Global Trade This Week – Episode 118
What’s going on in Global Trade this Week? Today Trade Geek Pete Mento & Doug Draper of Inland Star Distribution cover:
1:45 -Government Shutdowns Are Bad for Importers and Exporters
7:12 -US Trade Agreements Are Focusing on Metals
13:30 -Halftime
23:15 -Is the World Ready for Nuclear Cargo Ships?
26:20 -2024 Will Be the Year of the Parcel Wars
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Keenan Brugh 0:00
You're watching Global Trade This Week with Pete Mento and Doug Draper.
Doug Draper 0:09
Welcome to a another edition of Global Trade This Week. I am one of your hosts. Doug Draper. I'm out in the great state of Colorado. My partner in crime with some crazy artwork behind him. I've never seen those pictures. The one on your left shoulder is my buddy Pete mento. Pete, how're you doing?
Pete Mento 0:28
I'm doing great, Doug. How are you, buddy?
Doug Draper 0:31
I'm doing good. Doing good for for a Monday, and it's sunny gonna be low 80s Here. Look at that. We open the show and just a bunch of old men talking about the weather. So I will take responsibility for that I'm not going to talk about anymore.
Pete Mento 0:47
It's okay, man. I mean, we had a trash summer here. If it wasn't raining, it was like 105 It was it was a really brutal time. And now, I'll talk about a little bit more later. I was up in Maine all weekend. And a bunch of my friends who live in Texas and stuff didn't bring pants. They didn't bring trousers. And at night, it was 40 something degrees and like, don't you remember where we went to college? He was beautiful. skies were clear and everything but man, it was cold as hell. So I think winter is going to be bad. It's gonna be bad, dude.
Doug Draper 1:23
Bring it on. Bring it on a lot.
Pete Mento 1:25
Yeah. Well, for you and Kenan, you get all fired up when you hear that? Because you're gonna be scanned and everything. So
Doug Draper 1:31
yeah, yeah, it's never cold weather. It's just bad. Bad outfits and jackets. So I guess. Anyway, Alright, brother. Let's just get this sucker rollin. So I open. So your topic number one?
Pete Mento 1:44
Yeah, well, last week was pretty tough for customs brokers and freight forwarders everywhere, because we were facing an impending government shutdown. And for people who work primarily on the customs and trade side, that gives us a lot to worry about, because the Department of Homeland Security, and a lot of our partner government agencies, we're going to be faced with losing a lot of overtime. And having the folks in the government that we work with, have to come into work and not get paid, Doug. So that was going to mean delays in a lot of shipments and problems with getting what had normally been routine processing done. Things like problems with FDA issues with getting bonds approved. Problems with Fish and Wildlife, and inspections being done timely. Getting folks at customs to answer questions. There's things that we take for granted, that happened because of people being available and things being available. While in the last minute a continuing resolution was passed. And there was a lot of political clout that had to be I guess the best way to put it, we sacrificed my leadership in the GOP and other parts of the Republican Party now have come out and said, you know, you've done screwed up now, man, like we're coming for your chairmanship. And these continuing resolutions, they only last for 40 some odd days, we've only got 45 days left before they're gonna have to go through this again, normally, what's happening is, you know, it's a 12 part agreement that we're going to fund the government based on these, these, these 12 separate agreements. And the mandatory spending is already taken care of this is the additional stuff. And it's things like funding what's going on in Ukraine, dealing with issues at the border, because of just sort of the number of people that are coming across, and the emergency issues, they're trying to deal with problems that we're facing with the Fentanyl crisis. You know, managing stuff that just comes up outside the course of the regular government stuff that we see. So we could be managing the same problems again, here, and a little over a month. And because of the divisiveness that we're currently seeing in DC, I just don't want people to get too comfortable. We can be going through all of this again, a little over a month. Again, the good news is if you want to call it good news, I guess the comforting thing is, we've seen it before, so we can tell you what to expect. And the trade community on our side of the the aisle, I think did a pretty good job of letting everyone know here's what to expect. And don't think that most importers and exporters, we're letting everyone else in their organizations know. So we were telling everyone over the course of the past three weeks, get ready. Something terrible could happen. The good news is it didn't happen. But it still could happen again. So how about you take all that advice and all those warnings that happened over the last couple of weeks? And let everyone know the sky didn't fall but it still may very well fall? So let's get prepared for it if it does, yeah.
