News, events and analyses related to global trade and snippets of changing trade matrix during the month of November 2014 |

GfK Survey

Automobile trends

Few takers for Chinese cars? 

Any takers for Chinese manufactured cars? Many of the country’s products may be witnessing considerably rising acceptance amongst buyers in the US market, but cars are not amongst the most preferred. A study carried out by The GfK Barometer of Automotive Awareness and Imagery Study (using a sample of consumers in US who intend to buy a new car) revealed that 91% of the respondents preferred Made in USA autos, 67% chose German-made cars and 66% favoured Japanese cars. Only 18% were good with including a vehicle made in China in their consideration set. The GfK Study revealed that “where a car is manufactured” matters when consumers choose which car to buy. 44% of those intending to buy a new vehicle in the future said that its country of origin would influence their purchase decision. When the research firm specifically asked vehicle intenders how open they were to buying a vehicle from a Chinese company, only 7% of those aged 55 years and above said they were “very” or “somewhat” open, compared to 33% for those under 35.

The reason for the low number with regards to China is due to issues of product quality and safety. Labour conditions, environmental regulations, and economic competitiveness between China and US also emerged as strong themes driving consumers away from considering Chinese vehicles. “Chinese vehicles clearly have a lot to prove in the US market,” said Jeff Campana, Sr. VP of GfK’s Auto practice in North America.

Inducements

Role reversal

Malaysia seeks more investments from China

This is something for all those China baiters. Malaysia has more investments in China, than the latter has in the former. Now Malaysia is inviting China to reverse the trend. The Malaysian Minister of International Trade and Industry, Mustapa Mohamed, pointing to huge investment imbalance between the two countries stated that the ratio between the Chinese investment in China and the Chinese investment in Malaysia was about one to six. Referring to Chinese President Xi Jinping’s statement that China’s investment abroad during the next 10 years is expected to reach $1.25 trillion, Mustapa said “We hope we could get a share of China’s foreign investment in the future.” Calling more Chinese enterprises to invest in Malaysia, he informed that measures and policies are being made by the country in favour of China to woo its investors. “The Ministry of International Trade and Industry (MITI) has three offices in Beijing, Shanghai and Guangzhou, to make Malaysian policies better known to Chinese businessmen,” he said and added that institutions are being set up to ensure all the agreements are signed and all the decisions made during Malaysian PM Najib’s visit to China can be implemented.

LDCs Exports Share

Low share global trade

Least... and also the Last

Least Developed Countries (LDCs – 48 in total, as per WTO) continue to have the least share in global trade, despite their exports rising during the past few years. Exports of goods and commercial services from LDCs increased by 5.2% last year but their share was a minimal 1.23% of the world’s total. According to a report submitted by the WTO Secretariat in 2013, the value of LDC exports of goods and commercial services grew by 5.2%, more than twice the world average (2.5%). However, the total share of LDC trade still remains marginal. The LDCs also face a higher trade deficit as imports increased more than exports in 2013. Moreover, LDC exports are concentrated in a handful of products and sectors. Developing economies have also become more important as the destination market of LDC exports, receiving 55% of their exports in 2013, up from 40% in 2000. The report also notes that travel receipts, estimated at $14.2 billion in 2013, accounts for the majority of LDC exports of commercial services. Transport exports ($ 7.5 billion) is another big source of revenue for African LDCs.

US–China ITA

Camaraderie with comrade

Solution in sight on Information Technology Agreement

US and China seem to have taken a break from their usual acrimony over trade-related issues. In what is being viewed as a path-breaking process, US and China announced progress in solving remaining issues concerning the expansion of the Information Technology Agreement (ITA), a trade negotiation among 54 countries. WTO Director-General Roberto Azevêdo praised Chinese and US negotiators for reaching an understanding that paves the way to an expeditious conclusion of the expanded ITA and said, “Agreement on expanding the ITA would be the first successful tariff-cutting negotiation in the WTO for over a decade and a half – and, crucially, would benefit all WTO members, not just the ITA participants, because the tariff cuts would be applied in a non-discriminatory manner.”

According to the WTO, the ITA currently has 52 participants, representing 80 WTO members, which accounts for approximately 97 per cent of world trade in IT products. The total amount of import duties eliminated under the ITA were estimated at US$1.6 trillion in 2013.

UK–UAE Trade

Overshooting milestones

Trade targets achieved ahead of slated schedule

Quantum of Trade between the UK and UAE overshot all expectations and projections. In fact the forecast target of trade has been achieved two-years in advance of the slated year. According to figures released by UK’s Office for National Statistics bilateral trade between the UAE and UK reached £12.36 billion in 2013. This means that the £12 billion target for 2015, which the two governments set in 2009 has been met and surpassed. When the target was set in late 2009, bilateral trade stood at GBP7.5bn a year. The increase has been achieved across a wide range of sectors including energy, financial and professional services, education, healthcare and infrastructure, as well as defence and aerospace. Commenting on the achievement, UAE Ambassador to UK, Abdulrahman Ghanem Almutaiwee said, “The bilateral relationship between the two countries has gone from strength to strength in the past years, this is only a building block to our longstanding relationship dated from the 1950s. This success should motivate businesses in UAE and UK to take advantage in exploring potential business opportunities and partnerships in the future.”

