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

 

Thailand

Rice exports

Feeding the world 

Thailand claims that it has regained its position as the world’s largest rice exporter after three years, mainly due to low prices. According to the Thai Rice Exporters Association (TREA), Thailand exported about 3.93 million tonnes of rice between January 1 and May 20, 2014, slightly more than India’s 3.74 million tonnes. Thailand used to be the world’s top rice exporter for over two decades until 2011, when the government increased the rice purchase support price to almost double the market price under the rice pledging programme. This resulted in Thai rice millers and exporters reducing purchases and government rice stocks swelling to up to 18 million tonnes – almost half of total global rice trade. India’s return to the export market in late 2011, after a three-year ban on non-basmati rice exports, made matters worse for Thai rice exports.

This led to the interim Thai government scrapping the controversial rice pledging programme and aggressively selling rice this year. Thailand is also eyeing to increase exports to Iran and other countries in the Middle East in order to improve sales. TREA expects Thailand’s full year rice exports to reach 9 million tonnes in FY2014, which is in line with the United States Department of Agriculture (USDA) predictions. In fact, delayed monsoon in India, and Iran’s concerns over the quality of Indian rice might help Thailand ship even more. That’s what we call a comeback!

 

Latvia-China Trade

Dairy and meat products

Beyond the Great Wall

Latvian farmers and food manufacturers have expressed interest in exporting dairy and meat products to China. Latvian Minister of Agriculture Janis Duklavas shared this with Zhi Shuping, the Chinese Minister of State Administration of Quality Supervision, Inspection and Quarantine, who was on a brief visit to this Baltic nation recently.

Duklavas also assured the Chinese minister that Latvian State Food & Veterinary Services periodically undertakes inspections in order to ensure that all dairy and other agriculture products meet safety requirements and are suitable for the domestic market as well as export destinations. Shuping indicated that China is interested in Latvian dairy and meat products and expressed his satisfaction that Latvian institutions were capable of monitoring food production in order to ensure that consumers receive safe and qualitative products. For records, Latvia’s export of dairy and meat products to foreign countries have been rising over the last few years.[/block]

Duklavas also assured the Chinese minister that Latvian State Food & Veterinary Services periodically undertakes inspections in order to ensure that all dairy and other agriculture products meet safety requirements and are suitable for the domestic market as well as export destinations. Shuping indicated that China is interested in Latvian dairy and meat products and expressed his satisfaction that Latvian institutions were capable of monitoring food production in order to ensure that consumers receive safe and qualitative products. For records, Latvia’s export of dairy and meat products to foreign countries have been rising over the last few years.

During the meeting, the ministers inked protocols on quarantine and veterinary requirements needed for mutton and beef exports from Latvia to China.

 

Cold War 2.0

Tightening the noose

More than what meets the eye

The US has tightened export regulations against five Russian firms and added them to the list of ‘unchecked’ partners. According to the official journal of the federal government of the United States i.e. Federal Register, the Russian firms included in the list are Fryazino branch of the Russian Academy of Sciences’ Institute of Radio-Engineering & Electronics, JSC Voentelecom, Business Security Academy, Pumps Ampika Ltd. and Nuklin Ltd. Although export supplies to these firms have not been banned, they now require licensing, negotiation and registration on special stringent rules. However, supplies on preferential terms are not permitted anymore. The decision of the Bureau of Industry & Security to put these firms on the controlled list comes by the fact that the Bureau failed  to carry out a detailed check of these firms to find an end user of products they buy. Interestingly, US had earlier zeroed in on 29 firms from China, Russia, Hong Kong and UAE to be labelled as ‘unchecked’.

 

Japan

Butter imports

For that one perfect toast

Japan’s Ministry of Agriculture, Forestry & Fisheries (MAFF) has announced an emergency import of 7,000 tonnes of butter this year for industrial use, making it the country’s biggest-ever emergency butter import. This is in addition to the 3,000 tonnes, which Japan had already committed to import this year.

Japan’s milk production has slumped by 2-4% since 2013 due to extreme weather conditions. This has resulted in a drop in butter production by 23.5% (in February, 2014). Official sources claim that shortage of fodder and a decline in the number of dairy farmers are also reasons for the decline. On the other hand, per capita milk consumption is growing in Japan due to a rise in the popularity of bakery products. At the same time, higher demand for cream and natural cheese has reduced the availability of fluid milk for the production of butter.

Who gains from this? Of course, New Zealand – the main exporter of butter to Japan. Apart from New Zealand, EU and USA are also rushing in to supply dairy products to Japan where the demand for these products is likely to keep on increasing due to changing food habits.

