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WANT PEACE? PROMOTE FREE TRADE.

free trade

WANT PEACE? PROMOTE FREE TRADE.

Frédéric Bastiat famously claimed that “if goods don’t cross borders, soldiers will.”

Bastiat argued that free trade between countries could reduce international conflict because trade forges connections between nations and gives each country an incentive to avoid war with its trading partners. If every nation were an economic island, the lack of positive interaction created by trade could leave more room for conflict. Two hundred years after Bastiat, libertarians take this idea as gospel. Unfortunately, not everyone does. But as recent research shows, the historical evidence confirms Bastiat’s famous claim.

To Trade or to Raid

In “Peace through Trade or Free Trade?” professor Patrick J. McDonald, from the University of Texas at Austin, empirically tested whether greater levels of protectionism in a country (tariffs, quotas, etc.) would increase the probability of international conflict in that nation. He used a tool called dyads to analyze every country’s international relations from 1960 until 2000. A dyad is the interaction between one country and another country: German and French relations would be one dyad, German and Russian relations would be a second, French and Australian relations would be a third. He further broke this down into dyad-years; the relations between Germany and France in 1965 would be one dyad-year, the relations between France and Australia in 1973 would be a second, and so on.

Using these dyad-years, McDonald analyzed the behavior of every country in the world for the past 40 years. His analysis showed a negative correlation between free trade and conflict: The more freely a country trades, the fewer wars it engages in. Countries that engage in free trade are less likely to invade and less likely to be invaded.

Trading partners

The Causal Arrow

Of course, this finding might be a matter of confusing correlation for causation. Maybe countries engaging in free trade fight less often for some other reason, like the fact that they tend also to be more democratic. Democratic countries make war less often than empires do. But McDonald controls for these variables. Controlling for a state’s political structure is important, because democracies and republics tend to fight less than authoritarian regimes.

McDonald also controlled for a country’s economic growth, because countries in a recession are more likely to go to war than those in a boom, often in order to distract their people from their economic woes. McDonald even controlled for factors like geographic proximity: It’s easier for Germany and France to fight each other than it is for the United States and China, because troops in the former group only have to cross a shared border.

The takeaway from McDonald’s analysis is that protectionism can actually lead to conflict. McDonald found that a country in the bottom 10 percent for protectionism (meaning it is less protectionist than 90 percent of other countries) is 70 percent less likely to engage in a new conflict (either as invader or as target) than one in the top 10 percent for protectionism.

Trade and Conflict

Protectionism and War

Why does protectionism lead to conflict, and why does free trade help to prevent it? The answers, though well-known to classical liberals, are worth mentioning.

First, trade creates international goodwill. If Chinese and American businessmen trade on a regular basis, both sides benefit. And mutual benefit disposes people to look for the good in each other. Exchange of goods also promotes an exchange of cultures. For decades, Americans saw China as a mysterious country with strange, even hostile values. But in the 21st century, trade between our nations has increased markedly, and both countries know each other a little better now. iPod-wielding Chinese teenagers are like American teenagers, for example. They’re not terribly mysterious. Likewise, the Chinese understand democracy and American consumerism more than they once did. The countries may not find overlap in all of each other’s values, but trade has helped us to at least understand each other.

Trade helps to humanize the people that you trade with. And it’s tougher to want to go to war with your human trading partners than with a country you see only as lines on a map.

Second, trade gives nations an economic incentive to avoid war. If Nation X sells its best steel to Nation Y, and its businessmen reap plenty of profits in exchange, then businessmen on both sides are going to oppose war. This was actually the case with Germany and France right before World War I. Germany sold steel to France, and German businessmen were firmly opposed to war. They only grudgingly came to support it when German ministers told them that the war would only last a few short months. German steel had a strong incentive to oppose war, and if the situation had progressed a little differently—or if the German government had been a little more realistic about the timeline of the war—that incentive might have kept Germany out of World War I.

% reduction in conflict

Third, protectionism promotes hostility. This is why free trade, not just aggregate trade (which could be accompanied by high tariffs and quotas), leads to peace. If the United States imposes a tariff on Japanese automobiles, that tariff hurts Japanese businesses. It creates hostility in Japan toward the United States. Japan might even retaliate with a tariff on U.S. steel, hurting U.S. steel makers and angering our government, which would retaliate with another tariff. Both countries now have an excuse to leverage nationalist feelings to gain support at home; that makes outright war with the other country an easier sell, should it come to that.

In socioeconomic academic circles, this is called the Richardson process of reciprocal and increasing hostilities; the United States harms Japan, which retaliates, causing the United States to retaliate again. History shows that the Richardson process can easily be applied to protectionism. For instance, in the 1930s, industrialized nations raised tariffs and trade barriers; countries eschewed multilateralism and turned inward. These decisions led to rising hostilities, which helped set World War II in motion.

These factors help explain why free trade leads to peace, and protectionism leads to more conflict.

Free Trade and Peace

One final note: McDonald’s analysis shows that taking a country from the top 10 percent for protectionism to the bottom 10 percent will reduce the probability of future conflict by 70 percent. He performed the same analysis for the democracy of a country and showed that taking a country from the top 10 percent (very democratic) to the bottom 10 percent (not democratic) would only reduce conflict by 30 percent.

Democracy is a well-documented deterrent: The more democratic a country becomes, the less likely it is to resort to international conflict. But reducing protectionism, according to McDonald, is more than twice as effective at reducing conflict than becoming more democratic.

Here in the United States, we talk a lot about spreading democracy. We invaded Iraq partly to “spread democracy.” A New York Times op-ed by Professor Dov Ronen of Harvard University claimed that “the United States has been waging an ideological campaign to spread democracy around the world” since 1989. One of the justifications for our international crusade is to make the world a safer place.

Perhaps we should spend a little more time spreading free trade instead. That might really lead to a more peaceful world.

This article was originally published on FEE.org.

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Julian Adorney

Julian Adorney is a Young Voices contributor. He’s written for FEE, National Review, The Federalist, and blogs at The Empathetic Libertarian.

fashion

SEPTEMBER ISSUE: FASHION & TRADE IN A SHIFTING GLOBAL LANDSCAPE

As any devoted reader of Vogue knows, September is usually the time for a wardrobe refresh. This year, the new season may not be looking so good for the fashion industry which faces tariffs, changing consumer demand, and of course, fallout from the pandemic.

Going into 2020, fashion’s global leaders were already apprehensive about a difficult year ahead. They feared external economic shocks and were feeling pressure to adapt quickly to digitization and embrace the push for sustainability. Then, the COVID-19 pandemic upended their industry, cutting demand and disrupting supply chains. Meanwhile, escalating global tensions including the U.S.-China trade war added to the burden of trade barriers.

Though fashion can be seen as a luxury or even a hobby, the apparel industry is one of the largest in the world. Disruptions to this trillion dollar industry have meaningful impacts across the globe for the millions involved in making the world look good while clothing it.

The Big Players in the Global Fashion Trade

Fashion is a global business with global supply chains so tariffs, trade disputes, and transportation disruptions all play an important role in determining what we can buy and how much we pay for it. The global apparel market is valued at over one trillion U.S. dollars. The United States is currently the world’s biggest market for imports of apparel and footwear, importing around $85 billion worth of clothing, accessories and footwear in 2018.

“Knit apparel” is defined as any clothing made from the weaving of fibres. It’s the largest single apparel designation. The United States buys 18.95 percent of total knit apparel imports, twice that of the second-largest importer, Germany. Other top destinations for knit apparel around the globe include European countries such as Spain, the UK and France, and fashion-conscious Asian powerhouses like Japan and Hong Kong.

