Don’t Tread on Trade!
Micro exporters of BMWs are running afoul of the law, or are they? For several years now, enterprising entrepreneurs have been buying BMWs, most notably X5s, at sticker rates of $56,025 and selling them in China for $153,176. It’s a win for U.S. dealers who get to sell a BMW at sticker price, a win for the customer in China because he gets to buy the car of his dreams and a win for the arbitraging exporter who takes the risk and arranges the transportation and transaction details. What could be wrong with that? Well, let’s just say it doesn’t sit well with BMW. A spokesperson for Daimler AG maintains that “Vehicles exported to other countries undermines our pricing and volume positioning in the U.S. and other worldwide markets.” So what if it does? It sounds like BMW is upset that micro exporters are profiting from the sale of cars to China—and not them—and they have convinced the feds, who are only too happy these days to flex their muscles, to seize their bank accounts and cars in transit at ports. It sounds like the Boston Tea Party all over again only this time the roles are reversed. Note to Eric Holder: This is America, a country founded on the principles of free trade. You might want to reexamine why the American colonies adapted the phrase “Don’t tread on me.”
Global air freight is expected to grow 17 percent over the next five years, according to the International Air Transport Association. We think it will be more like 25 percent to 27 percent. Here’s why: China is expected to add more than 1 million additional cargo tons by 2017, matching the predicted increase for the U.S. over the same period. But stop the presses: China’s middle class is currently about 300 million and is expected to grow to more than 1 billion by 2017—roughly 80 percent of its entire population. This has staggering implications for U.S. exporters. As China’s middle class grows—almost exponentially—we look for an increase in demand for iconic consumer products, many of which traditionally favor air cargo.
What’s good for the goose is good for the gander. Right? So when we see that the U.S. accounted for 22 percent of worldwide GDP in 2013, down from 31 percent in 2000, are we to think our better days are behind us? Not at all. The more developing nations develop, the more they will snap up our exports.
It’s all good.
JP Morgan’s $13 billion “settlement” with the Justice Department is nothing short of extortion by Attorney General Eric Holder. All Americans should be educated and outraged by this. Keep in mind that the feds, led by Treasury Secretary Hank Paulson, practically pleaded with JP Morgan to bail out Bear Stearns and WaMu with their toxic mortgages in the first place. And keep in mind that it was the federal government that pushed risky lending practices into the marketplace and onto people who could not afford a home loan. Come on… zero to 3 percent down for a mortgage? What were they smoking? And now Holder comes along and pins the blame on JP Morgan? Even more Orwellian is President Obama threatening the health insurance companies to change their underwriting procedures and extend benefits to bail him out of his failing health overhaul, and making vague threats through his Health and Human Services secretary if they don’t. Make no mistake: If we allow the Justice Department to extort our largest bank and get away with it, the insurance companies are next. When does it end? Hopefully in 2016.
American capitalists spend too little time thinking about Mexico and even less about Canada. Ready to be astonished? Every day nearly $2 billion in goods and services crosses the U.S./Canadian border, and almost $1 billion crosses between the U.S. and Mexico. As the ancient Chinese proverb goes, the best time to plant a tree was 10 years ago. But in business, it’s never too late to jump in.
How’s your Spanish?
The worst thing we can do to Cambodia, Laos and Myanmar is to keep them on the foreign-aid dole. All this does is foster corruption while de-incentivizing their governments to create an environment for entrepreneurism to flourish. Welfare hasn’t worked in our inner cities and it doesn’t work when we export it to other countries.
Relax. China Isn’t Taking Over!