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Pencils: Still Teaching Us Lessons About Trade

pencils

Pencils: Still Teaching Us Lessons About Trade

Pining for Simpler Times

Pencils remind us of simpler times, when writing was an adventure and erasing life’s mistakes was easy.

In the classic 1958 essay I, Pencil, Leonard Read opened a window for readers into the surprisingly complex global supply chain of something everyone holds in their hand, the pencil. Read helps us realize that countless individuals are involved in logging, mining, processing, transporting, and manufacturing the California cedar, Sri Lankan graphite, Mississippi clay, and foreign and domestic copper, zinc, wax, and coatings combined to produce an elegantly simple pencil.

To Read, a pencil is a miracle. No single individual could make one and no “master mind” directs its production. Pencils are made nonetheless because of the “invisible hand” of free markets. In the decades since Read’s essay, commentators have observed that pencil making is not entirely the result of free-market activity. Governments, too, support pencil production by managing forests, educating workers, and building ports and roads.

The question of where and how pencils are made has resurfaced in the current debate over American trade policy. In a recent campaign video by Senator Elizabeth Warren, she criticizes “giant ‘American’ companies” and their U.S. and foreign shareholders for “hollowing out” American communities. Warren offers as a proof point that “the maker of the famous no. 2 pencil” now largely imports pencils made in China and Mexico.

With pencils in the spotlight, we revisit what can they teach us about the complexity and nuances of modern American trade.

Is Trade Erasing U.S. Manufacturing?

American pencil production has plummeted over the last 25 years. According to the U.S. International Trade Commission (USITC), the number of U.S. pencil manufacturers fell from 11 in 1993 to four in 2016.

Dixon Ticonderoga — maker of the iconic green-banded yellow pencil — shuttered plants in Ohio and Missouri in the early 2000s, shedding hundreds of jobs. With the end of production by Sanford L.P. in 2014, U.S. production and capacity plunged further — by more than half. During this period, the domestic share of America’s $557 million pencil market declined markedly, while imports from China, Brazil, Mexico, and elsewhere more than quadrupled, growing from 6.7 million gross in 1993 to 28.8 million gross in 2016. (A gross is 144 pencils.)

Trade Vistas- Number of US pencil manufacturers

What’s at the Core?

There has been a significant “hollowing out” of American pencil manufacturing. But is the pencil industry representative of U.S. manufacturing and trade generally? The data suggest it’s not.

America has lost five million manufacturing jobs since the mid-1980s. During this period, however, U.S. manufacturing output has doubled. America is making more stuff with fewer workers largely because U.S. factories are more efficient. Studies show that the loss of American manufacturing jobs is due primarily to improved technology, not trade. Economists at Ball State estimate that, overall, 87 percent of U.S. manufacturing job losses between 2000 and 2010 were due to automation, while 13 percent resulted from trade. (Automation was by far the predominant cause of job loss for 15 of the 18 manufacturing sectors studied.)

There are, however, certain largely lower-tech U.S. manufacturing sectors where trade has had a much greater impact. Foremost among these are furniture and apparel (Senator Warren’s video also highlights foreign production of Levi’s jeans) where economists estimate that trade accounted for some 40 percent of job losses. Pencil manufacturing is an example of a “mature” industry where there’s little room for manufacturing innovation but space for makers of high quality products for niche markets. Indeed, for American specialty manufacturers like New Jersey-based General Pencil, the process and equipment used to make pencils has hardly changed from over a century ago.

Can Protection Sharpen U.S. Production?

Policymakers often try to revive trade-impacted low-tech sectors through trade protection. The pencil industry’s experience highlights the difficulties of this approach.

In 1994, the United States imposed antidumping duties on pencils from China, after finding that sales of Chinese imports at “less than fair value” were injuring U.S. manufacturers. Imports of pencils from China fell sharply in 1995. By 1998, however, the volume of “subject imports” from China (six million gross) actually exceeded the volume during the original investigation.

The antidumping duty order was continued in 2000, 2005, 2011, and 2016 after the USITC found that revoking the order would cause further injury to U.S. pencil makers. However, despite duties as high as 114.90 percent imposed on “unfair” imports, subject imports continued to grow to 9.2 million gross in 2004 and 10.5 million gross in 2009, and were 8.5 million gross in 2016.

The pencil industry isn’t the only manufacturing sector where efforts at protection have seemingly failed. Over 97 percent of clothing and footwear sold in America is made overseas, despite the fact that America has, for decades, imposed tariffs on these imports that often exceed 30 percent.