China remains at the top when it comes to exports of apparel. In 2018, China’s exports of knit apparel made up just shy of 31 percent of total world exports. Bangladesh and Vietnam take the number two and three spots, but with market shares of 7.52 and 5.66 percent respectively.

Top Ten Knit Apparel

A look at longer term trends reveals that China’s market share has been slipping. In 2012, China commanded 41 percent of total knit apparel exports, meaning in the past six years it has lost ten percent of its market share. The below graph shows this decline, as well as the increasing share claimed by rising South and Southeast Asian competitors Bangladesh, Vietnam, and Cambodia. This can be explained partially by the escalating trade war between the United States and China, prompting businesses to shift all or part of their production away from China and to neighboring Asian countries to avoid the Made in China label and the tariffs that come with it.

Asian country share of knit apparel exports v China (1)

An Industry at the Whims of International Policy – and Trends

Even before the pandemic hit, the industry was expecting a shake-up as both global relations and trends were shifting. Global value chains are morphing and new industrializing markets emerging. At the same time, e-commerce continues to accelerate; and expectations for brands to be sustainable and socially conscious are growing. The global pandemic, social movements and international relations of 2020 have forced the fashion industry to be more innovative than ever before to stay in business.

Trade Disputes & Barriers

The fashion industry has long suffered from tariffs — global average import tariff rates for clothing products stood at 17 percent in 2018, about twice as much as that for all other manufactured goods.

In the United States, tariffs are as high as 32 percent for clothing and 65 percent for footwear. In fact, around 75 percent of the total tariff burden on American households comes from apparel products. U.S. tariffs generally vary widely, but those on clothing tend to be higher than in almost any other category and affect a larger portion of U.S. imports, translating into higher prices paid by U.S. consumers.

Given China’s textile and apparel export dominance, it is unsurprising that tariffs on clothing originating in China have been significantly affected by the U.S.-China trade war. The United States levied tariffs ranging from 7 to 25 percent on knitted and non-knitted apparel; textiles including silk and cotton; fabrics such as lace and embroidery; and a whole host of other inputs the fashion industry relies on (like rubberized textiles). China retaliated with its own list of tariffs against American products, including U.S.-produced apparel. The existence of these tariffs, and the constant threat of more, make China a less appealing location for production. If they can find the right mix of cheap-but-skilled labor, manufacturers are likely to relocate factories. Those Made in China labels may instead read Made in VietnamBangladesh or Turkey.

COVID 19: Decreased Demand & Shaky Supply Chains

The COVID-19 pandemic dealt a major blow to the fashion industry worldwide. The one-two punch of disrupted supply chains and a global population reining in luxury expenses hit designers, manufacturers and retailers of clothing and footwear particularly hard.

While people self-quarantined at home, retailers who rely on sales at their brick-and-mortar stores were impacted immediately. During the first six months of 2020, the sales of clothing and accessories at stores in the United States were close to 40 percent lower than one year prior. Department store Nordstrom has suffered a 53 percent dip in sales, and many retailers, including household names like Brooks Brothers, JC Penney and Neiman Marcus, have filed for bankruptcy. Tangentially, a whole population staying home did not demand the same types of clothes as before. No vacation meant no new summer wardrobe. No special events cut down on the need for fancy outfits, causing demand to fall even further.

Resilient and nimble supply chains are vital to any fashion house, as they must be able to react quickly to changing trends and draw on skills and resources spread throughout the world. This resilience was put to the test during the coronavirus pandemic as major production and transportation faltered. The clothing retailers that seem to be weathering the storm best are online-focused stores in a position to pivot quickly to the stay-at-home demand for comfy clothes and “athleisure” wear.

For Some Countries, Fashion Means Everything

Fashion houses and retailers are obviously struggling. Unraveling the threads of trade in fashion reveals the much larger number of people involved in the global fashion industry who have been impacted worldwide. They include millions of people employed as manufacturers of apparel and footwear, as well as producers of textiles and other materials, and farmers who produce raw materials, as well as myriad designers, creators and marketers who are part of the innovative “orange economy”.

Many countries are involved in apparel production, but for some South and Southeast Asian countries it forms a significant part, even the vast majority, of their total revenue. For example, 44 percent of national export revenue in Sri Lanka comes from apparel. That number is even higher for Cambodia, at 58.45 percent. Apparel is also Vietnam’s third-largest export sector, bringing in over $36 billion annually and accounting for 16 percent of GDP.

And nowhere is the apparel industry more important than Bangladesh, where 83 percent of total export revenue comes from the garment industry. The apparel industry, and more specifically the ability to trade the clothing and accessories manufactured in Bangladesh, has been a huge driver of economic development in the country and has given many the opportunity to earn a living beyond subsistence farming. About 80 percent of jobs are held by women, providing not only employment but autonomy and education to one of the world’s poorest and most vulnerable populations.

However, this specialization comes at a cost. Although trade in apparel has brought much needed revenue into the country, the heavy reliance on a single industry has also been a source of concern. For example, worldwide orders dried up at the height of the coronavirus pandemic, risking millions of Bangladeshi jobs and even prompting fears of starvation.

Bangladesh Garment Sector (1)

Trends in Fashion and Trends in Trade – Where Next?

Trends rule in the world of fashion. In this especially uncertain time, who knows what will win out as new autumn fashion appears on our shelves (and in our feeds)?

Will the growing shift to more sustainable and ethical fashion continue with a slow down of “fast fashion” in favor of investing in long-lasting pieces with a low environmental footprint? If so, we might expect a shift away from clothing produced in far-flung destinations to cut down on carbon footprints or to trace the origin of clothing made with free and fair practices. Or, as the world opens up post-COVID will the return of traveling and social events spur a worldwide shopping-spree and a desire for more clothing, more quickly? In that case, suppliers who can utilize large and diverse – yet agile – supply chains will come out on top.

Two things are certain: fashion will continue to be a global industry and trade will continue to play a vital role in shaping what we wear.

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Alice Calder

Alice Calder received her MA in Applied Economics at GMU. Originally from the UK, where she received her BA in Philosophy and Political Economy from the University of Exeter, living and working internationally sparked her interest in trade issues as well as the intersection of economics and culture.

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

export controls

UNPACKING US-CHINA SANCTIONS AND EXPORT CONTROL REGULATIONS: HUAWEI

This is the first in a series of articles by Eversheds Sutherland partners Ginger Faulk and Jeff Bialos explaining the legal and regulatory impacts of certain recent US sanctions and export control actions targeting various Chinese entities. Each article focuses on a different aspect of a recent US sanctions or export control regulatory action targeting China and explains in-depth the regulatory context. Recognizing that this is a highly charged political topic, the article does not condone or promote any governmental actions discussed here but is only explanatory in nature.

You undoubtedly will have heard by now that the United States has effectively blocked Huawei’s access to US exports of goods, software and technology, handicapping a giant in the global battle for 5G dominance, upsetting telecom supply chains and setting off a telecom cybersecurity crisis of conscience among many of the world’s developed and developing nations. As a result of Huawei’s designation on the US Department of Commerce’s “Entity List” in May 2019, all companies – no matter where they are – are prohibited under US law from exporting, re-exporting or transferring items that are “subject to the [US] Export Administration Regulations (EAR)” to 152 non-US Huawei affiliates. As a result, hundreds of telecommunication and software companies in third world countries are faced with the binary choice of whether to source technology and software from the United States or to transact business with Huawei.

