News, leads and analysis related to India’s trade and all that’s happened on the policy front during the month of May 2014

Gold

Mega refinery in Dubai

Beginning of the end of London price fixing? 

The global gold market is heading for interesting times as Kaloti Precious Metals’ $60 million mega gold refinery near Dubai is about to change the dynamics of the industry. To be completed by 2015, it will give traditional gold refiners in Europe and US a run for their money. The new refinery will also give impetus to Dubai Gold & Commodities Exchange’s (DGCX) plan to introduce a spot gold contract in June. Speaking about the new refinery project, Kaloti Precious Metals Chief Executive Tarek El-Mdaka told a news agency that Dubai is already a top global centre for gold trading and the new refinery is part of the process of converting Dubai into a centre for physical gold refining and clearing. Industry insiders feel the new refinery project will help Dubai gain competitive advantage over its European and American counterparts because of its proximity to India and China. Moreover, the country’s strong transport network and low taxation system will make it a more attractive gold trading destination than Europe or US.

Indonesia

Protectionism

Eyeing the world’ fourth largest population

Governments of United States and New Zealand have written to the WTO requesting a discussion with Indonesia regarding the latter’s restrictions on import of horticultural and animal products. The two countries claim that Indonesia’s decision violates the country’s trade commitment under the GATT 1994 agreement on agricultural commodities, particularly import licensing procedures and the agreement on pre-shipment inspection. Both US and New Zealand have urged Indonesian authorities to further discuss the matter in order to resolve the issue.

EU-China trade

Dumping charges

Tables have turned, and how

In a major setback to European exporters of Polysilicon, China has imposed anti-dumping and anti-subsidy duties on the raw material used in the manufacturing of solar panels with effect from May 1, 2014. According to Chinese officials, anti-dumping duties of 42% will be levied on Polysilicon exporters from Germany, Italy and Spain. European companies such as Schmid Group, Joint Solar Silicon, MEMC Electronic Materials SpA and Siliken Spain are expected to be the primary victims of the new anti-dumping duties. Interestingly, the Chinese authorities have kept Wacker Chemie AG out of the ban list citing the German company’s price commitments for the Chinese market. Further, Polysilicon exporters from Europe would also be subject to 1.2% anti-subsidy duties.

China and European Union (EU) have been at loggerheads since 2013 after the latter announced the imposition of anti-dumping duties on solar panels made in China. Chinese officials claim that the decision was taken to protect domestic solar panel producers. Notably, China had imposed similar duties on Polysilicon manufacturers from South Korea and US in January this year. On the other hand, the European Commission has alleged that Chinese companies are flooding European markets with low-cost solar panels which has severely affected local producers. Although the Commission had proposed to impose duty on Chinese solar panels, some EU member countries opposed it fearing loss of business and a similar action by Chinese authorities. Well, they seem to be right!

Polycrystalline silicon, also called Polysilicon, is used as feedstock material in most solar energy applications. Solar panels are shaping up as a major bone of contention between EU and China 

Ukraine – Australia trade

GATT violation alleged

Blowin’ in the wind

The Director-General of WTO has constituted a three-member panel to look into complaints filed by Ukraine against Australia’s plain-packaging law for cigarettes and cigars. Two years back, Ukraine had requested WTO for consultation with Australia concerning certain Australian laws and regulations that impose trademark restrictions and other plain packaging requirements on tobacco products and packaging.

Ukraine has objected to Australia’s Tobacco Plain Packaging Act 2011 and its implementing Tobacco Plain Packaging Regulations 2011, the Trade Marks Amendment (Tobacco Plain Packaging) Act 2011, and all further regulations, related acts, policies or practices that have been adopted by Australia. Ukraine claims that Australia’s measures, especially when viewed in the context of Australia’s comprehensive tobacco regulatory regime, appear to be inconsistent with TRIPS agreement, TBT agreement and the GATT 1994.

Ukraine claims that three Australian laws are inconsistent with TRIPs and GATT

Alt-Ctrl-Del

Windows 8 support

Dragon shuts down Windows

China’s Central Government Procurement Centre (CGPC) has banned the use of Windows 8 for PCs in government offices. The CGPC has issued the notice claiming to further the use of energy-efficient products in government offices. Experts view this as the Chinese government’s effort to ensure data security on PCs. Notably, Microsoft has already announced to stop providing support to Windows XP operating system. CGPC has issued a notice on its website ordering that all computers procured for government use can use any operating system other than Windows 8. According to reports, more than 50% of PCs in China run on XP. The decision to ban Windows 8 has come as a major blow to Microsoft, which has been aggressively trying to market Windows 8 as a replacement to XP. In the wake of the shutdown, local industry players have started pushing for a new OS, likely based on Linux or Xinhua. After all, someone’s pain is someone else’s gain!

