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10 Trends to Watch in International Business
Posted on January 22, 2015
Lower oil prices, Europe tipping into possible recession, trade deals, Cuba and cybersecurity”these developments will affect Massachusetts businesses engaged in global trade in 2015. Here are the top international stories that Bay State employers should follow this year:
- Lower Oil Prices”The 50 percent drop in oil prices is good for consumers and manufacturers in the U.S. and Japan, which are energy users/importers, and bad for oil producing countries like Venezuela, Saudi Arabia and Russia. Some U.S. companies are shifting freight to truck, versus rail, because of lower fuel costs. Energy companies are pulling back investments in domestic drilling and financial markets are unsettled.
- Europe Falling into Recession”Never fully recovered from the recent global recession, Europe is currently in an economic slump with many countries struggling with high unemployment and slowing economies. Even Germany, with the strongest economy in Europe, is experiencing zero percent economic growth. Europe’s woes affect Massachusetts exporters because Western Europe is the largest overseas destination for our exports.
- Economic Downturn in Russia”After Russia’s incursion into Crimea, the U.S. and Europe imposed sanctions which, coupled with lower oil prices, have sent the Russian economy tumbling. The ruble has plummeted in value and Russian companies are having difficulty getting financing. Massachusetts firms exporting to Russia are experiencing slow payments from customers. Russia is a major energy supplier and exporter to Europe and sanctions are having a negative impact on the European economy.
- Global Trade Deals”The November elections that left Republicans in control of both houses of Congress increased the chances of passage for two major trade deals: the Trans-Pacific Partnership (TPP) involving 12 countries, and the Trans-Atlantic Trade &amp; Investment Partnership (T-TIP) between the U.S. and the European Union. Trade Promotion Authority (TPA), or “Fast-Track,” is first up for approval. TPA gives the president the ability to seek a simple yes or no vote on trade deals, with no amendments permitted. This makes trade pacts easier to negotiate with foreign partners.
- Cybersecurity”Cybersecurity is now a priority for businesses around the world. This past year, Home Depot, Target, Nieman Marcus and Sony Pictures suffered major security breaches affecting millions of customers. The cybersecurity industry, with a significant presence in Massachusetts in firms such as AIM-member companies EMC/RSA and CyberArk, is racing to develop solutions to protect customer and company data for firms worldwide.
- China”Labor costs in China have increased, economic growth has slowed, and many US companies are looking elsewhere in Asia for manufacturing. China nevertheless continues to be a powerful global player. Ocean Spray, an iconic Massachusetts brand, recently partnered with big-box retailer Costco in China and saw sales soar as Chinese consumers, eager to purchase American goods, made Ocean Spray’s 48-ounce package of dried cranberries the single biggest seller on Alibaba (China’s largest on-line commerce company) in October.
- Ebola”Ebola has had a global impact as public health experts around the world struggle to prepare for potential cases on their soil. Tourism, trade and investment have slowed or stopped entirely in many sub-Saharan Africa countries. Cutting-edge Ebola genomics research is being conducted in Cambridge at the Broad Institute while non-profit Diagnostics for All, a Boston-based partnership of Harvard, UMass, GE Healthcare and Cambridge Consultants, is developing a fast, simple, low-cost test for diagnosing Ebola.
- Cuba”The Cuba-U.S. relationship is ripe for change following President Obama’s order to restore full diplomatic relations. Eighteen months of secret talks, helped along by Pope Francis, led to the historic announcement. The initial U.S.-Cuba trade embargo was put in place by President Eisenhower 54 years ago. Many challenges lie ahead before US companies can do significant Cuba trade. Massachusetts exports to Cuba peaked at $3.4 Million in 2005. From 2009-2013, the Bay State had no Cuban-bound exports. In 2014, however, some diagnostic, medical and pharmaceutical products were exported to Cuba. This year may bring more.
- MASSPORT Grows International Flights”Massport last year announced new non-stop flights, to start in 2015, between Logan Airport and Tel Aviv, Mexico City and Hong Kong. This brings to 14 the total number of new international non-stop flights inaugurated by Massport since 2007. Future destinations now being negotiated include Brussels, Singapore, Sao Paulo, Shanghai, Mumbai and Delhi.
- New Massachusetts Governor”With pressing budgetary challenges, Governor Charlie Baker is unlikely to put international travel on his near-term agenda. International business will continue, however, with visits to Massachusetts by foreign government officials and business leaders, overseas firms investing in the commonwealth and opening offices here, and local executives pursuing new global markets. During his eight years in office, former Governor Deval Patrick led trade missions to 15 countries to promote exports and foreign investment. AIM expects that Governor Baker will eventually travel abroad to open new markets for Massachusetts businesses.