Global Trade This Week – Episode 219
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Speaker 1 0:00
You're watching global trade this week with Pete mento and Doug Draper,
Pete Mento 0:07
Hello everyone, and welcome to another glorious episode, another stunning, stunning installment of global trade this week I and Pete mento with me is the CO hostess with the most is Doug Draper, Doug, how are you buddy? This looks like a new background. I don't think I've ever seen you in this room before. Seen you in this room
Doug Draper 0:23
before. Yeah, I don't think I've ever done a podcast from this room. It's a secret bunker in the mountain, Cheyenne Mountain down in Colorado Springs. I love it. I absolutely love it. Yeah, that's
Pete Mento 0:38
not I'm in a hotel in Madison, Wisconsin. So nice Not, not nearly as cool as that.
Doug Draper 0:44
Madison. Well, I'll tell you what Madison, Wisconsin School's in session. It's right before you know what kids nowadays, they bail out the weekend before Thanksgiving. So I would imagine the campus is going to be waning, not waxing, but there'll be some professionals there ripping it up this weekend. I'm sure my point is that campus is pretty rowdy. I mean, classic college experience there what? I don't remember the name of that street that comes off the south side of the campus, but
Pete Mento 1:15
don't know. Don't care. Doug, as I have stated many times, I hate young people. Nothing to do with them. I don't want to socialize with them. I don't want to be in the same bars and establishments as them. Yeah, they irritate me. They irritate
Doug Draper 1:26
me. Doug, yeah, okay, well, we'll leave it at that. All right, so let's get this party started. I know it's a little we're a little off kilter. Usually we do this show in the morning. Pete, and this is afternoon edition. So it's like, I gotta go. I gotta go shut it down for the day. So let's get this thing started.
Pete Mento 1:46
Sounds good to me, buddy, you're up first. I introduce you. Go first. Alright.
Doug Draper 1:51
So I got this. This got my attention end of last week with today's Wednesday. I've been like you, Pete, I've been traveling a little bit this week. Anyway, I saw this article, and it talked about China, and it's like green investment, and it's commitment for renewable energies. And we've talked about that a little bit, you know, you get the batteries and the EVS and the solar panels and wind turbines, and that's all good, but this spin is a little bit different. Pete is that they are selling these and exporting these to emerging markets. In a lot of it is in Africa. Sorry, I was trying to think of that they're coming down and investing into rural or up and coming countries, right? So everybody wants these renewables. It was a big hype for a while, but it's continuing. Sorry, my phone just went off anyway. My point is, is that okay? Cool China is doing all these green initiatives, and they're selling them to developing countries. Why do I care about that? The key thing here is that not only are they selling the products. They're investing in the infrastructure to use the technology. They're providing loans to the countries so they can buy the commodities, so they can be using it. And they're also investing in infrastructure with the ports in order to accept and transition and transload these. So I started thinking about this. This is a bit scary. They're making these products. They're financing these products, they're managing these products, and are managing the deployment into the field, and then they're also capturing the development of ports that need infrastructure assistance to get these things going on. So it's a little bit crazy while, and this may get a little political, which we say we never do, but while we're becoming more centric other parts of the world, and one of our biggest rivals and trading partners is saying, Okay, well, the US is part of the global trade, and we're going to invest in in renewables. And green tech, and we're going to permeate the world and put our fingers in all these different aspects. Right? So whoever controls the financing in the factories, whoever owns the ships that are moving this product, they control the ports. And so these engagements, in my opinion, Pete, are kind of weakening the US global position, because people are not the world is not centric on the US in all aspects of it, right? So you have China coming in, doing all these things that we're not readily aware of. And if we're at a weaker position globally. That means we have less control, and when we have less control, we have less global influence into global trade. So that's the indirect connection. But I didn't realize I dove into this article, and I'm like, Oh my God, they're making it, they're financing it, they're running it, and they're and they're investing infrastructure in the ports. So when the US wants to sell something or go into those ports, what do you think is going to get preferential treatment? And so I think this could really change the dynamic of shipping rates, because they're going to be controlling the vessels and where they want them to go into markets that they're supporting. It's going to limit us on our trade capabilities with emerging markets outside of the traditional powerhouses. So it just caught my attention, and it gave me a different perspective and a step back, like, wow, this is pretty impactful, and it needs to be called out in this show. It may seem like, yeah, renewables, that's fine. They make batteries and cars and all kinds of stuff. But if you peel that back and look at what it means beyond the surface, it's a little scary.
