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

China FDI

Four year low

The stonewall of China

China’s commerce ministry figures indicate a year-on-year increase of 112.1% in Chinese Overseas Di-rect Investment (ODI) while its FDI inflow shows a fall to a four-year-low of just $7.2 billion. Officials have indicated that ODI will exceed FDI even in the current year. The main reason for this is an anti-trust clampdown on MNCs operating in China. While restricting the entry of foreign players on its soil, through various regulations, China is urging its own companies to go forth and invest in major segments across the globe and, wherever possible, go for overseas acquisitions. While overseas investments might not be a major concern for other countries and might actually be welcomed, it is the anti-trust investigations initiated by the Chinese government against foreign companies on its soil that has got the world fuming. However, a Chinese commerce ministry spokesperson Shen Danyang has denied any link of falling FDI to Beijing’s multiple probes into foreign companies. “They are not related,” he recently told the media. Ac-cording to him, China plans to revise three laws governing overseas companies and Sino-foreign joint ventures. “By revising the laws, we hope to create a more stable, transparent and predictable legal environment for foreign investment in China,” he said. The rest of the world, though, finds the reasoning difficult to buy.  

Shen Dayang, MOFCOM China Spokesperson

Russia-EU Trade

Cold war 2.0

Driving to nowhere

The impasse between Russia and European Union (EU) seems to have become chronic. And Russia, hurt by the sanctions and coercion resorted to by Europe and US (because of its Ukraine adventure) is only too eager to return the favour – the recent move being imposition of anti-dumping duty (ranging between 23% and 29%) on Light Commercial Vehicles (LCVs) exported by EU. Following the move, EU has approached the World Trade Organisation (WTO) for a ruling on the issue. EU has expressed that anti-dumping duties imposed by Russia on imports of Light Commercial Vehicles from Germany and Italy was not in accordance with the WTO law, both on procedural and substantive grounds. It’s worth noting that EU’s LCV exports to Russia were any-way falling since the latter imposed a so-called ‘recycling fee’ in September 2012 on cars, trucks, buses and other motor vehicles. Commenting on the imposition of anti-dumping duties by Russia, EU Trade Spokesperson Wojtek Talko recently said, “The EU is concerned by the use of trade defence instruments as protectionist measures, without a proper justification. In line with our general policy to request WTO dispute settlement to address technical shortcomings of trade defence measures taken by another WTO Member, the EU has moved to the next step in this dispute.”  

China - Maldives

Maritime trade

Yet another Silk Route

Maldives may, in the near future, have a new trade connect with China. And there are no prizes for guessing what it will be called. Why, of course, ‘21st century Maritime Silk Road.’ Mal-dives has approved the plan for the same, forwarded by China’s President Xi Jinping during his recent visit to the country. In a joint statement, the two countries said, “Maldives welcomes and supports the proposal put forward by China to build the 21st Century Maritime Silk Road and is prepared to actively participate in relevant cooperation. The two sides have agreed to enhance cooperation in other areas, such as marine, economy, and security, as well.” Speaking about the project, Maldivian President Abdulla Yameen said that Mal-dives was ‘honoured’ to be a part of the trade route initiative, flagged by Xi during a visit to Indonesia last year and intended to revive a route running from China through Southeast Asia and the Indian Ocean to Europe. He expressed confidence that this would be the beginning of a new era of heightened and sustained cooperation between Maldives and China.  

Abdulla Yameen, President, Maldives

Cost Rica

Trade in services

Serving away to prosperity

An International Trade Centre (ITC) study related to the transition of global value chains from agriculture to manufacturing has highlighted Costa Rica as a case in point to substantiate the feasibility of shifting to services. Ac-cording to the study, Costa Rica has become the top Hi-tech exporter in Latin America and the 4th largest in the world after the country changed its focus from agriculture to services. “SMEs in developing countries have opportunities to join value chains as service providers, not just as suppliers of goods,” said Jane Drake-Brockman, who leads ITC’s Trade in Services programme. “The ‘servification’ of trade in goods is a trend that is driving exports,” he added.   The study points out that Costa Rica, with a long-term vision to encourage FDI, has built an international reputation over time. It gained credibility with the arrival of Intel in 1987, followed by other firms, as the country focused on attracting offshore business services, medical devices and high-tech manufacturing. The paper outlines how such strategies could be broadened to focus more on the ser-vices sector, which is in the pre-and post-manufacturing stage of global value chain, offers g r e a t e r value. By investing more in services linked to glob-al value chains, countries are more likely to climb the development ladder, the study stated and added that Costa Rica’s case is useful for countries seeking to transform their economies from a mainly agricultural focus to a focus on the services sector in global value chains.  

USA - Taiwan

Pork trade

Adding spice to sausage

Trust the fastidious Americans to literally put everything sourced from abroad under a microscope and come out with clinching evidence to substantiate their suspicion. In a recent such investigation, the United States has found pork imported from Taiwan containing a leanness enhancing drug ractopamine. In what could be read as a soft reprimand couched in diplomatic slang, US trade representative and US ambassador to the WTO Michael Punke has expressed concerns about the presence of the drug. Speaking at the third WTO Trade Policy Review of Taiwan, Michael Punke said “While Chinese Taipei (Taiwan) has reasons to be pleased with the results of its efforts to date, the United States would like to highlight several areas that we believe need greater attention.”He said that although Taiwan has established a maximum residue level (MRL) for ractopamine in beef muscle cuts in 2012, it has not done the same for pork. Michael Punke also pointed out that Taiwan maintains ‘unpredictable policies’ that impede the import of rice, organic products and other products from that country.  