The US government apparently concluded that this move alone did not work to prevent Huawei from benefiting from US-origin 5G semiconductor technology. Thus, more than a year later, recent rules have expanded the definition of what is “subject to the EAR,” with respect to Huawei specifically, to include offshore semiconductor production based on US technology. The changes to the rule demonstrate how US export controls are evolving to address perceived national security threats in the telecom sector writ large.

All of this is occurring against the backdrop of the US seeking to encourage friends and allies in Europe and beyond to eliminate or at least restrict the role of Huawei in their domestic telecom network infrastructure. This effort is based on concerns over the risk that Huawei theoretically could, at the behest of the Chinese government, either disrupt such infrastructure during periods of exigency or use their access to these platforms to conduct surveillance. In this regard, the new and more restrictive US regulatory approach to Huawei’s access to offshore semiconductor chips appears to have been effective. The UK has reportedly restricted its engagement with Huawei in 5G, apparently as a consequence of supply chain risks resulting from the new US rules, in other words, out of concern that Huawei might not have sufficient access to necessary semiconductor chips to meet the UK’s telecom needs. Whether other US friends and allies will do likewise remains to be seen.

 1. The initial Huawei ban

Since May 2019, the Export Administration Regulations have prohibited US and non-US persons and companies from exporting, re-exporting or transferring in the country, or causing, aiding, abetting or soliciting the export, re-export or transfer of, any item that is “subject to the EAR” to the designated Huawei affiliates.

Items that are “subject to the EAR”[1] include all commodities, software and technology, regardless of their sensitivity, that are:

1. a) in the US (even temporarily);

2. b) produced in the US, or

3. c) exported from the US.

The EAR state further that “items subject to the EAR” include all hardware, software and technology that meet the definition of that term, whether or not the items are listed on the Commerce Control List (CCL) in Part 774 of the EAR. Items subject to the EAR that are not listed in the CCL are designated as “EAR99,” which serves as a catchall category.

Non-US-origin items produced and sold from outside the US also may be subject to the EAR in the following ways:

(a)   Under the “De minimis Rule,” non-US items subject to the EAR include items anywhere in the world that contain more than a certain percentage (25% in most cases) US-origin content by value based on fair market price.

(b)  Under the “Direct Product Rule,” foreign items that:

(i)  are the direct product of certain “National Security”-controlled US technology, software, or

(ii)  are the direct product of a factory or major component of a factory (such as, chip manufacturing equipment) that is itself the direct product of specified controlled technology or software that may be subject to the EAR.

The Entity List designation created challenges for numerous US companies that are suppliers to Huawei or that afford it access to their technology platforms, such as Google’s Android operating system. Following the BIS designation, some of these US technology companies – including Google, Intel, Qualcomm and Broadcom – announced they would cease doing business with Huawei, effective immediately. Specifically, Google announced it would cut off Huawei’s access to the Google Play Store and to the core components of the Android ecosystem that are built by Google (i.e., not those distributed under the Android Open Source Project (AOSP)). Given that many third-party apps rely on Google Maps, this restricted the offerings of Huawei handsets, especially in the European markets. The chips manufacturers also were forced to shift outside of the US manufacturing and processing of silicon wafers that would ultimately be sold to Huawei.

Shortly after Huawei’s designation, in response to clamoring by industry, a Temporary General License (TGL) was issued to authorize the continued operation of existing networks and equipment, continued support to existing Huawei personal devices and equipment and cybersecurity research and vulnerability disclosures. It also authorized engagement with Huawei companies for the development of 5G standards. The goal of the TGL was to allow time in which to phase in the application of the designation for US firms with pre-existing arrangements with Huawei and allow them time to plan for an appropriate transition.

2. What was the perceived “loophole” in the rule?

Meanwhile, chipmaking factories outside of the United States, including Taiwan-based manufacturers, apparently continued to fabricate cutting-edge chips for Huawei using certain equipment that was designed, in part, based on US-origin technology.

This is because, for the first year of the rule (until May 16, 2020), whether intentionally or not, chips manufactured outside of the United States – even those designed or produced using US technology – appeared to fall outside of the EAR’s jurisdiction. Indeed, for purposes of determining US content value, the value of technology incorporated into a software or hardware component or used to design chip manufacturing equipment is not valued. As such, the “direct product rule” (prior to May 15, 2020) applied only to certain types of controlled technology to certain countries and did not extend to reexports to China of non-US-manufactured semiconductors not containing US-manufactured components.

3. How did US regulators fill in the loophole?

On May 15, 2020, almost exactly a year after the Entity List ban came into place, a new “footnote 1” was added to the Entity List banning the unlicensed export specifically to listed Huawei entities (but not to others on the Entity List) of a broad spectrum of foreign-produced telecom and computer components and equipment that are (i) the “direct product” of US technology or US software, or (ii) are the “direct product of manufacturing equipment that itself is a direct product of US technology or software. This extended the ban to, for example, semiconductor designs – and chipsets produced from those designs – that are developed on the basis of US software or technology. It also extended the ban to chipsets produced using semiconductor manufacturing equipment, even in Taiwan, if that equipment was designed on the basis of US-origin technology. According to industry experts, this seems to cover almost any chip currently in production. “To prevent immediate adverse economic impacts on foreign foundries utilizing US semiconductor manufacturing equipment that have initiated any production step,” the US provided a 120-day grace period for exports to Huawei of items based on (US-derived) Huawei design specifications as of May 15, 2020.

Under this revised rule, foreign-produced chips are prohibited for export or re-export when there is “knowledge [including awareness of a high probability] that they are destined for re-export, export from abroad, or transfer (in-country) to Huawei or any of its affiliates on the Entity List.” This change threatens to impact Huawei’s access to 5G microprocessors and appears to have caused the UK to rethink the role of Huawei in its developing 5G network. The US work to close the loophole was not yet complete, however…

4. The grip tightens…

The most recent rule change on August 20 ended the Temporary General License and also further tightened the screws on Huawei by clarifying that the ban applies (1) not only when a listed Huawei affiliate is the destination for or receives an item but also whenever it is an indirect party to a transaction involving a subject item, e.g., as a “purchaser,” “intermediate consignee,” “ultimate consignee” or “end-user,” and (2) when the foreign-produced item will be incorporated into or used in the production or development of any part, component or equipment produced, purchased or ordered by a listed Huawei entity. These changes were principally designed to address concerns raised by public commenters that Huawei could continue to procure US manufactured items through third-parties who incorporate the subject US-controlled component into a system that is ultimately sold to Huawei.

Critics of the rule have commented that the new rule will encourage China to develop its own computer and telecom system chips and technologies in order to support Huawei and other Chinese companies that rely on such chips for their products. Others have voiced concerns that – without US security patches and software updates permitted under the TGL – overseas consumers and operators will be vulnerable to severe disruptions and cyber-security risks.

Meanwhile, the global telecom sector is carefully watching countries like Germany, which is deciding the role that Huawei will play in domestic telecoms infrastructure. These decisions will signal whether continental Europe and other US friends and allies in Asia and elsewhere will fall in line behind US efforts to exclude Huawei from global networks – thereby decoupling US-China telecom supply chains. Or alternatively, whether these countries will assert their own “digital sovereignty” and allow Huawei a continued role – with attendant repercussions on their security relationships with the United States.

Meanwhile, the Department of Commerce enjoys the latitude to issue specific export licenses to firms that request to keep supplying Huawei with software or components. The stage is set for the battle to continue as China is reportedly considering retaliatory measures of its own, possibly to include its own export controls.