Doug Draper 4:48
Yeah, good. Good point. I can't there were so many LinkedIn posts from companies saying what happens if right which is great, that's good information that needs to be shared and, and everything but the one thing that you mentioned is that we've seen this before. And it's almost that we're numb to it right? When I was talking to my wife, I'm like, they'll figure it out. And then just wander around. What about our day? I just don't see how they can have a government shutdown in this day and age. I mean, if it does, I don't, I don't get it. It's just, it happens too much. The American people have become numb to it with the expectation that it'll get resolved, it'll get resolved literally in the final hour of what's going on. But the one thing related to our industry is that, like you said, 45 days from now, we're going to be kind of doing the same thing potentially. And hopefully, companies that did a little bit of prep work now will be in a better position in 45 days to say, Don't let your guard down. It's not over. Don't put the don't put your, your plans on hold and put it away. I think I mean, customs is customs, if there's no people there to push buttons and move paper. Nothing's going to happen. So I don't know. It'd be interesting. But I think that the the knowledge and awareness and the preparation that happened, that was not needed, will be beneficial, if it does happen in 45 days, but the bottom line is my prediction Pete, they're going to kick the can down the road, they'll get it, they don't want to upset during the holidays, blah, blah, blah, blah, and it'll be sometime in first quarter, we'll have the same conversation.
Pete Mento 6:30
I like to think that they'll find a way to pull this all together, particularly with elections coming, you know, and they don't want to continue to leave a sour taste in everybody's mouth. So we'll see. But I think there's going to be if I had to bet on it, I think that there's going to be some some serious blood in the water, when all this is over with. And both parties will do everything they can to embarrass one another so that they do more. So you know, we'll we'll see. But again, like you were just saying, like I was saying, everyone should take this as an opportunity to educate the folks they work with, to say it's not over yet. Use this as a chance for us to prepare ourselves as this really does come down. Yeah, yeah. What you got, Doug.
Doug Draper 7:11
All right, man, we've talked about this topic several times in different capacities. But, Pete, if you don't look, now, the US is talking to everybody in their dog about trade agreements related to precious metals, lithium, nickel, and the likes that go into evey batteries. So that is happening again, with the with the EU, and enhancing free trade agreements. So the minerals that are used that are important, and the cars that are produced that's using minerals that are not based in United States, but they'll still get the Eevee credits and consumers will still buy and everything else. So it just, it is interesting to see. We did this with Japan, I think in first quarter of last year, that basically reaffirmed that there's there's no barriers of entry with with those products. It just shows that lithium nickel, the precious metals that are needed to to build and manage the Evie industry, where we are full bore forward, private public sectors to make it happen. So you're going to see, see that a lot specific to Thanks, Pete. Number one, Chile is the world's largest deposit of lithium out there. And we do have a free trade agreement. But you're gonna see that on steroids, because we want to make sure that there is no barriers in accessing those raw materials from that part of the world. So I think you'll probably see something about that. We'll clean up and adjust that trade agreement. But specific to us, Pete is that the logistics industry, if you can't figure it out, alternative energy Logistics is going to be a big deal. And if there's companies that can figure it out, whether you're transporting it, importing it, warehousing it as far as you know, raw materials and and things of that nature, it's going to be big business. The one thing I realized Pete in the warehouse industry is warehousing lithium batteries, right? There's a company called ca TL in China that is one of the largest producers in the world. And we had an experience a personal experience where we needed to warehouse like 600 car batteries for production plant out in California. And I was like, yeah, just put him in the corner and we'll be good. Nope, nope. I mean, you've seen lithium batteries whether it's an electric bikes, electric cars, and you see Tesla's that burned for days. Imagine the compliance required to bring that many batteries in from a warehousing perspective. So Um, there's opportunities there where there's a will there's a way and when there's a need that's compliant, timely. There'll be companies that take advantage of it and develop verticals. I know they're already out there. For big companies, I'm sure DSV has a whole vertical for alternative energy, but it's not going away. And I think there will be entities that and companies that embrace it. But it's funny that rules are important. And trade agreements or trade agreements are important, unless they no longer are convenient or beneficial to what we're doing here in the United States. And so let's just change them and tweak them. So I think there will continually be news about changing updating or negotiating new agreements with companies that have precious metals that we need to fuel our electric economy. So anyway, that caught my attention on the headlines the other day.