Pete Mento 5:49
Well, Doug, not to get on a soapbox, bore you with history. But when Great Britain decided to go to the New World, and most of the European powers, we call this colonialism. We we found all kinds of natural resources and expensive labor in a market of its own, and we gave all the infrastructure necessary to produce an export. When we decided that we were in a similar position, we did the same thing with Mexico. Then we did the same thing with China. We have invested significant amounts of money in infrastructure, manufacturing and the such engineering IP, this is the natural order of things. As a soon to be hegemonic economy rises to the point where they want to control more of the rails trademark, Doug Draper, 2019 they put the money into it to do exactly that. We're doing something similar in places like India, certainly through Latin America, but now reinvesting and doubling down in places like Canada and Mexico. This is just the natural order of things, but it brings one pause, as you mentioned, buddy, when you begin to think about the fact that you know whoever supplied this stuff is probably going to get preferential treatment, and seeing as how they're maintaining its safety with their own standing army. It might have something to do with it too. So yeah, it's a long term. Talked about thing for decades now. What are we going to do about China's expansion in Africa? And so far, the answer is nothing. We're doing nothing. We're letting them build their foothold there. It's gone from a toe hold to a foothold. They're gonna have a very strong position there, well, we're going to look at other parts of the world. Theoretically, to do the same, we'll see. But I'm not very bullish on this, but yeah,
Doug Draper 7:27
and it's, it's a 50 foot view out ahead of us, not the 15 foot in front of us. So it You and I may be long retired before the situation comes to to roost, so to speak. But yeah, that kind of shook me in my boots. As silly as that sounds, I was like, Oh my God, this take a bigger picture of what's going on here. It's a little it's a little concerning. A lot concerning. Agreed, agreed. We'll watch this one.
Pete Mento 7:54
So mine also has something to do with sort of long term strategic supply chains the United States over the course of probably the past 10 to 15 years, has been putting a lot of money, a lot of money and a lot of effort into identifying parts of the world where we can refine, not, pardon me, mine, and eventually refine rare earth materials. 98% of the rare earths that are used in the world are refined by China. A lot of people think it's because they have them all. It's not the case. It's because they can refine them all. Because China has much more relaxed environmental policies than the United States does. It puts them in a position to be successful with the outcome of these rare earths, which can be quite detrimental to the environment, they're about to have real significant competition with the United States, Canada, Australia, Eastern Europe, parts of Latin America, and that grip on it will begin to loosen. So we've found a tremendous amount in the Arctic of a number of these rare earth strategic materials, and at the same time, we are building the necessary infrastructure to refine them and to do it in a way that is more gentle on the environment than we believe. Our friends in China are doing it, as is Australia, Canada, etc. So it's one thing to find this stuff. It's another to refine it. And right now, it's just theoretical. We haven't done any of it yet. So as excited as I am that we're getting engaged in this because it is crucial for our ability to maintain strategic advantage, I'll believe that we have refined materials when I see it.
Doug Draper 9:20
That's a good point. When you, when you speak of the Arctic, right? When you sent the show notes on this, I'm like, Okay, that is delicate land, and the approach up there, right? You have the who's in the right jurisdiction, what's the environmental and land impact, who owns the land, and all that kind of thing. And then the other piece, and I don't know, you may know this more than I do. Like, what's the grade? If that's the right term to use of the rare earth metals and elements down there. You know, you always talk now, if it's low grade stuff, it's going to cost a heck of a lot more money to need to refine, a lot more to get what you need. So I don't know if you're. Heard anything? Is there been testing like, Hey, this is primo iron ore or something?
Pete Mento 10:06
Yeah, is it trash material? I don't know. I just know they're finding a lot of stuff. They didn't expect to find, but they thought that they would find some of this stuff. I don't even know how to pronounce some of these things. Yeah, I know they're finding it. I don't know anything about the grade of it, though. That's an excellent question. I'll certainly look into it. So that brings us to halftime, ladies and gentlemen, Doug's favorite part of the show, where we get to talk about something that has nothing to do with logistics or trade or commerce. And halftime is brought to you, as is the entire show by our friends at CAP logistics. Want to thank them for their continued support and the mediocre service of our friend, Keenan, who manages and produces the show, so Doug, who's going to go first on halftime this week. Excellent.