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Ginger T. Faulk, partner at Eversheds Sutherland, represents multinational companies in matters involving US government regulation of foreign trade and investment. She has extensive experience advising and representing global companies, counseling clients in matters arising under US sanctions, export controls, import and other national security and foreign policy trade-related regulations.

Jeffrey P.  Bialos, partner at Eversheds Sutherland, assists clients in making multi-faceted business decisions, structuring transactions and complying with complex regulatory requirements. As former Deputy Under Secretary of Defense for Industrial Affairs, he brings deep experience in defense, homeland security and national security matters, including antitrust, procurement, export controls, industrial security and the Foreign Corrupt Practices Act.

[1] See generally 15 CFR Parts 732 and 734.

trade

THE “HOMEBODY ECONOMY” AND TRADE

Mindful Spending

An estimated 2.6 billion people – one-third of the world’s population – continue to live under some form of quarantine conditions. These are trying circumstances for individuals and businesses. From a consumer demand perspective, the longer we all engage in some form of quarantine or social isolation, the more likely our new habits will take hold.

The emergence of this “homebody economy” is becoming apparent in consumer spending. Only China seems to be rebounding in consumer spending – the rest of us are still cutting back on discretionary spending. We are focused on essentials, being cost-conscious and cutting back on services and travel. We are even spending less on apparel and footwear, which impacts millions of jobs worldwide as workers in global value chains face uncertainty in their employment.



According to the International Labor Organization (ILO), 93 percent of the world’s workers live in countries experiencing workplace closures due to COVID-19. ILO estimated the reduction in working-hours for the second quarter of 2020 as equivalent to the loss of 400 million full-time jobs. Job losses, reduced hours and foregone income are having a clear dampening effect on spending habits and demand in international trade, which in turn creates more job insecurity.

No Contact

In most countries, the vast majority of people have turned to e-commerce and other digital or contactless services such as curbside pickup and drive-throughs. Many consumers are likely to delay resuming “normal” shopping and other behaviors until after a vaccine is widely available. That includes, unfortunately, the resumption of preventative healthcare. The hidden health impacts of foregoing routine health screenings and other interventions will be felt in national economies for years to come.

On top of all this, we know that the impacts of recession – layoffs, loss of income and the growing effects of income equality are closely correlated with reduced health outcomes and life expectancy. The World Health Organization has cautioned about the long-term consequences of lockdowns and isolation on mental and physical health, noting that depression and anxiety under normal circumstances cost the global economy an estimated $1 trillion per year in lost productivity.

No doubt we’re all feeling some level of anxiety, mood swings, and changes in sleep patterns. McKinsey’s consumer sentiment survey shows, in another twist of cruel circularity, that people are spending more time inactively, consuming digital content, which could have negative implications for people’s happiness.

Trade Antidote for the Irritable, Anxious and Exhausted Among Us

Lest we leave you further depressed, might trade in some goods and services provide a much-needed antidote to the mental and physical wear and tear of COVID-19? We think so. Here are some ideas.

Yoga – Global demand for PVC has been hit hard with a major drop in demand in China. So, why not do your small part by buying yourself a fresh, new vinyl mat. The PVC-based mats are cushy, which might be nice for your next savasana. If you’ve gained a little weight during the lockdown, you can rely on American textile engineers – the same ones medical personnel turn to for durable emergency wear – to also deliver yoga pants that will hold your belly in place as you stretch in downward dog.

Guided Meditation – Evidence of meditation practice dates back to approximately 1500 years BCE, but we generally thank Chinese Taoists and Indian Buddhists from the 6th to 4th centuries BCE for developing forms of practice that spread throughout the world. These days, Andy Puddicome, a Brit who studied meditation in the Himalayas and became ordained as a Tibetan Buddhist monk in Northern India, can be credited for making meditation accessible, modern – and available online – for the masses through his app, Headspace. Through Headspace and others, you can have guided meditation through an app on your phone, a service traded across borders thanks to the Internet.

incense

Incense – The use of incense can be traced back to ancient Egypt where it was used by priests for fumigating ceremonies and tombs. It was thought to hinder the presence of demons and served as an offering to their gods during worship and ritual, which is how incense came to be used in India and throughout southern Asia and China. Resin-based incense such as frankincense traveled to Europe and the Mediterranean along a trading route known as the Incense Route. Today, you can buy very high end and exotic incense like the brand, Astier de Villatte, which is handmade on the Japanese island of Awaji by masters of aroma who have been honing their craft and handing it down for hundreds of years. Also popular is incense made from palo santo (which means holy wood), a tree that grows along the coast of South America.

A Cleanse – If you’ve tried any form of keto, paleo or cleanse diet these days, chances are you had to look online to find far-flung ingredients from around the world. Popular ingredients include Maca powder derived from root vegetables grown in the Andes mountains in Peru, carob, which is native to the eastern Mediterranean region, and the Schisandra berry, which comes from mountainous regions throughout China. Another exotic ingredient is moringa, a nutrient-rich plant derived from “the miracle tree” native to North India. If your diet has you cutting back on caffeine, you can also try teas that taste like coffee, such as from Teecino. Their herbal teas use herbs and nuts like ramón seeds harvested in rural communities in Guatemala through programs that support educational and nutritional programs for women and children in Central America.

inredients

The Struggle is Real, Trade Can Help

The WTO issued a news release in June that estimated an 18.5 percent decline in merchandise trade in the second quarter of 2020 as compared to the same period last year. By any measure, the impact on trade, on livelihoods, and on our well-being has been profoundly negative. But as we work toward collective resilience, one thing you can do is to work on being healthy at home. And, with all of the products and services available to us through trade, we have lots of ways to do just that.

_________________________________________________________________

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.

cross-docking

What Warehouses Should Keep in Mind When First Implementing Cross-Docking

Warehouses that want to improve labor and space utilization without expanding to a new location or breaking ground may consider cross-docking because of its potential efficiencies. Unfortunately, it can also come with many pitfalls for those trying it for the first time.

Cross-docking requires a detailed understanding of your team, space, partners, and technology. For new warehouses, that means implementing cross-docking should come with significant testing and preparation, especially in terms of your inventory management, scheduling, spatial allocation, and the training you give your team and partners.

Test inventory management tools

Cross-docking prepares companies for just-in-time (JIT) shipping and distribution, making immediate use of inventory as it arrives. Companies that want to start utilizing cross-docking will need a robust inventory management system that can understand and differentiate these inbound shipments.

Your tools must be able to understand inventory utilization. If half of the goods on an inbound shipment are for JIT purposes, then the inventory platform must be able to split received goods and correctly update both inventory levels and the number of products you list for sale. If this action would require ongoing intervention from you or additional inventory counts, it could introduce higher labor costs that negate cross-dock benefits.

Ultimately, cross-docking can help with inventory management and often keep companies from needing to expand physical infrastructure for the products they hold. It might also help you expand operations to support backorders. This takes time, however, and requires tools that help you understand and manage inventory levels without adding burden.

Robust scheduling includes flexibility

Cross-docking is intense choreography. You’re going to need smart people and reliable technology to manage the planning of how people and trucks are moving in and around your site. Cross-docking and JIT operations demand having the people available to handle inbound shipments and process them while helping your team know what inventory is ready to use and what needs to be put away.

Dock availability and the time of truck arrivals and departures must be flexible so that your operations can run normally. Every cross-docking team plans on a smooth day where everything runs on schedule. However, that’s rarely a reality. Paperwork, traffic delays, accidents, or even someone needing to use the bathroom can cause a small delay. Something as simple as an employee driving through the parking lot can force a truck to wait.

