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

Cold War 2.0

Russian Retaliation

No longer a one way traffic

The spat between Russia and the West is snowballing into a tit-for-tat trade war, with Russian President Vladimir Putin signing an order that puts a one year ban on imports of agricultural and food products from countries that have imposed sanctions on the Russian Federation. The products that have been banned include meat, poultry, dairy products, sea food, vegetables and fruits from United States, European Union, Canada, Norway and Australia. The embargo, however, does not include infant foods and goods.

Reacting to the ban, European Union’s foreign ministers reiterated that “the grounds for the imposition of restrictive measures against the Russian Federation remain valid.” In a joint statement, the ministers said, “In order to ensure unity of the international community and uphold international law, the European Union expects developing nations and candidate countries to refrain from measures which are aimed at exploiting new trading opportunities arising from the introduction of these measures,” adding that “the Council, together with the Commission and the HR/VP, remains engaged in the monitoring and assessment of these measures and remains ready to consider further steps, in light of the evolution of the situation on the ground.”  

US-Africa Trade

Export Push

Killing two birds with one stone

With the dual objective of providing impetus to domestic small businesses and also expand the country’s footprint globally, the Export-Import Bank of the United States has announced a record package of $1.7 billion to finance US exports to Sub-Saharan Africa. According to the bank, this would facilitate small businesses to sell their products in the international markets, apart from supporting more than 10,000 American jobs. The announcement came during the US-Africa Leaders Summit convened by US President Barack Obama, which was also attended by the bank’s Chairman and President Fred P. Hochberg. “Export Import Bank is firmly committed to equipping US exporters to realise the vast economic opportunities emerging throughout Sub-Saharan Africa, which is home to seven of world’s 10 fastest-growing markets,” Hochberg said and added, “Each transaction we support creates jobs for local US businesses and strengthens our relationship with a region that has a strong prospect for long-term economic growth.” The bank also declared that it will keep aside $3 billion to finance US exports to Sub-Saharan Africa over the next two financial years.  

Barack Obama, President, USA

China

Grain Imports

To feed over a billion

China has decided to import grain to tide over spiraling prices at home, and also ensure sufficient stocks. The imports, according to Chinese official sources, will cut down unexpected supply risks and ensure long-term food security. “International cereal prices are much lower than those prevailing in the domestic markets. Demand for various cooked wheat food goes up in China between January and July. Due to lower prices in global markets, the nation has increased its imports,” said Li Guoxiang, Deputy Director of the Rural Development Institute at the Chinese Academy of Social Sciences in Beijing. He added that “rising grain imports do not pose any threat to the nation’s food security.”

Pricing of food grains has been a very controversial issue at the WTO, with developing and developed countries at loggerheads over subsidies

According to reports, China imported 11.34 million metric tonne of cereals between January 1 and July 31, 2014, up 80% year-on-year. The nation’s grain imports mainly cover wheat, rice and corn. Although China’s grain production has been rising every year for the last 10 years, it has never been enough to meet the domestic demand. Interestingly, in 2006 China had introduced price floors for farm products to safeguard farmers from price volatility. The government buys for the State reserve only when the market price falls below the price floor.

Australian Exports

Russian Ban

Going down... down under

Russia’s ban on import of agricultural products from Australia have put the latter at sea, literally. As a result of the ban, Australian export goods – comprising agricultural products, raw materials and foodstuff – are either stranded at sea or in transit to Russian markets, although government officials have initiated measures to divert them to alternative destinations. The concern about taking contingent measures is quite justified, since most of them are perishables.  According to the Australia’s Department of Agriculture, total agricultural trade with Russia was valued at AUD 404.7 million in 2013. Of this, a majority were in the meat, livestock and animal products category, followed by dairy, seafood, cereals and pulses. In the FY2013-14, Russia accounted for about 1% of total Australian agricultural exports.

US-ECOWAS

Framework Agreement

Gearing up for an African Safari

The United States has signed a Trade and Investment Framework Agreement (TIFA) with the Economic Community of West African States (ECOWAS). The TIFA will provide a mechanism for expanding trade and investment between United States and the 15 ECOWAS member states, and across the entire ECOWAS region. The signing took places alongside the White House’s announcement that major American companies have committed to invest $14 billion in Africa’s future. “This is a tremendously exciting and formative time for US-Africa trade relations,” US Trade Representative Michael Froman said. “Africa is an increasingly critical trading partner for United States, and the signing of the Trade and Investment Framework Agreement with the 15 countries of the Economic Community of West African States is emblematic of our commitment to strengthening the economic bonds that connect America and the African community,” he added. US exports to ECOWAS member states were worth $9.9 billion in CY2013, with mineral fuel ($3 billion), automobiles and auto parts ($2.1 billion), machinery ($1.2 billion), and wheat ($977 million) being the dominant components. Total United States-ECOWAS trade was valued at $23.3 billion in CY2013.