Back to School – With Trade, the Consumer Wins

Is “Big Pencil” to blame for the loss in U.S. manufacturing jobs? Or, are big retailers who seek lower-cost pencils from overseas? While Dixon Ticonderoga isn’t a large company, it’s now owned by a larger Italian firm and imports most of its pencils. And, according to the USITC, there has been increasing consolidation among U.S. wholesale purchasers of pencils. Office Depot and Office Max have merged and big box stores like Target and Walmart are buying larger volumes and seeking low prices.

These retailers are responding to demand for lower-cost imported pencils — in no small part from America’s parents.

Although there has been a resurgence in demand for high-quality, specialty pencils like the Palomino Blackwing and coloring pencils for stressed-out Boomers, most “commodity” pencils are sold during the “back to school” season. In recent years, schools are increasingly requiring parents to buy student supplies like pencils.

School Supplies Costs to US Parents

In 2018, American parents paid an estimated $941 for school supplies and fees for each middle school child. These costs can be a significant burden, especially for low-income parents. Imported pencils — and binders and backpacks — can help moderate these costs. Studies show that middle-income, and especially lower-income Americans, gain significant buying power, stretching their dollars further, from imports.

Pop Quiz

The pencil has a storied history. According to pencils.com, Ancient Roman scribes introduced the use of thin metal rods as a stylus. In the 1800s, the best graphite was sourced from China. Although the first mass-produced pencils were unpainted to show off high-quality wood casings, pencil makers later painted them yellow, a regal color in China, to demonstrate the quality of the graphite within.

The simple pencil continues to both transcribe and itself illustrate complex stories, including the growth and effects of global trade. It can also evoke fond memories like the time mine saved me on a pop history quiz in the 5th grade:

Question 3: Name three Colonial forts.

My answer: Fort Pitt, Fort William Henry, and . . . uh . . .oh yeah! Fort (Dixon) Ticonderoga!

______________________________________________________________

Ed Gerwin

Ed Gerwin is a lawyer, trade consultant, and President of Trade Guru LLC.

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

China

Amid US-China Trade Battle, Here is how America can Remain the World’s Strongest Economy

The Communist Party of China has laid plans for a century of unlimited Chinese power and, with it, the end of the American era. However, we still can — and must — bet big on the future of American economic power. The best antidote to China’s ambitions is to ensure America’s continued economic and technological preeminence.

Far too many strategists, investors, and policymakers accept China’s economic preeminence as an inevitable outcome, given the country’s enormous population and potential for growth.

As the business community looks toward a “partial trade deal” to unwind tariffs and reduce trade hostility between the world’s two largest economies, we must understand that non-negotiable problems in U.S.-China relations will accelerate if China closes the gap with the United States in terms of economic and technological power. With the right strategic mindset and a focus on domestic productivity, America can not only win the economic and technological contest but also turn the tide in the U.S.-China competition for global power.

China’s bid for global power is built on its economic ascendency, which is based on engagement with the United States and our allies. Chinese companies are capturing global markets and climbing the ranks of the Fortune Global 500 by taking advantage of stolen or coerced foreign intellectual property and state-orchestrated market distortions. The Communist Party is converting China’s technological power into a dystopian surveillance state and a military that is focusing its capabilities on the United States and our partners.

Chairman Xi Jinping calls regularly for Chinese forces to “prepare to fight and win wars,” while converting civilian industrial technology into military power through “civil-military fusion.” Meanwhile, China’s current account surplus is employed for global influence, buying “strategic partners” with intercontinental projects like the “Belt and Road Initiative” and state-backed acquisitions of foreign firms.

U.S.-China competition is likely to be the hardest geopolitical contest in generations — but it is a contest that the United States can win if we focus on the right objectives.

The People’s Republic of China is a challenge to America’s values and concept of world order. U.S.-China competition is likely to be the hardest geopolitical contest in generations — but it is a contest that the United States can win if we focus on the right objectives. So, where do we go from here?

Focus on GDP

The first step must be a focus on accelerating U.S. productivity growth. U.S. productivity growth need only increase from 1.3 percent a year to 2.5 percent for U.S. GDP to remain ahead of China’s for the entirety of the 2020s, the decade in which many expect China’s economy to surpass America’s.

By 2030, economic leadership will be easier to maintain as China’s demographic problems set in. Such a productivity increase is realistic, given that productivity growth from 1995 to 2008 was higher than 2.5 percent.

Protect America’s edge

The second step is to preserve our edge in advanced and emerging technologies. America must remain ahead of Communist China, not only in hard sciences, but also in the actual production of advanced goods and services.

