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THE ORANGE ECONOMY – WHERE CREATIVITY IS AN ECONOMIC ASSET

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Archives, Global Trade Daily, Imports/Exports, International Trade

THE ORANGE ECONOMY – WHERE CREATIVITY IS AN ECONOMIC ASSET

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Our economic potential is limited only by our collective imaginations – the right hemisphere of our brains applied to both creative and quantitative endeavors.

Orange, the Color of Creativity

You’ve heard of the green economy and the blue economy. Now, researchers are taking a closer look at the so-called “orange economy”. With no set definition, the core of the orange economy encompasses a wide array of cultural and creative goods and services from architectural design and performing arts to film, games, fashion, music and video games.

Creative goods and services include art you can hang on your wall, print newspapers and crafts, but also works that are “experienced” such as gastronomy and live music. Beyond the physical realm, they include gaming apps on your phone, advertising on TV, and streamed movies. The infrastructure that supports our interaction with creative goods and services are also part of the orange economy, such as stadiums, fiber-optic networks and museums.

Capturing the Value of Creative Output

A 2015 analysis by Ernst & Young presented in their report, Cultural times, attempts to quantify the value generated by cultural and creative industries in the orange economy. It suggests the global industry generated $2.25 billion in revenue, supporting 29.5 million jobs in 2013. At the time, the creative economy exceeded the value of the global telecoms services industry and the entire GDP of India – and this was before the digital streaming boom.

Value of Creative Industries
The Asia-Pacific region accounts for more than one-third of global sales and 43 percent of jobs associated with cultural and creative industries. Visual arts and television broadcasts accounted for nearly 40 percent of the value generated by the industry and 35 percent of jobs. Other parts of the industry such as newspapers and book publishing employ more people but generate less revenue.

The report credits cultural and creative output as driving the online economy’s rapid growth. Sales of e-books, music, videos and games generated $66 billion in 2013. Content sales in turn drove sales of digital devices and subscriptions to online media and streaming platforms and the advertising on them. Ernst & Young estimates creative content yielded $22 billion in advertising revenues in 2013 for online media and free streaming websites such as YouTube.

These figures have probably grown exponentially in subsequent years. Consumer appetite for greater bandwidth and faster networks available on smart, portable devices appears insatiable, and the figures do not include billions in online ticket sales for performances, or all the additional revenue and jobs accruing to creative professional service providers such as digital advertising and media agencies.

Beyond the numbers, nurturing talent in the cultural and creative sector is important to economic development and growth. The industry is characterized by relatively fewer barriers to entry and digital opportunities now abound for creators to grow their business by acquiring a global reputation and audience. Cultural and creative industries tend to employ more youth and women and can offer more flexible work environments.

For example, American artists are 3.5 times more likely to be self-employed than U.S. workers overall. On the downside, many of the associated jobs are gigs – or temporary work – and remuneration might rely heavily on acquiring and asserting intellectual property rights. Without sustained work that is well compensated, creative and cultural work may fail to provide a source of reliable and adequate income.

A Culture of Trading

The beauty of trade in creative goods and services is the ability to enjoy tremendous cultural diversity, ingenuity, and have shared experiences as a global community. When K-pop and K-beauty burst on the scene, everyone could dance Gangnam-style or slather snail slime on their face. Beyond the cultural enrichment, policymakers have noticed the boost to the GDP bottom line of exporting cultural and creative offerings.

The UK is known for world-famous video games. One of its most notable exports is Grand Theft Auto 5, the fastest-selling video game of all time, which grossed $1 billion worldwide in its first three days. The UK government launched a $6.2 million Prototype Fund to help video game start-ups and pledged another $6 million to support a Skills Investment Fund for training in this and other creative sectors.

Canada has long offered tax credits to attract film and video production. An Ontario Music Fund provides grants to address investment gaps in its live and recorded music industry.

Latin telenovelas and music attract global audiences. The many World Heritage sites in Latin America built upon ancient Inca, Maya or Aztec civilizations are magnets for tourism exports (when visitors spend money in your country), supporting both local and national economic development while sharing the region’s rich cultural history.

Orange stroke of paint

Modern and traditional African art, sculpture and music hold wide appeal and are featured in global concerts and festivals. Nigeria’s government supports its film industry (“Nollywood”) which has become the country’s second-largest employer, generating export earnings and tax revenues.

Deploying a different model, Dubai in the UAE has created a cottage industry of hosting international cultural events, boasting the region’s largest indoor exhibition space. The UAE also opened the Louvre Abu Dhabi in 2016 to serve as a focal point for contemporary art in the Middle East and invested $136 million in the Museum of the Future, which showcases futuristic inventions but is also positioned as an incubator for global design innovation.

Colombian President Iván Duque even campaigned on supporting growth of creative industries and set a goal of expanding production and exports to grow Colombia’s orange economy from 3.3 percent to 10 percent of Colombia’s GDP, putting it roughly on par with the manufacturing industry. He held an auction during which more than 320 investors bid on $124 million of “orange bonds” issued by Bancóldex backed by a triple-A rating.

Getting Paid for Creativity in the Orange Economy

To enable these industries to thrive, governments must shore up their legal frameworks to protect cultural and creative intellectual property from theft. Goods and services in the creative economy usually hold a distinct intellectual property claim, so that when an author or creator exports it, they retain some form of ownership on which to compensate them for use or enjoyment of the work. A developer in the Ukraine or Colombia, for example, would be entitled to receive a royalty each time their copyright-protected and licensed software is downloaded anywhere in the world.

Simply having appropriate intellectual property laws on the books, however, will not be sufficient to protect many creative works. In a survey by the Inter-American Bank, just 34.8 percent of creative entrepreneurs in Latin America and the Caribbean had made some effort to register their rights to intellectual property or obtain a copyright. Of the total of entrepreneurs, 17.4 percent responded they had not done so because they considered it “very expensive,” and another 16.4 percent said they did not know the procedures for getting the registration.

Although the survey was limited to one region, this is likely a familiar refrain globally, including in the United States where creators are familiar with rights available to pursue but find it too costly to obtain representation and navigate complex intellectual property laws. In some industries, creator organizations such as collective management organizations (CMOs) in the music industry, help overcome such challenges by manage licensing and distribution of royalties and remuneration to its member artists. More could be done by governments to help their creators avail themselves of intellectual property protections.

IP in LA for Creatives

An Infinite Economic Asset

Protecting author and creator rights is critical to fuel industry growth and provide returns to authors and creators, particularly as digital platforms expand. Although such platforms enable them to reach global audiences, creators must adopt new business models and strategies to monetize amidst a sea of free content on internet intermediary platforms. Another challenge is that such platforms remain immune from liability despite hosting entities that traffic in products that violate copyright and other intellectual property rights protecting their creative goods and services.

It should also be mentioned that when it comes to cultural and creative experiences, digital and virtual are not forcing the extinction of an analog experience. Before COVID-19, New York City’s Broadway was achieving record sales. World class museums like the Guggenheim and cultural zones like West Kowloon Cultural District in Hong Kong attracted their share of visitors. The Comic Market in Tokyo still drew global fans of Japanese manga and anime.

my visual

Put On Your Thinking Cap

Creativity is rapidly becoming a condition for competing in the globalized economy. It has become among the top ten skills sought by employers. The application of creativity is not limited to cultural goods and services. Scientific creativity drives the pursuit of new ways to study, experiment and resolve societal problems. Creative thinking is applied to design new products, new production processes and commercial practices.

