Posted on June, 26, 2023 at 08:27 am
1. US and UK sign ‘Atlantic Declaration’ rather than free-trade deal
Trade is part of a broad new deal between the US and UK that will seek to bolster the countries’ cooperation on a number of issues.
The Atlantic Declaration includes plans to strengthen US-UK supply chains, boost mutual industrial investment and develop advanced technologies like AI, quantum, and 5G and 6G. It also includes a commitment in principle for a “data bridge” to remove bureaucracy around transfers of data between UK and US organizations.
The agreement will lead to further discussions on how UK-produced critical minerals required for electric vehicles could count towards tax credits for clean vehicles available under the US Inflation Reduction Act. Moreover, the deal includes an accompanying Action Plan that sets biannual meetings and outlines other steps to advance cooperation.
US President Joe Biden and British Prime Minister Rishi Sunak described the deal as a “first of its kind” agreement, because of the broad range of trade, economic, technological and commercial details included. But it still falls short of the free-trade deal that the UK had been hoping for.
The US is the UK’s largest single trading partner, accounting for 16.3% of UK trade last year, according to the UK’s Office for National Statistics. The UK is the seventh biggest trade partner of the US, making up 2.7% of its total, according to US government data.
The UK has been pursuing a range of free-trade deals since leaving the EU in 2020. It has signed three new trade agreements since then, and is in negotiations with countries including India, Canada and Mexico, as well as with the six Gulf Co-operation Council countries.
2. Supply chain early-warning system included in Indo-Pacific deal
An early-warning system on potential supply chain disruptions will be set up as part of a deal between the 14 members of the US-led Indo-Pacific Economic Framework (IPEF).
A “Crisis Response Network” will issue the early warnings and allow member countries to ask for support in the event of supply problems. The countries will establish a council to coordinate regular supply chain activities.
“I would have loved to have had that Crisis Response Network during COVID,” US Commerce Secretary Gina Raimondo said. “It absolutely would have helped us secure American jobs and keep supply chains moving.”
A new labour rights advisory board will also be put in place as part of the deal, to improve labour standards across supply chains. It will have government, employees and employer representatives.
IPEF launched in May 2022 and now includes Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam. The group makes up 40% of world GDP and 28% of global goods and services trade, according to the US government.
3. News in brief: International trade stories from around the world
The Black Sea Grain Initiative is under threat, with Russian officials saying the deal to allow Ukrainian seaborne grain exports cannot be extended in its current form. “We are open to all reasonable proposals and to any dialogue but not to the detriment of our country’s interests,” Valentina Matviyenko, speaker of Russia’s upper house of parliament, told the country’s Interfax news agency. The agreement runs to 17 July.
A possible new emissions tax for the shipping industry has “growing support from countries, companies and trade bodies”, the Financial Times reports. Shipping transports 90% of global goods trade, but the industry’s dependence on fossil fuels means it is also a significant source of greenhouse gases. A carbon levy would inevitably impact costs for shipping firms and their customers, the FT adds.
Sustainability will become an even more critical factor in determining levels of foreign direct investment when new sustainability measures are added to International Financial Reporting Standards at the end of June. As companies are forced to disclose more details on their sustainability governance and risk management, this will “redefine the notion of competitiveness and access to global financial markets along the whole investment value chain”, according to fDi Intelligence.
China’s exports dropped by 7.5% on the year in May amid faltering global demand – far outstripping a forecast fall of 0.4%. The country’s imports also dipped by 4.5%, a slower contraction than the expected 8% decline. Both drops indicate bumps in the road on China’s post-COVID economic recovery. Nonetheless, China’s economy grew faster than expected in the first quarter thanks to robust domestic services consumption.
Brazil’s trade surplus hit a record $11.4 billion in May. Exports were up 11.6%, with strong growth in shipments of key commodities – sugar up 91.8%, soybeans up 23%, crude oil up 21.4%. At the same time, Brazil’s imports dropped by 12.1% to $21.7 billion.
Namibia has imposed a ban on exports of unprocessed lithium and other critical minerals. The southern African country has large deposits of these materials, demand for which is surging as they are critical for renewable energy storage and electric vehicle batteries.
The UK is being urged to join an international deal on goods trade instead of seeking delays to post-Brexit tariffs that threaten to batter its car industry. Senior EU officials say the UK should sign up to an existing agreement involving 20 nations across Europe, the Middle East and Africa, the FT reports. Our trade roundup from last month had more on how post-Brexit trading arrangements could hit carmakers.
All Kenyan exports to the EU will be duty-free and quota-free thanks to a new trade deal. The EU already accounts for over a fifth of Kenya’s exports, making it the country’s largest foreign market, the FT reports. Kenya made commitments on environmental protection, climate and labour rights as part of the deal. Such demands have held up EU trade talks with the likes of Indonesia and Malaysia.
The UAE and Vietnam have begun talks on a Comprehensive Economic Partnership Agreement that could boost trade in areas related to the green economy and food security. Vietnam is the UAE’s top trade partner among ASEAN countries.
The value of world trade will rise by over 50% to reach $32.6 trillion by 2030, bank Standard Chartered says in a new report. Growth in trade corridors in Asia, Africa and the Middle East will outpace the global average, it adds.
President of the European Commission Ursula von der Leyen announced €10 billion of investments in Latin America and the Caribbean during a trip to Brazil. Von der Leyen also discussed ending deforestation by 2030 with Brazilian President Lula da Silva as EU lawmakers continue to advance bans on goods linked to deforestation.
4. More on trade from Agenda
The Fourth Industrial Revolution presents opportunities and challenges for foreign direct investment (FDI) as it transforms how companies operate. But attracting FDI remains key to helping transfer knowledge and technologies to enable economic development in developing countries. How can countries remain attractive for FDI?
Rewiring supply chains and reducing international trading dependencies to fit geopolitical preferences could slow the pace of climate action, writes John Letzing, the World Economic Forum’s Digital Editor, Strategic Intelligence. That points to possible downsides for policies like the G7’s move to “de-risk” its supply chains away from China, which we covered in last month’s trade roundup.
The “Middle Corridor” between China and Europe saw record growth in goods shipments in 2022, with the volume of cargo transportation increasing by two and a half times to 1.5 million tons. World Economic Forum Managing Director Mirek Dušek explores the route’s rise in popularity and how it can realize its full trade potential.
Source: Hellenics Shipping News