Traditional architecture in Sanaa, Yemen. Inhabited for more than 2.500 years, the Old City of Sanaa is a UNESCO World Heritage City
News, events and analyses related to global trade and snippets of changing trade matrix during the month of July 2014
Yemen republic
Joining WTO
Yemen has become the 160th country and the 35th Least Developed Country (LDC) to join the World Trade Organisation (WTO). The entry will help Yemen gain preferential (sometimes duty-free) access to markets in several rich countries. Yemen will also get technical assistance and capacity building from WTO to boost its trade. Yemen’s WTO commitments include granting trading rights in a non-discriminatory and non-discretionary manner by December 31, 2014, and opening market for goods and services.
For goods, Yemen has committed to limit its tariffs to an average of 21.1% for all products – 24.9% on average for agricultural products and 20.5% for other products. The country will also open its markets to 11 core services sectors: business services, communication services, construction and related engineering services, distribution services, educational and environmental services, financial services, health services, tourism and travel, recreational, cultural and sporting services and transport services.
Yemen’s entry is expected to boost its trade with UAE, China, Netherlands, Saudi Arabia, Switzerland, Kuwait, India, Japan, Brazil, Turkey and USA – some countries with which it already has bilateral agreements signed. Expectations are that India’s exports to Yemen that fell y-o-y by 11.4% to about $1.3 billion in FY2014, will also get a boost with curbs on many imports removed.
Crop Prices
On a decline
According to UN’s Food and Agriculture Organisation (FAO) and OECD, the recent decline in prices of major crops in the international market is likely to continue for another two years, when prices are likely to stabilise at pre-2008 levels. The FAO Food Price index stood at 161 in 2007, but surged about 25% to 201 points the next year. It peaked at 230 in 2011, but has declined since to around 206 as of June 2014. The reason for this decline has been higher production, which have pushed stocks to all-time highs. OECD Secretary-General Angel Gurría feels crop prices were unusually high earlier and that agriculture markets are returning to more settled conditions now. FAO also feels another reason for a decline in crop prices is the change in food patterns across the world, with people consuming more protein, sugar and fats due to urbanisation. However, cereals are expected to continue to be the major staple in the next decade, with most of the production taking place in Asia and Latin America. “Developing regions will account for more than 75% of the additional agricultural output over the next decade,” FAO says.
Republic of the Philippines
Rice Imports
After winning approval of other WTO nations to extend (quantitative) restriction on rice imports, Philippines has agreed to increase the WTO minimum access volume (MAV) from 350,000 tonne to 805,200 tonne per year and lower the import duty on rice under the MAV limits from 40% to 35%. Rice imports outside of the MAV will continue to have a 50% tariff. The Philippines will allocate 755,200 tonne of rice imports under country specific quotas (which is likely to include China, India, Pakistan, Thailand and Vietnam), while any WTO member can supply the remaining 50,000 tonne.
According to the Philippines Department of Agriculture (DA), milled rice production in the country increased by around 1.6 million tonne during CY2010 and CY2013. However, rice consumption in the country is higher than production and the country is expected to import around 1.6-2 million tonne of rice this year. The Philippines government is keen to protect local farmers from imports as rice from India, Thailand and other Asian exporters is substantially cheaper than local rice. Changes in the MAV for rice is part of the negotiations Philippines is involved in to seek a five-year extension of the WTO Quantitative Restriction (QR) that expired in June 2012.
Kingdom of Saudi Arabia
Non-oil exports
Saudi Arabia’s non-oil exports have increased significantly from last year due to increasing focus on economic diversification. According to official sources, the value of Saudi Arabia’s non-oil exports in Q1 CY2014 stood at about $14.62 billion, up 18.7% y-o-y. The country’s Minister of Commerce and Industry Dr. Tawfiq Bin Fawzan Al-Rabiah claims continued growth of non-oil exports will help economic diversification over the coming years. Its non-oil exports include plastics and metal goods.
Untied states’ Independence Day
Chinese Fireworks
Chinese fireworks industry got another feather on its cap as it dominated the US Independence Day celebrations. Most of the fireworks (estimated at millions of dollars) that brightened American skies on July 4 this year are believed to have been imported from China. China already controls the fireworks import market in US with imports from the dragon nation standing at $203.6 million in CY2013. This is about 95% of the total fireworks imports by US during the year. Industry insiders claim that Chinese fireworks imports are likely to increase due to the product’s improving quality. They also claim that ‘Made in China’ fireworks are almost 10 times less expensive as compared to those made in US.