Pete Mento 10:57
We we've been working on that agreement with Chile for a while we have political issues that are making it difficult for us to do that. We have issues with Europe, that make it hard for us to get past our Evie issues there, you know, we have demands about value content for us MCA. And the battery making up most of the value of these cars makes it hard for us to get past those, we gotta get out of our own way, we want to see more and more EVs on the road, because of the way that we set up these agreements, and pass those, those political issues that get us where we desperately want to be there. You know, I'm, I'm hopeful that as we begin to craft this new evolution of trade agreements, we begin to focus more on the idea of what we want them to look like in 50 years and not year, one, two, and three. Because as the evolution of trade, and as this, this economy that we've been trying to build forever, which is based on innovation, stalls from the idea that America has just been leading all these new technologies, we lead to the next ones, which is exploring space, genetic therapies, all this new medicine, we should think like China does, and 100 year leaps, not in two, or three or four or five year leaps, and protect ourselves for what's coming next. We knew this Evie thing was going to be a big deal. 1015 years ago, we should have been preparing for it. Up until then, I don't really think that we were but and that was a that was a missed opportunity. And then as far as freight forwarding companies preparing for it, I can only speak for DSV in a limited amount that I've been able to understand. So far, we've been really working hard for a long time to create tailored large scale solutions to the point where we have you know, air solutions with our own equipment. We have we have relationships at significant airports where we've taken up our own space, to be able to deliver goods outside of congested areas for the Evie building community, all over the world, so that we can get them products, because we just know, we have to be there. Now in order for us to be at scale when it does get where it needs to be. But we're fortunate to be able to do that because of our size. I think that as people continue to invest, that's a place that you want to be like Gretzky said to be where the puck is going to be not where the puck is. So get yourself in that position now so that when it does become a significant economic opportunity, you're already there, if you can do
Doug Draper 13:28
great, great analogy. I love it. Okay, we got a little halftime going on here. That's when Pete and I get to pontificate about anything that we want. And it has nothing to do with our industry or sometimes it does. But it's brought to you by CAP logistics. And we want to thank them for giving us the platform every single week. It's always fun. And I'm glad that they they grant us that opportunity. So Pete, I don't know you want to go start you had a hell of a weekend. So share it with the audience.
Pete Mento 13:58
Yeah, I got away this weekend, I went to Castine, Maine where I did my undergrad at Maine Maritime Academy. And the Maritime Academy is a four year university with a graduate school that focuses on degrees for people in direct into maritime industry. So people who want to go to sea on ships work in container vessels, all vessels at sea, also to to have careers in the US military. They also have a number of degrees and things like marine sciences, Ocean Sciences, and international business and logistics. They also have degrees for people on the engineering side for power. So whether that is folks that want to work at nuclear power plants, people that are going to be managing large engineering plants shoreside and when I was a young guy coming up back in 1980, wherever it was, it was a relatively small school that was challenging and not a lot of people made it through there. So not a lot of people applied. And it was a school for screw ups like me and the sons of lobstermen who wanted to get their kids into a good school. But it has always graduated people, men and women into fantastic careers, it's always been a place where if you got through it, you're gonna pretty well for yourself. You worked half a year, generally, you made significantly more than the national average. And in 20 years, you could retire and do very well. Over time, that's changed. I mean, there are less and less people that want to go to sea, there are fewer and fewer people, young people who want to really go into a very academically and physically rigorous University, honestly. So the regimen of Midshipman makes up about 65% of the student body now, which is nice, because there are actually women that go to school there now, frankly, and there are a diversity of students now, which is good for a lot of different reasons, not the least of what you have differing opinions on campus, which is nice as well. But one thing hasn't changed. The students there are very bright, and they're hard working in every day. They work with their hands, the wrench and on engines. They're the repairing things on vessels, they're getting dirty and wet and sweaty and miserable. Things break and they get to fix them things go desperately wrong, and they have to find their way out of it. And it is a career preparing wonderful place where they teach you how to just deal with things going wrong. And it was my 30th reunion. From what I can remember of it, it was magnificent. I I did I did drink a little more than I probably should have. But the one thing I wanted to mention before I stopped talking about my school, it's really two things. I went to three different universities and you know, pursue degrees and was fortunate enough to get them I'm not real proud of going to Harvard to joke about it. You know, I I constantly shit on the institution tugging i I'm proud of getting through it. I'm happy from the things I studied. And I really liked most of my professors. But I wasn't impressed with the educational experience there. I am so proud that I got the opportunity to go to that school, the set up to me maritime. The second thing is my classmates have all been to a person wildly successful to a person. I was I graduated 122 Midshipman. And I think 53 of them were there this weekend. Wow. Every single one of them has done well. Every single one of them. And professionally. Personally, I think like most of them have been divorced. But nearly every single one of them has gone on to be a ship's master, a chief engineer and senior leadership in shoreside businesses own their own very successful businesses. attorneys who are doing very well, people who have run for public office, individuals who have done exceptionally well in the US military receiving the highest ranks. Just just people who have led, who are pillars in their local communities that give of service, just everyone has done very, very well. And I want to think that's because from the time that we were teenagers, we just embrace the suck and learn to work in teams. And it made me happy to see so shout out to that weird little place in the middle of nowhere in the coast of Maine that we all hated, but turned out to be a really good thing for all of us.
