1 USITC Executive Briefings on Trade September 2012 U.S. E XPORTS OF W ATER F ILTRATION AND P URIFICATION E QUIPMENT S HOW S IGNIFICANT G ROWTH Andrew David ( , 202-205-3368) and Mihir Torsekar ( [email protected] , 202-205-3350) [email protected] U.S. exports of water filtration and puri fication equipment reached $1 .8 billion in 2011, increas ing by 20 percent since 2007 and by 110 percent since 2002, with Asia the leading export destination. Due to insufficient availability of water, rising incidence of extreme weather events, and increasing global demand for water resulting from demographic shifts, urbanization, and industrialization, U.S. exports of water treatment equipment are expected to remain high. USES AND APPLICATIONS Water filtration and purification equipment principally saniti zes water, removing contaminants and pollutants for either case of wastewater, reuse or release. consumption, industrial use, or, in the Technologies range in complexity and sophistication from highly advanced treatment equipment (e.g., ozone and ultraviolet disinfection, and desalination) to low-technology equi pment (e.g., simple residential filtration systems). GLOBAL WATER TREATMENT MARKET The global water treatment equipment and supplies market—of which filtration and purification equipment is a subset—is currently valued at near ly $50 billion and is forecasted by The Freedonia Group, to reach $65 billion by 2 015. In particular, growth in global demand for water, and low water supply in some locations, will be the principal drivers of this expansion. Demand expected is Global water demand 2005 from increase to The world’s population is expected to Demographics: 3 which will ─ up from 7 billion reach 9 billion by 2050 ─ ) 2030, to (m meters cubic billion strain available water supplies. China 54 178 300 By 2025, an estimated 5 billion people Urbanization: will be living in urban areas. Further, 70% of the world’s India 40 338 89 population is expected to inhabit cities by 2050 Saharan ‐ Sub according to Bank of America. A burgeoning urban 92 320 28 Africa population will put increasing pressure on governments Asia Rest of 80 243 117 to provide clean drinking water and likely require significant improvements and additions to existing water N. America 21 181 124 infrastructure. Industrialization: New shipping rules and the growth of Europe 12 72 100 ─ such as energy high-water intensive industries America S. (including oil and hydraulic fracturing) ─ will increase the 89 23 68 need for high-end water treatments, including ballast 0 200 400 600 systems, membrane and thermal desalination 3 technologies, filtration, and biological treatment systems. billion m to Water demand increase from 2005 2030, Industry Agriculture Municipal/Domestic Governments in developing countries are Regulations: imposing more stringent water regulations. China’s 12th Source: Bank of America Sector, Lynch, The Global Water Merrill five-year plan, for instance, mandates more extensive September 28, 2011. wastewater treatment and lower levels of certain pollutants. Supply According to Deutsche Bank Extreme weather : : Freshwater accounts for less than Water supply shortages events, from droughts to Research, severe weather 3% of total water globally and is not evenly distributed excessive rainfall, are increasing, particularly in among countries; 60% of freshwater is concentrated in just 10 countries. Bank of America estimates that by tropical climates. Furthe r, resultant changes in hydrological systems are contributing to falling water 2030, demand for water will ex ceed supply by 40 percent, with nearly half of the world’s population expected to live levels in some regions and increased water runoff in in water-scarce areas. others. d not those of the USITC or any individual Commissioner. Disclaimer: The views expressed are those of the authors an