 

Malawi

Export push

No more of living beyond one’s means

Malawi President Arthur Peter Mutharika recently announced that his government will double the country’s export base in the next five years. The President made this announcement while opening the 26th Malawi International Trade Fair in Blantyre, Malawi’s centre of finance and commerce. As per him, the target will be achieved through a persistent implementation of the National Export Strategy, which has a set roadmap for developing the country’s manufacturing base and ensure both export competitiveness & economic empowerment.

Mutharika also acknowledged that business environment in Malawi had deteriorated in recent years due to macro-economic, security & structural challenges. This has eventually led to several economic problems such as low foreign direct investment, anaemic industrial output and unsustainable structural trade deficit. Mutharika says his government would go that extra mile to overcome these challenges by carrying out much needed regulatory and institutional reforms, aimed at addressing bottlenecks that are impacting enterprise development in Malawi. Further, the government is also looking at improving the country’s rank on the World Bank’s “Ease of Doing Business” Index.Mutharika plans to place the private sector at the core of this drive to enhance competitiveness of Malawian products in the international markets.

 

USA

Trade deficit

Blame it on the Polar Vortex

US trade deficit has widened to $174 billion in the January-April period, due to rising imports. According to the Department of Commerce, US exported goods and services worth $767.3 billion in January-April 2014, up about 2% (y-o-y), while imports stood at around $941.4 billion, up about 3.3% (y-o-y). Total trade deficit for the period stood at $174 billion, up around 8% (y-o-y). In April 2014, the deficit stood at $47.2 billion (exports of $193.3 billion and imports of $240.6 billion), up from $44.2 billion in March. Some claim the deficit grew due to the unusually cold weather that hampered exports, while others claim USA’s import of automobiles, capital goods and consumer goods reached record highs in April. Well, you decide!

 

Pakistan-Tajikistan Trade

Textile development

Every penny counts

The governments of Pakistan and Tajikistan have signed a memorandum of understanding (MoU) on collaboration in textiles development, during a recent visit of Pakistani Prime Minister Nawaz Sharif to the Central Asian nation. As per the MoU, both nations will exchange information on cotton, organise training programmes, exchange visits of experts and trade delegations, and establish joint enterprises.

The memorandum also mentions that Pakistan’s National Textile University and Tajik Technological University would facilitate research in fibre development and textile related technologies. During the visit, Pakistani Prime Minister Sharif and Tajikistan’s President Emomali Rahmon also agreed to set a target of bilateral trade to $500 million over the next three years and to work towards a Preferential Trade Agreement (PTA).

Nawaz Sharif Prime Minister,Pakistan

 

Brazil-Argentina

Bilateral pact

A barter beyond the border

The two Latin American neighbours Argentina and Brazil have signed a new bilateral car trade pact giving the former more favourable terms. The one-year pact, which allows Brazil to export $150 worth of automobiles for each $100 worth of the same product it imports from Argentina (without paying tarriffs), has been designed to restore trade volumes and fill in the widening gaps in their external accounts. Reason: Automotive industry accounts for more than half of the $36 billion trade between the two countries which have been involved in several industrial disputes over the last few years. “The key issue is the volume of trade, and the ratio agreed certainly favours the free flow of commerce between both countries,” Brazilian Trade Minister Mauro Borges told reporters at a news conference in Buenos Aires after signing the pact.

Cars waiting to be exported at the Port of Santos, São Paulo, Brazil 

The previous accord that favoured Brazil at a ratio of 1.95:1, had come to an end last year after a dispute over its terms. Under the new pact, both countries will freeze their current share in each other’s market. This means Brazilian cars cannot account for more than 44% of sales in Argentina, while Argentine cars cannot be more than 11% of sales in Brazil. The revival of the accord will help in restoring the bilateral trade relation between the two nations. After all, it’s a win-win situation for both!

 

USA

Crude oil re-export

From Washington, with love!

The US Department of Commerce approved 13 crude oil export and re-export licenses in May 2014. As such, the country has approved 52 oil export licenses in the last six months. The approved permits include, one license each for re-exports of foreign origin oil to China, Spain, South Korea, the Netherlands and UK, seven licenses for exports of US oil to Canada, and one re-export license that could be issued to any of the following countries (US has not yet specified the name) – Argentina, Belgium, Brazil, Canada, Chile, Finland, France, Germany, Greece, Israel, Italy, Japan, Korea, Malaysia, Morocco, Netherlands, Norway, Poland, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey and UK. It’s worth noting that US does not allow export of its own oil (except to Canada). It allows the re-export of foreign oil. All licenses are valid for only one year and exports under the exemption need to be approved by the department’s Bureau of Industry and Security.