Michael Froman , US Trade Representative

APEC

Curbing Corruption

Joining hands to catch the crooks

Sleuths belonging to Asia-Pacific Economic Cooperation (APEC) are sharpening their tools to curb prevalent corruption that is impacting the market. APEC Network of Anti-Corruption Authorities and Law Enforcement Agencies, or ACT-NET, have opened a ground-breaking new channel for the exchange of sensitive case information, which would significantly enhance their ability to combat large scale corruption and bribery affecting the Asia-Pacific market. Officials shared detailed insights into on-going criminal investigations and prosecutions for the first time on an APEC-wide basis during the inaugural meeting of the ACT-NET. A secretariat, to be initially hosted by China, will manage information-sharing in an institutional capacity. “As domestic anti-corruption efforts intensify, corrupt officials flee abroad and remain at large by taking advantage of legal differences between our jurisdictions,” said Fu Kui, Vice Minister of China’s National Bureau of Corruption Prevention. He further stated it was a serious challenge to each economy’s rule of law. “By building a multilateral platform to strengthen work-level exchange and case cooperation, we can cut off the escape route for corrupt fugitives to a large extent,” Fu Kui added.

New Zealand

Beer Exports

Cheers to Asian giants!

The Australian and New Zealand Banking Group (ANZ) claims that New Zealand craft beer exports might triple over the next decade as Asian consumers have started developing a taste for boutique brews. ANZ’s central region General Manager (Commercial and Agri) John Bennet believes fast-growing economies like China and India offer huge export opportunities for Kiwi brewers. “The potential for exporters is enormous – up to 300% growth in the next 10 years – but New Zealand brewers and hop growers will need to significantly expand production if they are to take advantage of the opportunity,” Bennet said. It’s worth mentioning that the output of New Zealand craft breweries is expanding at about 25% per annum, while the domestic consumption has been increasing just 10% annually.

File photo of a Boutique micro brewery with steel equipment

Britain

Car Exports

Racing ahead in top gear

Thanks to rising demand for luxury car brands like Volkswagen-owned Bentley and BMW-owned Rolls Royce, car exports from Britain are on a roll. In fact, according to the Society of Motor Manufacturers and Traders (SMMT), car exports from Britain rose 3% y-o-y in July to the their best ever levels for the month. This, as global demand for top-end cars continued to grow. Britain manufactured over 1,03,000 cars during the month and the total number, along with those manufactured for domestic sales, reached 1,32,750 units, up 2.8% y-o-y. The SMMT said rising exports were primarily due to new models being made in Britain and increasing popularity of premium and specialist brands, including that of the Tata-owned Jaguar and Land Rover. The SMMT expects about 1.6 million cars to roll off UK production lines in 2014 and if this growth rate continues the production is expected to surpass the 1.92-million record set in 1972 by 2017. Interestingly, today about 8 out of 10 cars manufactured in UK are exported.

Rows of Land Rovers queued at Southampton Docks in UK awaiting export

Afghanistan

Drop in Exports

Election takes its toll on purse

The Afghanistan Chamber of Commerce and Industry (ACCI) has announced that exports from the war-ravaged nation have dropped by almost 20% since the start of 2014. Unending violence and political instability seem to be the root cause of this big drop. ACCI officials claim that exports from Afghanistan were worth just $90 million during the first three months of the year as compared to $120 million during the same period last year. Officials in the Ministry of Finance of Afghanistan have also expressed concerns regarding the delay in the announcement of presidential election result. The officials said the delay in announcement of the result of the presidential election has led its customs revenue decrease by as high as 25% in 2014.

Malaysia

Steel Plate Imports

Another day, another protectionist attempt

The World Trade Organisation (WTO) has reported that Malaysia has launched a safeguard investigation into the import of hot rolled steel plates to determine whether rising imports are causing harm to the domestic industry. In the last five years, Malaysia’s imports of iron and steel structures like plates, rods and angles have risen at CAGR of 22.73%, a majority of them from China.

The WTO has said that the local industry has to submit their responses within 30 days of the publication of the notice in the Government Gazette of Malaysia if they want their views and submissions to be considered. A safeguard investigation seeks to determine whether increased imports of a product are causing, or is threatening to cause, serious injury to a domestic industry. During a safeguard investigation, importers, exporters and other interested parties may present evidence and views and respond to the presentations of other parties. A WTO member may take a safeguard action, i.e., restrict imports of a product temporarily, only if the increased imports of the product are found to be causing, or threatening to cause, serious injury.