If you schedule everything down to the minute and don’t give your team and partners flexibility, it’ll cause greater delays. In most cases, as you’re expanding and learning, arriving trucks will end up waiting because it’s hard to predict the time people need, but you also don’t want docks sitting empty for extended periods. So, ensure that you have people ready when trucks are there and test the time you give teams for inbound and outbound.

Dock door assignments should consider space and traffic

One other caveat that many warehouses don’t consider when they first start cross-docking is the physical space that people, trucks, and inventory required. Cross-docking effectively requires that dock door assignments be efficient and allow incoming and departing trucks enough space to maneuver safely and quickly. Adding extra points to a turn will slow the entire process down, for example.

If your warehouse wasn’t built with cross-docking in mind, test this thoroughly. Often, warehouses need significant reconfiguration of internal elements or will install new doors and adjust the building design to facilitate cross-docking. Multiple teams, doors, trucks, and the equipment everyone is using are going to take up extra space and need to be able to move freely and safely. Start by giving everything and everyone more leeway than you think they need.

Some new inventory and dock management platforms support cross-docking and can make suggestions based on timing, assignments, and other aspects of your operations based on historical and current data. When your tools offer this, try out their analysis and recommendations to see if you can maximize your efforts.

The entire supply chain requires competencies

Cross-docking is an advanced management and utilization technique for any warehouse or distribution center. You’re managing dock door assignments, transshipment, vehicle routing, product allocation, barcode scanning and putaway, new warehouse layouts, and the network and systems required to manage it all.

Your team needs competency in each of those areas and activities. Partners should have their own understanding plus the ability to support you. Inbound expertise is required, across the board, for JIT requirements and scheduling to be effective.

You’ll eventually want to build out appropriate penalties for time windows to keep things running smoothly, but that requires your team not to cause delays. In many instances, cross-docking is complicated mathematics disguised as people and trucks.

Take your time to test and implement it. Work with partners proactively to help understand what they need from you and explain what you need from them. Train your team specifically on the new processes and requirements. Simulate, test, and optimize procedures and layout continually.

Cross-docking can save warehouses significantly on a variety of costs and size requirements. You might reduce material handling and make labor more efficient. Customer satisfaction can be improved, too, as you’re relying less on backorders or older products. Achieving all of those wins is a lengthy process, and it’s important to walk into the situation with patience.

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Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.

An Economic Recovery From COVID-19 in 2021 Is Possible – But Massive Uncertainty Remains

COVID-19 has had a devastating effect on human life. But it has also caused widespread economic upheaval for both advanced and emerging market economies as countries shut down to try to stop the spread of the virus. The U.S. for instance is set to see the most severe economic downturn since GDP was first tracked in the 1940s.

This means deep hardship for many businesses of all sizes and across all industries. Shutdowns caused many firms to entirely cease operations for a time. Now, they are grappling with plummeting demand as a result of rising unemployment and uncertainty, on top of supply chain difficulties and uncertainty as to financing resources.

Bad Timing for a Global Crisis

Although there is no “good” time for a pandemic to strike, business conditions in 2020 were already a little shaky prior to the outbreak. At the beginning of the year, the global economy had just finished its weakest year since the Great Recession, global trade was turning sour, trade finance had become more restricted and continued uncertainty from the U.S.-China trade war weighed on businesses everywhere.

If the outlook was stormy at the beginning of the year, it’s now outright bleak. Atradius economists are now forecasting that global trade will decrease approximately 15 percent in 2020, while global GDP will decline about 5 percent. The U.S. will perform below average, with a 6.1 percent decrease in GDP – largely due to its lag in controlling the virus and subsequent record high in number of COVID-19 cases, in addition to soaring unemployment as well as pressure on incomes, leading to a drop in consumption.

Will Government Intervention Be Enough?

Governments and central banks the world over have enacted measures to counteract the pandemic’s economic devastation. Early in the crisis, for instance, the European Central Bank put in place a Long Term Refinancing Operations III program, while the U.S. Federal Reserve increased quantitative easing.

Countries have also put together aid packages, such as the U.S. CARES Act and a number of packages from individual EU economies and the UK. Similarly, China is providing tax relief, state-backed credit guaranteed, and delayed loan and interest payments. Altogether, global government stimulus measures amount to approximately 9 percent of global GDP, or around $7.8 trillion.

But will this be enough? Atradius economists suggest not – not unless countries also enact vigorous policies to revitalize the economy at every level. The EU Pandemic Fund provides a good example: the $750 billion initiative will bestow loans and grants to the areas and sectors hardest hit by the pandemic, allowing for a more even recovery rate across the entire EU.

Although stimulus measures are necessary, soaring government debt levels are also cause for concern – even before the outbreak, many countries had worryingly high debt levels. The most recent baseline scenario from Atradius economists has the U.S. federal budget deficit, as a proportion of GDP, increasing by more than 10 percentage points this year. The UK will fare even worse, seeing a 13 percentage point increase in deficit growth rate. China and India are the only major economies likely to maintain moderate debt ratios through the pandemic.

All that said, low interest rates will likely stick around through the end of 2021 at least – this should help offset some of the concerns over high government debt levels. Moreover, central banks like the Fed and ECB will continue purchasing government bonds, suppressing any financial market stress.

What’s Next?

While the global economy is under undue strain at the moment, Atradius economists predict a recovery could begin as early as this year, continuing into 2021. Our baseline scenario has global GDP rebounding by 5.7 percent in 2021, with the U.S. coming in just under that, with GDP growth of 4.2 percent.

This scenario, however, is shrouded in uncertainty and hinges on a few key assumptions:

-That researchers are able to develop a successful vaccine in the near-term

-That lockdowns will be limited throughout the remainder of the outbreak

-That oil prices will remain low

-That the U.S.-China trade war will remain at a standstill

-That the rise in financing cost for firms, if any, remains limited

Should these assumptions not play out, the global economic recession could be much worse than anticipated – contraction rates could be twice as damaging as those currently predicted, with global GDP contracting 12.2 percent in 2020 and U.S. GDP seeing a 7.9 percent drop. Recovering from a contraction of this size would be a slow, painful process, although we would expect 2021 to see similar growth rates.

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John Lorié is chief economist with Atradius Economic Research. He is also affiliated with the University of Amsterdam as a researcher. Previously, he was Senior Vice President at ABN AMRO, where he worked for more than 20 years in a variety of roles in commercial and investment banking. He started his career at the Dutch Ministry of Foreign Affairs. John holds a PHD in international economics, master’s degrees in economics and tax economics as well as a bachelor’s degree in marketing. 

Theo Smid is an economist with Atradius Economic Research. His work focuses on business cycle analysis, insolvency predictions, thematic research and country risk analysis for the Commonwealth of Independent States. Before joining Atradius, he worked for five years in the macro-economic research team of Rabobank, focusing on business cycle analysis of the Dutch economy. He holds a master’s degree in economics from Tilburg University.  

agility

4 Strategies Manufacturers Can Adopt to Increase Agility

In turbulent, transformative times like these, the term “business agility” seemingly appears everywhere. And though it’s easy to imagine even the world’s largest tech companies or consulting firms making a sudden pivot, it’s harder to picture a manufacturer with a factory full of heavy equipment doing the same thing.

So what does business agility mean in the context of manufacturing or construction? It’s less about the speed and scope of changes being proposed and more about communicating effectively across large, dispersed organizations. When disruptions break the supply chain or cause demand to plummet, manufacturers must be able to encourage an information flow across all corners of the enterprise. Agility depends on the free flow of information and the ability to guide a team directly.