Ernst & Young analysts point out that the world is young – and that young population is increasingly literate, has more means and a global outlook. If policymakers view creativity as a significant economic asset, and nurture and protect it as such, countries can leverage creative output to support jobs and growth.

And – if we can manage to protect freedom of expression and the ability to trade in cultural and creative works – we can simultaneously promote cross-cultural experiences, preserve traditions and heritage, and celebrate diverse aesthetics, which might just make our world more civilized.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

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DESPITE TRADE TENSIONS FIREWORKS EXPORTS FROM CHINA ARE BOOMING

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Liuyang, China: Birthplace and Epicenter of Fireworks Production

Many historians credit the Chinese in ancient Liuyang with creating the first natural firecracker around 200 B.C. Roasting bamboo caused it to explode due to its hollow air pockets. The noise it generated was said to ward off evil spirits. Some 800 to 1,000 years later, Chinese alchemists mixed saltpeter, charcoal, sulfur and other ingredients to discover an early form of gunpowder. When they stuffed that mixture into bamboo shoots and threw them into a fire, boom – the first “modern” fireworks were born.

Capitalizing on its pedigree of two centuries of fireworks production, Liuyang has focused its economy on becoming the undisputed fireworks capital of the world. Overall, China produces some 90 percent of the world’s fireworks. Around 60 percent of those are made in Liuyang.

Global Fireworks Exports in 2017

Potential Powder Keg: Mr. Ding’s Dynasty

Whether you bought a multipack of screamers, bottle rockets, and roman candles from a roadside stand, or plan to watch a professionally-designed community display this Fourth of July, chances are the fireworks themselves were produced in China. In 2016, the United States imported $307.8 million worth of fireworks. Nearly all, $296.2 million worth, came from China. U.S. consumers purchase about half of the pyrotechnics China exports globally.

That may not be very surprising when you consider the abundant use of pyrotechnics at American events and celebrations. “Thunder Over Louisville” is an annual event that blasts through 60 tons of fireworks in 30 minutes.

What might be concerning, however, is the discovery by a Washington Post investigative team that around 70 percent of all Chinese fireworks entering the United States are produced, warehoused, transported, and ultimately imported under the control of companies owned by just one Chinese businessman, Ding Yan Zhong. The reporters estimate that Mr. Ding’s companies have imported 7,400 containers, 241 million pounds, of fireworks so far this year. Of the 108 containers that arrive on average every day, 72 are controlled by Mr. Ding.

Another Example of China on the Smile Curve?

There is a brighter side for the American fireworks industry. While there’s practically no firework manufacturing left in the United States, jobs in and around the fireworks industry follow a familiar pattern where the lower-skilled work is performed in China and other, higher value-added jobs can be found occupied by Americans. Here are some examples.

Pyrotechnic engineers are trained chemists who deploy their knowledge of how certain compounds react with other inputs to create bigger, brighter, and more exciting pyrotechnics. We love the classic chrysanthemum, peonies, and willow fireworks that send bright stars scattering into arcing trails. But we also await each Fourth of July the new patterns and colors these engineers have dreamed up.

The mean salary for a U.S.-based chemical engineer in 2015 was $103,960. Contrast this job with a firework maker in Liuyang, China, where most fireworks are still made by hand, by women for a mere $80-285 a month depending on skill level. It’s not just low paying; it’s dangerous work. According to a Slate article, Wang Haoshui, chief engineer with China’s State Administration of Workplace Safety, told a Chinese newspaper that only coal mining was considered a more dangerous occupation in China.

Today China produces 90% of the world’s fireworks.

In more desirable parts of the fireworks ecosystem, American show producers spend their days “choreographing” pyrotechnic displays for large scale events in sports arenas (Super Bowl halftime show and the Olympics) and concert venues (Kiss and Mötley Crüe). Winco Fireworks in Prairie Village, Kansas, imports and distributes fireworks but also innovates electrical firing systems. The company just launched the FireFly firing system that allows backyard enthusiasts to sync their music using Bluetooth® technology while detonating their fireworks wirelessly. Enthusiasts turned entrepreneurs are also common in the American fireworks industry. Scott Smith is one such example. He’s an electrical and computer systems engineer from Ganesvoort in upstate New York and founded COBRA, a company that creates software for designing fireworks shows.

Growth is Explosive in China

As with so many other consumer products, demand for fireworks is growing so rapidly in China that Liuyang manufacturers are turning their attention inward. China’s Spring Festival and lunar New Year celebrations offer healthy competition to demand for fireworks at American Fourth of July parties.

Chinese manufacturers also say it’s getting harder to export due to strict U.S. requirements. The U.S. American Tobacco and Firearms agency (ATF) requires “anyone in the business of importing, manufacturing, dealing in, or otherwise receiving display fireworks” to first obtain a Federal explosives license or permit from ATF for the specific activity. Firecrackers sold to the American public can only have 50 milligrams or less of pyrotechnic composition per firecracker.

China’s regulations are more permissive, not simply as they pertain to manufacturing, but also with respect to the power consumer fireworks can pack. Fireworks available for purchase can be several times more potent than fireworks that have been banned in the United States.

US fireworks consumption

Trade Ensures the Continuation of an American Tradition

The first American fireworks display is said to have taken place in Jamestown in 1608. According to historians, John Adams wrote a letter to his wife on July 3, 1776 in which he predicted that the Fourth of July, the day on which the Continental Congress adopted the Declaration of Independence, would be “the most memorable in the history of America… celebrated by succeeding generations as the great anniversary festival.”

He went on to suggest the commemorations “be solemnized with pomp and parade…and illuminations [fireworks]…from one end of this continent to the other, from this time forward forevermore.” Wherever and with whomever you enjoy those colorful bursts in the night sky, celebrate this symbol of American independence and also the economic dynamism we currently enjoy thanks to our role in the global economy.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

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HONEY BEES POLLINATE TRADE OPPORTUNITIES

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Harvesting season in the Central Valley

Stretched across some 500 miles throughout California’s Central Valley, almond hulls are splitting open, signaling the beginning of harvesting season.

The U.S. Department of Agriculture is forecasting that California’s almond growers are set to produce a bumper crop this year of about 2.5 billion pounds, about 70 percent of which will be exported around the world.

It’s an industry that drives about one-quarter of California’s farm exports and generates about $21.5 billion in economic output for the region including growing, processing and manufacturing activities.

A productive crop must be nourished

California is blessed with the perfect climate for almond production, but it must import one of its most important ingredients: pollinators for the almond blooms.

Every February, two out of every three commercial bee hives in the United States are transported to California, their bee residents pressed into service of the almond bloom.

In fact, it’s just the start of an annual food pollinating bee tour. Anywhere from 60 to 75 percent of the bee population kept as livestock crisscross the United States foraging on the blooms of crops that will eventually make their way into our grocery stores and into overseas markets.