If America competes against China only through soybean and oil production, we will fail to counter China in advanced industries such as robotics, semiconductors, aerospace and biopharmaceuticals. China is gaining in these and other technologies and industries and could eventually have a decisive advantage over the United States.

As Alexander Hamilton warned 200 years ago, America can’t be great if it is a “hewer of wood and drawer of water.” We must out-invent and outproduce China in advanced technology and industrial goods.

Maintaining U.S. advantage will require collaboration between government and corporations towards national goals in science, engineering and industry. This approach has long served our nation in times of international struggle and led to lasting commercial and national security breakthroughs.

New and Big

In order to attain these goals, Washington must think new and big. New in the sense of a bipartisan consensus that productivity growth and technological competitiveness must be national priorities.

Big in the sense of big and bold proposals. Here are three: First, implement a robust research, development and investment tax credit that will stimulate innovation and investment on American soil. Second, establish a series of well-funded “moonshot” goals to ensure American leadership in emerging industries such as advanced robotics and quantum computing. Third, develop a national productivity strategy that will take the best ideas of government and industry and focus on building the next $10 trillion in annual U.S. GDP by 2030.

Half a century ago, under the leadership of President John F. Kennedy, America faced a Communist superpower that believed that it would “bury” the United States, much as Chinese Communist leaders today believe that the 21st century belongs to China. Kennedy reminded us then that America would “bear any burden” and “meet any hardship” to prevail in that consequential time.

In the end, it was the power of the American economy, the power of American technology, and the power of American industry that brought victory over our ambitious foe. We must unleash these forces once again, wrestle them into national service, and build on toward the greater good — an American era that can and must prevail.

__________________________________________________________________

Dr. Jonathan D.T. Ward is the author of “China’s Vision of Victory” and founder of Atlas Organization, a strategy consultancy on US-China global competition. Follow him on Twitter @jonathandtward

Dr. Robert D. Atkinson is the president of the Information Technology and Innovation Foundation and the author of “Big is Beautiful: Debunking the Mythology of Small Business.” Follow him on Twitter @robatkinsonITIF..

This article originally appeared on FoxBusiness.com. Republished with permission. 

grapefruit

Grapefruit Market in Asia – Japan Halved Grapefruit Imports Over the Last Decade

IndexBox has just published a new report: ‘Asia – Grapefruits (Inc. Pomelos) – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

The revenue of the grapefruit market in Asia amounted to $6.4B in 2018, picking up by 6.1% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price). In general, grapefruit consumption continues to indicate strong growth. The pace of growth appeared the most rapid in 2015 when the market value increased by 18% y-o-y. Over the period under review, the grapefruit market reached its maximum level in 2018 and is expected to retain its growth in the near future.

Consumption By Country in Asia

China (4.8M tonnes) remains the largest grapefruit consuming country in Asia, comprising approx. 72% of total consumption. Moreover, grapefruit consumption in China exceeded the figures recorded by the region’s second-largest consumer, Viet Nam (611K tonnes), eightfold. India (377K tonnes) ranked third in terms of total consumption with a 5.6% share.

In China, grapefruit consumption increased at an average annual rate of +7.5% over the period from 2007-2018. In the other countries, the average annual rates were as follows: Viet Nam (+5.5% per year) and India (+7.1% per year).

In value terms, China ($4.5B) led the market, alone. The second position in the ranking was occupied by Viet Nam ($707M). It was followed by Thailand.

The countries with the highest levels of grapefruit per capita consumption in 2018 were Viet Nam (6,331 kg per 1000 persons), China (3,340 kg per 1000 persons) and Thailand (3,267 kg per 1000 persons).

From 2007 to 2018, the most notable rate of growth in terms of grapefruit per capita consumption, amongst the main consuming countries, was attained by China, while the other leaders experienced more modest paces of growth.

Market Forecast 2019-2025 in Asia

Driven by increasing demand for grapefruit in Asia, the market is expected to continue an upward consumption trend over the next seven years. Market performance is forecast to decelerate, expanding with an anticipated CAGR of +3.7% for the seven-year period from 2018 to 2025, which is projected to bring the market volume to 8.7M tonnes by the end of 2025.