APEC

Open boundaries

Global trade at, across and behind the border

Member countries of Asia Pacific Economic Cooperation (APEC) have agreed on continuing support for the multilateral trading system and advancing regional integration through Bogor goals, and Free Trade Area of the Asia Pacific (FTAAP).  According to the statement issued by the Trade Ministers of member countries after the conclusion of the two day APEC meeting held in Qingdao, China, a decision was also taken to develop the global value chain, and supply chain connectivity.  Further, according to the statement, APEC aims to strengthen regional economic integration by removing impediments to trade and investment ‘at the border’, enhancing supply chain connectivity ‘across the border’ and improving the business environment ‘behind the border.’ Another significant agreement among the member countries was on improving the operating environment for business by reducing the cost of cross-border trade, improving access to trade information and simplifying regulatory and administrative processes. The member countries also expressed support to the multilateral trade negotiations underway in the WTO. 

APEC was of the view that further simplification of customs and immigration procedures, harmonisation of industry regulations and standards, and cutting of administrative costs for things like permits and shipping containers would accelerate the process of multilateral trade among member countries. The focus of the APEC meeting was to develop strategies for improving trade and economic growth across the Asia-Pacific region, to promote regional economic integration, promote economic innovative development and reform, and facilitate establishment of comprehensive infrastructure and connectivity. The APEC member countries also deliberated on intellectual property rights, services, investment, industry, and regulatory cooperation. The APEC member countries also expressed their support to a forward looking approach on travel facilitation issues and the End-to-End review of the APEC Business Travel Card Scheme. They also prepared a blueprint emphasising on regional connectivity to improve trade and investment and cutting down on logistics costs across the Asia-Pacific region. An APEC Multi-Year Plan on Infrastructure Development and Investment, to be implemented in 2016, was also discussed at the meet. Priority areas include the showcasing of public-private partnership infrastructure projects, recommendations for bankable PPP delivery, including legal and regulatory enhancements, and the establishment of new PPP centres to promote these arrangements. 

Chinese Minister of Commerce Gao Hucheng (4th L) addresses the APEC trade ministers’ meeting held in Qingdao, China, on May 17, 2014

Africa

Bucking the trend

From world’s supplier to an aspiring superpower

Africa, the so-called Dark Continent, can transform its economy and achieve a development breakthrough by participating more effectively in the global production of goods and services. The annual report – African Economic Outlook – by African Development Bank, OECD Development Centre and the United Nations Development Programme (UNDP) shows that Africa has weathered internal and external shocks and is poised to achieve healthy economic growth rates in the near term.

The continent’s growth is projected to accelerate to 4.8% in 2014 and 5-6% in 2015, levels not seen since the global financial crisis of 2008. Africa’s economic growth is more broad-based, argues the report, driven by domestic demand, infrastructure and increased continental trade in manufactured goods. The African Development Bank Chief Economist and Vice-President Mthuli Ncube says, “In order to sustain economic growth and ensure that it creates opportunities for all, African countries should continue to rebuild shock absorbers and exercise prudent macro management. Any slackening on macro management will undermine future economic growth.” He is of the  view that to achieve strong, sustained and inclusive growth in the medium- to long-term, the opportunity for participating in global value chains should be viewed as part of the overall growth strategy. The report argues that more effective participation in regional and global value chains  could serve as a springboard for Africa in economic diversification, domestic resource mobilisation and investments in critical infrastructure. “Now is the time to step up the tempo of economic transformation, so that African economies become more competitive and create more gainful jobs,” the report states. In order to do so, the continent, however, needs to avoid getting stuck in low value-added activities. It’s high time the Dark Continent moves ahead.

Natural gas

Russia-China deal

West’s checkmate fails

Russia and China have signed a $400 billion deal, as per which Russia will supply natural gas to China through a new pipeline for the next 30 years. The accord, signed after more than a decade of talks, will allow Russian state-run gas producer OAO Gazprom to invest $55 billion developing giant gas fields in eastern Siberia and building the pipeline. It’s an ‘epochal event,’ Russian President Vladimir Putin said in Shanghai after the contract was signed. “Both countries are satisfied with the price,” he added.

Vladimir Putin, President, Russia 

The deal was sealed after Gazprom CEO Alexey Miller and Zhou Jiping, Chairman of China National Petroleum Corporation signed on the dotted line. The agreement is for 38 billion cubic meters of gas annually over 30 years. While Gazprom declined to give a price, the company said the total value would be about $400 billion. China may make as much as $25 billion in advance payments under the contract to invest in infrastructure.

US-Mexico ties

Making up for lost time

Beefing up

Tom Vilsack, Agriculture Secretary, USA

US Agriculture Secretary Tom Vilsack recently highlighted the progress made on trade ties between US and Mexico, following a panel discussion with Mexico’s Secretary of Agriculture Enrique Martínez Martínez. The panel was part of the Global Forum on Agro Food Expectations forum in Mexico City. Vilsack’s remarks came as Mexico’s expanded import ruling to allow increased potato imports from US. Mexico also recently announced it would expand American beef imports as well. At the forum, Vilsack joined Martínez and Canada’s Minister of Agriculture and Agri-Food, Gerry Ritz, for a panel discussion titled “Integration of Agro-Industrial Markets in North America: Challenges and Opportunities.” The panelists discussed how US, Mexico and Canada can continue to work together to create jobs and economic opportunity for the agricultural industry. “Mexico is an important ally and a partner to US. In recent months, we have made progress on a number of issues that will help increase economic opportunity for both of our countries,” Vilsack said.