New Zealand

Seed exports

Under the microscope

Seeds and plant material exports to New Zealand will now be subjected to stringent scrutiny for targeted diseases. According to the Ministry of Primary Industries, biosecurity rules applied to commonly imported seeds and plant material, including capsicum and cape gooseberry seeds, and plant material of dahlia, chrysanthemum, and petunia have been changed. Exporters of these seeds and plant material would now meet the new rules. According to the new rules, both home gardeners and commercial growers would now only able to bring seeds and plant material sourced from businesses that are certified to be free of the targeted diseases.

Agriculture accounts for over half of New Zealand’s exports

Rwanda

Trade facilitation

Networking to new avenues

According to Rwanda’s Minister of Trade and Industry Francois Kanimba, the use of Information and Communication Technologies have helped speed up processes and make them more transparent. Access to capital for small and medium-sized enterprises (SMEs), for instance, has increased through a common credit tracking system, and this has led to Rwanda’s ranking as No.13 in the World Bank Doing Business Indicators. Speaking at the World Export Development Forum in Kigali, Kanimba pointed out that cross-border trading is an area in which Rwanda can benefit from trade facilitation. “Using a single electronic window for customs clearance is key, and now this can be done online,” he said. Dialogue among the three presidents of Rwanda, Uganda and Kenya has helped to improve trading across borders and related transit issues. As a consequence, time taken for shipping goods from Rwanda to the Port of Mombasa in Kenya has reduced from 22 to 6 days. This has contributed to an increase in exports by 30% through regional integration, he stated.

Francois Kanimba Rwanda’s Minister of Trade and Industry

USA

Agri trade

For a freer, flatter world

The United States has started initiating the process of limiting barriers to agricultural products trade. The American Farm Bureau Trade Advisory Committee, led by Kevin Paap, is set to meet World Trade Organisation Director General Roberto Azevedo, the WTO Director of Agriculture and Commodities and trade ambassadors of Brazil, Japan, Australia, India, China and Canada, to iron out the contentious issue. Following the meeting in Geneva, the group will travel to Brussels to meet EU officials to discuss the Transatlantic Trade Investment Partnership (TTIP). The idea behind TTIP is to expand the economic relationship between US and EU. It’s worth noting that US ex-ported $12 billion worth of agricultural products to EU in CY2013, while EU exported $17.3 billion worth of agricultural products to US. “US farmers and ranchers are ready for commitments that result in real actions to open market access and limit trade disruptions,” American Farm Bureau Federation President, Bob Stallman said. Before US considers reductions in or limitations on domes-tic support for its agriculture sector, negotiations must yield an important net gain for US farmers and ranchers through commitments on market access and trade-distorting policies by our trading partners, he added.   

Roberto Azevedo Director General World Trade Organisation

Australia

Tourism

Kangaroo tourism gallops

Tourism Research Australia’s ‘International Visitors in Australia’ Survey reveals that there has been a record arrival of tourists from Australia’s key markets – New Zealand, USA, China, Singapore, Malaysia, Hong Kong, India and Germany. The survey comes at a time when reports doing the rounds indicate $20 billion worth of prospective investment in new tourism infrastructure at the high-quality end of the market in Australia. “Tourism is one of our great strengths. The industry is finally receiving the attention it deserves. We are pursuing an aggressive investment agenda to ensure we develop the infrastructure required to cater for the growing international demand,” Trade and In-vestment Minister Andrew Robb said and added, “Tour-ism Australia has received record levels of funding. It is a national investment priority. The Passenger Movement Charge has been frozen and the Carbon Tax has been abolished.” It’s worth noting that the Australian government has recently allocated $43 million for a new Tour-ism Demand-Driver Infra-structure Programme and $10 million in new funding for the Australia-China Approved Destination Status (ADS) scheme.

Andrew Robb Minister for Trade and Investment Australia

Vietnam - Germany

Trade surplus

Not what many can boast of

Vietnam has recorded a surplus of $1.7 billion with Germany in the first eight months of this year. According to the General Department of Vietnam Customs, this accounted for 56.6% Vietnam’s overall trade surplus of over $3 billion. As of August 31, Vietnam’s exports to Germany had reached $4.95 billion, accounting for 2.6% of its total exports. Key components of Vietnamese exports to Germany included mobile phones and components (25.23%), garment-textiles (15.77%), footwear (11.3%), coffee (10.1%) and seafood (4.76%). On the other hand, Vietnam’s imports from Germany was about $1.63 bil-lion, accounting for 1.7% of its total imports in the period. The main items that the Southeast Asian country imported from Germany were machinery and components (46.6%), pharmaceutical products (7.67%), chemical products (5.7%), and milk and dairy products (2.27%).

Germany’s overall trade surplus is by far the highest in the world