Production in Asia

The grapefruit production stood at 7M tonnes in 2018, growing by 6.4% against the previous year. The total output indicated a remarkable increase from 2007 to 2018: its volume increased at an average annual rate of +5.6% over the last eleven-year period. The trend pattern, however, indicated some noticeable fluctuations being recorded throughout the analyzed period. Based on 2018 figures, grapefruit production increased by +81.9% against 2007 indices. The pace of growth appeared the most rapid in 2015 when production volume increased by 12% y-o-y. Over the period under review, grapefruit production reached its maximum volume in 2018 and is expected to retain its growth in the immediate term. The general positive trend in terms of grapefruit output was largely conditioned by a resilient increase of the harvested area and temperate growth in yield figures.

In value terms, grapefruit production stood at $6.9B in 2018 estimated in export prices. Overall, grapefruit production continues to indicate a strong increase. The growth pace was the most rapid in 2015 when production volume increased by 18% against the previous year. The level of grapefruit production peaked in 2018 and is expected to retain its growth in the immediate term.

Production By Country in Asia

The country with the largest volume of grapefruit production was China (5M tonnes), accounting for 71% of total production. Moreover, grapefruit production in China exceeded the figures recorded by the region’s second-largest producer, Viet Nam (598K tonnes), eightfold. The third position in this ranking was occupied by India (377K tonnes), with a 5.4% share.

From 2007 to 2018, the average annual rate of growth in terms of volume in China amounted to +7.5%. In the other countries, the average annual rates were as follows: Viet Nam (+5.3% per year) and India (+7.1% per year).

Harvested Area in Asia

In 2018, the total area harvested in terms of grapefruits production in Asia stood at 220K ha, going up by 3.7% against the previous year. The harvested area increased at an average annual rate of +2.8% from 2007 to 2018; however, the trend pattern indicated some noticeable fluctuations being recorded in certain years. The most prominent rate of growth was recorded in 2015 with an increase of 18% year-to-year. The level of grapefruit harvested area peaked at 226K ha in 2016; however, from 2017 to 2018, harvested area stood at a somewhat lower figure.

Yield in Asia

The average grapefruit yield amounted to 32 tonne per ha in 2018, jumping by 2.6% against the previous year. The yield figure increased at an average annual rate of +2.7% over the period from 2007 to 2018; the trend pattern remained consistent, with somewhat noticeable fluctuations in certain years. The most prominent rate of growth was recorded in 2017 when yield increased by 9.6% against the previous year. The level of grapefruit yield peaked in 2018 and is expected to retain its growth in the immediate term.

Exports in Asia

In 2018, the amount of grapefruits exported in Asia amounted to 525K tonnes, jumping by 21% against the previous year. The total export volume increased at an average annual rate of +5.6% over the period from 2007 to 2018; however, the trend pattern indicated some noticeable fluctuations being recorded in certain years. The most prominent rate of growth was recorded in 2008 when exports increased by 23% year-to-year. Over the period under review, grapefruit exports reached their maximum in 2018 and are likely to see steady growth in the near future.

In value terms, grapefruit exports totaled $449M (IndexBox estimates) in 2018. The total exports indicated a strong expansion from 2007 to 2018: its value increased at an average annual rate of +5.6% over the last eleven-year period. The trend pattern, however, indicated some noticeable fluctuations being recorded throughout the analyzed period. Based on 2018 figures, grapefruit exports increased by +15.7% against 2014 indices. The pace of growth was the most pronounced in 2008 with an increase of 21% y-o-y. Over the period under review, grapefruit exports reached their maximum in 2018 and are likely to continue its growth in the immediate term.

Exports by Country

In 2018, China (211K tonnes) and Turkey (182K tonnes) were the major exporters of grapefruits in Asia, together recording near 75% of total exports. It was distantly followed by Israel (88K tonnes), achieving a 17% share of total exports. China, Hong Kong SAR (16K tonnes) and Cyprus (8.3K tonnes) followed a long way behind the leaders.

From 2007 to 2018, the most notable rate of growth in terms of exports, amongst the main exporting countries, was attained by China, Hong Kong SAR, while the other leaders experienced more modest paces of growth.

In value terms, the largest grapefruit markets in Asia were China ($200M), Turkey ($119M) and Israel ($87M), with a combined 91% share of total exports. These countries were followed by China, Hong Kong SAR and Cyprus, which together accounted for a further 4%.

Among the main exporting countries, China, Hong Kong SAR recorded the highest rates of growth with regard to exports, over the last eleven years, while the other leaders experienced more modest paces of growth.

Export Prices by Country

The grapefruit export price in Asia stood at $855 per tonne in 2018, waning by -3.7% against the previous year. Over the last eleven years, it increased at an average annual rate of +1.2%. The most prominent rate of growth was recorded in 2017 when the export price increased by 10% y-o-y. In that year, the export prices for grapefruits attained their peak level of $888 per tonne, and then declined slightly in the following year.

