For many U.S. companies, the task of recovering from the economic shock of the pandemic is requiring new strategies and a commitment to finding new customers to replace lost business. Today, one of the best ways to locate strong business opportunities is by looking beyond our borders. In fact, according to the DHL Global Connectedness Index 2020 (GCI), which offers one of the first comprehensive assessments of globalization during the pandemic, cross-border trade and capital flows are already starting to recover, while international data flows actually increased during the pandemic due to surging global e-commerce activity.
If your organization is not conducting cross-border trade, now is a good time to devise an international strategy, especially if yours is a small business engaged in e-commerce. If you are already trading, then you should consider expanding your footprint, since, as the Wall Street Journal has reported, “global trade is rebounding much more quickly this year than it did after the 2008 financial crisis, lifting parts of the world economy and defying predictions.”
With this in mind, here is a look at some key international markets that show promise for 2021:
Both the U.S. and the UK are pursuing trade agreements with Kenya, an indication of the African nation’s growing role as a global player and its importance in the region. For U.S. companies, a trade agreement removing certain tariffs on exports and imports would serve as a critical financial incentive to consider the country, which currently represents about $1.1 billion in two-way trade.
Regardless, Kenya is already a member of the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA), and the U.S. does currently have a Trade and Investment Framework Agreement with each of these regional organizations. In 2019, according to the Office of the United States Trade Representative, U.S. goods exports to Kenya were $401 million, up 9.9% from 2018.
Importantly, a significant effort is underway in the country – an across many African nations – to boost e-commerce and technology opportunities, and to help small businesses find a growing audience. In fact, online sales have increased significantly in the region in the past five years, and experts see a huge potential for growth in the years ahead.
In March, the U.S.-Mexico-Canada Agreement (USMCA) was formally ratified, and it entered into force on July 1, 2020. The trade agreement, which replaced NAFTA, is already creating opportunities for small businesses engaged in trade with our closest neighbors. By implementing new Customs procedures, increasing Mexico and Canada’s de minimis, allowing e-signatures and self-certification of origin, the deal is streamlining trade, especially e-commerce, and promises important financial benefits for companies and consumers in the year ahead.
Trade with Canada in 2021 will be particularly important. That’s because the country’s GDP is an estimated $1.7 trillion, and Canadian leaders are taking aggressive steps to recover from the pandemic. Our second largest goods trading partner overall with $612 billion in total two-way trade, Canada is the largest U.S. export market. Top export categories in 2019 were vehicles, machinery, electrical machinery, mineral fuels and plastics. Top import categories were similarly mineral fuels, vehicles, machinery and plastics.
Importantly, like other parts of the world, Canada is experiencing rapid e-commerce growth, in part due to the pandemic, which signals increased opportunities for online retail sellers. Language, cultural and tax similarities give U.S. companies an advantage in doing business in Canada.
Trans-Pacific Partnership (TPP) Nations
In 2015, the U.S joined 11 Pacific Rim nations in negotiations on the TPP, a landmark trade agreement that sought to improve market access and provide key trade facilitation benefits. In 2017, the U.S. withdrew from the pact. The remaining countries in the TPP have moved forward with a new arrangement, now implemented, which is known at the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It includes many of the same trade facilitation provisions that were being considered by the TPP.
With new leadership in Washington, D.C., it is possible that the U.S. may consider participating in some version of the TPP in the future. President-elect Biden has not said whether he would re-join the TPP; however, he has indicated that the U.S. must be active in setting trade rules in concert with other nations.
The nations that make up the TPP are certainly important for U.S. companies in 2021, and the prospect of a potential agreement – though it likely would not occur before 2022 – suggest that focusing on these nations will be useful. In addition to the U.S., the original TPP countries are: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
In October, 50 U.S. senators called on the Trump administration to engage in bilateral trade agreement negotiations with Taiwan. Since Taiwan is claimed by Beijing as sovereign Chinese territory, the move is seen as an effort to offset China’s global trade influence.
Recently, it was reported that “Taiwan’s foreign minister voiced confidence … that the incoming government of U.S. President-elect Joe Biden would support a long sought-after bilateral trade agreement, following high level economic talks with the outgoing administration.” If a deal is finalized eventually, it will make Taiwan a more attractive market for many U.S. companies, but it may also complicate trade with China.
According the Office of the U.S. Trade Representative, Taiwan is already our 10th largest goods trading partner, with $85.5 billion in total two-way goods trade in 2019 – including over $31 billion exported from U.S. companies.
The largest country in South America, Brazil is also the second largest economy in the Western Hemisphere. For U.S. companies, the opportunities for trade are significant, especially in light of the country’s surging e-commerce activity. Despite several years of economic challenges in Brazil, online sales have increased significantly in the past several years. And, as is the case globally, the pandemic has pushed e-commerce into overdrive. Consider these statistics:
- Brazil is the 4th largest internet market globally, with 150 million internet users out of total population of more than 209 million.
- The country represents approximately 42% of all B2C e-commerce in South America.
- With 130 million active Facebook users, Brazil is in the top three for users of the platform.
Trade with Brazil is facilitated by an agreement signed with the U.S. in 2011 and updated in 2020: the Agreement on Trade and Economic Cooperation. The agreement streamlines Customs procedures and simplifies import/export processes – an important plus for U.S. e-commerce companies looking to export to Brazil.
What are your company’s top global markets in 2021? Let us know on Twitter @DHLUS.