The good news is that manufacturers are used to disruptions. They regularly deal with supply chain issues, sudden regulatory changes, or shifting market dynamics. Adaptation is in their nature.

The bad news is that COVID-19 puts a unique strain on the industry that makes agility more important yet less accessible. Specifically, factories and construction sites that have had to either scale back or shut down in response to public health requirements can’t exactly pick their work up remotely. Teams are spread out more than ever and cut off from core assets — and that includes everything from machinery to data.

These are circumstances manufacturers don’t have contingency plans for. Meeting the moment will require extensive brainstorming, aligned leadership, and quick and decisive action — but none of those things will be easy with stakeholders scattered to the wind.

Today’s Realities

All of this means manufacturers need a new concept of business agility along with a fresh sense of commitment.

Since the start of the pandemic, we’ve seen heavy-duty industries forced to shut down suddenly and reopen as quickly as possible. While opening, they’ve had to integrate new social distancing requirements into all aspects of operations and vastly expand health and safety measures. In some cases, they’re even learning how to stop sharing pens and clipboards. And those are just the implications for operations.

Unstable economic forces mean that supply and demand could be in flux for the foreseeable future. Granted, some manufacturers are booming right now — but others have seen business crater, and the long-term fallout of this pandemic remains to be seen. Manufacturers must reexamine (and in many cases revise) their plans, strategies, and fundamental business assumptions. Everything is up in the air.

On top of everything, this pandemic is accelerating the shift away from in-person interactions toward digital ones. Relationships with customers, suppliers, employees, and all other stakeholders are evolving because of the need to socially distance. More than that, though, this health crisis has underscored the fact that digital environments are more efficient, convenient, and customizable than the alternatives. This could prove to be a tipping point for digital transformation throughout the manufacturing industry.

It’s hard to overstate the pace of change right now. The degree to which some manufacturers have already responded is impressive; we’ve seen liquor producers start making hand sanitizer and sports equipment manufacturers adapt assembly lines to create face masks. Agility is possible in the face of this crisis, but manufacturers must take the initiative.

“Business as usual” stopped being relevant with the first COVID-19 cases, and there are serious questions about whether we’ll ever return to normal. That means something different for every manufacturer while still placing the same obligation on all of them: Stay agile or get swept under.

Building the Basis of Business Agility

Manufacturers need to grow agile as quickly as possible. Unfortunately, moving fast while staying coordinated is never easy. Apply these strategies to help guide your transformative efforts:

1. Share information in real time. People need answers right now, whether that’s about health and safety measures, new workplace practices, changing strategies, and everything else that’s been uprooted by the pandemic.

The less accessible this information is, the more disorganized things become. Sharing information in real time so everyone has the answers they need on demand keeps communication issues from making a bad situation worse. Strive to be as transparent as possible and to make information highly accessible.

2. Identify information bottlenecks. The pandemic exacerbated the existing information bottlenecks in organizations and created a number of new ones. Analyzing how internal communication works — how information flows through an organization — identifies where these bottlenecks are and suggests how they can be resolved.

Better access to information (of all types and at all levels) helps accelerate and improve decision-making. Before COVID-19, 86% of companies surveyed said frontline workers need more insights at their disposal. That priority is even higher now.

3. Lead from the bottom up. In any fast-changing scenario, insights from the front lines are what matter most. If executives ignore the ideas and perspectives of workers who are actually in the thick of operations, they miss both the red flags that require attention and the innovative ideas necessary to meet this moment. Information needs to flow freely and broadly within an organization, from one-on-one and small group communication all the way up to corporate messaging. Instead of giving lip service to this priority, make sure there’s a direct pipeline.

4. Create new touchpoints. Information from outside the organization — from customers or suppliers — is also immensely valuable right now. It’s vital to business agility because it helps a manufacturer explore how it can pivot without alienating the partners it relies on. Take those outside insights seriously and solicit as many as possible. Convenient digital touchpoints make it easy for others to supply complaints, suggestions, and praise, all of which inform a manufacturer’s next move.

Remember that agility is all about alignment. Any company — manufacturer or otherwise — can evolve on the fly as long as it can move as one. Communication is what cements that connection and helps achieve unity across the board.

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Daniel Sztutwojner is chief customer officer and co-founder of Beekeeper, the single point of contact for your frontline workforce. Beekeeper’s mobile platform brings communications and tools into one place to improve agility, productivity, and safety. Daniel is passionate about helping businesses operate more efficiently. He has a background in applied mathematics and more than eight years of experience in sales and customer success.

frozen fish

Germany, the UK, and France Dominate the European Frozen Fish Fillet Market

IndexBox has just published a new report: ‘EU – Frozen Fish Fillet – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

The EU frozen fish fillet market totaled $6.6B in 2019 (IndexBox estimates), surging by 5.1% 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). The market value increased at an average annual rate of +2.0% from 2013 to 2019; the trend pattern remained consistent, with only minor fluctuations being recorded throughout the analyzed period. The pace of growth appeared the most rapid in 2018 with an increase of 7.7% year-to-year. Over the period under review, the market reached the maximum level in 2019 and is likely to see gradual growth in years to come.

Consumption by Country

The countries with the highest volumes of frozen fish fillet consumption in 2019 were Germany (275K tonnes), the UK (193K tonnes) and France (155K tonnes), together comprising 48% of total consumption. Spain, Poland, Italy, Sweden, the Netherlands, Malta, Austria, Belgium, and Hungary lagged somewhat behind, together comprising a further 42%.

From 2013 to 2019, the most notable rate of growth in terms of frozen fish fillet consumption, amongst the main consuming countries, was attained by Malta, while frozen fish fillet consumption for the other leaders experienced more modest paces of growth.

In value terms, Germany ($1.2B), the UK ($1.2B), and France ($901M) were the countries with the highest levels of market value in 2019, together accounting for 51% of the total market. These countries were followed by Spain, Italy, Poland, Sweden, Austria, the Netherlands, Hungary, Belgium, and Malta, which together accounted for a further 40%.

In 2019, the highest levels of frozen fish fillet per capita consumption were registered in Malta (77 kg per person), followed by Sweden (3.71 kg per person), Austria (3.43 kg per person) and Germany (3.35 kg per person), while the world average per capita consumption of frozen fish fillet was estimated at 2.55 kg per person.

In Malta, frozen fish fillet per capita consumption increased at an average annual rate of +6.7% over the period from 2013-2019. In other countries, the average annual rates were as follows: Sweden (-4.9% per year) and Austria (-0.8% per year).

Imports in the EU

In 2019, the amount of frozen fish fillet imported in the European Union was estimated at 1.4M tonnes, remaining relatively unchanged against the previous year’s figure. In general, imports recorded a relatively flat trend pattern. The most prominent rate of growth was recorded in 2016 with an increase of 4.5% against the previous year. In value terms, frozen fish fillet imports amounted to $7.1B (IndexBox estimates) in 2019.

Imports by Country

In 2019, Germany (339K tonnes), distantly followed by the UK (162K tonnes), Poland (155K tonnes), France (154K tonnes), Spain (143K tonnes), the Netherlands (105K tonnes) and Italy (89K tonnes) were the largest importers of frozen fish fillet, together comprising 82% of total imports.