Pollinated crop acreage

First stop, almond orchards

For most commercial bees, the pollinating season begins with almonds, California’s largest crop. To provide a sense of scale, Scientific American estimates it takes some two million hives – more than 31 billion honeybees – to pollinate the Central Valley’s 90 million almond trees during their two-week bloom. It’s a symbiotic relationship: the bees gather nectar and pollen to feed their colonies, enabling them to triple their population.

Once almonds bloom in January, hives are moved to other spring-blooming orchards such as cherries and plums in California or apples in the Pacific Northwest. Some head to Texas to pollinate squashes, others to citrus fruit orchards in Florida, and others are dispatched to pollinate cranberries in Wisconsin and cherries in Michigan.

In all, these busy bee travelers pollinate over 90 different crops and then sweeten the deal by shifting into delicious honey production by the end of summer, which they will nourish themselves on over winter while we get to consume the rest. Americans consume a staggering 1.6 pounds of honey per person every year. Even though U.S. beekeepers produced 148 million pounds of honey in 2017 and exported 9.9 million pounds, we imported 447.5 million pounds to keep up with demand from consumers and food producers.

Mobile beehive on trucks
Millions of bees are “exported” state to state to pollinate 90 different American crops.

One in every three bites of food

From cucumbers and citrus fruits to watermelon, kiwis, berries, cherries, apples, melons, peaches, figs, tomatoes, pumpkins and almonds, one-third of the U.S. food supply relies on pollination by the hard-working honey bee.

And, of course, since the United States is a major exporter of agricultural crops, we could say that honey bees help pollinate our trade opportunities. That’s true globally for hundreds of billions worth of crop production and internationally traded food that depends on pollinators.

$15 billion in value for 90 crops

Healthy bees, healthy trade in food

When bees get sick, the health of the U.S. agriculture economy and agricultural exports is imperiled.

Although honey bees are not the only pollinators supporting U.S. agriculture, they are the most important, adding more than $15 billion in value to U.S. agricultural crops each year according to the U.S. Pollinator Health Task Force.

Colony collapse disorder over the last few years drew widespread attention, but the decline in North American honey bees is a long-term trend. In 1947, there were about six million colonies but today we are down to about 2.5 million.

Sharp declines were seen following the introduction in 1987 of an external parasitic mite, aptly named Varroa destructor, that feeds on the blood of honey bees. Loss rates over the winter have been averaging around 31 percent since 2006, far exceeding the 15-17 percent that commercial bee keepers say is economically sustainable.

The rise of monoculture agriculture with increased reliance on pesticides and reduced use of cover crops is thought to add stress on bee health. The bees are struggling to maintain a varied and high-quality diet – they need protein from pollen and carbohydrates from the nectar of flowering plants. Without adequate nutrition, they are also more vulnerable to viruses.

1 in 3 bites

Experts have organized into research consortia, working groups and task forces to try to determine what can be done. The factors negatively impacting bee health are multiple, complex, and interacting, requiring a similarly comprehensive approach to combat them, including restoration of habitats, dissemination of best practices in hive management, and investments in research to better understand how to prevent colony loss.

We are all invested in their success, and when you see honey bees buzzing around your garden this summer, think about the humble but essential role their busywork plays in U.S. food production and agricultural exports.

This article is adapted from “Honey Bee Health is Serious Business” by Andrea Durkin for Progressive Economy.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

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“Free” Trade and Modern Slavery

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Modern Slavery

It’s more common than you might think. Seeking a means to provide for themselves and their families, millions of people routinely put their fate in the hands of brokers who promise factory, fishing, farming, hospitality or healthcare jobs overseas. They leave their country, greeted in a strange land not by honest employers but by traffickers. They are now bonded laborers who are told they must work to pay off their debt under threat of violence. Sometimes that “work” is commercial sex. Against their will, by force, fraud or coercion, they have become slaves.

The International Labor Organization estimates that 20.9 million men, women and children are victims of forced labor at any point in time. Although a person does not need to be physically transported to be subject to slavery, 29 percent of victims end up in forced labor after moving across international borders.

$150 Billion in Illicit Profits – Every Year

In small numbers, we should be concerned. But this is no small problem. According to the Alliance to End Slavery and Human Trafficking, human trafficking is one of the largest criminal enterprises in the world, generating an estimated $150 billion in illicit profits annually.

In the United States, January has been designated National Slavery and Human Trafficking Prevention Month. To recognize the 20th anniversary of the landmark Trafficking Victims Protection Act of 2000 (TVPA), the White House held a Summit on Human Trafficking on January 31.

The summit culminated in the signing of an executive order to improve prevention, increase prosecutions, and strengthen protections for victims in the United States, recognizing that “millions of individuals are trafficked around the world each year — including into…the United States.”

To combat it requires a comprehensive government effort involving labor and criminal enforcement, public services to aid victims, counter-trafficking policies and programming in overseas assistance, intelligence and diplomatic coordination – and trade policy.

Human Trafficking Across Borders Stat

Trade Policy and Trafficking

As far back as the Tariff Act of 1930, the United States prohibits the importation of foreign goods made by means of slave labor. But more recently, Congress has debated whether the United States should grant trading privileges to governments that do not respect human rights or fail to combat trafficking. That question featured in the annual debate over whether to grant “most favored nation” trading status to China before it entered the WTO. It arose again when some Members of Congress questioned whether Malaysia should be included in the Trans-Pacific Partnership negotiations.

In January 2018, Senators Menendez and Portman introduced the Anti-Trafficking Act to suspend countries from U.S. trade preference programs for one year for failing to address trafficking.

The U.S. State Department spearheads an annual Trafficking in Persons (TIP) Report to assess the extent to which our and other governments are making efforts to meet minimum standards to eliminate human trafficking. On that basis, countries are placed into one of three tiers or on a watch list. “Tier 1” countries are deemed compliant with minimum standards under TVPA for making “serious and sustained efforts” to eliminate human trafficking.

On the other end of the spectrum, governments on “Tier 3” do not fully meet the minimum standards and are not making significant efforts to do so. A country in Tier 3 may be restricted from receiving certain U.S. foreign aid, though the president may issue a partial or full waiver, particularly if withholding such assistance would cause adverse effects to vulnerable populations. The concept of withholding benefits to Tier 3 countries has also been applied to trade.

A “Principal” Trade Negotiating Objective

The Bipartisan Congressional Trade Priorities and Accountability Act of 2015 as amended (the legislation that gives the executive branch its trade negotiating mandate and authority) added a principal trade negotiating objective on human rights. The expedited voting procedures afforded to trade deals under the Act can be conditioned on progress toward achieving this objective.

Principal negotiating objective smaller font

More powerful a lever, the Act explicitly prohibits applying so-called “fast track” voting on trade agreements with countries ranked on Tier 3 of the TIP Report.

Tier 3 exception smaller font

However, the Act was amended to allow the President to submit a waiver to Congress. The waiver is not meant to rest its case on new, untested commitments. Rather, it should describe “concrete steps” that country has taken to implement recommendations in the TIP report and should include supporting documentation. To date, no country has been denied a trade deal on this basis.

