade enforcement provisions to prevent the evasion of trade remedy orders and a new, regularized and transparent MTB process to eliminate temporarily duties on imported inputs and other products not available in the United States. NAM Vice President of International Economic Affairs Linda Dempsey penned an op-ed in the Washington Examiner, calling for action on this legislation and highlighting NAM priorities. The NAM will continue making this legislation a priority and is seeking passage later this fall.

TTIP talks resume in October.
U.S. and EU negotiators will meet for the 11th round of talks October 19–23 in Miami, Fla. It is expected that discussions on two issues critical for manufacturers—tariffs and investment protections—will intensify during this round. Discussions will also continue on a range of other issues important to manufacturers, including regulatory coherence, intellectual property and customs measures.

European Court of Justice strikes down U.S.–EU Safe Harbor Framework.
On October 6, the European Court of Justice effectively struck down the U.S.–EU Safe Harbor Framework, summarizing the decision in a press release as concluding that a European “Commission decision finding that a third country ensures an adequate level of protection of the personal data transferred cannot eliminate or even reduce the powers available to the national supervisory authorities under the Charter of Fundamental Rights of the European Union and the directive.” This decision effectively dismantles the existing U.S.–EU Safe Harbor Framework, creating uncertainty for the thousands of U.S. and EU companies that have relied on the Safe Harbor Framework since 2000 to operate their businesses in a globally connected economy where data must be shared across the Atlantic to operate. European Commission First Vice-President Frans Timmermans and Commissioner for Justice, Consumers and Gender Equality Věra Jourová issued this statement on the decision. Secretary of Commerce Penny Pritzker stated that the Obama Administration was “deeply disappointed” with the decision and indicated that it will work with the European Commission to address the new uncertainty that has been created. The NAM is working closely with the Obama Administration to address this substantial new challenge to transatlantic trade and investment.

The first U.S.–India Strategic and Commercial Dialogue promotes further discussions as the NAM seeks concrete actions.
Top U.S. and Indian government officials convened for the first-ever U.S.–India Strategic and Commercial Dialogue (S&CD) on September 22 in Washington, D.C. The commercial track focused on expanding trade and investment partnerships, including through establishing a new annual innovation forum, better cooperation on product and standards development and best practices in manufacturing. Prior to the meeting, the leaders of the Senate Finance and House Ways and Means committees sent a bipartisan letter to Secretary of State John Kerry and Secretary of Commerce Penny Pritzker urging progress on key access, standards and intellectual property issues of importance to manufacturers. The NAM also worked with its Alliance for Fair Trade with India (AFTI) colleagues to call upon President Obama to advocate our priorities for those talks and in discussions later in the month with Indian Prime Minister Narendra Modi. An op-ed the NAM penned with our AFTI co-chair, the U.S. Chamber of Commerce’s Global Intellectual Property Center, also stressed the importance of translating such high-level talks into tangible trade reform on the wide range of trade barriers, regulatory divergences and weak intellectual property and investment protections in the Indian market. The NAM will continue pressing for progress, including in preparation for the upcoming U.S.–India Trade Policy Forum likely to occur later this month and through collaboration with the Obama Administration on the work plan developed as part of the S&CD.

U.S.–China leaders meet to discuss a broad range of commercial and strategic issues.
President Obama hosted Chinese President Xi Jinping for a state visit on September 25 and held discussions on a wide range of commercial and strategic issues. The White House issued this fact sheet on the state visit and a second fact sheet on U.S.–China economic relations that note the heavy emphasis on key commercial issues, such as cybersecurity and the ongoing U.S.–China bilateral investment treaty negotiations, which were characterized as a “top economic priority.” Prior to arriving in Washington, D.C., President Xi visited Washington state, where he and his delegation participated in several events focused substantially on innovation, trade and investment.

Environmental Goods Agreement (EGA) talks to intensify this fall.
The ninth round of EGA negotiations took place September 16–22 in Geneva, Switzerland, where discussions continued on the approximately 650 products nominated for duty-free treatment by the United States and other countries. Specifically, negotiators discussed where convergence may exist in terms of export priorities, countries’ import sensitivities and customs-related challenges. The Coalition for Green Trade, which the NAM co-chairs, led a USTR briefing for our membership and other coalition members.

