Issue 8 | Oct. 7, 2011

President Obama Submits Trade Agreements to Congress for Approval
President Barack Obama has called for the swift passage of a series of free trade agreements with South Korea, Colombia and Panama. “The series of trade agreements I am submitting to Congress today will make it easier for American companies to sell their products in South Korea, Colombia and Panama, and provide a major boost to our exports.” The agreements would lower tariffs and other barriers to trade between the United States and the signing countries. The deals have wide bipartisan support, but are expected to face opposition from labor unions and NGOs concerned with Colombian workers’ rights.

Pimco Forecasts Europe Recession Next Year
Pacific Investment Management Co. forecasts little economic growth in industrialized nations. Pimco predicts a global economic expansion of 2.5 percent for 2012. The International Monetary Fund had estimated a growth of 4 percent for the next year. A default by Greece would not only affect the euro zone, but investors as well.

EU Members Split On European Financial Tax
The European Commission proposed a tax on financial transactions that take place in the European Union. The proposed rate is 0.1 percent on all transactions between institutions when at least one party is based in the EU. The tax would raise about €57 billion ($78 billion) annually. EU countries with a high volume of financial transactions oppose the tax, yet others support it. If implemented, EU financial firms could move overseas to avoid the tax.

Panel Excludes Part of Port of L.A.'s Clean Truck Program
U.S. 9th Circuit Court of Appeals eliminates a provision that would have ended trucking companies' use of independent contractors to haul containers from the Port of Los Angeles. The program was aimed at reducing diesel emissions. The employee provision called for heavily polluting drayage trucks to be replaced with lower-emission models. The American Trucking Association argued that the provision imposed an unfair economic burden and violated federal law.

U.S. Manufacturing Increases 
According to the Institute for Supply Management, the U.S. manufacturing sector expanded and employment strengthened in September. Spending on construction projects in the United States unexpectedly rose during August. The production index increased to 51.2 from 48.6, the factory employment index increased to 53.8 from 51.8, and the exports index rose to 53.5 from 50.5. However, if manufacturers don't see more demand in coming months, they will have little incentive to keep increasing production.

Europe Shipping Services Fall While China’s Increases
European air freight business and shipping services traffic is expected to decrease during the coming months as a result of the nation's current economic state. Airline profits in the region will slide to $300 million next year from $1.4 billion this year.  Asian freight services are not projected to have substantial decreases. Forecast earnings fell to $2.3 billion next year from $2.5 billion. As a result, many investors are currently focusing more on Asian freight operations than those based in Europe.

Chinese Exports Weaken
Chinese manufacturing increased slightly in September.  However, domestic demand helped to offset the weakness in the export sector. Surveys conducted by HSBC show bare signs of a major slowdown in demand. This could hinder growth in other countries that depend on Chinese industries to drive demand for iron ore, factory machinery and other goods.

Struggling Freight Companies Could Face Restructuring or Bankruptcy
At least four U.S.-listed shipping companies are likely to face restructuring or declare bankruptcy over the next 12 months. Maritime firms are struggling with low freight rates and an oversupply of new vessels.  Companies in the tanker and dry bulk markets are more vulnerable than their counterparts in the box shipping sector. Korea Line, The Containership Company and Omega Navigation Enterprises are a few that have filed for bankruptcy protection.