Free Trade Begins with Free

Trafficking in humans is an abomination and the worst form of illicit trade. Some policymakers believe that trading with the United States is a powerful incentive to government action and is therefore an effective tool to deploy as a punishment or carrot to improve human rights. Others argue that engagement in trade opportunities should not be withheld, lest it hold back economic progress in places and for people who need it the most.

Human rights as customary international law came into being and “grew up” alongside the international trade regime after WWII. The primacy of human rights over trade liberalization obligations is consistent with trade law itself, which explicitly provides exceptions where necessary to protect human life.

Wherever the debate comes out on how to use trade agreements and policies to promote human rights, we can all agree that free trade begins with free. The human right to be free will always come prior to free trade.

Dive Deeper: Trafficking in Persons Report 2019

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fourteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.
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Rule of Law is the Bedrock of Trade Agreements

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Trade agreements promote rule of law

One could argue that the fundamental goal of any trade agreement is to promote and undergird government adherence to rule of law, which in turn enables private economic activity to thrive. When coupled with commitments to market access, individuals and companies are free to do business anywhere in the world.

Trade agreements such as the newly congressionally approved U.S.-Mexico-Canada Agreement contain provisions designed to directly combat corruption and promote good regulatory practices. They also contain myriad requirements that support best administrative practices including publishing changes to regulations, allowing for public comment, and adhering to transparent processes for government tenders, for example.

What is rule of law where trade is concerned?

No country gets it perfectly right. Supporting rule of law requires vigilance, upkeep and continual improvement.

Impartial review and scrutiny can be a powerful incentive for self-reflection. In 2013, the U.S. Chamber of Commerce launched an effort to measure the qualities that companies look for “to make good investment and operating decisions..in any given market.”

Its resulting Global Rule of Law and Business Dashboard identified five broad factors to assess rule of law: transparency, predictability, stability, accountability and due process. Are the laws and regulations applied to businesses operating in the market readily accessible, easily understood, and applied in a logical and consistent manner? Do governing institutions operate consistently across administrations or are decisions arbitrary and easily reversed? Can investors be confident that the law will be upheld and applied without discrimination? Does the judicial system allow for disputes to be resolved through fair, transparent, and pre-determined processes?

That’s so “meta”

The Chamber didn’t recreate the analytical wheel – it developed a “meta measure” of rule of law for business by combining underlying indicators from several established indices.

The list includes the World Economic Forum’s annual Global Competitiveness Report, the World Justice Project’s Rule of Law Index, Transparency International’s Global Corruption Barometer, the Heritage Foundation’s Index of Economic Freedom, and several World Bank survey and index products including the Doing Business reports that have been long used by governments as roadmaps for reforms. By pulling relevant pieces of these indices, the Chamber computes a composite score to rank 90 markets.

Sunshine is the best disinfectant

Rating and publishing information about the operating conditions in the marketplace can be one of the best ways to shine light on corruption and poor governance, sometimes prompting a healthy competition among governments to show improvements that will attract more businesses.

Increasing all forms of private investment, including foreign direct investment, is critical to sustaining economic growth for most countries. Over the last few years, however, multinational companies have been reducing their foreign direct investments. In 2018, FDI flows dropped 19 percent from to $1.47 trillion to $1.2 trillion.

Companies consider many criteria when evaluating where to do business. Respect for rule of law is often a decisive factor over whether companies can or will participate in an overseas market. Without sufficient rule of the law, the risks are too great and the return on investment jeopardized. Having a high degree of confidence in rule of law is clearly correlated with where FDI flows. Other than the large emerging markets of China, Brazil, Russia, Mexico and India, the top recipients of net inflows of FDI between 2000 and 2017 are the same countries that ranked highly on the Global Rule of Law and Business Dashboard.

Room for improvement

Unsurprisingly, Singapore, Sweden, New Zealand, Netherlands, Australia, Germany, United Kingdom, the United States, Japan and Canada comprise the economies held the top ten slots on the Rule of Law and Business Dashboard released in July 2019. (China fell from 19th in 2017 to 26th in 2019.)

Bottom 10 smaller framed

And, unsurprisingly, countries beset by political instability and civil strife remain stuck at the bottom of the index. Here in the Americas neighborhood, Guatemala and Honduras, Nicaragua, El Salvador and Mexico are all perilously close to bottom of the list, something we should be concerned with and engage these countries on as important trading partners.

Importantly, the Chamber report points out that, “income is not necessarily a predetermining factor in terms of the strength of the rule of law and business environment.” Senegal and Kenya, with a per capita GDP of just around $3,458 and $3,292 respectively, score similarly to South Africa with its per capita income that is almost four times higher.

In producing the study, the Chamber seeks to induce positive changes across the board over the long run. Although the Global Rule of Law and Business Dashboard hasn’t been conducted long enough with a full complement of countries to tout a concrete impact just yet, the Chamber reports that the aggregate score does seem to be moving in right direction, increasing from 51.63 percent in 2015 to 56.77 percent in 2019. Even the United States pulled its score up more than four percentage points from 2017.

The best kind of competition

Benchmarking is a valuable approach, not merely to expose flaws but as a way for governments to identify and adopt reforms yielding proven results for other countries. Governments can even market an improved ranking to potential investors.

While we often measure the outcomes of trade agreements by the volume of trade, the biggest victory may be the least appreciated: the subtle but important improvements to the way our trading partners respect the rule of law as applied to their own citizenry – and to ours.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fourteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

 

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Grains of Global Salt Trade

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Salt is readily available almost everywhere on Earth – why do we still trade so much of it?

Salt wars, salt taxes and salt revolts – how and why we traded salt for millennia

Over thousands of years of humanity, civilizations invested enormous symbolism, prevented famine, waged wars, built and lost empires over a commodity that we now blithely toss by the millions of tons all over our icy streets in wintertime – salt.

Salt has such an important and varied role in health, religious life, death, wars and trade that a 450-page New York Times bestseller – called Salt, A World History by Mark Kurlansky – was written about it.

Sodium chloride (known commonly as salt) is versatile. Considered precious and therefore a source of great power throughout ancient history, in the modern era, refined salt is common and used extensively throughout the chemical industry. Gourmet varieties like fleur de sel season our food, but most of the salt mined is low-grade and deployed to de-ice our roadways. Given modern extraction techniques and geological understanding, we know salt is plentiful, so we no longer fight wars over it, but we do still trade it.

For sustenance and power

Ancient civilizations founded major cities and built empires near sources of salt, conquering and monopolizing saltworks as needed to maintain power. The ancient Mayans controlled salt resources at Salinas de los Nueve Cerros, an area in Guatemala where natural salt springs flowed into a river gully, enabling those who controlled it to trade salt and salted goods such as cured hides with downstream consumers.

Egyptians were among the earliest civilizations to preserve food on a large scale as insurance against crop failure in dry years. They evaporated seawater from the Nile Delta, but also likely procured salt through African trade with Libya and Ethiopia, as well as through Mediterranean trade. Trade spread knowledge about the use of salt for preservation (and taste) but also, according to Kurlansky, gave rise to trade in salted foods such as cured meats and fish, which “would shape economies for the next four millennia.”

