Issue Date: July 6, 2009
Emerging Markets Boost Commerce
Worldwide trade in chemicals increased in 2008, part of a larger trend of increasing globalization of the industry. Full-year figures suggest that although chemical production closely follows economic cycles, longer term economic forces—namely the pace of development in emerging markets—governs the volume of international trade.
In the U.S., the chemical industry kept its status as the number-two exporting sector, after machinery and transport equipment. The total value of chemicals exported by U.S. chemical makers in 2008 exceeded $179 billion, or more than 17% of the $1 trillion in total U.S. exports.
The U.S. enjoyed a second year of positive chemical trade balance. A major reason for the short streak was the low value of the dollar compared with other currencies, especially the euro. The low dollar made U.S. exports especially price-competitive in 2008 compared with 2002–06, when the chemical trade balance was negative. The dollar strengthened toward the end of 2008, however, and the trade surplus for the year narrowed.
The biggest U.S. trading partner by far was Europe, and despite the cheap dollar, the U.S. imports significantly more chemicals from Europe than it exports. But the rate of growth of trade between the U.S. and many emerging markets rose faster than that with Europe. Imports from China and Vietnam soared 48.0% for the year, and imports from the Middle East jumped 40.7%. Trade with Latin America was also strong. Although the U.S. exports far more than it imports from the region, imports grew at a faster pace in 2008 than in 2007.
The biggest product category of U.S. trade in 2008 was medicinals and pharmaceuticals, edging out organic chemicals. Pharmaceuticals are also the biggest source of negative trade for the U.S., and the deficit has grown significantly over the past 10 years. On the other hand, plastics had the strongest trade balance last year: The U.S. exported 8.6% more plastics in 2008 than in 2007.
Trade in fertilizers and other agricultural chemicals, although a relatively small portion of overall trade, skyrocketed in the U.S., as well as in Canada and Japan. Soaring prices for food commodities, driven in large part by growing populations in Asia, sent demand for agricultural products through the roof.
Canada, home of the fertilizer makers Agrium and Potash Corp., exported 43.1% more agricultural products in 2008 than in the previous year. But overall, the country's trade deficit widened, mostly due to an 11.8% drop in exports of basic chemicals. Canada's biggest trading partner is its neighbor to the south. Yet in 2008, the share of its chemical imports coming from the U.S. fell to less than 60%, continuing a three-year slide.
In Europe, as in the U.S., trade with developing countries showed dramatic increases. At the same time, European trade with developed countries either stayed flat or declined. European imports to and exports from Russia, China, and Brazil all posted double-digit growth in 2008. In contrast, trade with the U.S., Canada, and Japan saw declines. The biggest drop in imports was from Canada, decreasing more than 30% for the year. Only exports to Japan increased, and the growth was less than 1%.
In Asia, the biggest news was the speed with which China's chemical trade deficit continued to narrow: Exports rose 34.7%, and imports grew by only 12.2%. China's deficit in organic chemicals came down from $14.2 billion in 2007 to $10.2 billion in 2008.
Meanwhile, Japan's trade surplus shrank slightly as imports rose faster than exports. In particular, exports of organic chemicals dropped slightly while imports rose 19.8%. It was a similar story for synthetic resins: A bump in exports of 8.0% was overwhelmed by a surge in imports of 18.8%.
The trend was different in South Korea, where the chemical trade surplus continued to expand. The biggest jump was in exports of petrochemicals, which rose 11.4% while imports advanced by a mere 6.0%.
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