Doug Draper 18:40
Nice. Yeah, that's cool. You went there. 30 years. That's a long time. So no offense, I didn't mean it that way. The one thing that we can talk about a different show, but I hear the creative writing classes at school are phenomenal.
Pete Mento 18:56
Yeah, I think we took two humanities classes and a lot of technical writing. Yeah, no, sure. No, no, there wasn't a lot you had you had 20 some odd credit hours a semester so most schools were 12 So you know, you're taking eight classes a semester and laboratories and you're you think God you were so busy because there was nothing to do there. But they were all technical classes. Everyone got a bachelor science it was there wasn't a whole lot of fun stuff, man. But if you want to learn how to weld, or scuba dive, or sale, or you know, paint it was it was a fun place to go to school now. It was right for me I would not have made it very long in a traditional university. I lacked the discipline and I think the self awareness to have made it in retrospect, I'm very happy my mother submitted my application without my knowledge in 1988.
Doug Draper 19:54
Nice well mother's know best ever. All right, brother. I sent the pop up last week, I was going to talk about it last week. But did you know that there's a private rail that just opened up that goes from Miami to Orlando, Florida?
Pete Mento 20:09
Not until you told me this morning? I had absolutely no idea.
Doug Draper 20:12
No clue. No clue. I forget what it's called. I think it's the bright, bright line VRI GH vrsg. HD line. And yeah, they're they're shuttling people from Miami and Orlando Orlando to Miami. Couple of you know, not? Well, Miami is a gateway for sure. But they're just shuttling people out there for, for enjoyment, as well. But I didn't know I had no idea about it. Right. And they're building one out on the West Coast that's going to connect Shaka LA and Vegas. Right? They're breaking ground sometime this year. And they say it's going to be done in 2027. But some statistics on the bright line, right? So I want to read this cuz I don't want to make it make it wrong. So a round trip, right? round trip ticket for one person $158. Right. It's, it's not bad. It's about a three hour, it's less than a car, not dramatically less. It can get up to like 125 miles an hour, right. And you can do business class for 158, first class for 298. And then there's group rates and all that kind of stuff. This is what blew me away. And I double check this, they run 32 trains every day. Wow. 32. Now that's, you know, you know, could be 16 up and 16 back, but 32 trains a day on this private rail line that goes from Miami to Orlando that I've never heard of. And granted, I'm on the western part of the US. But anyway, kudos like, there's some rail going on in California that's supposed to connect LA and San Francisco that's been going on literally, forever. And I drive by some of the construction and I've been driving by it for eight months and looks exactly the way it's looked in the past. So kudos to the company that put bright line together. It just shows that the private sector can move faster than the public sector. And it'll be interesting to see what transpires with the bright line West, between LA and Vegas. So really quick peek. Where would be the third place that you would put a rail here in the US what two cities would you connect? If they asked you? Where's the third rail gonna be?
Pete Mento 22:35
That's really tough, buddy. You know, I don't know. I think those are probably the two best. Yeah, because just the the amount of tourist traffic that goes between the two of them. I have no idea. I think Miami and Orlando was brilliant. So is Vegas and LA. Just gonna get people between maybe Dallas and Austin. I think it probably the other great one. Just because the number of people that go between the two.
Doug Draper 22:57
Yeah, yeah, northeast. I don't see that happening. I'm there to Congestus
Pete Mento 23:01
you know the number of people that want to see Disneyworld, are you crazy, and now they've got two airports that can fly into and the number of people that want a party and vacation in Miami. That's just genius.
Doug Draper 23:10
Yeah, yeah. Cool. All right. Let's hammer out this. The second half. So I don't know you want to go first? You want me to?