From tuna, sardines, mackerel to sturgeon, salted fish was traded extensively as both food and medicine. Fishing industries flourished around port cities, especially based on trade in Atlantic cod, a fatless fish that was easily dried and salt-cured for transport. To support cod trade, the fearsome Vikings established “salt routes” that delivered delicate bay salt from Normandy back to the Baltic.

Sfax port and salt beds

For wealth and control of trade

As the saying goes, “All roads lead to Rome.” One of the most famous was the Via Salaria or Salt Road that connected Rome to the saltworks at Ostia on the coast. Centuries later, the Italian city-states of Venice and Genoa staked their trading dominance on salt. Although Venice produced salt for themselves, the Venetian merchants realized they could make more money by controlling trade in salt.

Venice and Genoa contested control of as many saltworks throughout the Mediterranean as possible, jointly monopolizing the amount of salt available on the market and therefore the price at which salt was sold. Although the Genoese had a more sophisticated maritime industry and larger ships to hold bulk salt, the government in Venice ensured a landed price for importers by taxing its citizens. The subsidies to importers produced profits from salt trade with which to purchase Indian spices that they turned around and sold at lower prices than their competitors. The government plowed salt tax revenues back into loans to merchants, enabling Venice to dominate trade in spices, grain and textiles.

To wage war

Access to adequate salts stocks could affect the outcome of wars and is a recurring theme from early warfare through the U.S. Civil War. The livestock used to feed soldiers require salt, cavalry and workhorses hauling supplies and artillery require salt, and salt was needed to disinfect wounds. Napolean lost hundreds of thousands of troops in retreat from Russia due to starvation and lack of salt to treat wounds. The Union blocked Confederate ports in the south from receiving British salt and destroyed saltworks to weaken Confederate efforts. The Romans taxed their salt advantage to raise money to fight the Phoenicians and even paid soldiers in salt – the origins of the word “salary”.

To raise government revenue

Many governments have taxed this essential commodity, but their policies turned out to be not worth their salt. Protests against salt taxes were the proximate cause of many consequential revolts throughout history.

For centuries, French monarchs forced their subjects to buy salt from royal depots. Grievances against this practice helped spark a revolution against Louis XVI. The Moscow uprising of 1648 is known as the Moscow Salt Riot, instigated by the government’s replacement of different taxes with a universal salt tax to replenish the state treasury.

But perhaps the most well-known rebellion against oppression was the 1930 Salt March led by Mohandas Gandhi to protest British rule in India. For centuries, India had mined its ample natural salt fields, deposits and lakes. In particular, Orissa, located on India’s east coast, is home to a long and deep tract of natural salt beds, which even the poorest of residents could collect using simple techniques. Salt was traded for cotton, food and other necessities.

While it would have been convenient and cheap for the British government to avail itself of Orissa salt for gunpowder to fight its many wars with the French, doing so would have been detrimental to salt from Liverpool that could not compete on price or quality. The British took over salt production in Orissa, banning private production or sale, and subsequently imposed internal customs checkpoints to prevent smuggling. Duties were placed on salt from Orissa that were matched by duties on imports, generating government revenue and raising the price of salt for all Indians. Eventually, the government abandoned the Orissa saltworks causing a salt shortage and famine.

This breaking point became a foil for Ghandi’s “salt campaign,” a 240-mile march to the beach at Dandi where he scraped up a handful of salt in defiance of the British law that mandated the government monopoly. Soon thereafter, ordinary Indians resumed openly gathering and selling salt, fueling a movement that opened the door to future negotiations toward independence.

Today, India is a globally competitive producer with nearly 12,000 different salt manufacturers, mostly small scale, but still heavily regulated by the central government’s Salt Commissioner.

Salt trade through camel caravans in Mali

For security

Salt production was undertaken in China as early as 1,000 BC during the Xia dynasty and the Chinese can be credited with employing shaft wells, salt solution mining and percussion drilling techniques hundreds of years before anyone else.

China also has a longer legacy of state-control over production and trade of salt. Prices were kept artificially high. Salt revenues helped fund the Great Wall to defend against the Huns. Still today, the China National Salt Industry Corporation employs over 48,000 people charged with overseeing the national industry and China’s annual production of some 68.5 million tons.

For highways and factories

The many wars fought over production and trade of salt seem ironic and tragic in hindsight, considering that nearly every country in the world has salt deposits, not to mention that the salt content in the oceans is nearly unlimited.

Of course, today we enjoy the benefits of refrigeration, flash-freezing processes, and efficient transportation which all eliminate the need to preserve food by salt. Widespread use of modern drilling techniques and vacuum evaporators mean we can extract all the salt the world needs.

Why trade salt today?

Uses of salt in 2018 in US

The U.S. profile of salt consumption largely mirrors the way salt is used in most parts of the world. In 2018, 43 percent of salt consumed in United States went to de-ice our highways.

Another 39 percent was consumed by the chemical industry. Sodium chloride is a key raw material in the production of chlorine and caustic soda, which are used to manufacture glass, paper, rubber, PVC for construction, the dyes in textiles, as well as in water treatment and pharmaceuticals.

Just six percent went to agricultural and food processing. We can only eat so much of the stuff. Despite producing 42 million tons of salt worth $2.3 billion in 2018, we imported another 17 million tons, mostly from Chile, Canada and Mexico, mostly for our roadways and factories.

Who wins today’s salt wars?

These days, salt is traded peacefully – the wars are simply for market share. Leading salt exporters include The Netherlands, Germany, India, Chile and the United States. Given salt’s lead role in industrial manufacturing, it should be no surprise that the leading consumers of traded salt are Japan, China, Germany and the United States.

But while the chemical industry relies on sodium chloride to make so many things in our households, the majority of salt we pull from the Earth and trade around the world now lands unceremoniously beneath our feet and our car tires in winter.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fourteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.
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Holiday Gift-Giving in the Trade Spirit

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FOR THE ROMANTIC

Tea Sampler:

Whether you favor green, black, oolong or white tea, all originate from the plant Camellia sinensis. It’s the soil, atmosphere and method of processing that confer different tastes, colors and scents. Tea traded globally is grown on large plantations in more than 30 countries. The four biggest producers are China, India, Kenya and Sri Lanka. This sampler of dissolvable “tea drops” includes citrus ginger, blueberry acai, rose earl grey, sweet peppermint, and matcha green tea made from teas sourced around the world but hand assembled by in Los Angeles, California.

FOR THE GOURMAND

Artisinal Chocolate Bars:

Cacao grows close to the equator in places like Brazil, Ecuador, Peru and Madagascar. Askinosie, a family-owned chocolatier in Springfield, Missouri offers dark chocolate bars sourced from women farmers in Tanzania. Harper Macaw of Washington, DC blends Brazilian cacao and Brazilian coffee beans roasted in Annapolis, Maryland to produce its milk chocolate Coffee Bar. Madecasse was founded by former American Peace Corps volunteers. It makes 92 percent pure dark bars in Madagascar from local cacao. Marou is truly small artisanal chocolate maker that works with small farmers to help Vietnam become the newest producer of cacao in the world.

Cashmere Sweater:

Your sweater begins as the coat of a cashmere goat. Named for their origin in the Himalayan region of Kashmir, cashmere-producing breeds also thrive in Australia and throughout China. Among the most famous are the Zalaa Ginst white goat of Mongolia and the Tibetan Plateau goat. Some $1.4 billion in cashmere garments are traded globally each year. Top manufacturers hail from Scotland and Italy, but these days you can find “cashmere-blends” on discount racks in U.S. fast fashion stores.

