NORTH AMERICA – Opportunities and challenges

zapuruguayanBiotechnology

Dec 9, 2012 (4 years and 10 months ago)

148 views

NORTH AMERICA


Opportunities

and
challenges

Leif Beck Fallesen

ESSAM Aarhus, Denmark,

June 29th, 2011

Agenda


Time to
write

the
obituary

of the U.S.
economy
?


Opportunities

in North America (U.S.)


Challenges

in North America (U.S.)


The Atlantic
Secret


Conclusion

Obituary

of the U.S.
economy
?


”The
report

of
my

death

have
been

greatly

exaggerated
” (Mark Twain
, 1887
)


Three

scenarios: a)
no

exaggeration
; U.S.
defaults b) U.S.
muddles

through

c) U.S.
regenerates

and
surges

ahead


Basic

assumption

of
this

presentation
; U.S.
muddles

through

at the
macro

level
,
corporate

America
may

surprise

on

the
upside

Globalisation

=
growth

Long term
predictions

have short lives;


1950s: U.S.
owns

the
world

(
forever
), but in the
1960s
Germany

and Japan had
growth

rates of
12
-
14%


1980s; Japan
took

the
lead
, 1990s
predicted

to
be

Japan
´
s

decade

(
until

bubble

broke
)


Second

half

of 1990s; U.S., the comeback kid


2011: China
becomes

the
world
´
s

manufacturer

no. 1 and
predicted

to
overtake

the U.S. by 2025


BUT long term
globalisation

=
growth

Opportunities

in North America


China
may

be

the
world

manufacturer
, but the
U.S. is (still) the
world’s

consumer
,
driving

a
quarter

of
demand

in the global
economy


U.S.
consumers

are

the
richest

and most
discerning
;
Ontario

is a test
market

for the U.S.,
the U.S. is test
market

for the global
emerging

middle

class


Corporate

America is
globalised
,
breaking

away

from U.S.
political

gridlock

and
lacklustre

short
and
medium
-
term

growth

prospects

19,7%

6,3%

42,0%

10,2%

19,8%

World
value

added

in
manufacturing

2010 ($
bn
)

China
Germany
Italy
Others
Japan
US
Total:

$10078bn

2,0%

Source: The Boston Consulting Group; World Industry Service; IHS Global
Insight

Manufactured

in the
U.S.A.



You

have to
be

successful

in the U.S.
if

you

want

to
be

the
No.1”


Martin
Winterkorn
, CEO, VW.


New 1
bn

Passat plant
in
Chattanooga
, May
2011


$20.000
-

$8.000
cheaper

to
produce

20.2

8.2

4.6

39.5

27.5

Market Value by country in
percentage in 2010

EU
China
Japan
Others
US
Source
: FT

Global 500 2010

Note: China
includes

HK

and Taiwan, EU
includes

Norway

and
Switzerland

11

4

13

14

13

Newcomers

to the list by country in
percentage

by the end of
2010

EU
China
BRIC (minus China)
US
Others
Source: FT

Global 500 2010

Note: China includes HK

and Taiwan, EU includes Norway and Switzerland, BRIC: India, Russia, Brazil

Top ten
sectors

by country

Number of firms

US

Japan

China

EU

Others

Banks

69

7

3

11

20

28

Oil & gas producers

45

11

1

4

8

21

Technology hardware & equipement

21

13

2

2

2

2

Pharmaceuticals & biotechnology

20

10

2

0

6

2

General retailers

19

11

2

0

4

2

Financial services

18

12

1

2

1

2

Industrial metals & mining

18

2

2

2

1

11

General industries

13

4

1

4

2

2

Chemicals

13

4

1

0

5

3

Health care equipement & services

12

11

0

0

1

0

Software & computer services

12

6

1

1

1

3

Source
: FT Global 500

U.S.
share
/
growth

trends


Ageing



health

care

11/12


Pharmaceuticals
,
biotechnology

10/20


The web
economy

-

Technology

& hardware
13/21


Software & Computer services 6/12


Food
-

world’s

largest

producer and
exporter



U.S.
water

resources

a
comparative

advantage


And all have INNOVATION
inside

Web
economy
:
customer

potential

43.5

35.4

21.1

44.8

35.8

19.5

0
10
20
30
40
50
Europe
Americas
Asia and Oceania
% of OECD Internet subscriptions

OECD
Broadband subscriptions by geographic area

2007
2010
Source: OECD
based on Broadband Portal [www.oecd.org/sti/ict/broadband], June 2011.

U.S. global
trump

cards


Aerospace

and
defence

spending

has
very

strong

spill
-
overs

-

computers, the web, GPS,
pilotless

aircraft

next


Political
, social and
cultural

environment

strongly

supportive

of social media and digital
consumption



Google
,
Facebook

etc.


unlike

China


Culture

of
resilience



the
ability

to
fail
,
fail

again

and
then

succeed
,
unlike

EU


Risk
-
taking

corporate

culture
,
backed

by real
money
,
unlike

Japan

The
cost

of
creating

jobs

525

49512

26370

31659

0
10000
20000
30000
40000
50000
60000
China
US
UK
Germany
constant 2000 US$)

The
world’s

most
productive

farmers

Value

added

per
worker

(
2000
dollars)

Source: World Bank

Challenges

in North America


Macroeconomic

risk
; A U.S. default
when

creditors

refuse

to
finance

public deficit (2020?)
Unlikely
,
who

would

lose
? (China, Japan) More
likely
;
high

inflation,
high

interest

rates,
collapse

of the $ (stagflation),
low

growth

(the lost
decade
)