Prices varied noticeably by the country of origin; the country with the highest price was Israel ($995 per tonne), while Cyprus ($585 per tonne) was amongst the lowest.

From 2007 to 2018, the most notable rate of growth in terms of prices was attained by China, Hong Kong SAR, while the other leaders experienced more modest paces of growth.

Imports in Asia

In 2018, the amount of grapefruits imported in Asia totaled 272K tonnes, surging by 24% against the previous year. In general, grapefruit imports, however, continue to indicate a relatively flat trend pattern. The most prominent rate of growth was recorded in 2018 when imports increased by 24% y-o-y. Over the period under review, grapefruit imports reached their maximum at 280K tonnes in 2010; however, from 2011 to 2018, imports failed to regain their momentum.

In value terms, grapefruit imports amounted to $232M (IndexBox estimates) in 2018. Over the period under review, grapefruit imports, however, continue to indicate a relatively flat trend pattern. The pace of growth was the most pronounced in 2014 when imports increased by 15% y-o-y. The level of imports peaked at $236M in 2007; however, from 2008 to 2018, imports remained at a lower figure.

Imports by Country

In 2018, Japan (85K tonnes), distantly followed by China (45K tonnes), Saudi Arabia (34K tonnes), South Korea (23K tonnes), China, Hong Kong SAR (23K tonnes) and Viet Nam (15K tonnes) were the largest importers of grapefruits, together comprising 83% of total imports. Iraq (11K tonnes) followed a long way behind the leaders.

From 2007 to 2018, the most notable rate of growth in terms of imports, amongst the main importing countries, was attained by Viet Nam (+115.4% per year), while the other leaders experienced more modest paces of growth.

In value terms, Japan ($64M), China ($60M) and South Korea ($32M) were the countries with the highest levels of imports in 2018, with a combined 67% share of total imports. China, Hong Kong SAR, Saudi Arabia, Viet Nam and Iraq lagged somewhat behind, together accounting for a further 21%.

Viet Nam (+99.6% per year) experienced the highest rates of growth with regard to imports, in terms of the main importing countries over the last eleven-year period, while the other leaders experienced more modest paces of growth.

Import Prices by Country

The grapefruit import price in Asia stood at $853 per tonne in 2018, dropping by -8.6% against the previous year. Overall, the grapefruit import price, however, continues to indicate a relatively flat trend pattern. The pace of growth was the most pronounced in 2017 when the import price increased by 12% against the previous year. In that year, the import prices for grapefruits reached their peak level of $933 per tonne, and then declined slightly in the following year.

Prices varied noticeably by the country of destination; the country with the highest price was South Korea ($1,420 per tonne), while Iraq ($323 per tonne) was amongst the lowest.

From 2007 to 2018, the most notable rate of growth in terms of prices was attained by China, while the other leaders experienced more modest paces of growth.

Source: IndexBox AI Platform

China

What Every Business Should Know About Selling in China

Not only is China the most populous country on earth (1.3 billion people), it also has the second-biggest economy in the world by Nominal GDP (14.242 trillion dollars).

As the country has pursued ever more progressive policies to trade (and despite the current trade war between China and the United States) more and more opportunities to sell in the country have arisen to businesses across sectors. If you see China as a potential growth market, here are some of the most important considerations when selling in China.

Seek advice

When looking to enter a foreign market, it is always advisable to seek sage advice, and even look to local businesses who you can partner with. Although you may not wish to go down the partnership route, it is definitely advisable to seek the counsel of businesses who are already operating within the sphere, or groups such as the Global Innovation Forum who often provide free advice regarding penetrating new markets. 

This is a smart strategy because selling in China will be totally unlike selling domestically, or in European markets, for example. Any insights that you can garner will be potentially critical to the success of your sales strategy and approach in China, because as is abundantly clear, you will be operating within a totally different market, both literally and culturally.

“The cultural considerations when accessing new markets should never be overlooked. From the way that you brand and market your products to the way that you negotiate with local businesses and retailers, everything you do will be influenced by different rules: rules to which you are unfamiliar. Get the help you need to pass through this difficult phase,” advises Grant Tarrant, a business writer at Writinity.com and Lastminutewriting.com.

Understand Chinese governmental practices and rules

Although the Chinese Government has grown increasingly receptive to foreign businesses working and partnering in China, rules will still be a little conservative in comparison to the Western approach. Make sure you totally familiarize yourself with what you are expected to adhere too, especially when visiting the country and seeking to operate a sales operation from within China.

