News, events and analyses related to global trade and snippets of changing trade matrix during the month of November 2015

Mega Trade Deal

Trans-Pacific Partnership

12 nations and a landmark deal!

After years of negotiations, a dozen Pacific nations, including United States and Japan, finally closed in on the largest trade-liberalising accord in history. The sweeping trade pact – signed in Atlanta after marathon talks – includes matters of trade liberalisation, safety protocols, environmental standards, and economic policies. The countries involved in the pact include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Interestingly, both China and India are not part of the bloc. However, both the Asian countries are the potential future member of this deal, which is now being considered for approval by lawmakers of each member nation. Once approved, the agreement would reduce trade barriers and set common commercial rules for 40% of world’s economy. Meanwhile, analysts are viewing Vietnam as the biggest winner of the TPP deal given that TPP’s reduced tariffs are going to be a boon for the nation whose economy relies primarily on exports. The pact is facing skepticism from US lawmakers and politicians. Interestingly, Hilary Clinton, who once supported the deal, has expressed her disapproval, citing “currency manipulation” by Asian countries.

A file photo of leaders of prospective member states at a TPP summit in 2010

Egypt

Rice exports

A gift of the Nile!

] Rice exports were banned on Sept. 1 to satisfy domestic demand.

In a move that will mark the return of Egypt’s medium-grain rice to international markets, the Egyptian authorities have allowed its exports over the next six months. The government’s decision is based on a projected surplus of the cereal in the country. Egypt produced 4.3 MMT of rice against the domestic consumption of 3.6 MMT in FY2015. The move comes as a good news for the traders who would be allowed to export rice only if they pay a tariff of 2000 Egyptian pounds ($280) per tonne of rice exported. The development follows the ban on rice exports on September 1, 2015, imposed to satisfy the domestic consumption which was expected to exceed production. With exports allowed, the country’s medium-grain rice would compete mainly with US, Russian and Italian rice in international markets. The country has been imposing various bans on rice exports since 2008 owing to the fluctuating demand. Rice exporters have been arguing that the bans have made exports non-profitable and encouraged illegal trading.

Sri Lanka-Poland

Trade Balance

When tradition drives trade

] Female tea pickers in a tea plantation in Maskeliya, Sri Lanka. The tea industry in Sri Lanka employs over one million people.

High export volumes of Sri Lanka’s traditional items like tea to Poland have further tilted the trade scale in favour of the former. Overall, exports from Sri Lanka to Poland have grown to $53 million in CY2014 from $47 million in CY2013. While Poland’s export to the island have increased from $13 million in CY2013 to $18 million in CY2014. The development has prompted Chairman of the Ceylon Chamber of Commerce, Samantha Ranatunga, to invite the Polish business community to look at other agricultural products in Sri Lanka to boost the bilateral trade. “This is rare for our country and more the reason why we value doing business with Poland,” he said. Ceylon tea has seen a rise in popularity in Poland, and has shown the potential for growth. Major export items of Sri Lanka to Poland constitute traditional products such as tea, spices and rubber products. Poland’s exports to Sri Lanka include machinery, agricultural equipment, electrical items, iron and steel, among others.

South Korea

Pear Exports

Cheer moment for pear!

Australia has been importing nashi pears from S. Korea.

Pear growers in South Korea have a reason to cheer as the country will resume exports of the fruit to Australian market. The pear exports were halted after the South Korean government informed Australia of the outbreak of fire blight disease in June this year. A few local farms in the central region of South Korea had reported the outbreak in May leading to a blanket ban on pears even from the unaffected areas. During the joint inspection in August, the South Korean and Australian officials found that the disease has been brought under control, thus giving a green signal to exports. In CY2014, pear exports from South Korea to Australia had touched 100 tonne, up from 50 tonne in CY2013.

WTO

Global Trade Forecast

A bumpy ride ahead!

Underscoring a disturbing trend of the financial crisis ahead, the World Trade Organisation (WTO) has trimmed its forecast for growth in global goods trade. As the trade body revised down its projections for growth in world trade this year from 3.3% (projection made in April) to 2.8%, it also warned the world about risks including potential increase in US interest rate, China’s slowdown, further slowing in emerging markets and Europe’s refugee crisis. The cut in the growth forecast has been attributed to a fall in the import demands from China, Brazil and other emerging economies, a decrease in the cost of oil and other main commodities, slowing down of economic activity in developing nations and fluctuations in exchange rates. It’s worth noting that if the current projections are accurate, then CY2015 will mark the fourth successive year in which annual global trade grew by less than 3%.

  Australia-China Malcolm Turnbull Prime Minister, Australia

Free Trade Agreement

It’s a deal... finally!

Australia appears all set to ratify a trade accord with China after the government promised to fulfil the opposition’s demand to safeguard Australian workers under the China-Australia free trade agreement (ChAFTA). The breakthrough was achieved after several proposed amendments to address fears of job opportunities in favour of Chinese workers. In a bid to resolve the political dispute, Australian Prime Minister Malcolm Turnbull-led government has vowed to accept opposition’s demands so long as the measures did not breach the text of the agreement. Labor’s proposals included changes that amend domestic laws and not the agreement. The trade deal, which took more than a decade of negotiations to complete, is seen as the next step in economic relations between China and Australia. However, there was a serious bone of contention delaying the ratification – ChAFTA allows Chinese companies working for projects above $150 million to bring in their own workforce, with no requirement for them to offer jobs to local workers first. Now, that was something to fear!

Nigeria

Oil Leak

Yet another grand theft...

The Trans-Forcados pipelines carry crude oil from Shell’s production facilities in Nigeria to export terminals in Forcados

Yet another oil leak on the Trans Forcados pipeline has led Anglo-Dutch oil giant Shell to halt crude exports from a key terminal in southern Nigeria. The suspension has hit crude oil exports from one of Nigeria’s main export terminals that carries one-fifth of African country’s exports. The aging pipeline – which has the capacity of carrying up to 400,000 barrels a day – is subject to regular disruption following attack by oil thieves and activists. The oil giant has often complained about the repeated sabotage and oil thefts from its pipeline that has resulted in spills in the oil-producing region. According to government estimates, crude oil thefts and losses during repairs had cost the Nigerian authorities a hefty sum of $12 billion in CY2013. In March last year, Shell had to shut down the oil terminal for weeks in order to repair a leak caused by “crude theft point” on an undersea pipeline. Nigeria is Africa’s biggest oil producer, accounting for over two million barrels of crude every day.

EU

Fish Imports

It’s a fishy business!

EU is by far the world’s biggest importer of seafood.

Looks like the European Union’s (EU) stringent import norms would take fish off their menu and how? EU, the world’s largest importer of seafood, has adopted strict stance against illegal fishing practices rampant across the globe. After threatening Thailand (to ban seafood imports from the country) over concerns about slave labour in fishing industry and illegal fishing, EU warned Comoros and Taiwan with yellow cards over illegal, unreported and unregulated (IUU) fishing. Both Taiwan and Comoros now have six months to take stronger action against illegal fishing or face red card, which would mean ban on their seafood exports to the 28-nation trade bloc. It’s worth mentioning here that Cambodia, Guinea and Sri Lanka have already got red cards from EU, which has successfully forced several nations to change their fisheries’ policies. EU, by the end of the year, will be deciding on issuing a red card to Thailand after its investigations of the latter’s fisheries control and social conditions. Meanwhile, the bloc lifted the ‘yellow card’ from Ghana issued in November 2013, after the African nation took sufficient measures to crack down on illegal fishing practices. The development comes as a relief for Ghana that reportedly lost about $150 million during the ban period.