Doug Draper 10:46
Yeah. Well, we're approaching Thanksgiving, right? We're not sure if we do a show next week or not, so we'll leave our audience on their edge of their seats. So I wanted at this time to talk a little bit about Thanksgiving, and I just had three things that I wanted to get your opinion on, Pete, as far as when you're sitting down at the Thanksgiving table and kind of figure out what is, what is Pete's favorite? So let's talk about pies, right? Thanksgiving would not be Thanksgiving without a pie. So do you have a favorite pie that you'd like to enjoy at the end of the meal?
Pete Mento 11:20
I have favorite pies. So being a proud son of Texas in the south, pecan pie always be pecan pie. I want my pecan pie with not Briars ice cream, Blue Bell vanilla bean ice cream. I also really like chocolate silk or chocolate cream pie. Big fan, big fan, I want that with Cool Whip. Not whipped cream, not ready whip. Excuse me, I want Cool Whip. I want it out of the tub that will eventually be used to hold bolts or nuts or something else down the road. Now, my favorite pies, I don't think I've ever seen them served at Thanksgiving. I love peach pie. Doug. That is my that's my favorite. And I don't often see that on the Thanksgiving Day table, which I think is a travesty, frankly, as is cherry pie, another one that I really enjoy. All of these pies are terrible, bad for you, full of sugar, corn syrup, all that. I don't care. It's the only time all year I really eat pie is on Thanksgiving. And those are my favorite
Doug Draper 12:21
nice, yeah, I'd say apple and French silk. I think that's what you were talking about on your second choice there, right? But you got to have them both. Big fan, all right, what's your take on? Hey, we just right before the big meal, we go in the backyard and we play the annual football game, or have our turkey bowl or back backyard games. Are you a big turkey bowl fan?
Pete Mento 12:44
Any opportunity to lay the smack down and physically beat the shit out of another member of my family? Doug, I'm in. If I have an opportunity, people tend to forget that I played pretty high level, rapping, not saying it was any good, but I did play. And if you're out in the open field and I tackle you, I'm going to break some ribs. And, you know, Sicilian families, we hold long grudges, long grudges. So yeah, heaven help you if you're in the open field for that. But any of those lawn sports I once went to a Thanksgiving dinner where they played croquet, and I thought that was pretty stupid, until I started playing it and saw just how incredibly competitive and mean spirited it could be. I'm all in. So if you're going to force me to spend a day with family members, I generally cannot stand any opportunity to either hurt or humiliate them. I'm going to pick up on pretty quickly. Okay,
Doug Draper 13:32
you need to be don't let your passions out on those comments, right? That's pretty bold. All right, here's my last one. I'm going to give you three things. You tell me which one's your your favorite green bean casserole, stuffing or mashed potatoes with gravy? Oh,
Pete Mento 13:48
you son of I don't know if I can pick just one. That's like the holy trinity of happy tummy for me. Doug, I'm gonna go stuffing all right, gravy and it's hell yes. I want all the crap on it. I'm gonna mix some cranberry sauce in on that too. I like the cranberry sauce that comes out of the can. It makes a big sport sound. That's my personal favorite. But my mom's green bean casserole I've never been able to duplicate since she passed. I don't know what that woman put in it, but there was a very different taste to it than what I get at anyone else's version of it. So what's yours? Doug, what's your favorite of the
Doug Draper 14:21
three? I probably say green bean casserole, right? It's got to be, it's going to have the French cut, which are like the string ones. I got to have that. And then the cranberries, you and I are on the same page. I love the little pop it makes. And then it just, we just clump it right in a bowl. But it's not really a bullet just standing there, and you can see the rings of the
Pete Mento 14:42
can. Oh, yeah. Oh, it's fabulous, Doug. And with the green bean casserole, almost every year, my mom would buy the French's fried onions just put on the top. Oh yeah, for sure, either my father or I will have eaten them all before. So she would always hide a second can somewhere so we didn't find it.
