State by State – ASEAN and Ohio Trade
By: Dezan Shira & Associates
Editor: Fernando Vidaurri
Ohio is the 7th largest economy in the US and a big part of this has been thanks to the trade relationships Ohio-based companies have with other countries. The state has been keen to take advantage of its manufacturing, logistics and agricultural capabilities. Ohio has also strategically taken advantage of FTAs negotiated by the US with partner countries to leverage these treaties into beneficial trade relationships.
ASEAN in particular has seen a large growth in trade flows with the state. In 2014, Ohio exported US $2.77 billion in goods and services to the region, a 7.3 percent increase from the previous year. Imports to the state meanwhile, increased by 6.5 percent to reach US $5.01 billion. While these numbers are significant, they represent only 7.1 percent of imports and 5.4 percent of exports out of the state.
Among ASEAN member states, Singapore has become the biggest export market for Ohio and its second largest trading partner. In 2014 Ohio-Singapore trade reached US $672.75 million, a 23.7 percent increase over the previous year. This trend can be explained by the fact that Ohio has taken advantage of the US-Singapore FTA to export more products to the country.
However the trade has been imbalanced – imports from Singapore accounted for only US $285.18 million in 2014. This leaves Singapore behind some of the other countries in the region, which have been able to reach almost the same level of exports to Ohio without the benefit of an FTA in place.
One example of a growing trade relationship without an FTA in place is Thailand. In 2014 alone exports to the country reached US $414.06 million, an increase of 26.5 percent. Imports meanwhile reached US $557.18 million, making Thailand Ohio’s third largest trading partner in the ASEAN region.
Agriculture has been one area that has seen greater cooperation between Thailand and Ohio. In 2014 the total trade on the Oil Seed, Grains and Fruit category reached US $74.2 million making Thailand the state’s fourth largest market in this category. This trend is also nothing new – Thailand has been among the top five export partners for Ohio in this category since 2012, reaching a total trade volume of US $130 million.
Like Thailand, Indonesia has also seen increasing trade with Ohio, despite the absence of a US-Indonesia FTA. In 2014, imports to the state increased by 16.6 percent to reach US $ 777.85 million, and though there was a decrease in imports Indonesia’s massive economic potential means the trade relationship has plenty of scope for growth. Again in line with Ohio’s trade with Thailand, agriculture has become an area that has seen greater cooperation between ASEAN and Ohio.
Elucidating this point, in February of this year a team of soybean growers from Ohio visited Indonesia as part of a trade delegation. The objective of the mission was to assure Indonesian importers of the high quality of their products, as well learn how to better serve the market that has become the biggest buyer in the region. Their warm reception highlights the importance of trade is agricultural products between the two partners.
Trans-Pacific Trade Agreement
Trade between Ohio and ASEAN looks poised to increase even more with the anticipated future passage of the Trans-Pacific Partnership (TPP), a multi-country trade agreement. The treaty has been met with some opposition in Ohio where it is seen as threatening jobs, however, others have recognized TPPs passage as an opportunity to increase imports and exports. The treaty would open more markets to Ohio agricultural products, such as soybeans and corn. Additionally, despite reservations in the manufacturing sector, it would allow companies to take advantage of a more competitive environment.
The treaty also presents opportunities for ASEAN, given that four of its members, Brunei, Malaysia, Singapore and Vietnam are among its signatories. Based on data from the International Trade Administration businesses based on Ohio are more likely to conduct trade with countries with whom the US has FTA.
New Business Opportunities: Vietnam and Malaysia
Vietnam and Malaysia are two countries that can benefit from the implementation of the TPP to increase trade flows with Ohio. In 2014, Ohio’s exports to Vietnam reached US $105 million, significantly less than trade than with other regional neighbors. Yet, it represents an increase of 29.4 percent on the prior year’s trade numbers. Additionally, Ohio imported most of their Knitted and Non-Knitted Apparel and Accessories from the country, placing Vietnam with Indonesia among the top 5 trading partners in this category.
As for Malaysia, despite a decrease in 2014 in the gross volume of imports and exports, total trade with Ohio managed to reach US $685. Looking ahead there are sectors where the country has started to see some competitive advantages. Due to the low labor costs and skilled workforce the country has become more competitive in the manufacturing of solar panels. Companies like First Solar from Perrysburg, Ohio have benefitted from incentives like the 10-year tax holiday, which have allowed First Solar to set up production in Malaysia, helping make the country the second largest importer of solar panels to the US.
Further Support from Dezan Shira & Associates
Dezan Shira & Associates can service Ohio-based companies that are looking to further develop their operation in ASEAN. The firm can help companies establish a direct office in the country and can guide them through the affiliated tax, legal and HR issues that come with doing so. To arrange a free consultation, please contact our U.S. office at firstname.lastname@example.org.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
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