Turkey Auto Sector

Revving up

Accelerated exports of cars?

Exports of cars from Turkey – one of the biggest automobile manufacturing hubs in Central and Eastern Europe (accounting for 25% of vehicles produced in this region) is set to hit 900,000 units by the end of this year. Speaking at the World Automotive Conference in held in Istanbul, Turkey, the Secretary General of Automotive Manufacturers Association, Ercan Tezer said that an increase of 10-11% was expected in auto exports. The country exported more than 828,000 motor vehicles in 2013. Noting that 75% of Turkey’s auto output was export-oriented, Tezer stated that the total production figures by the year-end would be around 1.1 million. Arda Ermut, VP of the Investment Support and Promotion Agency of Turkey (ISPAT), informed that the number of foreign companies operating in Turkey is more than 40,000 and the amount of FDI attracted during the last 12 years has reached $146 billion. As a home for global automakers including Ford, Fiat, Toyota, Honda, Renault and Hyundai, the Turkish automotive industry manufactured a total of 1.13 million vehicles in 2013.

NZ–Korea FTA

Mutual benefits

Leeway for the ‘free’ way

New Zealand and Korea have signed an FTA that both nations view as a win-win proposition. Korea is New Zealand’s 6th-largest export destination and the 8th-largest source of imports, with total two-way trade of $4 billion in the year ending June 2014. As per the FTA, tariffs will be eliminated on 48% of current New Zealand exports. Tariff cuts under this FTA will create an estimated duty saving of $65 million in the first year. Duties on New Zealand’s exports will largely be eliminated within 15 years of entry into force. Improving access to international markets through FTAs is a key component of the New Zealand government’s business growth agenda.

Global Procurement Agreement (GPA)

Increased opportunities for exporters

‘Members Only’ area: Opening a floodgate of opportunities!

With more takers evincing interest in joining WTO’s Global Procurement Agreement (GPA), the current members of the GPA are working hard to secure multi-million dollar foreign government procurement orders for their local exporters. At present the GPA has a total membership count of 48 nations, including the EU 28 countries, Canada, Japan, South Korea, US, Hong Kong, Iceland, Israel, Norway, Singapore, Switzerland, Liechtenstein and Taiwan. New Zealand and Montenegro recently concluded GPA membership negotiations, while talks are on with Albania, Georgia, Jordan, Oman, Ukraine, Oman, Moldova and Kyrgyz Republic. Australia is also in the queue. Giving this information, Australia’s Trade and Investment Minister Andrew Robb said, “The GPA is a significant international trade agreement. It covers a government procurement market estimated to be worth over $1.7 trillion. GPA coverage is expected to expand significantly in the future with a number of countries currently in negotiations to join – including China.”

Australia–China FTA

Breaking barriers

Oz relishes prospects of access to large markets

Australia is relishing the prospects of the huge potential to be tapped from an FTA it signed with China on November 17, 2014. The agreement will grant it substantial access to the world’s second-largest economy. Australia’s Minister for Trade and Investment, Andrew Robb said the ChAFTA (China Australia FTA) will greatly enhance the country’s competitive position in key areas such as agriculture, resources and energy, manufacturing exports, services and investment. While the ChAFTA is expected to add billions to the Australian economy (much of which will come from the planned $1.25 trillion FDI by China until 2015), the immediate benefit to Australia will come in the form of 85% of its exports to China becoming tariff-free. For Chinese businesses, the FTA is a savoury snack. Among other benefits, it raises the ceiling for investment by Chinese private firms in Australia in non-sensitive areas, from the current $0.25 billion to $1.08 billion.

Japan–Abu Dhabi Trade

A well-oiled deal, Version 2.0

MoC on oil storage projects

Japan and Abu Dhabi signed a Memorandum of Cooperation (MoC) to renew the existing joint oil storage project between the two countries on November 9, 2014. The project was launched in June 2009 under a five-year contract, in response to a proposal offered by Abu Dhabi in the same year. Under the agreement, the Ministry of Economy, Trade and Industry (Govt. of Japan), leases domestic private crude oil storage tanks at the Kiire base (Japan) of JX Nippon Oil & Energy Corporation, with support from the Government of Japan, and Abu Dhabi National Oil Company (ADNOC) provides a priority supply of stockpiled crude oil in the tanks for Japan in case the country’s oil supply becomes insufficient, while making use of the tanks as the company’s transshipment and oil-stockpiling base for East Asia. Japan depends on Abu Dhabi for about 23% of its imports of crude oil, and this agreement has the capacity to strengthen its ability to respond to crises. The renewed MOC includes the official agreement to extend the project, and Japan’s lease of such oil storage tanks with a capacity of up to about 6.30 million barrels.