GHY Tradelines

(Monika Ermert – Intellectual Property Watch)

The pace to negotiate bilateral or plurilateral free trade agreements has been accelerating rapidly over the last month as the big trading blocs seem eager to position themselves in the race for market access and standards.

China, Japan and Korea in March hurried to open their first official round of negotiations (CJK), just in time to edge ahead of Japan’s joining the negotiations of an enlarged Trans-Pacific Partnership Agreement (TPP) and also ahead of the official start of a Transatlantic Trade and Investment Partnership (TTIP) announced by the European Union and the United States earlier this year. Meanwhile, a concerned Association of Southeast Asian Nations (ASEAN) rushed to counter these ventures with their own competitive bid by starting detailed talks on a Regional Comprehensive Economic Partnership (RCEP) in Brunei Daressalam last Friday.

For years, China and Korea had been reluctant to negotiate the CJK FTA, said Junji Nakagawa, professor of international economic law at the Institute of Social Sciences of the University of Tokyo. Research on the CJK started in 2003, with an official study begun in 2010 and finalised only last spring. Read more here.
 

(BBC)

Karel De Gucht said that China had to take responsibility for the global trading system, just as the EU did.

Mr De Gucht’s comments come just days after the EU said it may investigate claims that Chinese telecom firms have been paid subsidies, allowing them to flood markets with cheap equipment.

The EU fears illegal payments may give Chinese firms an unfair advantage. [...]

“China has become a very big economy and they have to take responsibility, just as we do, for the global trading system,” Mr De Gucht told the BBC. Read more here.
 

(The Economist)

Container shipping has done more for trade than 50 years of agreements

The humble shipping container is a powerful antidote to economic pessimism and fears of slowing innovation. Although only a simple metal box, it has transformed global trade. In fact, new research suggests that the container has been more of a driver of globalization than all trade agreements in the past 50 years taken together.

Containerization is a testament to the power of process innovation. In the 1950s the world’s ports still did business much as they had for centuries. When ships moored, hordes of longshoremen unloaded “break bulk” cargo crammed into the hold. They then squeezed outbound cargo in as efficiently as possible in a game of maritime Tetris. The process was expensive and slow; most ships spent much more time tied up than plying the seas. And theft was rampant: a dock worker was said to earn “$20 a day and all the Scotch you could carry home.”

Containerization changed everything. It was the brainchild of Malcom McLean, an American trucking magnate. Read more here.
 

(Alex Lennane – The Loadstar)

The air freight market is currently in a weak yet stable condition, according to carriers and consultancies. Drewry’s east-west air freight price index for April revealed that all-in rates (for standard deferred airport-to-airport services), over 21 major routes, rose slightly to $3.21 from $3.15 in March, but were down year-on-year.

Interestingly, perhaps, one of the sharpest rebounds in pricing was on the Shanghai-Frankfurt route. Drewry’s index saw it rise 13.8% in April.

“China is recovering,” said a spokesman for Lufthansa Cargo. “We’ve increased the frequency to Shanghai, but the market is still unspectacular – we don’t expect a real recovery until the second half.” Read more here.
 

(Charles Kenny – Bloomberg)

Over the past few weeks, much has been made about the transatlantic trade pact President Obama proposed in his State of the Union address, as well as the announcement that Japan will join the Trans-Pacific Partnership, which the U.S. hopes to wrap up this year. Largely overlooked, however, was another development in the area of trade: the leadership contest for the post of the World Trade Organization’s director general. The winning candidate, Brazil’s Roberto Carvalho de Azevêdo, managed to secure the closed-door consensus that passes for a selection procedure with milquetoast statements designed to offend no one.

The lack of excitement about Azevêdo’s appointment reflects the extent to which the WTO has been marginalized in favor of trade regionalism. That’s a real problem for the U.S.: Regional approaches can’t handle a lot of the country’s most significant trade issues. The World Trade Organization, meanwhile, remains vital to national and global economic prospects. Read more here.
 

(Jonathan Fahey – AP)

The surge in oil production in the U.S. and Canada and shrinking oil consumption in the developed world is transforming the global oil market.

The threat of chronic oil shortages is all but gone, U.S. dependence on Middle Eastern oil will continue to dwindle and oil will increasingly flow to the developing economies of Asia, according to a five-year outlook published Tuesday by the International Energy Agency. […]

The report paints a picture of a world with plenty of oil to meet modestly growing demand. Where the oil is originating and where it is going are changing dramatically, according to the IEA, an energy security and research organization based in Paris that serves 28 oil-importing countries, including the U.S. Read more here.
 

(Reuters)

China has raised concerns about European Union plans to negotiate an ambitious free trade deal with the United States, fearing it is a protectionist move, a senior EU official said on Tuesday.

Chinese officials queried EU foreign policy chief Catherine Ashton about the issue when she visited Beijing at the end of April for talks with Foreign Minister Wang Yi and other Chinese leaders. [...]