Country-of-Origin Labeling (COOL) reform awaits Senate action.
The NAM is continuing to co-lead the COOL Reform Coalition and end the threat of retaliation against U.S.-manufactured exports following a final judgment on May 18 by the WTO against the United States in the COOL dispute brought by Canada and Mexico. A WTO panel adjudicating the level of retaliation that could be imposed by Canada and Mexico met September 15–16, and an announcement on the approved level of retaliation is expected later this fall. The NAM continues to support Senate passage of legislation that would repeal the noncompliant COOL provisions.

White House announces Generalized System of Preferences (GSP) product review.
Last week, USTR announced the outcome of the Obama Administration’s Limited Product Review pursuant to the GSP process. GSP, reauthorized earlier this year, allows more than 120 developing countries to export thousands of select products to the United States duty-free, supporting the economic development of those nations and providing manufacturers in the United States with key inputs. The most recent review graduated Uruguay, Venezuela and Seychelles from the list of eligible exporters as they now qualify as “high-income” nations based on the per-capita gross national income level set by the World Bank. As a result, Seychelles will also lose its eligibility for benefits under the African Growth and Opportunity Act. The review also modified coverage for a number of products under the GSP, including certain textiles, chemicals, copper and other raw materials.

Kazakhstan joining the WTO sets off U.S. consideration of legislation.
WTO members accepted Kazakhstan’s proposed accession to the global trade body in late July, and Kazakhstan’s formal ratification is expected by the end of October. For U.S. companies to benefit fully from the market-opening commitments to which Kazakhstan has committed, Congress must approve Permanent Normal Trade Relations (PNTR) with Kazakhstan. To that end, on July 29, Rep. Dana Rohrabacher (R-CA) introduced H.R. 3400 to extend PNTR to Kazakhstan, Tajikistan (already a WTO member) and Uzbekistan (not a WTO member). The NAM will be engaging with House and Senate staff on Kazakhstan PNTR in the weeks and months ahead. Please contact NAM Director of International Trade Policy Ken Monahan if you would like to participate in this effort.

Exports in Action

Webinar: Exporting to an Evolving China

October 13
The dynamics of China’s economic and business environments present a significant challenge to U.S. exporters. In this webinar, U.S. diplomats from the International Trade Administration and in-country experts from Wells Fargo will discuss the strategies and realities for U.S. companies seeking to enter China’s complex markets. Topics will include current market opportunities, an overview of International Trade Administration services and best practices for exporting to China. For more information, click here.

Discover Global Markets: Pacific Rim Consumers

October 29–30
Location: Orange County, Calif.
The U.S. Commercial Service and the District Export Council of Southern California will host a two-day conference on consumer markets throughout Asia and the Pacific region. The program will provide in-depth market intelligence on specific countries, regions and industries; guidance on marketing, distribution and intellectual property protections; and opportunities to network with senior business leaders. For more information, click here.

Electrical and Electronic Equipment and the Environment Conference 2015

November 11–12
Location: Heathrow, UK
This two-day conference will cover the latest and most critical developments in regulatory policy and best practices in the global economy. Panelists will include policy experts from the European Commission and UK government, law enforcement officials and industry representatives. The event will also provide networking opportunities with issue experts and industry peers. For more information, click here.

Green Technologies Suppliers Meetings (GTSM)

November 17–19
Location: Seattle, Wash.
The U.S. Commercial Service and GTSM will host a unique opportunity for U.S. green technology manufacturers to meet with foreign governments and other customers through prearranged business-to-business meetings. Across the three-day conference, participants will hear presentations on top issues facing the industry, attend workshops on new market developments and innovations and meet with preselected customers and suppliers. The event will draw entities from all portions of the supply chain, including energy departments, international utilities, research centers and equipment suppliers. For more information, click here.

Smart Cities Infrastructure Trade Mission: India

February 8–12, 2016
Deadline to Apply: November 10
Location: New Delhi, Mumbai and Chennai, India
The International Trade Administration is organizing an executive-led infrastructure business development mission to India. As India’s urban centers expand, the demand for smart infrastructure continues to rise. The Indian government has encouraged the participation of the U.S. government and U.S. companies in the initiative to modernize urban infrastructure. This trade mission will explore development opportunities in safety/security, intelligent transportation, water, wastewater, power and other critical sectors. For more information, click here.

For a listing of other upcoming Department of Commerce trade missions, click here.

Questions or Comments?

Contact Chief Economist Chad Moutray at