Trade Wrap March 2018 issue

Trade Wrap

trans-pacific partnership

New name, new direction?

After months of “Will They, Won’t They”, the first official announcement on the renegotiation of the TPP came in the form of a joint statement made at the Asia Pacific Economic Cooperation (APEC) meeting in Vietnam. The announcement was made by top officials from the remaining 11 countries of the original 12 TPP countries (now known as the TPP-11). The group has agreed to the basic framework of the newly rechristened Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The agreed upon framework currently excludes 20 of the original provisions, including medical devices, investment and telecommunications. It is being reported that there are four main “country-specific” provisions that will need to be agreed on before the deal is officially signed.

The original deal had reached a roadblock when the then newly-elected President of the United States Donald Trump announced his decision to quit the TPP, claiming that the multi-nation trade deal was against the interest of the American consumers and trade community. The remaining 11 signatories to the trade deal include Canada, Japan, Australia, Brunei, New Zealand, Peru, Mexico, Singapore, Chile, Malaysia and Vietnam. The deal aims to improve trade relations between nations within the region through reduced tariffs and trade barriers, across sectors. The deal also hopes to help strengthen the regions’ position against the growing strength of China in global trade.

Of photo ops and trade talks

After 11 months of flip-flopping on the nature of US’s relationship with China, US President Trump made his first visit to Beijing as a part of a 12-day multi-nation visit. The visit started in Japan and ended in the island-nation of Philippines. President Trump kicked off his visit in the Japanese capital of Tokyo on November 5. Post Tokyo, President Trump’s subsequent trips were to the South Korean Capital of Seoul and the much-anticipated visit to the Chinese Capital of Beijing.

While the US has been actively talking about taking action against China’s unfair trade practices, the recent visit by Chinese President Xi Jinping to the US and Trump’s visit to Beijing showed no signs of acrimony, as the two nations announced the signing of over $250 billion worth of deals. The Chinese President also extended an invitation for American companies to join China’s One Belt One Road (OBOR) initiative. While President Trump has announced the visit to be a huge success, critics have said that he has been rather soft on China. The coming days are expected to provide a much clearer picture on whether the visit to China was just another case of photo ops and news-making global diplomacy or were they steps towards a new alliance.

FTP review
Exports get a new boost

Trade Wrap

After a delay of almost six months, the DGFT finally released the Foreign Trade Policy 2015-2020 review document on December 5. The main focus areas of the new policy are ease of doing business, expanding into new markets, diversifying the export product basket, logistics-related initiatives and increasing access for agricultural exports. Taking into consideration concerns about GST, the review also included various incentives and initiatives to ease some of the burden that traders were facing since its implementation. Some policy changes announced included a provision for imports of gold (for re-export) via Specified Nominated Agencies without payments of GST and imports under schemes like EPCG and Advance Authorisation and imports by 100% EOUs without upfront payment of GST. The government also announced an e-wallet system to be put into effect from April 2018. Additionally, increments were announced for both MEIS and SEIS schemes. For Readymade Garments and Made-ups, the incentives have been increased from 2% to 4% while for the MSMEs and labour-incentive sectors like rubber and leather sector, an overall 2% increase was announced. A similar 2% increment was announced for the services sector, under the SEIS scheme. In total incentives worth Rs 8,450 crore were announced. The review was initially expected to be announced before the GST implementation in June, this year, but was delayed to include solutions for GST-related concerns of the trading community. Additionally, the government announced a new services division in DGFT to examine Exim policies and procedures to push services exports and a division to provide data analytics and immediate solutions.

Encouraging entrepreneurs

Thought leaders, entrepreneurs and investors gathered in Hyderabad last month for the three-day Global Entrepreneurship Summit 2017 (GES 2017). In its 8th year, the summit while continuing to emphasise on encouraging startups and entrepreneurs, put a special focus on women entrepreneurs with the theme, ‘Women First, Prosperity for All’. The GES this year had attracted participants from over 150 countries. Heading the US delegation was Ivanka Trump, First Daughter and Advisor to the President of the United States,

herself a succesful entrepreneur. The global event saw participation from a range of Indian ministers – from Prime Minister Narendra Modi, Defence Minister Nirmala Sitharaman, Telangana Chief Minister K Chandrashekar Rao, Telangana Minister for Information and Technology KT Rama Rao, to Minister for Overseas Affairs Sushma Swaraj, apart from high profile leaders from both Indian and global companies. While the event saw participation from entrepreneurs and investors across a wide cross section of industries, the key sectors highlighted at the event were energy & infrastructure, digital economy & technology, healthcare and life sciences and media & entertainment.

A never ending crisis!

Rumours and criticism of a proposed £50 billion bill for separation from the EU turned out to be just one of the many problems stalling Theresa May’s plans to officially finalise the Brexit deal. One of the biggest obstacles to a final ‘divorce’ has been the nature of borders and continued access to EU markets. A recent meeting between European Commission President Jean Claude Juncker and Prime Minister May had to be abruptly ended due to a disagreement between May and Ireland’s leaders regarding a regulatory alignment of Ireland’s border. The suggestion of a regulatory alignment was being made, according to May’s government, in order to avoid a hard border within the region. The EU remains adamant that Britain will not be able to broker a deal that only keeps the ‘good bits’ of EU without sharing the pains.

Energy woes

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In a major blow to Pakistan’s LNG plans, US petroleum major Exxon is stepping away from a multi-company LNG deal. The deal was a partnership between six companies in Pakistan’s Port Qasim. The other partners include Total (France), Mitsubishi (Japan), Qatar Petroleum (Qatar), Global Energy Infrastructure Limited (Turkey) and Hoegh LNG (Norway). The decision by Exxon is being attributed to differences with the other partners. It is being reported that Exxon is planning to invest in a separate project. The Port Qasim project is now reaching out to new partners to complete the project which now faces roadblocks in the absence of a full quorum of partners.


Paving a new path

In a landmark development, India’s first consignment of wheat to Afghanistan via the Chabahar port in Iran reached the Afghan city of Zaranj. The consignment travelled from the port to Afghanistan via road. The opening of this route now allows India to directly export to Afghanistan bypassing Pakistan. The newly-inaugurated port route is expected to play an important role in expanding trade relations between India and the rest of the land-locked Central Asia, which had been cut off after Pakistan refused access to transportation of goods between India and Afghanistan. This consignment is a part of an ‘Indian grant’ to provide Afghanistan with 1.1 million tonne of wheat.

India - Italy
Of trade and terrorism

During his two-day visit to India, Italian Prime Minister Paolo Gentiloni inked six deals between India and Italy. The deals pertain to a variety of areas from tackling terrorism and cybercrime and strengthening ties between the two countries in areas such as railways and energy to mutual investments. Indian Prime Minister Narendra Modi has expressed hope that the two countries will be able to strengthen both trade and political relations. PM Modi also invited participation by Italian companies in the Indian government’s flagship programmes like ‘Smart Cities’.

India - Ethiopia
New and approved

The Union Cabinet gave its ex-post facto approval to a trade agreement between India and Ethiopia in the first week of November. Indian President Ram Nath Kovind had during his visit to Ethiopia, in October, signed the agreement with Ethiopian President Mulato Teshrome. The new agreement replaces the trade deal that had been previously signed in 1982, and is expected to encourage trade, economic and technical cooperation and investments between the two nations.