China worried about whether the plan was “a pulling of the wagons into a circle to … insulate the transatlantic economy from the rest of the world or is it, as we argue, even greater opening of both economies?” the EU official said, briefing journalists on condition he was not further identified. Read more here.
 

(Jonathan Manthorpe – Vancouver Sun)

There is a growing feeling among analysts that the golden age of “Factory Asia” has reached its zenith and that the caravan of international low-cost production is moving on.

Amid growing evidence that “Asia’s trade pattern will shift in remarkable ways,” The Asian Development Bank last week devoted its annual Governor’s Seminar, held in the Indian capital New Delhi, to ask questions about what is happening and why.

And last week Oxford Analytica, the U.K.-based group producing global analysis and advice for governments, international institutions and multinational companies, said there are three overriding reasons why the attributes that have made Factory Asia such a powerful source of economic growth in the last 30 years is being overtaken by events. Read more here.
 

(Taeho Bark – Business Today)

If you chase two rabbits at once, the old saying goes, both will escape. And yet this is precisely what many governments are required to do: pursue both growth and distributional fairness. The two objectives, though not incompatible, are entirely different from one another, and few policy tools can simultaneously help to achieve both.

This idea matters a lot in trade policy. Much theoretical and empirical research demonstrates that opening trade can spur a country’s GDP growth. But increasing a pie’s size does not guarantee that it will be shared fairly. Read more here.
 

(Carla A. Hills – NYT)

The opening of global markets — starting in 1947 with the first round of trade negotiations among 23 nations and the creation of the General Agreement on Tariffs and Trade (GATT), through the creation of the World Trade Organization in 1995 — caused international trade to explode and standards of living for nations rich and poor to soar.

Economic studies show that the opening of global markets since the end of World War II has added about $9,000 of additional wealth for the average American household. Developing nations have also gained from global trade. On average, poor countries that opened their markets to trade and investment have grown more than three times faster than those that kept their markets closed. No country has prospered by sealing itself off from global economy. Read more here.
 

(AMEinfo.com)

The International Chamber of Commerce (ICC) on behalf of global business finalized recommendations for World Trade Organization (WTO) member countries to salvage parts of on-going Doha trade negotiations that could boost global GDP by $960bn.

Several hundred business leaders and trade experts met for the ICC World Trade Agenda Summit, held on the first day of the ICC WCF 8th World Chambers Congress, the first ever Congress to be held in the Middle East.

The four-day Congress in Doha, Qatar is set to gather 1,000 delegates from chambers of commerce, as well as from multinational and small- and medium-sized companies. Read more here.
 

(STR Trade Report)

The American Chamber of Commerce in China said this week that its 2013 Business Climate Survey found a more cautious but still generally optimistic assessment of business conditions in China. The report said the corporate outlook broadly accords with China’s own revised economic goals in an era of rebalancing: expectations for growth, but at a more tempered pace than seen just a few years ago; and investment expansion, yet at a more moderate rate than in the past. Respondents voiced continued concerns over pressure to transfer technology, inadequate protection of intellectual property rights, the potential for corporate data breaches, difficulties in obtaining business licenses, and inconsistent regulatory interpretations and unclear laws.

Risks
Rising labor costs and are now considered as great a business risk as a Chinese economic slowdown, followed by shortages of qualified employees and managers and increased Chinese protectionism. Just over a third of respondents believe they are disadvantaged by industrial policies that favor state-owned enterprises. 35% said de facto technology transfer as a requirement for market access is a concern, and 37% said this requirement is increasing, compared to 27% in 2012. Nearly three-quarters (72%) of respondents said IPR enforcement is ineffective or totally ineffective, up from 59% in 2012, though 47% said enforcement has improved over the past five years. The percentage of those saying that IPR infringement causes material damage to their Chinese operations rose from 22% to 34%. Over a quarter (26%) of respondents said proprietary data or trade secrets from their China operations have been breached or stolen, and 42% said this risk is increasing.

Revenues
71% of respondents said their revenues in China increased from the previous year, down from 85% in 2011 and 81% in 2012. Over 40% said their operating margins in China are better than the global average for their company, though 33% said they are lower.

Investment
The percentage of respondents ranking China as a top-three destination for global investment fell from 58% to 47% and 11% said China is not a high investment priority at all, up from 7% in 2012. Just over one-fourth (28%) said they anticipate improvement in China’s investment environment, down from 43% a year earlier, while 53% said they think the situation will stay the same, up from 36%. The expectation of slower growth in China or faster growth in other markets was the primary reason cited by those who plan to slow their investment in China, followed by market access barriers or disadvantageous government policies.

Sourcing
71% of respondents said their involvement in China is focused on producing or sourcing goods or services for the Chinese consumer and business markets, up from 61% in 2011 and 66% in 2012. 12% said they are focused on producing or sourcing goods or services for the U.S. market, compared to 10% in 2011 and 9% in 2012.
 

(EDC via CNW)

Pent-up demand is reappearing in key economic indicators following 4 years of sluggish global performance, setting the stage for an acceleration in world growth, according to a Global Export Forecast by Export Development Canada (EDC).