Homemade Hot Sauce:

If you’re going to try your hand at it, you’ll need two key ingredients – chili peppers and spices. Chili peppers grow in the United States but Capsicum annuum was originally domesticated in Mesoamerica, a region that extends from Central Mexico to Central America. After Spanish colonists returned with it to Europe, hot peppers traveled the globe swiftly on Portuguese trade routes to spice-loving India through the Portuguese-controlled port of Goa, and from there, over the Himalayas to Sichuan, China.

FOR THE PRAGMATIST

A Pair of Necessities:

Some people like receiving the essentials – from underwear to appliances. Many of our undergarments come to the United States from Sri Lanka, an island nation off the southern coast of India. Home to some 22 million people, Sri Lanka produces for major global brands like Victoria’s Secret, Gap, Nike, Tommy Hilfiger, H&M and more. The (still) popular Instant Pot is manufactured in China but was invented by Robert Wang, a former software engineer from Canada who applied his knowledge of microprocessors and sensors to the science of not burning dinner.

FOR THE TRENDY

A Small-Batch, Globe-Trotting Bourbon:

Why not support American whiskey, which has been hard hit in overseas markets by retaliatory tariffs. Jefferson’s Ocean is the brainchild of Jefferson’s, a Kentucky artisan distillery. Barrels of bourbon hitch a boat ride on a shark-tagging research vessel, crossing the equator four times, visiting over 30 ports on five continents. The temperature fluctuations, salt water air exposure, and constant motion of the ship during the journey renders a thick, dark bourbon with caramel flavors and a briny scent.

FOR THE RE-USER

Silicone Lunch Boxes and Nylon Bags:

We’ve written before about the silicon in sand which can be made into the tiny individual semiconductor chips that get embedded into our globally trade devices. Silicone, on the other hand, is a rubberlike plastic increasingly used in food storage, transportation and reheating, due to its low toxicity and high heat resistance. Food52 makes a colorful container with a silicone sleeve that is, according to the manufacturer, “just right for layering miso salmon and spinach over black rice.” No bag lunch for the modern hipster.

Baggu is a re-usable shopping bag made from lightweight ripstop nylon that comes in a variety of bold colors and prints. The synthetic polymer known as nylon was first produced in United States, born of the need to find alternatives to silk and hemp for parachutes in World War II. Today, China is the largest exporter of nylon.

FOR THE “VSCO GIRL”

If you’re not familiar with the term, you probably don’t have a teenager in your home. VSCO is a popular photo editing app that many social sharers use before posting on Instagram or other platforms. The term “VSCO girl” has been adopted to describe some of the latest teen fashion trends and must-haves for the middle and high school hallways.

Here are some of the essentials you might give the VSCO girl in your life, beginning with a Fjullraven Swedish backpack to put it all in. Add to it some Glossier Lip Balms if you care about transparency in the global supply chain of your makeup, a Hydroflask made of pro-grade 18/8 stainless steel (are there tariffs on that stainless steel?), some Pura Vida jewelry from Costa Rica, and an Instax camera from Japanese maker Fujifilm. Where do VSCO girls hang out when they aren’t in school? On TikTok, of course. There are some 422.4 million videos on Chinese app TikTok tagged #vscogirl.

Whatever you buy for the holidays this year, chances are, there’s a global trade aspect to your gift-gifting. As we like to say at TradeVistas, “see the trade in everything.” Happy holidays.

Note: Neither the author nor TradeVistas’ sponsor endorses the above-mentioned products. We merely seek to illustrate the global trade dimension in popular gifts this season.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fourteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

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The Maker Movement can Flourish Thanks to Trade

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The Maker Movement

Life is pretty cushy. We long ago stopped having to make everything we need: forging tools, handcrafting shoes from hides and weaving textiles for clothing. Manufacturers eventually specialized where they had comparative advantage and produced at scale. Specialization led to more trade in goods and services. Today, anything we need can be obtained at the push of a computer button from almost anywhere in the world.

While much attention is being paid to the potential for new technologies to displace manufacturing workers, there’s an interesting phenomenon afoot. Bits and bytes are bringing us back to our “maker” roots by making information and technologies more accessible to everyone. The smallest inventors and producers can integrate into globally distributed production chains and sell into global markets. Basically, trade is providing us the luxury of producing again at a small scale, and it’s the art of inventing nimbly and producing small that just might help us stay globally competitive.

Re-Making our Workforce

“Makerspaces,” TechShops and FabLabs are popping up in cities all over the country and they are playing an increasingly vital role in education, workforce development, entrepreneurship and even revolutionizing advanced manufacturing.

Memberships give hobbyists, tinkerers, students and entrepreneurs alike access to tools, machines and materials to gain experience with 3D printing, CAD/CAM, electronics, robotics, plastics and composites, fabrication, welding, coding and programming, woodworking and more. Students and young workers can be exposed to industrial careers in a relatively low-cost, low-risk environment, picking up skills in weeks — not months and years. They can create portfolios to demonstrate competency in the skills employers require.

By partnering with local colleges and employers, training in Makerspaces can culminate in recognized and portable credentials that prove mastery of a specific skill or set of equipment, enabling companies to develop talent pipelines with less direct investment. Meanwhile, students are not just gaining experience working with materials and machines. They are also putting math and measurement into practice, reading blueprints, and using design software — the knowledge skills associated with modern manufacturing and foundational competencies for a wide variety of jobs that lie in between traditional “blue collar” and executive levels.

TradeVistas- Maker movement graphic

Small Batch Production

“Making” can create new pathways to working at established manufacturing companies, but it is also spawning a resurgence of custom fabricators who are positioned for small-batch or on-demand manufacturing. The current trend of “niche consumerism” is responding to demand for tailored products in small lots, even by the big brands.

Makers can iterate quickly in response to consumer feedback or engage in rapid prototyping to optimize product design. Makers can offer these services to larger firms or they can leverage the resources of Makerspaces to keep costs down and retain control during product development, iteration and initial production of their own invention. The difficulty of communicating well with manufacturers or visiting facilities in China is a common refrain for small entrepreneurs.

Reverse Engineering

Makers and Makerspaces are attracting the attention of major corporations. GE and National Instruments were among the first to emulate Makerspaces to support open innovation on their corporate campuses. Ford Motor Company worked with a company called TechShop to build a world-class Makerspace for Detroit, becoming the facility’s anchor tenant. Affording their engineers the opportunity to cross-pollinate with other inventors and have a freer hand in direct and more rapid prototyping, Ford says that within one year, the company doubled the number of patents the company produced.

Large companies recognize that good ideas can come from anywhere, from hobbyists to amateur scientists and roboticists. Some Makerspaces cater more to small designers and inventors, but others are more like modern-day Edison workshops hosting sophisticated “experiments” employing biotechnology, nanotechnology and additive manufacturing. As such, they have become ecosystems of innovation where individuals, small businesses and large corporations can come together to incubate and accelerate ideas in a decentralized and agile network — emulating the same set of activities and interactions that were once only housed inside the corporation.

