Global Trade September 2016 March 2018 issue

Global Trade September 2016

News, events and analyses related to global trade and snippets of changing trade matrix during the month of August 2016



Changing tone, yet again

US Democratic presidential candidate Hillary Clinton yet again drew the attention of millions across the globe and this time for her new stance on trade deals. In an apparent attempt to win over wavering liberals, as well as conservatives disenchanted with Republican nominee Donald Trump, Clinton changed her tone on trade, reassuring her supporters that she would oppose the Trans-Pacific Partnership (TPP) deal that she once helped push as a top diplomat in the Obama administration. Re-emphasising her opposition to the TPP agreement, Clinton vowed to kill the trade deal if elected President. “I will stop any trade deal that kills jobs or hold down wages, including the Trans-Pacific Partnership,” she said while delivering an economic policy speech in the state of Michigan. “I oppose it now, I’ll oppose it after the election and I’ll oppose it as President,” Clinton said. Incidentally, though Clinton supported the TPP deal in the days of the Obama administration while she was the US Secretary of State, she changed her stand once the deal was completed last year. She categorically stated that she was only opposing the multilateral trade deal but would continue to support the other six bilateral trade deals. She would also continue to support the implementation of NAFTA (with tweaks) and most-favoured status for Chinese trade. Experts are attributing her altered stance to pressure from the Republican presidential nominee Donald Trump. The US-led TPP accord involves 12 countries including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The deal formally signed by ministers from 12 countries in February 2016 seeks to allow preferential trade of goods and services between the member countries. Signed after five years of negotiations, the accord has to undergo a two-year ratification period before implementation. However, given Clinton and Trump’s stance on TPP, uncertainty over the fate of the treaty is mounting.

Global Trade September 2016



Signs to worry

In what can be seen as a Brexit fallout, Irish exporters are in the midst of a currency crisis on the back of a weakening sterling caused by the UK referendum result. This warning comes from the state’s biggest business body. According to the Irish Business and Employers Confederation (IBEC), a sharp fall in pound against euro is already making Irish exports to UK less competitive. Notably, Ireland is Britain’s fifth-largest trading partner with the latter being Dublin’s biggest export destination. Giving a bleak assessment of the impact of the weakening of sterling on Irish exporters, the trade body warned that Ireland’s food exporters could be hit by the losses of £700 million and thousands of jobs if sterling weakens to £0.90 against euro. A survey showed that new export orders fell for the second time in three months. UK’s decision to leave the bloc was cited as one of the factors for reduced export orders. The Brexit vote has also hit hard Ireland’s business activity and manufacturing sector with production slowing and new business stagnating for the first time in three years. It must be noted that Ireland’s Central Bank in July 2016 had cut its economic growth forecast and said Brexit vote was likely to restrict exports, investments and employment growth.



On a destructive path

Angering many, Russia has destroyed over 7,200 metric tonne (MT) of banned food imports, mostly fruits and vegetables, under its counter-sanctions since August 2015. Russia’s agricultural watchdog Rosselkhoznadzor in a statement said that it had overall destroyed 7,282 MT of foodstuff, majorly, including apples, peaches, pears, tomatoes, eggplants and oranges. The world’s largest country (by area) also destroyed 228,642 MT of food of animal origin over the last one year. According to reports, the maximum amount of banned food products (2,700 MT) were destroyed in Bryansk and Smolensk regions near the border with Belarus, followed by Tver and Pskov regions, each destroying 1,900 MT of fruits and vegetables. It is worth mentioning here that Russia had initially prohibited imports of a wide range of food items from US, Canada, Australia and European Union in response to the sanctions imposed against Moscow over its stance on the Ukraine crisis. Later in July 2015, Russian President Vladimir Putin signed a decree on destroying foods falling under Russia’s banned items following which the banned food imports began to be destroyed from August 06, 2015. The ban has been widely criticised. Coupled with the Russian currency’s sharp depreciation, the ban has been driving consumer prices up continuously.



Starting afresh

Libya’s state-controlled crude producer National Oil Corporation (NOC) is working toward resuming exports from three blocked oil ports – Ras Lanuf, Es Sider and Zueitina – after the UN-backed government reached a deal with local guards to settle payments. The armed brigade controlling these major ports had blocked the facilities during a pay dispute that started in December 2014. NOC, which had earlier objected to paying cash to reopen these ports, has now stated that it welcomed the ‘unconditional’ reopening of ports. The agreement is being seen as a major step to revive Libya’s dwindling exports as the state oil company will ‘start working’ with the unity government to resume exports. The three ports have the capacity to export 600,000 barrels per day (bpd) and help boost the crude exports of this North African nation. Meanwhile, NOC has stated that it will gradually increase the production to 900,000 bpd by the end of the year. Notably, higher production from Libya would add more oil to the global glut.

Global Trade September 2016


Beef Exports

‘Beef’ing up trade

Now this is going to add a lot of meat to the story. If all goes well, both USA and Brazil will have fresh beef and beef products from respective markets as the two countries have exchanged food safety documents that will open their respective markets for beef exports. The US Department of Agriculture (USDA) reached an agreement with the Brazilian government to get access to US beef products in the Brazilian market for the first time since 2003.

In yet another development, Brazil announced that it would be exporting beef to United States, 15 years after being banned from shipping meat due to the outbreak of foot and mouth disease. The decision came after USDA’s Food Safety and Inspection Service determined that Brazil’s food safety system for meat matched the US standards. The development is expected to boost Brazil’s (the world’s third-largest exporter of frozen beef) exports to US by $900 million. The agreement is being seen as USDA’s ongoing efforts to end barriers to US exports. Since January 2015, USDA has eliminated BSE (mad cow disease) related restrictions in 16 countries, in the process of gaining additional market access for US beef.


Wheat Exports

Losing the top spot

With France facing the worst harvest in 30 years, the European country could lose its position as EU’s top wheat exporter. According to Paris-based consulting firm Agritel, after a ‘disastrous’ French harvest following the bad weather, France’s soft wheat exports could decrease not only within EU but outside the bloc as well. Head of Agritel Michel Portier said, “France is probably going to lose this season its place as EU’s biggest wheat exporter.” Agritel has forecasted that France would export 7.3 million metric tonne (MMT) within EU in 2016-17 as against 7.7 MT in 2015-16. The fall in exports may allow Germany to overtake France as the EU’s top wheat exporter in 2016-17. The steep fall in export prospects is the result of sharply lower harvest – which forecasters see at 28.68 MMT and erratic grain quality, thanks to the heavy rains across many producing regions. The steep decline in harvest is expected to hit soft wheat exports outside EU, dropping by 60% to 5.1 MT in 2016-17 from 12.6 MT last season. What is worth noting  is that the loss in trade in wheat crop could even have a negative impact on the country’s trade balance.

Global Trade September 2016

Zimbabwe-South Africa


Looming trade war

Zimbabwe’s controversial decision banning imports of basic consumer goods from South Africa has led to a trade dispute, with the later giving three weeks’ ultimatum to either roll back the decision or face the consequences. In a bid to protect and develop local industries, Zimbabwe had in June 2016 promulgated Statutory Instrument (SI) 64 of 2016 that restricted imports of several goods including cosmetics, cereals, canned goods, etc., from its southern neighbour. While Harare has denied any kind of dispute with its largest trading partner (Harare has described the controversial ban as a ‘safeguard measure’ to shore up local manufacturers), the Zimbabwean government has come under fire with demonstrations by the traders. A miffed South Africa has flexed its muscle telling Harare to negotiate properly and resolve the impasse before the meeting of SADC (Southern African Development Community) trade ministers in Botswana on August 24.