Pete Mento 23:16
Yeah, mine's pretty easy, Doug. Alright, so I'm in I'm in this fundraising speech where they're asking all of us to get our checkbooks out. And the president of the Academy is talking about how there's this massive push to bring nuclear cargo ships as part of dealing with environmental issues. And so he he's points out many of the military vessels around the world right now use nuclear boilers, and they are incredibly safe and effective. And you pretty much feel at once for the life of the vessel and environmentally, they their home run, you know, and, you know, so he's talking to a super friendly audience. Let's get that straight right now. I mean, most of the people in the room are former Navy officers, you know, a lot of them are let's to put it lightly, pretty right wing people from northern Maine that have done very well and hate taxes, you can read between the lines, you know, and, and I'm in the back and he makes this comment where he says, you get a lot of folks that protested that are of the bearded sandal wearing variety, and I look at myself and I'm like, bearded look down, like, sure enough Birkenstocks and I didn't raise my hand and start to stink or anything, but I can understand what's coming from the thing is though, I am painfully pronuclear I just I'm wondering, Is the world ready? Doug, fir, for nuclear containerships. And is Is the world ready to the point where are we going to see little reactors going all over the world? And people being cool with that pop in and out of ports all over the place? I don't know dude, like I mean, I I like where your head's at, man. But you know, I got a lot of friends that are like nuclear. No, no matter what I don't know, Doug, what do you think?
Doug Draper 25:03
Well, first, it's probably the next script for Tom Cruise's Mission Impossible movie, right? Yep. He's got to save some subs. And, you know, it's been around for a long time. And I think people when they hear nuclear sub right people heard that term is I think that may be the ammunition in the in the military might not necessarily it's being powered off and I nuclear. So it's just, they gotta they, whoever they is, you know, the messaging has to be pivoted because people still remember Chernobyl and the other nuclear reactor implosions right. And people are scared and not understanding all that. I think that's a good solution. I think the more we talk about it, the more people will feel at ease. But it's all about messaging. And how do you pivot away and have people understand it's it is not as dangerous as the perception is out there. And until that is broken down and that barrier is removed? It's still going to be a hard a hard sell,
Pete Mento 26:04
maybe? I don't know you want to power these EVs buddy build a bunch of nuclear power plants? Easier? I don't know. But you want to get my friends all fired up? Have you started throwing bomb water on each other start talking about building nuclear power plants, they get all fired up? You get all kinds of angry? Bring it home? Brother, what you got for us?
Doug Draper 26:24
Alright, fine. It's pretty quick. And it was something I read just this morning. Right? So my, my take on this is that 2024 is going to be the year of the small parcel wars, right. And the beneficiary of that is going to be companies and the end consumer. And the reason I say that is the article I read is that ups in an effort to gain back business they lost when people were preparing for their strike earlier this year, is they're essentially offering rebates or concessions to pay for penalties that companies will incur. Because they went to FedEx or another carrier and said, Okay, we'll help you out UPS is about to have a strike, we'll help you out, you gotta sign this contract. And you have to have a long term commitment. So if you break that commitment, and go back to UPS, and I don't know the proof statement, or what you have to generate, but UPS is saying I will help offset those costs for you to come back. So they're trying to pull the business away. FedEx is saying, Hey, we just got this business, we're not going to let you go, we're going to emphasize this contract, or we'll give you a discount, we want you back. So there's going to be this ebb and flow of these two powerhouses trying to gain market share and customer base. And that is gonna be the the consumer and companies that use high volume parcel, they're going to be the beneficiaries. So you better get ready, there's going to be some some epic battles between Beale Street and hot Atlanta coming up. And I'm glad to say that I personally believe there will be benefit for users and consumers of parcel shipping. So that's my prediction for 2024 as parcel goes,
Pete Mento 28:07
I'm with you, buddy. And I'm with you. I read that same article, and I'm going through it and I'm like, Man, can you imagine being a sales guy, it's gonna be like, yeah, come back home, you know. You know, we're sorry about all the all the drama over here, you know, it happens, but he come back, we'll give you the money that these guys are going to charge you for breaking your contract. But then if I'm FedEx, I'll just be like, You know what, we do what we had to do? Just kidding. You know, hey, you know what, we'll drop that. We'll drop that. And we've got some some rates here. But you don't want to be, you know, you don't be the kind of person that puts a contract together, then you're seen as someone who doesn't, doesn't create it. So yeah, I think this is going to be a pretty wild time to be dealing with the small parcel, folks. It's not that different from people that were trying to pry containers away from the ocean carriers, just recently, and all the back and forth that was going on there. I'm just happy. I don't have to be a part of it. So I guess we're gonna have a good time watching it all dug?
Doug Draper 29:04
Yeah, for sure. For sure. All right.
Pete Mento 29:07
Well, that's gonna do it for us this week on global trade this week, brought to you by our friends at CAP logistics to learn more, check them out at cap logistics.com. Don't cry, Doug. And I'll be back again next week with Keenan behind the board for another edition of global trade this week. Thank you all as always, for listening and for watching till all your friends and subscribe. And we'll see you again next week. Thanks, Doug.
Doug Draper 29:27
Excellent. Thanks, everybody.
Transcribed by https://otter.ai