Doug Draper 15:00
Yeah, love it. All right, very similar Thanksgiving meals, for sure. So anyway, thank you for sharing with our audience a little bit about your
Pete Mento 15:09
your meal. Well, speaking of family gatherings and groups of people, it has come to my attention from our good friends in the press that millennials and Gen Z and even people our age are playing more cards. They're getting together, and rather than going to a bar or watching movies together, this is one of the few times that apparently people are socializing and they're sitting around, maybe have a drink, maybe don't, and playing what I would consider to be classic card games and other things of that ilk. So not too long ago, Dungeons and Dragons had a massive comeback, which you mocked me for endlessly. Thank you, Doug. But now what you're seeing is classic card games like bridge, Euchre, pinochle and mahjong. Mahjong, the very difficult to play Chinese game that people can make a living playing. So here's my question, Doug, were you ever like whist or do these? Did you grow up playing these games? And would you have any interest in playing any of them now?
Doug Draper 16:12
So did I grow up playing them? Not really, but I've gotten into cribbage and Euchre you know, my wife's from the Midwest, and if you're in the Ohio, Wisconsin, upper midwest Eucharist is a big deal. So I've attempted it's not that difficult of a game, once you get it right. It's all about a little bit of bluffs and making, I would say, educated guesses, but somebody would rip me if they're listening to the show, because if you can count cards, there's not that many cards, right? So you should be pretty strategic about know what, knowing what your what your partner is going to lay down, and you certainly do not want to trump your partner, which I often do inadvertently. So Euchre I give myself a c plus, as far as capabilities. But yeah, you know, I was, I was thinking it's, it's almost like the kids want to have an analog engagement, right? They just want to get off from their phone and not play the game on their phone, or, or, or on their I was about to say laptop, but a game console consoles, yeah. So it's almost like an analog engagement, right? And then you can do meetups. That's kind of a big thing. Now, let's do a meetup to go running, or a meetup to do this. And so I think it's kind of cool. I'm glad it's having a comeback. And just the concept of it's an analog engagement just rang in my head whenever I saw this one.
Pete Mento 17:40
Doug, I will play cribbage for hours. I actually have an app on my phone that I will play on a plane when I'm not working, and I derive so much joy from it. But in my family, it was mostly word games, so Scrabble, wobble played a lot of Yahtzee, a lot of Yahtzee growing up. And those those games could be ugly, but for my daughter and I, we will play vicious tournaments of UNO. Okay, classic uno, just really nasty. I mean, you know the blood sticker than water, but we're playing uno, so draw four, you know, I'm saying, like, it's, we get, we get, mean,
Doug Draper 18:15
nice, yeah, very cool, very cool. All right, well, hey, that's the end of halftime. I'm going to jump into mine here, and then you can end the show with your last topic. Is that? Alright? Absolutely. Let's go, bud. Alright. So General Motors, last week, I saw that they are taking a bold move. That's the quote that was on the article that I read to rip literally, it said. And I wrote, I wrote this down because I'm going to read it right now. GM is bold move to rip China out of the supply chain by 2027 right? And so this isn't just batteries or high end componentry. This is everything. If you sell a tiny widget to GM to help manufacture one of their vehicles. They're asking you to ditch China sourcing by 2027 and and realign. And there's basically saying the geopolitical tensions, obviously, the tariffs that we talk about all the time, some rare earth restrictions that you just mentioned. So all these factors are having GM come up with the stance. Obviously, China's dominated in the auto parts manufacturing for decades. And to peel that back, just, you know, within, I mean, it's going to be 2026 here in like six weeks Pete. And that means 2027 is just one year away. So to unwind a 30 year supply chain of manufacturing going on in China for automotive industry is going to be a tough it's going to be difficult, right? So I don't know if this all in approach is is going to work. I don't know if it's going to be sustainable, or if it's going to be one of those things where it gets kicked out. I know. A year or two, but you know immediately, the classic things is, okay, supply chain delays, right? Which means, are these cars going to get being manufactured? And obviously there's deadlines with getting new, new year models out, right? So what happens when you have to source a product outside of China and it doesn't exist, or the factory you want to go to is, is backlog, right? And then there's going to be Park shortages and all that kind of stuff. So it is a little bit interesting to see. It's a bold statement. It's kind of cool, but the ripple effects, we'll have to see how that goes. And will that decree stick around all the way to 2027
Pete Mento 20:43
it's fun to have goals. Doug, I think it's an important part of the human experience to set difficult goals. This is not one they're going to achieve. This reminds me of, like, you know, reality shows, when you're rooting for somebody, you know, they get they get told they're off the island. Like, I'm really rooting for you, buddy. Or when you watch hard knocks, and there's that walk on guy that wasn't drafted, and he's really trying hard, and you really believe in Him, and the last day of cuts he's gone, there is no way in hell. And I, I really hope that they pull this off. You know, we're all very patriotic on the show. We believe the American manufacturer. We're big boosters. But the idea that you were going to divorce yourself from China's supply chain completely is hysterical, because you're going to buy stuff from countries that are buying stuff from China. So are you just stopping direct importation from China? Because that's probably more likely, but there's going to be all kinds of Chinese content in there, and I hope they pull it off. I would love to have a truly American pickup truck. I think that would be great. But I believe in the Easter Bunny more than I believe this is going to happen.