People’s Republic of China
Largest Trader
In the fifth review of the trade policies and practices of China during 2012-2014, WTO said that China has become the world’s largest trader (excluding intra-EU trade) but needs to rebalance its economy and boost consumption in the country to maintain the growth. According to WTO, China’s merchandise trade stood at $4.16 trillion in CY2013, which included $2.21 trillion of exports and $1.95 trillion of imports. Manufactured products (mostly office machines, telecommunication equipment and textiles) accounted for around 94% of total exports by China in CY2013, while machines, chemicals, fuels, mining products and agricultural products accounted for most of the nation’s imports. WTO members say China’s growth model hinges largely on investment (FDI) and directed credit availability. China should rebalance its economic growth through policies to promote consumption and push for further liberalisation of the domestic market. WTO members have also urged China to have a transparent global trading system. It’s worth noting that China became a WTO Member in December 2001, almost seven years after India joined the WTO in January 1995.
BRICs
New Development Bank
Leaders of the BRICS have launched a $100 billion New Development Bank (NDB), which will be based in Shanghai. The first President of NDB will be from India. NDB will have an initial authorised capital of $100 billion and the initial subscribed capital will be $50 billion, which will be equally shared among the founding members. NDB will aim to address financial constraints that BRICS nations and other developing economies face. In a joint declaration, the BRICS members said, “We continue to face significant financing constraints to address infrastructure gaps and sustainable development needs. With this in mind, we are pleased to announce the signing of the agreement establishing the New Development Bank (NDB), with the purpose of mobilising resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies.” BRICS has also launched a Contingent Reserve Arrangement (CRA), with an initial size of $100 billion, to help member nations manage currency fluctuations and economic volatility. BRICS represents around 19.8% of global GDP and 16.9% of global trade. Total exports by the five member countries have grown over 500% in the last decade. In the four years between 2008 and 2012, BRICS’ international trade increased almost 42%, from $4.3 trillion to $6.1 trillion.
Xi Jinping, President, China
Islamic Republic of Pakistan
Thrust on Exports
The Pakistan government is planning an overhaul of its trading model and of the Trade Development Authority of Pakistan (TDAP) as it aims to more than double its exports from the current $23.1 billion to over $50 billion per year. Pakistan’s Commerce Minister has said he has constituted a committee that will oversee the major transition. He said there is an urgent need to transform TDAP to boost exports. The minister has also asked the committee members to prepare a model that emulates the success of export-based East Asian economies. This is the first time TDAP has been targeted since it was established in 2006 under a presidential ordinance during Pervez Musharraf’s rule. Industry insiders claim the move will please several trade bodies and associations in Pakistan that have accused TDAP of creating hurdles in exports and of monopolising exports in the name of quality restrictions.
The World trade organisation (WTO)
Trade Promotion
The World Trade Organisation (WTO) has launched a ‘trade stories’ selfie competition, which will allow an individual to share one’s trade story with the world. The competition is a part of the run-up to WTO’s Public Forum that will take place during October. The theme this year is “Why trade matters to everyone” and the aim is to bring out the human angle behind trade. Do you think you can do it? Why not send your entry to WTO at [email protected]. Remember, the last day for entries is the 1st of September. If you are selected, your selfie will be displayed at the Public Forum, posted on the WTO website and its social media channels and of course flashed on news channels and newspapers worldwide.
Camel Imports ban
Saudi Arabia-Somalia
When Somalia got a federal government in mid-2012 after a fragile transition, many saw hope that the Horn of Africa had the best chance, in two decades, to survive and achieve stability. However, the country’s future is at stake due to both rebels and from a proposed ban of camel imports from the country by Saudi Arabia. 
Somalia’s GDP per capita and human development indices are among the lowest in the world. Livestock still conststitutes the bulk of the country’s economy. According to the World Bank, livestock supports about 60% of Somalia’s jobs, 40% of its GDP and account for 80% of its exports.
Almost 70% of Somalia’s livestock exports find a destination in Saudi Arabia. Although camels account for a small share of the 4.5-5 million animals that Somalia exports to Saudi Arabia every year, experts feel any ban on camel imports by Saudi Arabia could have a cascading effect and devastate Somalia’s economy like it happened in 2000. About 14 years ago, Saudi Arabia had banned livestock imports from Somalia over quarantine concerns regarding the spread of rinderpest and Rift Valley fever. This time, Saudi Arabia health officials suspect Somali camels could be carrying the deadly MERS virus, which has reportedly killed nearly 300 people and infected many more.
Livestock is the main occupation of the local population in Hargeisa, Somalia’s second largest city
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