2 USITC Executive Briefings on Trade 2012 September ASIAN AND LATIN AMERICAN MARKETS ARE DRIVING U.S. EXPORT GROWTH The United States is one of the leading global exporters of and filtration water of exports U.S. parts purification water filtration and purification equipment, with $1.8 billion and equipment rose significantly during 2002–11 in equipment and parts exports in 2011. During the recession, 2.0 1.8 equipment exports fell more than exports of parts, but both subsequently recovered and surpassed prerecession levels. The 1.5 U.S. trade surplus was $548 million in 2011, and U.S. exports $ were about 17% of global exports of water filtration and 1.0 purification equipment (excluding parts). Billion 0.9 : The value Asia and Latin America driving export growth 0.5 of U.S. exports to Asia rose 30% during 2007–11, with four countries—Korea, China, Ja pan, and India—accounting for 0.0 most of the growth in exports to the region. China is the largest U.S. export destination in Asia. China’s membrane, 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 filtration, and disinfection equipment market was about $1.1 billion in 2010, and U.S. expor ts of water filtration and was Asia in market export U.S. 2011 largest the purification equipment to China totaled $204 million in 2011. U.S. exports to Latin America rose by 75% during 2007–11. e biggest increases in U.S. Mexico and Chile accounted for th Other Middle East exports. Demand in Mexico, the region’s largest U.S. export Canada EU America Latin $135 Asia $161 $220 destination, is rising and U.S. producers are strongly $313 $330 7.5% $637 9.0% 12.3% positioned in the market. The Chilean market is growing due 17.4% 18.4% 35.4% to factors such as the expansion of mining. Chile has share million is Value exports. U.S. of is Percent dollars. significant demand for advanced treatment technologies, which are commonly produced in the United States. drove Asia growth export U.S. America Latin and U.S. industry competitively positioned : U.S. exporters 147 141 150 include small firms and diversified multinationals that export $) products ranging from small residential filtration systems to high-end technologies. U.S. producers have been competitive 100 (million in global markets due to factors such as substantial production 11 of advanced technologies, the development of products that ‒ serve unique market niches, efforts by U.S. producers to 2007 50 34 expand into new markets and enhance their global distribution 24 networks, significant U.S. production for growing market exports segments like ballast water treatment, and the ability of U.S. in 0 producers to add value through the provision of services. ‐ 19 : U.S. producers face significant Competitive global market Change ‐ 23 Middle Latin Asia Other Canada EU competition from manufacturers in the European Union (EU) ‐ 50 America East and elsewhere. For example, U.S. producers lost market share in Canada to producers from the EU and Japan, with the U.S. Source for above figures: USITC DataWeb/USDOC. water filtration and purification share of Canadian imports of equipment and parts falling from 78% in 2007 to 58% in 2011. In this paper, U.S. trade data are exports in Document notes/sources: apparatus for filtering or HTS 8421.21.0000 (machinery and Germany’s global exports of equipment (excluding parts) purifying water) and 8421.99.0040 (parts of equipment in 8421.21). exceeded U.S. exports by $28 million in 2011. Sources include USITC DataWeb/USDOC; GTIS, Global Trade 19, 2012); Deutsche Bank Research, Atlas database (accessed March : Tariff and nontariff barriers Trade barriers affect exports , June 1, 2010; Bank of America Merrill Lynch, World Water Markets The Global Water Sector , September 28, 2011; Goldman Sachs, The (e.g., local-content requirements) may hinder the growth of Essentials of Investing in the Water Sector , version 2.0, March 24, More than 60% of countries U.S. exports to certain markets. I), “Five Years to Clean Up 2008; Global Water Intelligence (GW had applied tariff rates of 5% or more on water filtration and China’s Thirst for Water , China’s Wastewater,” January 2012; Dow, purification equipment (HS 8421.21) in 2011, including 2011; The Freedonia Group, “World Water Treatment Products,” September 2011; WTO, Tariff Download Facility, substantially higher rates in some countries (e.g., 7.5% to 10% http://tariffdata.wto.org ; CUSTOMS Info, Global Tariffs system, S. exports to a few countries in India and 14% in Brazil). U. http://export.customsinfo.com ; India Central Board of Excise and with tariffs enter duty free due to free trade agreements. ; USITC staff interviews. http://www.cbec.gov.in Customs Web site, Disclaimer: The views expressed are those of the authors an d not those of the USITC or any individual Commissioner.