Political

risk
;
political

gridlock

and
protectionism

further

impairs

growth


Only

real
hedge
;
locating

some

production

in the
U.S. and
selling

to the U.S.
cash

in
advance

-12%
-10%
-8%
-6%
-4%
-2%
0%
2010
2011
2012
2010
2011
2012
% of GDP

US

Euro

Area

Challenges

in North America:
Fiscal

mess

without

the
Source: OECD

More,
if

you

like


Unemployment

rate has
remained

very

high
,
despite

recovery



and
that

work

force has
dropped

10m


Dramatic

disparity

in
educational

and
skill

levels

within

the U.S.
Compressed

middle

class

is
being

priced

out of
education

and
housing


Financial
industry

is
licking

its

wounds

after

the Great Recession

The Atlantic
Secret




Global
focus

is
on

BRIC
countries
,
who

have led
the global
economy

out of the made in U.S.A.
financial

crisis
.
Understandable

and
justified

from
global
macro

perspective


But the Atlantic
relationship

is the
mainstay

of
corporate

sales and
income

for
many

years

to
come
, not
least

because

markets

are

so
alike

in a
global
context


One of the
best

kept

secrets

in global
trade



(
fairly
)
happy

marriages

get

no

publicity


divorces

and
domestic

violence

does



Report

Card

2000
-
2009

United States (2000=100)


Real GDP 115


Exports

(
volume
) 125


Imports (
volume
) 113


Share

in global
exports
: 8,43%
(services: 14,07%)


Exports
: EU 20.9% Canada
19,4,Mexico 12, China
6,6%,Japan 4,8


Imports: China 19,3%, EU
17,9,Canada 14,2,Mexico 11,1,
Japan 6,1

European Union (27) 2000=100


Real GDP 112


Exports

(
volume
) 126


Imports (
volume
) 126


Share

in global
exports
: 16,1%
(services 26,6%)


Exports
: U.S. 18,0%,
Switz
-
erland

7,2,China 7,2.
Russia

5,8,
Turkey

3,9%


Imports: China 17,6%, U.S.
13,1,Russia 9,4,
Switzerland

6,1,
Norway

5,6%

33.7%

36.2%

216.4%

0%
50%
100%
150%
200%
250%
US
Germany
China
% change

Growth in GDP pr. capita 2000
-
2010

2010: PPP
levels
: US$:

U.S.: 50.633 EU: 29.392 (
Italy
) China: 6.828


Source: International
Monetary

Fund. GDP pr.
capita

adjusted

for PPS.

Atlantic deficit: Trade in
goods
: EU with US

186.8

250.1

63.3

0
50
100
150
200
250
300
Imports
Exports
Balance
Billions of euros

2008

159.2

205.5

46.3

0
50
100
150
200
250
Imports
Exports
Balance
Billions of euros

2009

169.5

242.1

72.6

0
50
100
150
200
250
300
Imports
Exports
Balance
Billions of Euros

2010

Source: Eurostat, Statistical Regime 4

Like for like: Trade in commercial services (excl.
g
overnment
services): EU27 with United States

131.1

133

1.9

0
20
40
60
80
100
120
140
Imports
Exports
Balance
Billions of euros

2008

124.1

116.9

-
7.2

-20
0
20
40
60
80
100
120
140
Imports
Exports
Balance
Billions of euros

2009

131

125.2

-
5.8

-20
0
20
40
60
80
100
120
140
Imports
Exports
Balance
Billions of Euros

2010

Source
: World Trade Organisation

Collapse of FDI flows in 2010

EU 27 FDI inflows fell by 75% to 54bn, outflows 62% to 107bn

44.4

148.2

103.8

0
20
40
60
80
100
120
140
160
Inflows
Outflows
Balance
Billions of euro

2008

97.3

79.2

-
18.1

-40
-20
0
20
40
60
80
100
120
Inflows
Outflows
Balance
Billions of euro

2009

28.5

11.9

-
16.6

-20
-15
-10
-5
0
5
10
15
20
25
30
35
Inflows
Outflows
Balance
Billions of euro

2010

Source
: Eurostat (
NewCronos
)

U.S.
share
;


53% 11%

56.60%

55%

50%

50%

50%

47%

45%

45%

45%

43%

41%

40%

35%

30%

20%

15%

13%

29.40%

0%
10%
20%
30%
40%
50%
60%
Why

Americans
can

consume

more:

Top
rate of
income

tax

2010

Source: KPMG

Long term (non
-
BRIC) bet: EU, U.S. or …. Australia?

Potential growth in GDP 2012-25
0
1
2
3
4
Tyrkiet
Australien
Norge
Irland
Luxemb.
Slovakiet
Korea
N. Zealand
US
Mexico
Østrig
Tjekkiet
Finland
Spanien
OECD
Schweiz
UK
Ungarn
Island
Polen
Belgien
Canada
Sverige
Frankrig
Italien
Holland
Euroområdet
Grækenland
Portugal
Tyskland
Danmark
Japan
Source: OECD Economic Outlook No. 87

Conclusion


The
report

of the
death

of the U.S.
economy

has
been

exaggerated


from a
corporate

perspective


New business in the
BRICs

is more
exciting

than

touring

the
Midwest

or

Bavaria


But the Atlantic business
relationship

is
crucial

to
both

EU and US
core

business
survival


Opportunities

in North America
outweigh

the
challenges



if

you

have global ambitions