“Shaking off the memories of recent growth crashes, some as spectacular as they get, will be tough,” said Peter Hall, Chief Economist, EDC. “But as the race gets going and the adrenaline kicks in, economies may even surprise themselves with their renewed performance. The acceleration will lift the world economy by 3.6% this year, and 4.2% in 2014. It looks like this time, the race is on.”

“Canadian growth will soon require some fancy gear-changing, and it will be up to trade to shore up the bottom line as the domestic economy slows. It won’t disappoint,” said Mr. Hall. “Exports will leave last year’s modest growth in the dust, rising 8% this year and an additional 5% in 2014, benefiting from the resurgence in our largest trading partner, the U.S.” Read more here.

Related: EDC Dials Back View on U.S. Economy (Globe & Mail)
 

(CTV News)

World stock markets were mostly lower Tuesday as weak economic data, falling commodity prices and big losses on Wall Street shook investors. A deadly bombing in the U.S. also rattled confidence.

The sell-off in markets was triggered by the Chinese government’s report Monday that growth in the world’s second-largest economy slowed to 7.7% in the first quarter from 7.9% in the final quarter of last year. Growth was expected to accelerate slightly to 8%.

The report stoked worries about the strength of China’s economy at a time when U.S. economic data has disappointed and Europe remains embroiled in its government debt crisis. It also pummeled oil and commodity prices. Read more here.
 

(Bloomberg)

The Canadian dollar had its biggest drop in more than a year against its U.S. peer as gold led commodities down with its biggest loss in 33 years after China’s growth slowed more than forecast in the first quarter.

The currency weakened against the majority of its 16 most-traded peers on speculation slowing growth at home and abroad will lead the Bank of Canada to trim its economic growth forecast at a policy meeting April 17. Data released last week showed retail sales in the U.S., Canada’s largest trading partner, unexpectedly contracted in March. Commodities, including crude oil, Canada’s biggest export, fell. Read more here.
 

(Montreal Gazette)

The Conference Board says Canada has been spinning its wheels in the critical area of business innovation despite a decade of trying.

The Ottawa-based think-tank says its latest comparison of 16 advanced economies puts Canada in 13th place on innovation, a key element of a modern, competitive economy.

The report, being released Thursday morning, says Canada ranks second last in two important aspects of the overall innovation record, the amount businesses spend on research and development and in venture capital expenditures. Ironically, the research shows Canada does well in the quality of its scientific research and the creation of new businesses. Read more here.
 

(Reuters)

The global air cargo market is set to extend its slow recovery unless a fresh blow to confidence from the euro zone reverses the trend, the International Air Transport Association (IATA) said on Tuesday.

IATA said global freight demand grew by 2.0% year-on-year in February, after adjusting for calendar effects.

“This is welcome news after two consecutive years of contraction,” IATA chief executive Tony Tyler said in a statement. “It is even better news that this growth is expected to pick up moderately as the year progresses. But improvements cannot be taken for granted. Events in Cyprus have reminded us that the euro zone crisis is far from over.” Read more here.
 

(Journal of Commerce)

Overall confidence levels in all sectors of the shipping industry recovered to their highest level in two years in the three months ended February, according to the latest Shipping Confidence Survey from international accountant and shipping adviser Moore Stephens.

The survey found an improved expectation of freight rate increases over the next 12 months in all shipping sectors and greater likelihood of new investment in the industry.

In the container ship market, there was a 7 percentage point increase, to 34%, in the overall number of survey respondents who expect rates to go up. The levels of expectation that rates will go up were up across all categories of container sector respondents, most notably in the case of charterers (up 12 percentage points to 47%). Read more here.
 

(Mercopress)

Brazilian President Dilma Rousseff will attend this week’s BRICS summit of five emerging powers hosted by South Africa to discuss creation of their own development bank, the Planalto office announced.

Rousseff will join Chinese President Xi Jinping, Indian Prime Minister Manmohan Singh, Russian President Vladimir Putin and South African President Jacob Zuma in Durban on Wednesday.

The talks will focus on how to spur development and reform international financial institutions such as the International Monetary Fund. The leaders will also discuss security issues.

But the top agenda item is likely to be the establishment of a development bank, meant to fund infrastructure and development projects in member states and developing nations, and a joint foreign reserves fund. Read more here.
 

(Conference Board)

The Conference Board Leading Economic Index® (LEI) for China increased 1.3% in February to 257.5 (2004 = 100), following a 1.3% increase in January and a 0.4% increase in December. Five of the six components contributed positively to the index in February.

Says Andrew Polk , resident economist at The Conference Board China Center in Beijing: “The Leading Economic Index for China maintained its pace in February, a sign that the current economic expansion should continue in the near-term. Current economic conditions strengthened considerably compared to previous months. However, the six-month average growth rate of the LEI has weakened. The drivers of growth remain fragile, and recent improvements in consumer expectations are not likely sustainable in the face of rising inflation. Investment activity, which is also underpinning the current growth rebound, is heavily credit dependent and could be affected by changes in monetary policy in the wake of the leadership transition.” Read more here.