Germany experienced a relatively flat trend pattern with regard to the volume of imports of frozen fish fillet. At the same time, Poland (+2.0%) and Italy (+1.6%) displayed positive paces of growth. Moreover, Poland emerged as the fastest-growing importer imported in the European Union, with a CAGR of +2.0% from 2013-2019. Spain, the Netherlands, France, and the UK experienced a relatively flat trend pattern. The shares of the largest importers remained relatively stable throughout the analyzed period.

In value terms, the largest frozen fish fillet importing markets in the European Union were Germany ($1.5B), the UK ($1B), and France ($897M), with a combined 49% share of total imports. Spain, Poland, Italy, and the Netherlands lagged somewhat behind, together comprising a further 32%.

Among the main importing countries, Spain saw the highest growth rate of the value of imports, over the period under review, while purchases for the other leaders experienced more modest paces of growth.

Import Prices by Country

In 2019, the frozen fish fillet import price in the European Union amounted to $5,096 per tonne, growing by 4.4% against the previous year. Over the last six years, it increased at an average annual rate of +2.1%. The pace of growth was the most pronounced in 2017 when the import price increased by 5.3% year-to-year. Over the period under review, import prices attained the maximum in 2019 and are likely to continue growing in years to come.

Prices varied noticeably by the country of destination; the country with the highest price was the UK ($6,351 per tonne), while Poland ($3,415 per tonne) was amongst the lowest.

From 2013 to 2019, the most notable rate of growth in terms of prices was attained by Spain, while the other leaders experienced more modest paces of growth.

Source: IndexBox AI Platform

heirloom tomato

ALL THE WORLD TREASURES AN HEIRLOOM – TOMATO, THAT IS

Everyone Can Enjoy an Heirloom

Spring weather heralds the start of weekend farmers markets offering colorful fruits and vegetables, artisanal cheeses, and home-made baked goods. Along the east coast, tomatoes play a starring role at the local farmers markets. Green, yellow, orange, brown, grape tomatoes, cherry tomatoes, large, small – the variety seems endless.

Farmers markets are a great way to shop fresh and seasonal, but if you can’t get there, you can still find an increasingly impressive selection of tomatoes at your local grocery store. Are the tomatoes in the organic corner market the same tomatoes you get from the farmer? Unlikely. For the most part local farmers cannot sustain supply to large grocery chains where consumers are demand tomatoes year round. To meet that demand, the business of the heirloom tomato has grown global.

Pimp my Tomato

Italians made tomatoes a kitchen staple, but the tomato didn’t originate in Europe. Researchers have traced its origin to the “pimp,” a pea-sized red fruit that grows naturally in Peru and Southern Ecuador. As with so many foods we love, the Mexicans domesticated the tomato and Spanish explorers brought it home, where locals created a sweeter and tastier, but also more vulnerable, tomato.

Whether due to the preferences of grocers or their shoppers, the market overwhelmingly demands that growers focus on the few breeds of tomatoes that dominate our grocery shelves today. Producers worked to change the characteristics of tomatoes through cross-pollination in order to increase yield, to produce uniform shapes and sizes with smooth skin, and to render the tomatoes hardier for transport. Tomatoes are picked while green and artificially ripened with ethylene gas, sacrificing better taste for better looks (the flavor comes from the sugars that develop as the tomato ripens naturally).

partial-dg-pimp-tomato-graphic-for-web

Photo: The pimp fruit by David Griffen, Smithsonian.com

The New (Old) Tomato

The strict definition of heirloom tomato is a variety of tomato that has been openly pollinated for more than 50 years. Today, most experts would consider heirlooms as any non-hybrid tomato. Unlike heirlooms, many hybrid vegetables and fruits, while resilient and uniform, produce seeds that cannot reproduce. Therefore, the open pollination principle for heirlooms is key. As a result, it is the seed savers and gardeners with a flair for history that helped propel heirloom tomatoes to their elite status.

In the last decade, consumers started going back to the tomato’s heirloom roots. Top restaurants, prominent chefs, cooking magazines, the farm-to-table movement, and the proliferation of farmers markets have all put heirloom tomato flavor on display. Americans have become more tomato-curious than ever.

Regional is the New Local

Generally speaking, the entire world loves a tomato. As the most consumed vegetable in the world, we devour 130 million tons of tomatoes every year, of which 88 million are sold fresh. The remaining 42 million tons are destined for processing into tomato sauce and other products. China, the European Union, India, the United States, and Turkey are the world’s top producers.

Trade in tomatoes tends to be regional. Asia, Europe, and Africa represent 45 percent, 22 percent, and 12 percent, respectively, of global production, and much of what’s grown in one region is traded there. France, for example, is the fifth largest producer of tomatoes in Europe, exporting one quarter of its production across the European continent, primarily to Germany.

North American Tomato Trade – A Tasty NAFTA Product

About half of fresh tomatoes consumed in the United States are imported. The government applies tariffs to fresh tomatoes from countries we don’t have a free trade agreement with, and the tariffs fluctuate based on the timing of the U.S. growing season. From March 1 to July 14 (when Florida’s volume is highest and California and southeastern producing states begin to ship commercial tomatoes), it’s 3.9 cents per kilogram. Between July 15 until August 31, it goes down to 2.8 cents per kilogram (availability of locally grown tomatoes is highest). September 1 to November 14, it goes up again to 3.9 cents per kilogram. For the remainder of our winter, November 15 until March 1, it goes back down to 2.8 cents per kilogram.

Nearly all of fresh tomatoes we import into the United States come from Mexico (89 percent) and Canada (10 percent) duty-free under NAFTA. NAFTA partners are also the primary destinations for exported American tomatoes, with 77 percent of our exports going to Canada and 20 percent to Mexico. (The United States manufactures 96 percent of the tomatoes it uses in processing.)

Even though they enter the United States duty-free, tomatoes from Mexico are subject to minimum prices that vary based on the season; the price floor for winter tomatoes ranges from 31 cents to 59 cents, while summer tomato prices vary between 24.6 to 46.8 cents, depending on the tomato category. This is because Mexico has gotten very efficient at producing tomatoes year-round, which concerns some segments of American growers, particularly in Florida.

Florida growers are seeking changes to U.S. antidumping and countervailing duty proceedings in the current renegotiations of NAFTA to allow them to pursue dumping cases based on pricing in one specific season versus relying on three years of data, as is currently required. This proposal has created rifts among U.S. growers – primarily Southeast growers who support it and Western growers who fear its consequences. Mexico has also expressed strong opposition. American producers of other fruits and vegetables have also publicly opposed the proposal. They worry Mexico could use the same approach against American exporters of perishable produce.

Global, Regional, Local – It’s All Good

Our love for tomatoes will not recede any time soon. Improvements in technology are helping farmers increase their yields while maintaining or even reducing the acreage they are devoting to tomatoes. But even as trade routes for tomatoes are increasing and broadening, the allure and specialness of a locally-grown fresh tomato remains.

Tomatoes are the most popular plant for amateur home gardeners like myself. And with spring in full bloom, it’s only a matter of time before local tomatoes explode onto the scene in our neighborhood farmers market, exhibiting their versatility and flavor. The heirloom tomato has once again returned to prominence – just sprinkle a little salt on it, and take a satisfying bite. Trust me, you won’t regret it.

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Ayelet Haran

Ayelet Haran is a contributor to TradeVistas. She is a government affairs and policy executive in the life sciences industry. She holds a Master’s of Public Administration degree in International Economic Policy from Columbia University.

