Business export opportunities Q2 2021 update: leverage stimulus in the US and regional integration in Asia Pacific

World trade exports should show a healthy +7.7% increase in volume terms in 2021 and an increase of +15.9% in value terms worth USD3.5tn, based largely on ambitious domestic spending support in the US and on regional economic integration in Asia Pacific. This is good news for import-export business opportunities following the global trade contraction estimated at -8.0% in 2020 in volume terms, precipitated by the cessation of economic activities around the world as governments attempted to control the spread of the Covid-19 virus.

Widespread availability of vaccines in several large export markets coupled with government measures to foster economic recovery have cast a more positive light on the future and should encourage export opportunities. 

In the US, President Joe Biden’s USD1.9tn domestic stimulus package is a boon for exports as it increases the spending power of American consumers. If your business sells to the US, you have considerable export opportunities and can participate in an increase worth USD360bn in exports over the next two years.

“It’s a good boost and good news for exporters across the world,” explains our Senior Economist Françoise Huang, commenting on export opportunities to the US. “In terms of regions, Western Europe, Asia and Latin America should benefit the most from increased US domestic demand.” In the coming two years, we expect gains in international exports thanks to the US stimulus to be the largest in household equipment, computers and telecom, automotive manufacturers, and machinery and equipment.

The Biden stimulus package also prompted us to revise upward our GDP growth projections for the US to +6.3% y/y in 2021 (from +3.6% expected in December 2020) and +4% in 2022 (from +3.1%), after a -3.5% contraction in 2020. Already, US GDP grew 6.4% on an annualised rate in Q1, a positive sign for increasing export opportunities to the US. Check out our US country report for more insights.

But one of the only G20 economy to exhibit positive GDP growth in 2020 was China. This signals export opportunities to China, especially for goods in the energy, electronics, metals, chemicals, and agrifood sectors.

China was quick to recover from Covid-imposed lockdowns and able to resume driving growth in the Asia Pacific region and those economies that are part of the China supply chain. “For us, a thread to watch in terms of export opportunities is these economies that are recovering faster and stronger out of the Covid-19 crisis, such as South Korea, that performed well last year,” Françoise continues.

However, though we rank China as a “medium” for commercial risk, there are specific risks and sectors to be wary of if you are considering export opportunities to China.

Real estate, for example, rebounded strongly last year but remains a sector subject to consolidation that would drive out highly leveraged small developers. “You can have business with a market that is overall performing well,” says Françoise, “but you have to be mindful of the specific risks, or the specific sectors or companies that you’re dealing with to assess the direct commercial risks”. This is important to keep in mind when evaluating export business opportunities. You can check our China country report for more insights.

Another potential boost for export opportunities in China and Asia Pacific in the coming years is the pending ratification of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade agreement. It is composed of the ten ASEAN countries plus five: China, Japan, South Korea, Australia and New Zealand. The agreement was signed in November last year and full ratification is expected early next year.

RCEP should provide an additional boost for intra-regional exports in the Asia Pacific region. “These fifteen economies will be adhering to a common rule of origin meaning that goods will flow more easily from one economy to the other within this block,” Françoise points out. It should also increase import-export business opportunities to the region overall. “RCEP should reduce export costs and administrative costs and shorten delivery times. Our calculation shows that this common rule of origin should boost exports among the signatories of RCEP by some USD90bn on average per year.”

To keep up to date with export business opportunities, you can also check out Trade Match, our proprietary tool that highlights the export risks and opportunities across 17 sectors in 70 markets.

An unforeseen event had an impact in import-export business opportunities. On the morning of March 23, the 20,000-tonne, 400-metre long Ever Given  cargo ship ran aground in the Suez Canal and shut down international shipping for six days. The manmade waterway is a major East-West trade connection for exports ranging from auto parts to computer equipment to furniture to clothing.

Export opportunities to China as well as overall import-export business opportunities were jeopardised as the disruption cost global trade USD6bn to USD10bn a day according to our estimation. “We calculated that the interruption to trade would mean 0.3% point downward revision in our forecast,” says Françoise. “If we hadn’t had the Ever Given stuck in the Suez Canal, the +7.7% increase we predict for this year in our global trade forecast would have been +8.0%.”  

Because of this event, export opportunities could be momentarily reduced, while further costs to global trade could arise due to supply chain disruptions, already frayed during the Covid-19 crisis. We estimate that supply chain disruptions other than the Suez Canal event would cost at least 1.5% point to global trade growth in volume terms this year. In value terms, supply chain bottlenecks are actually pushing prices and thus our forecast higher.

“One lesson that has emerged recently is that it’s very important for companies to have a good knowledge of their supply-chain exposures and a good knowledge of their suppliers.” says Françoise. “Companies need to look for solutions in order to be prepared if a crisis emerges that would hit their supply-chains.”  Having a “Plan B” is necessary if you don’t want to miss out on export business opportunities.

Some 20-30% of companies in a supply chain survey we conducted late last year said they are considering home-shoring or near-shoring. “For example, a lot of economies are putting subsidies in place to encourage companies to ‘come home’,” Françoise adds. “But according to our analysis, China still appears as the top destination for companies looking for supplies outside their home country. So it’s not the end of the Chinese supplier yet.” And, as China’s economic rebound is ahead of the rest of the world, it’s also not the end of export opportunities to China.

Learn more about how we can help you take advantage of export trade opportunities thanks to our trade credit risk solutions or by visiting your local website.