Manufacturing Renaissance?

Putting compact versions of industrial tools in the hands of millions more people means that inventors can get a “minimum viable product” out in the world faster and at much lower cost. Small and growing manufacturers can take smaller bets on the market with lower volume commitments or put a wider variety of products out for testing consumer preferences.

Specialty manufacturers that can re-tool quickly are filling an increasingly important role offering “manufacturing-as-a-service.” The Maker Movement encourages innovation through co-creation and crowdsourced designs, rapid prototyping and experimentation with new production processes. Maker facilities enable micro-factories that can service orders from anywhere in the world. Some notable inventions in Makerspaces have even transformed commerce itself. For example, millions of small businesses now use Square to take payments.

Join the Movement

Makers aren’t likely to replace mass production anytime soon, but they are an important source for training the next generation of inventors and manufacturing workers. Makerspaces are poised to drive real economic benefits for cities that embrace and support them. For example, the Brooklyn Navy Yard brings together makers, artisans, and manufacturers. The more than 10,000 people working within the complex generate some $390 million in economic output, supporting an estimated $2 billion in indirect earnings and an additional 15,500 jobs in 2011. According to the Pratt Center for Community Development, it’s a model producing similar results from across the country from Chicago to Minden, Nevada.

The famed Defense Advanced Research Projects Agency (DARPA) has supported a TechShop in Pittsburgh and provides membership for thousands of veterans. With funding from the Department of Labor, the AFL-CIO and Carnegie Mellon University partnered with TechShop Pittsburgh to create apprenticeship programs for workers and to encourage startups to manufacture locally. As Brooking’s Mark Muro has written, the Maker Movement is “a deeply American source of decentralized creativity for rebuilding America’s thinning manufacturing ecosystems…hacking the new industrial revolution one town at a time.”

#Thankstrade

Makers are able to access the materials and tools they need because of trade. Take the 3D printer, for example. The global market for 3D printers, plastics and related services have exploded in recent years. And perhaps one could even be so bold as to say that it’s the expansion of global trade that affords us the opportunity to rediscover and reinvent the art of “making” itself, which could in turn profoundly impact what we make and what we trade.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fourteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

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Peeling Away Trade Protections for Bananas

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Simple in appearance, pleasantly sweet, nutritious, and nearly universal in appeal, that Cavendish bunch of bananas on your counter comes off as pretty unassuming. In reality, it has been through jungle wars and trade wars and now sits on the precipice of extinction. More than half of the bananas traded globally are the Cavendish variety. But with two diseases threatening the world’s largest Cavendish plantations, growing to love more varieties could help save trade in bananas.

Still an Important Cash Crop

Grown in more than 150 countries, bananas are the eighth most important food crop in the world – fourth most important in developing countries. Bananas are among the most traded fruit in the world, generating revenues of more than $8 billion a year for the top banana exporters including Ecuador, the Philippines, Costa Rica, Colombia and Guatemala. However, most are produced for local or national consumption.

For example, the Food and Agriculture Organization estimates that between 70 and 80 percent of bananas in Africa are produced by smallholder farmers. Around 114 million tons are produced globally beyond what isn’t too small to be counted, yet only 19 million tons were shipped globally. That said, for the top five exporters, bananas are a major contributor to the total value of their agricultural exports. India and China are among the biggest producers but their output mainly serves the large domestic markets.

global bananas trade

Peeling Away Trade Protections

The Banana Wars, centered on the European Union’s (EU) banana trade regime, spanned 20 years as the longest running series of disputes in the multilateral trading system to date (although the Boeing-Airbus dispute may be on track to take that title). As one of the most significant episodes in trade law, the Banana Wars are deserving of more attention, but here are some abridged highlights.

Europe’s banana regime began as an umbrella for complex arrangements at the individual EU Member State level that were designed to offer exclusive or preferential access to former colonies in Africa, Caribbean and the Pacific (ACP), and at the same time shield EU producers from competition.

Under the EU’s original regime, ACP countries received a zero-tariff rate while imports from other countries were taxed at 20 percent. However, each Member State was allowed to “derogate” and maintain special protective provisions for imports from their overseas departments. For example, France set aside two-thirds of its market for Guadeloupe and Martinique and the remaining third for the ACP Franc Zone states of Cameroon and Cote d’Ivoire. The Spanish market was reserved for shipments from the Canary Islands. Greece banned imports to protect its own production in Crete. Only Germany opened to free trade.

The Single European Act of 1986 mandated an integrated EU market by January 1993, which required that Member States consolidate their programs into a common regime for bananas. As devised, this version still enabled members to discriminate among imports by source, offering better terms to their overseas departments and to imports from ACP countries. Colombia, Costa Rica, Guatemala, Nicaragua and Venezuela (supported by the United States) challenged the regime as inconsistent with the EU’s obligations under the GATT.

The EU’s ability to offer tariff preferences was upheld because it had a waiver in the GATT for its general tariff preference program; but the GATT Panel found the EU’s discrimination through tariff quotas to be inconsistent with its obligations. However, prior to the WTO, a GATT member could simply veto the outcome of a panel decision, enabling the EU effectively to ignore the GATT Panel ruling.
EU banana imports

Second Banana

The EU revised its banana regime in 1993 to include new special distribution licenses under a general quota. Licenses were divvied up among primary importers and importers performing secondary activities such as customs clearance, warehousing and storage; licenses were dependent on historical performance, subject to country allocations, market share and other criteria. After yet another challenge by the five Latin American countries, a GATT Panel found in 1994 that the EU’s licensing system was excessively restrictive and not covered by its waiver.

After 1995, with the WTO’s enforceable dispute settlement system in place and additional obligations to avoid discrimination in trade in services, the EU recognized it would face more challenges to its regime. The large multinational producers involved in shipping, warehousing, ripening, marketing and distribution had an even stronger case to make. The EU negotiated with all of the disgruntled Latin American producers but Guatemala to head off the legal challenge. Having offered additional or expanded quotas, they temporarily pleased some countries but further worsened the discriminatory effect for those countries not a part of the negotiation.

A third complaint against the EU’s banana regime was reviewed in the WTO in 1996, this time with the United States as the lead plaintiff in response to complaints from Chiquita and the Hawaiian Banana Association. A WTO decision in 1997 again concluded that, although the EU’s discriminatory tariffs were covered under its historical waiver, its tariff quota allocations and convoluted import licensing administration violated its WTO obligations. The EU’s next version of its banana regime did little to remedy the discriminatory elements, which led to the imposition of tariffs by the United States and Ecuador in response to the EU’s failure to comply with the WTO ruling. By 2001, the EU made another attempt to transition its system, but not until 2006 would the EU decide to phase in a tariff-only system, dispensing with quotas.

Banana Splits

At the end of 2009, after negotiations with non-ACP producers, the EU agreed to reduce the tariff rate it applies to all WTO members. Tariffs would come down from 176 euros per ton to 114 euros per ton by January 2017 (stipulating it could revert to higher rates if exporting countries exceed a “trigger” amount of imports). It wouldn’t be until 2012, that the EU and 10 Latin American countries finalized signed an agreement in the WTO to codify the revised EU banana tariff schedule (“The Geneva Banana Agreement”), officially closing the longstanding legal disputes.