For example, you will need to understand the levels of bureaucracy that exist to set up a business entity that operates within China. For example, you may need to set up as a Wholly Foreign-Owned Enterprise (WFOE) to operate, and this can be a costly and timely exercise that may delay you implementing your sales strategy. Forming a business plan which pays close attention to all the requirements (and timeframes) of the Chinese state is essential.

Understand your customer

This piece of advice holds for whoever you are selling too, but obviously your Chinese customer base will be different from your US customer base and will have different expectations. For example, haggling is a standard cultural procedure, and Chinese customers demand to know a product impeccably before they buy, so ensure that your eCommerce operation includes high numbers of images and product reviews: this will be expected.

“If you study Chinese eCommerce sites such as Taobao you will see that it facilitates the Chinese custom of haggling down prices. In the West we are totally unfamiliar with this practice as we are satisfied that the price is the price, Be prepared to change your approach accordingly,” says Rachel Walliston, a marketer at Draftbeyond.com and Researchpapersuk.com

Provide impeccable customer support

Chinese customers have come to expect an extremely high level of customer support from their retailers and will demand this from any new business operating within their sphere. Knowing this, make sure you ramp up support efforts, and that, of course, raises questions regarding how you will do this in a new language and culture. Seeking advice from established entities is again the recommended route, and establishing support centers in the country is also best practice. 

Understand the marketing and communication channels

If you go in with a Facebook-based marketing strategy, be prepared to be disappointed. In China the social media platforms are different, for example, WeChat is one of China’s most popular platforms, but barely exists outside of the country. It has been dubbed a ‘super-app’ because it can be used for a multitude of actions, so utilizing such platforms is an absolute must if you wish to successfully penetrate the Chinese market. 

_________________________________________________________________

Ashley Halsey is a writer, editor and international business expert who can be found at both Luckyassignments.com and Gumessays.com. She has been involved in many projects in Asia, and enjoys traveling, reading and cultural exchanges.

BREAKING BAD TRADE: FENTANYL FROM CHINA

The Real Poison Pill in U.S.-China Trade

Following a historic dinner between President Trump and President Xi last December in Argentina on the margins of the G20 Summit, many of us awaited news on tariffs. We were surprised when, as part of a trade announcement, President Trump hailed a commitment from China to step up its regulatory oversight of fentanyl, the opioid that the Centers for Disease Control says has caused a “third wave” of drug-related overdose deaths in the United States.

It seems the seedy underbelly of e-commerce involves a steady stream of online purchases of deadly variants of the drug fentanyl, made in China and shipped to American doorsteps through the U.S. postal service.

Deadly Parcels from China

Fatal drug overdoses have doubled over the last decade, rising from 36,010 in 2007 to 70,237 in 2017. Synthetic opioids other than methadone – mainly fentanyl – now account for 40 percent of all drug overdose deaths and 60 percent of opioid overdose deaths.

China is the primary source of illicit fentanyl, fentanyl analogues, and fentanyl precursor chemicals in the United States. According to U.S. Customs and Border Protection, almost 80 percent of fentanyl seized in 2017 was interdicted at U.S. Postal Service and express consignment carrier facilities, having been shipped in small quantities from China.

Fentanyl precursors are also shipped from China to Mexico, and to a lesser degree Canada, before being synthesized, often mixed with heroin or cocaine, repackaged, and then trafficked over U.S. land borders in the southwest.

Fentanyl third wave of overdoses

STOP

Last March, the White House stepped up its campaign against opioid abuse, seeking to address factors driving both demand and supply. The Initiative to Stop Opioid Abuse (referred to as STOP) includes education programs, measures to curb over-prescription, expanded access to treatment and recovery, and – a focus on cutting off the flow of illicit drugs from China.

According to Homeland Security, more fentanyl in larger volumes is seized at land crossings, but the fentanyl seized from mail and express consignment carrier facilities is far more potent with purities of over 90 percent versus Mexico-sourced fentanyl that is often diluted to less than 10 percent.

The president’s initiative would require the postal service to provide advance electronic data for 90 percent of all international mail shipments within the next two years, offering data that will help law enforcement identify and seize illegal substances shipped through mail. Private shippers such as UPS and FedEx routinely require such electronic data.

