WTO - Trade Facilitation Agreement - A Deal Worth Considering?
News, events and analyses related to global trade and snippets of changing trade matrix during the month of December 2015
In a report released in late October, the World Trade Organisation (WTO) stated that if the Trade Facilitation Agreement (TFA) is executed exactly the way it is meant to be, then the agreement can boost global trade by $1 trillion every year. TFA is a multilateral trade agreement between member countries of the WTO. As per the new report, the agreement is expected to reduce total cost of doing business by 14.5% in low-income countries and by 13% in upper middle-income countries by standardising global customs procedures. The increase in exports for developing countries is expected to go up from $170 billion to $730 billion, and at least 20 million jobs would be created, mostly in developing countries. The agreement has been ratified by 51 member countries so far, and will come into execution once two-thirds of the members (i.e., at least 107) ratify it. It’s worth mentioning that Pakistan has recently become the 51st WTO member to ratify the agreement. However, India is yet to ratify the TFA, and is waiting for a permanent fix to the public stockholding for food security.
EXPORT BAN
They call it the ‘fish’ trick!
It seems like North Korea’s Supreme Leader Kim Jong Un is finally making his people happy! The Supreme Leader has banned fisheries exports from the Democratic People’s Republic of Korea (DPRK), in order to increase its supply to the people of the country. Naturally, following the ban, fish sales in the country are rising steadily. The highlight of the mandate is, however, the supply of fisheries to the army– a move that has been welcomed with open arms by military officials. Marine products have been one of North Korea’s biggest export bets, following mineral fuels and articles of apparel, accessories (not knit or crochet), and have played a big role in bringing forex into the country. The biggest importer of marine products from North Korea is the People’s Republic of China, but it seems unlikely that the ban will have a major impact on Chinese fisheries imports.
cattle trade
When cows fly in real life
A Boeing 747 cargo plane redefined ‘flying cattle-class’ as the history-making flight flew first air-shipment of live slaughter-cattle from Australia into the Chinese beef market. A total of 150 Angus and Angus cross steers were shipped following a landmark deal between Australia and China in July 2015. Australia sent its inaugural air-freight live slaughter-ready cattle to the lucrative beef market despite the nationwide outrage over live cattle exports following reports of cruelty towards animals. China is Australia’s second-largest export destination for live animals. Given that China’s beef market is increasing, with a preference for fresh beef amongst the emerging middle class, Australia is already doing much to exploit the Chinese market. While animal rights groups are opposing this move, it is unlikely that Australia will care much. After all, the hopping kangaroo needs an alternative to exporting ores and metals!
BEEF trade
Red is the colour of the season!
Canadian beef lovers will soon have access to beef from the European Union (EU). For the first time since 1996, Canada has re-opened its market to beef from 19 EU member states. Beef exports from EU were banned to the North American country in the wake of Bovine Spongiform Encephalopathy (BSE), a disease that can affect the health of any human who eats infected beef. The lifting of the ban came after Canada audited meat inspection systems in four EU states. The move has come as a relief to beef producers who were badly affected by the Russian ban on EU food imports. Meanwhile US has also opened its markets for EU beef. The lifting of the ban is definitely goods news for EU beef exporters, especially at a time when anything near good is very good news for an ailing EU.
TRADE TIES
Game of Chicken
President Barack Obama has given South Africa two months to tone down the restrictions on import of poultry meat, beef and pork from US. If South Africa fails to do so, US will suspend the trade benefits of the country. Under the African Growth and Opportunity Act (AGOA), South Africa can ship farm animals and other agriculture products to US without paying any duty. The warning comes after South Africa’s ban on US poultry imports in December 2014, following an outbreak of avian influenza. Following negotiations in Paris, South Africa had agreed to resume poultry imports from US. However, the October 15 deadline of resuming said imports passed by without any action taken. South Africa may really have to pull its socks as the suspension of AGOA benefits could amount to huge losses – just last year, South Africa exported $43 million worth of macadamia nuts, and $33 million worth of wine to US.
EXPORTS RESUME
Learning from mistakes!
Zimbabwe has the second largest chrome deposits in the world, after South Africa, so naturally many countries look to Zimbabwe for their raw chrome needs. However, in 2011, the Government of Zimbabwe had banned the exports of chrome ore, in order to promote value addition. The ban was supposed to encourage chrome exporting companies to process the metal locally, as the country is trying to increase its chrome-smelting capacity. However, given the global demand, and the fact that the ban did not have the desired effect, it was temporarily repealed in June 2015 in order to bring in foreign exchange and enhance the viability of small-scale miners who were finding it hard to stay afloat. Under the terms of the lifting of the ban, producers can export up to 30 MMT of chrome; the government also removed the 20% export tax on chrome, but increased royalty from 2% to 5%. However, it was only last month, Zimbabwe finally resumed the exports of raw chrome.
JUTE IMPORTS
‘Sack’ crisis in Pakistan?
Bangladesh has banned jute exports for a month, putting unshipped export shipments in an awkward situation. Bangladesh implemented the ban in order to increase the supply of fibre for local jute sack makers. The biggest loss in this is for Pakistan, which imports a significant amount of the raw materials for its jute mills from Bangladesh. The Pakistan Jute Mills Association (PJMA) has urged the government to convince the Bangladeshi government to lift this ban. In a press statement, the organisation mentioned that “the government of Bangladesh has violated international norms both on legal and moral grounds as the shipments have already been paid for”. Pakistan’s agricultural industry may also be affected by this ban, as jute bags are used to store rice, wheat, maize, and other produce.
wheat Import Ban
Shortage to surplus
Iran is making huge strides in normalising its trade. Over the last decade, Iran had become quite a big importer of wheat, following a surge in the population and a decrease in production due to a long-lasting drought. But given the country’s high production of wheat this year, Iran has placed a ban on the import of the product. The country, which is the second-biggest importer of wheat in the Middle East, having bought nearly 8.1 MMT of wheat from its farmers, imagines that there will be no need for imports of wheat this year. Iran usually buys wheat from Kazakhstan, Russia and Germany. Such has been the production this year, that by March 2016, Iran plans to export 300,000 tonnes of durum wheat, which could be the first time it will be exporting wheat in decades.
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