Doug Draper 21:46
Yeah, well, the term was sourcing. So you could, you know, throw that term in a court of law, and you could spin that in a lot of different directions. So you have good points there, but I don't, I can't answer them other than the fact that do not source from China.
Pete Mento 22:00
Good luck with that. We're all rooting for you. You know, win or lose, we're still going to be at the Dairy Queen to buy a buy a chocolate dipped comb, and we're done, because we believe in you big fans. Awesome. My last topic today, I'm going to get salty, all right, so Amazon is going to start selling customs directly as a service line. Not only that, my friend, they're going to sell trade services. I have friends that are going into those roles. I believe in them, and I believe in Amazon's ability to go after the marketplace. I don't know who their customers and clients will be. Will it be their smaller customers. You know, the small suppliers will it be for the larger ones that they work with? I don't know. I don't have the answer to any of this. But when you are able to Bezos something like this, right, when you're able to take the scale and the volume and replicate what you've done into the marketplace, it is a massive disrupter. You don't even have to be good at first, your your reach, your ability to get to so many companies and to build volume is going to drive down your price. They make great software at Amazon. They make fantastic AI enabled software. So maybe they're not going to be the best customs house broker for a little while. All right, no one is at first, but man, when they start getting momentum, they're going to be a problem. And I worry about the, you know, the more what, I guess I call them generic, you know, commercial Customs House brokers that are out there, the big ones that really have not been paying attention because they're about to have the 7000 pound shoot a rocket into space, get you your new underwear in two days. Gorilla all up in their job, and I think that this is going to be a massive disruption, whether they're great at it at first or not. There's just too much behind them to not have some degree of disruption in this marketplace stuff.
Doug Draper 23:58
Yeah, yeah. I like that term Bezos. This thing is getting Bezos. What I read is that it's primarily going to be focused on FBA clients. And for those that may not know that fulfillment by Amazon, which means it's stuff in their warehouse that they're filling on behalf of another customer. So you and I want to make, you know, a widget that makes us hair grow back, some sort of tonic. Hey, if Amazon's going to fulfill it's going to be in their warehouses. They'll take care of the logistics of it, and now they're going to be taking care of the brokerage services. I read that if you use their Amazon, I think it's global logistics AGL, if that's the acronym. If you use their forwarding services, the brokerage is included. There's no brokerage fees. Now, that's just for the you know, the service there are. They're not covering duties and taxes and things of that nature. But you know, it's an also ran to Amazon, right? Hey, we're making. Money on you on the way in. We're making money on you in the in the warehouse, in the handling so it's just another way that they're going to say, hey, it's for free. So my point is that I think it's going to be for the smaller type of players that are entering the market that don't understand, don't have the patience to understand, and their supply chain is not that complex for large, complex organizations out there that your career has danced around. I don't think it's going to be that important or impactful. Excuse me. But if you're making a widget and you're trying to sell it on all the different marketplaces, and Amazon is it's in their warehouse, and it's hair tonic for guys like you and me. Yeah, it's going to be disruptive.
Pete Mento 25:45
All right, Doug, I got into the call. I gotta jump on so I gotta, we gotta close out this week. Yeah, I want
Doug Draper 25:51
to thank everybody for joining us this week. If it happens in the world and it's related to global trade, we're going to be talking about it every single week right here on the show. Pete, thanks, brother, we'll catch you later. Thanks,
Speaker 2 26:02
buddy. Take it easy. Boys. You.
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