The administration is also scaling up the Department of Justice’s “darknet” enforcement efforts. Fentanyl in its various forms is relatively cheap and easy to buy from China online paying with cryptocurrencies, or even credit cards or money transfers.

fentanyl shipments from China

Over One Million Pills a Day – In One Factory in China

China has grown to become the largest mass producer of generic drugs and pharmaceutical ingredients in the world with over 5,000 pharmaceutical manufacturers. Upwards of 90 percent of the active pharmaceutical ingredients used in U.S. production of finished dosage forms of medical pharmaceuticals is imported from just two countries: India and China.

In addition, China has over 160,000 chemical producers and hundreds of thousands of pharmaceutical and chemicals distributors. The explosion in volume and number of producers has far outstripped China’s FDA (CFDA) from adequately regulating and monitoring them.

Faster Than Can Be Regulated

Unlike opioids derived from the poppy plant, fentanyl is a synthetic painkiller produced in a laboratory. It is 50 times more potent than heroine and 50-100 times more potent than morphine. Inhaling just two milligrams of pure fentanyl can be lethal.

In the United States, most fentanyl products are classified either as Schedule I chemicals, those that have no accepted medical use and high potential for abuse, or as Schedule II chemicals, those with medical use but only available through a non-refillable prescription.

Fentanyl’s molecular structure can be easily modified to create new derivatives, putting regulators constantly behind in evaluating and classifying each new variant one-by-one. From furanyl fentanyl, acetyl fentanyl, acryl fentanyl, to carfentanil — to name just a few — fentanyl has hundreds of analogues that differ slightly from the original, enabling criminal producers to operate in a gray territory while regulators struggle to ban the new substances. Legislation passed in 2017 now allows U.S. FDA to schedule fentanyl analogues immediately on a temporary basis while the agency conducts its investigations.

President Trump has urged President Xi to implement a similar approach. China currently controls around 25 types of fentanyl-related products. President Trump wants China to establish fentanyl as its own class of controlled substances, restricting all fentanyl analogues, including future fentanyl-like substances. Doing so would be a start.

Busting Drug Trade

Such a commitment by China is not, however, likely to put a dent in its fentanyl exports to the United States absent real enforcement. In recent years, CFDA has imposed stricter licensing requirements for pharmaceutical and chemical producers, but diversion, adulteration, and clandestine production remain significant problems.

“Chinese chemical manufacturers export a range of fentanyl products to the United States, including raw fentanyl, fentanyl precursors, fentanyl analogues, fentanyl-laced counterfeit prescription drugs like oxycodone, and pill presses and other machinery necessary for fentanyl production.” — U.S China Economic and Security Review Commission Staff Research Report

CFDA has undergone several reorganizations in the last few years. In the most recent, some of its regulatory responsibilities have devolved to provinces and counties with little accountability. Pre-marketing approvals will be managed separately from post-market inspections and surveillance. With just a little over 2,000 inspectors, authorities have little hope of effectively overseeing legal compliance, let alone spotting even a fraction of criminal activity.

The central government has assisted U.S. drug and law enforcement agencies, sharing information and intelligence that helps U.S. agencies target Chinese nationals trafficking illicit drugs in the United States. To alleviate the free flow of fentanyl from China, the Chinese government should also prosecute transnational criminals operating in China in high-profile cases with severe penalties.

Soybeans, Tech Transfer, and Fentanyl

Trade talks over soybeans and intellectual property protections for American technologies seem an unlikely setting for addressing illicit trade in deadly fentanyl.

There are some in the United States who are frustrated with this administration’s willingness to toss out the traditional trade policy playbook, but this is one case where it can welcomed by everyone.

 

 

Interested to read about fentanyl trade in more detail?

See two key reports produced by U.S.-China Economic and Security Review Commission analyst Sean O’Connor: Fentanyl: China’s Deadly Export to the United States, February 2017 and Fentanyl Flows from China: An Update, November 2018

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.

leek

Leek Market in Asia – Supply and Demand

IndexBox has just published a new report, the Asia – Leeks And Other Alliaceous Vegetables – Market Analysis, Forecast, Size, Trends and Insights. Here is a summary of the report’s key findings.

The revenue of the leek market in Asia amounted to $1.1B in 2017, going down by -16% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price). The market value increased at an average annual rate of +1.9% from 2007 to 2017; the trend pattern remained consistent, with only minor fluctuations throughout the analyzed period.

The most prominent rate of growth was recorded in 2016, when the market value increased by 20% y-o-y. The level of leek consumption peaked at $1.3B in 2012; however, from 2013 to 2017, consumption failed to regain its momentum.

Production in Asia

In 2017, the amount of leeks and other alliaceous vegetables produced in Asia totaled 1.2M tonnes, falling by -3.1% against the previous year. The leek production continues to indicate a relatively flat trend pattern.