As a prologue, the EU signed trade agreements with Andean and Central American countries in 2013 and Ecuador in 2017. Ecuador has seen a large bump in global export volume as its agreement with the EU is implemented. By next year, the tariff on bananas from Ecuador to the EU will go down to 75 euros per ton with no quota on the amount eligible for this rate. As the EU continues to edge toward “freer” trade in bananas, the ACP producers will face considerable adjustment.

2009 Geneva Banana Agreement

Going Bananas

Having survived the banana trade wars, the popular Cavendish banana faces a new challenge, one that could actually wipe them out.

“Panama disease TR4” has ravaged thousands of acres of Cavendish plantations throughout Southeast Asia and Australia and is spreading to Africa and the Middle East. It can lie dormant in soil for decades and has proven resistant to fungicides and fumigants. It is only a matter of time before TR4 takes hold in Latin America, which supplies nearly the entire U.S. market. Banana plantations in the Caribbean are threatened by another disease called Black Sigatoka, which has been reducing banana yields by 40 percent every year in affected areas.

Before Cavendish was top banana, a banana called the Gros Michel (Big Mike) dominated the banana trade in the early 1900s until the fungus TR1 took it to the brink of extinction in the mid-1950s. At that time, the Cavendish variety from China was discovered to be resistant to TR1 so it replaced Mike. But bananas don’t have seeds. They breed asexually so they cannot recombine their genes to ward off threats. In other words, the Cavendish is ripe for attack because it cannot evolve – every generation is a clone of the previous.

Try Hanging with a New Bunch

If scientists don’t make a breakthrough, TR4 and TR1 could spell the end for the beloved Cavendish. With over 1,000 different varieties of bananas growing around the world, why not get to know some others that might grow more popular through trade – here are a few to get you started.

For your next dessert, try using Niño, Manzano (“apple bananas”) that have a hint of apple and strawberry flavor, or Goldfinger, a newer variety from Honduras. Intriguingly, there’s also Blue Java, named for its blue skin, which has a creamy, ice cream-like texture and purportedly offers a subtle vanilla flavor.

Cooking bananas include the Macho plantain and other fun-sounding varieties like the Burro which has squared sides and a lemon flavor when ripe, and the Rhino Horn from Africa, which can grow up to two feet long. If consumers demand it, perhaps global trade in bananas will finally branch out.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fourteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

 

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Pomegranates Are Symbolic Even for Trade

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613 Seeds

It’s the Jewish New Year, a time for introspection and atonement and of course every Jewish holiday has its food customs. Celebrants dip apples in honey to symbolize hopes for a sweet year ahead. Pomegranates also figure in celebrations at this time of year. Its many seeds are associated with the 613 commandments in the Torah. Before eating the pomegranate seeds, Jews traditionally say, “May we be as full of mitzvot (commandments) as the pomegranate is full of seeds.”

The pomegranate is one of the seven species of Israel listed in the Torah, along with grapes, figs and dates. They’ve been cultivated throughout the Middle East for thousands of years and remain a staple in the cuisine. Outside the United States, consumers can enjoy dozens of varieties, from those with sweeter pink seeds to yellow-green Golden Globes. The only kind I’ve ever seen in my grocery store are the ruby red Wonderful variety, which make up 90 to 95 percent of the U.S. market.

Ancient and Modern Purveyor of Good Fortune

Pomegranates are drought tolerant so they can grow in tropical to warm climates, but they do best in regions with cool winters and hot, dry summers. They thrive throughout Latin America, southern Europe, Asia, Africa and Fresno, California. Due to this heartiness, there’s almost always a season for pomegranates somewhere in the world and – thanks to trade – we can enjoy them nearly all year-round. Recently, the U.S. Department of Agriculture approved imports of Peruvian-grown pomegranates, which U.S. retailers say won’t compete directly with California production because they’ll be harvested and shipped as California’s season ends.

Known to be a good source of antioxidants and vitamin C, pomegranates are more popular than ever, finding their way into juices, fruit strips and other processed foods. Higher demand has been especially great for exporters from developing countries. Pomegranate exports are even playing a role in moving farmers in Afghanistan from opium poppy or coca farms to growing legal as well as profitable crops.

Where efforts to shift into other crops have failed, the pomegranate holds promise. Afghan varietals are prized for being especially delicious, creating demand for Afghan farmers to supply pomegranates to buyers around the world. Last year, Afghan farmers exported nearly 23,000 tons of pomegranates, up 35 percent over the previous year. Non-profit organizations have provided startup seeds and planted hundreds of thousands of pomegranate saplings in Afghan fields. If successful, Afghan producers could also move into finished products like fruit bars. More than a symbol, pomegranates are a tangible vehicle for renewal in Afghanistan.

Global Seed Trade

Sowing Trade Seeds

Although pomegranates no longer seem “exotic” to us, Americans are increasingly open to trying new varieties of fruits and vegetables in pursuit of innovative flavors, in response to health trends, and out of affinity for local growers who often produce heirloom and other varieties we can’t find in the grocery store. To enjoy a variety of foods – and importantly, to sustain basic crop production – growers must have access to a variety of high-quality seeds.

Founded in 1883, the American Seed Trade Association (ASTA) represents over 700 companies involved in seed production, plant breeding and related industries in North America. According to ASTA, a seed can cross up to six borders between the breeder to the farmer who plants it in the field. The United States exported $1.8 billion in seeds in 2017, $610 million of which went to Canada and Mexico.

The global seed market was an estimated $66.9 billion in 2018 and expected to reach $98.1 billion by 2024. According to the International Seed Federation, the Eastern European countries of Czech Republic, Slovakia, Hungary, and Poland are the largest exporters of seeds for field crops after France and the United States.
Food supply and seed trade

Good Genes

Despite a robust seed trade, the Food and Agriculture Organization worries about the steady loss of biodiversity for food and agriculture. Through a network of more than 1,750 gene banks, the Global Crop Diversity Trust supports a global seed conversation system to ensure a diversity of genetic resources from the ancient, traditional and heirloom varieties to the raw genetic material needed to breed nutrition-packed, high yield, weather- and pest-resistant modern crops.

Seeds can be made available from the gene banks to help farmers recover from natural disasters. After Hurricane Maria devasted 80 percent of Puerto Rico’s crop value, farmers turned to the Tropical Agriculture Research Station run by the U.S. Department of Agriculture for seeds and tree grafts to replenish their farms.

One of the largest seed collections resides in the Svalbard Global Seed Vault, nestled inside a mountain on an island halfway between mainland Norway and the North Pole. It houses over 983,500 seeds with room to conserve 4.5 million varieties.
Svalbard
Seed conservation is about more than saving for a rainy day. Food production around the world depends on the availability and international trade in seeds. According to the Global Crop Diversity Trust, many countries strongly depend on crops whose genetic diversity originates from foreign regions, both in their food supply and in their production systems.

So while we should all be thankful that gene banks preserve our food heritage, it’s the free movement of seeds in trade that helps protect today’s food production and supply. Now, if we can only get the stores to carry those Golden Globe pomegranates.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fourteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.