Issue 14 | January 20, 2012
 

France, Austria and other Euro countries downgraded
Standard & Poor’s downgraded the credit ratings of France and Austria from AAA to AA+ on Jan. 13, reflecting pessimism surrounding the ongoing European debt crisis. The two countries, along with Italy, Portugal and Spain, which also suffered downgrades of their debt, are expected to see their borrowing costs increase. German bonds, on the other hand, have become considerably more attractive to investors, with two-year yields dropping as low as 0.134 percent to reflect investor confidence in German stability in contrast with the uncertain outlook in much of the rest of Europe.

Keystone XL permit declined by Obama administration
President Obama announced his decision on the contentious Keystone XL issue on Jan. 18, denying TransCanada Corp. the permit necessary to build the $7 billion oil pipeline slated to bring Canadian oil to refineries in Texas. The construction has raised hackles on both sides of the aisle, with environmentalists contending that the pipeline would worsen climate change and potentially pollute groundwater in Nebraska; supporters of the pipeline, however, point towards the projected creation of 5,000 - 6,000 construction jobs, as well as increased energy independence from the Middle East and Venezuela, as essential for a recovering economy. TransCanada Corp. is expected to continue to seek the pipeline’s construction, albeit along a different route.

Obama seeks to merge six trade and commerce agencies
President Obama announced his plan to merge several government agencies on Jan. 13, citing an overly complex bureaucracy as unnecessarily expensive for federal spending and cumbersome for businesses to navigate. The proposed consolidation would save $3 billion and reduce the federal workforce by 1,000. The agencies to be merged are the Department of Commerce, the Export-Import Bank, the Office of the U.S. Trade Representative, the Overseas Private Investment Corp., the Small Business Administration and the Trade and Development Agency. Critics of the plan, however, contend that merging agencies with already defined roles, like the Office of the U.S. Trade Representative, will only hamper efforts to increase trade.  

China slowdown is expected, but estimations differ on severity
Although China exceeded expectations by growing at 9.2 percent in 2011, analysts predict that the booming economy will experience a slowdown in 2012 in the wake of a weakening domestic housing market as well as lower than average demand for exports globally. Chinese officials also express concern about the bad debt that has accumulated with Chinese banks due to the booming property market. Nonetheless, the central bank is expected to encourage more lending in order to soften the effects of the predicted economic slump. According to a Reuters poll of experts, growth could drop to 8.2 percent in the first quarter, with some foreseeing an even steeper decline.

Obama calls for tax incentives to add jobs from abroad
President Obama declared the need for tax incentives for firms that return jobs from overseas during a Jan. 11 meeting with business executives at the White House. Lauding the recent phenomenon of “insourcing,” Obama encouraged businesses to continue the trend that has seen the increase of jobs in the manufacturing sector for two years after a decade-long decline. The president cited companies including Ford Motor, Master Lock and Lincolnton Furniture as firms that have spearheaded the insourcing effort and pledged to establish additional tax breaks to inspire others to return jobs similarly.

Port of Los Angeles breaks U.S. record for export container shipping
After a strong year for Los Angeles exports, the Port of Los Angeles broke the national record it had previously set in 2010 for the shipment of export containers. With the yearly total for 2011 at 2.11 million containers, surpassing the 2010 number of 1.84 million, the Port seems poised for even stronger growth in 2012. While London firm Drewry Shipping Consultants predicts a 6.5 percent increase in worldwide container shipping overall this year, Paris firm AXS Marine predicts that much of that increase will consist of a projected 4.6 percent growth in trade with the Far East in contrast to the smaller projected 1.5 percent growth in trade with Europe, a result of the continuing European debt negotiations.

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