Leek Exports

Exports in Asia

In 2017, exports of leeks and other alliaceous vegetables in Asia amounted to 75K tonnes, surging by 17% against the previous year. The leek exports continue to indicate a modest increase.

In value terms, leek exports amounted to $70M (IndexBox estimates) in 2017.

Exports by Country

China dominates leek exports structure, recording 62K tonnes, which was approx. 82% of total exports in 2017. It was distantly followed by Turkey (5.1K tonnes), achieving 6.8% share of total exports. Malaysia (2.8K tonnes) and Pakistan (2.4K tonnes) followed a long way behind the leaders.

From 2007 to 2017, average annual rates of growth with regard to leek exports from China stood at +2.3%. At the same time, Pakistan (+65.4%) displayed positive paces of growth. Moreover, Pakistan emerged as the fastest growing exporter in Asia, with a CAGR of +65.4% from 2007-2017. By contrast, Turkey (-1.5%) and Malaysia (-5.6%) illustrated a downward trend over the same period. From 2007 to 2017, the share of Malaysia increased by 2.9% percentage points, while Pakistan (-3.1%) and China (-16.5%) saw their share reduced. The shares of the other countries remained relatively stable throughout the analyzed period.

In value terms, China ($54M) remains the largest leek supplier in Asia, comprising 78% of global exports. The second position in the ranking was occupied by Turkey ($3.2M), with a 4.6% share of global exports. It was followed by Malaysia, with a 3.3% share.

Export Prices by Country

In 2017, the leek export price in Asia amounted to $925 per tonne, reducing by -17.3% against the previous year. The the leek export price continues to indicate a relatively flat trend pattern.

There were significant differences in the average export prices amongst the major exporting countries. In 2017, the country with the highest export price was China ($882 per tonne), while Pakistan ($395 per tonne) was amongst the lowest.

From 2007 to 2017, the most notable rate of growth in terms of export prices was attained by Malaysia (+3.8% per year), while the other leaders experienced more modest paces of growth.

Leek Imports
Imports in Asia

In 2017, imports of leeks and other alliaceous vegetables in Asia amounted to 92K tonnes, picking up by 13% against the previous year. The total import volume increased at an average annual rate of +1.9% from 2007 to 2017; however, the trend pattern indicated some noticeable fluctuations being recorded over the period under review. In value terms, leek imports stood at $104M (IndexBox estimates) in 2017.

Imports by Country

Japan dominates leek imports structure, recording 63K tonnes, which was approx. 69% of total imports in 2017. South Korea (8.4K tonnes) ranks second in terms of the global imports with a 9.2% share, followed by Malaysia (6.2%). The following importers – Singapore (3.8K tonnes), China, Macao SAR (2.6K tonnes), Afghanistan (1.9K tonnes) and Vietnam (1.5K tonnes) together made up 11% of total imports.

From 2007 to 2017, average annual rates of growth with regard to leek imports into Japan stood at +1.3%. At the same time, Vietnam (+86.2%), Afghanistan (+79.8%), China, Macao SAR (+13.8%), South Korea (+13.0%) and Malaysia (+4.1%) displayed positive paces of growth. Moreover, Vietnam emerged as the fastest growing importer in Asia, with a CAGR of +86.2% from 2007-2017. By contrast, Singapore (-2.2%) illustrated a downward trend over the same period. Vietnam (-1.6%), Malaysia (-2%), China, Macao SAR (-2%), Afghanistan (-2.1%), South Korea (-6.5%) and Japan (-8.6%) significantly weakened its position in terms of the global imports, while the shares of the other countries remained relatively stable throughout the analyzed period.

In value terms, Japan ($79M) constitutes the largest market for imported leeks and other alliaceous vegetables in Asia, comprising 76% of global imports. The second position in the ranking was occupied by Singapore ($6.4M), with a 6.1% share of global imports. It was followed by Malaysia, with a 5.2% share.

Import Prices by Country

The leek import price in Asia stood at $1.1 per kg in 2017, reducing by -14.6% against the previous year. Over the period from 2007 to 2017, it increased at an average annual rate of +2.3%.

There were significant differences in the average import prices amongst the major importing countries. In 2017, the country with the highest import price was Singapore ($1.7 per kg), while Afghanistan ($399 per tonne) was amongst the lowest.

From 2007 to 2017, the most notable rate of growth in terms of import prices was attained by Singapore (+7.2% per year), while the other leaders experienced more modest paces of growth.

Source: IndexBox AI Platform