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

saw log

The Pandemic to Put a Drag on the Growth of the Global Coniferous Saw Log And Veneer Log Market

IndexBox has just published a new report: ‘World – Saw Logs And Veneer Logs (Coniferous) – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

The Global Saw Log and Veneer Log Market Expanded Robustly Over the Last Decade

The global market for saw logs and veneer logs (coniferous) totaled $68.8B in 2019, increasing by 2.5% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, taxes, and margins, which will be included in the final consumer price). The market value increased at an average annual rate of +1.3% over the period from 2007 to 2019; the trend pattern remained relatively stable, with somewhat noticeable fluctuations throughout the analyzed period. Global consumption peaked in 2019 and is expected to retain growth in the near future.

The countries with the highest volumes of consumption of saw logs and veneer logs (coniferous) in 2019 were the U.S. (261M cubic meters), Russia (168M cubic meters), and Canada (113M cubic meters), with a combined 46% share of global consumption. In value terms, the largest saw logs and veneer logs (coniferous) markets worldwide were the U.S. ($13.2B), Russia ($9.3B), and Canada ($5.7B), together comprising 41% of the global market.

Sawlogs and veneer logs are one of the basic materials around the world, as they serve as raw materials for the production of sawn wood and all kinds of wood-based panels, which are widely used in construction, and, at a lesser extent, in industry. The key factor determining the development of the saw logs and veneer logs market is the dynamics of construction in a particular country, which, in turn, depends on a set of economic and social factors: population growth, employment and income of the population, economic growth of the country, rates of urbanization, investment volumes and the availability of credit resources for the population, which altogether reflect the overall GDP growth.

Over the past years, the global construction industry has grown at a steady pace thanks to residential construction and major investment infrastructure projects, in both emerging markets and some developed markets. The main driver of growth in the global construction industry was the growing demand from developing countries, mainly China and the countries of Southeast Asia.

In these countries the economic growth rates are the highest in the world, which is accompanied by active urbanization and growth of the population’s income; all this together leads to an expansion of the volume of housing, industrial, and infrastructural construction. The pace of construction in the United States was also high, which was due to both the growth of the economy and the tendency to move from large cities to the suburbs, as well as active immigration; these factors were especially relevant to the saw log market due to the high popularity of wood construction materials in America.

The Lockdown and Uncertainty in the Construction Sector to Hamper the Market Growth

Until 2020, the global economy has been developing steadily for five years, although at a slower pace than in the previous decade. The slowdown in global economic growth was caused by increased political uncertainty in the world and trade wars between the United States and China. According to the World Bank outlook from January 2020, the global economy was expected to pick up the growth momentum and increase by from +2.5% to +2.7% per year in the medium term.

In early 2020, however, the global economy entered a period of the crisis caused by the outbreak of the COVID-19 pandemic. In order to battle the spread of the virus, most countries in the world implemented quarantine measures that put on halt production and transport activity. The result will be a drop in GDP relative to previous years and a sharp fall in the demand for oil, which led to extremely low prices and heavy oil production cuts.

The combination of those factors disrupts economic growth heavily throughout the world. According to World Bank forecasts, despite the gradual relaxing of restrictive measures and unprecedented government support in countries that faced the pandemic in early 2020, the annual decline of global GDP could amount to -5.2%, which is the deepest global recession being seen over the past eight decades.

In Asian countries, especially China, which faced the pandemic earlier than others, the epidemic situation improved earlier, with the quarantine measures largely relaxed, and the economy is gradually recovering from the forced outage. Thus, in China, by the end of 2020, an increase of 1% is expected (while a year earlier it was 6.1%), and in general in Southeast Asia in 2020, an increase of 0.5% is expected. In the medium term, it is assumed that the economy will gradually recover over several years as the restrictions are finally lifted.

The U.S., by contrast, is struggling with a drastic short-term recession, with the expected contraction of GDP of approx. -6.1% in 2020, as the hit of the pandemic was harder than expected, and unemployment soared due to the shutdown and social isolation. In the medium term, should the pandemic outbreak end in the second half of 2020, the economy is to start recovering in 2021 and then return to the market trend of the gradual growth, driven by the fundamentals existed before 2020 and boosted by support measures imposed by the government. In the European Union, the economy may plunge by 9% in 2020, in many other countries a comparable negative trend is also expected.

An additional serious risk for the medium-term recovery is the growth of geopolitical tensions in the world, especially between the United States and China, which are being drawn into a political confrontation on a wide range of issues. If sanctions and restrictions are tightened, it will hit global trade and worsen economic growth both in the United States and China and in many other countries involved in supply chains.

The construction sector has proven extremely vulnerable to the pandemic as due to quarantine measures, construction projects were paused, and the drop in incomes of the population makes mortgage loans less affordable. Thus, the above economic prerequisites will have the most negative impact on the production of building materials, and, therefore, on the consumption of saw logs and veneer logs.

Taking into account the above, it is expected that in 2020 global consumption of saw logs and veneer logs will drop by approx. 5%. In the medium term, as the global economy recovers from the effects of the pandemic, the market is expected to grow gradually. Overall, market performance is forecast to expand with an anticipated CAGR of +0.3% for the period from 2019 to 2030, which is projected to bring the market volume to 1.2B cubic meters by the end of 2030.

Production

For the seventh consecutive year, the global market recorded growth in the production of saw logs and veneer logs (coniferous), which increased by 1.8% to 1.2B cubic meters in 2019. The total output volume increased at an average annual rate of +1.5% from 2007 to 2019; the trend pattern remained consistent, with only minor fluctuations being recorded throughout the analyzed period. The most prominent rate of growth was recorded in 2010 when the production volume increased by 6.4% year-to-year. Global production peaked in 2019 and is expected to retain growth in years to come.

In value terms, the production of saw logs and veneer logs (coniferous) expanded modestly to $69.8B in 2019 estimated at export prices. The total output value increased at an average annual rate of +1.6% from 2007 to 2019; the trend pattern remained relatively stable, with only minor fluctuations being recorded in certain years. The growth pace was the most rapid in 2017 when the production volume increased by 9.4% y-o-y. Over the period under review, global production attained the peak level in 2019 and is likely to see gradual growth in the immediate term.

Production By Country

The countries with the highest volumes of production of saw logs and veneer logs (coniferous) in 2019 were the U.S. (278M cubic meters), Russia (181M cubic meters), and Canada (120M cubic meters), with a combined 49% share of global production. These countries were followed by Sweden, Finland, Brazil, New Zealand, Germany, Poland, Chile, China, and Japan, which together accounted for a further 30%.

From 2007 to 2019, the biggest increases were in New Zealand, while the production of saw logs and veneer logs (coniferous) for the other global leaders experienced more modest paces of growth.

Imports

In 2019, global imports of saw logs and veneer logs (coniferous) totaled 155M cubic meters, growing by 3.4% against 2018 figures. Overall, imports saw a relatively flat trend pattern. The pace of growth appeared the most rapid in 2010 when imports increased by 24% against the previous year. Global imports peaked at 165M cubic meters in 2014; however, from 2015 to 2019, imports remained at a lower figure. In value terms, imports of saw logs and veneer logs (coniferous) contracted to $8.1B (IndexBox estimates) in 2019.

China Remains the Largest Market for Imported Coniferous Saw Logs and Veneer Logs

China was the key importer of saw logs and veneer logs (coniferous) in the world, with the volume of imports accounting for 69M cubic meters, which was approx. 45% of total imports in 2019. Austria (17M cubic meters) occupied an 11% share (based on tonnes) of total imports, which put it in second place, followed by Sweden (7.3%), Japan (7%), Germany (6.8%) and South Korea (4.8%). Belgium (3.7M cubic meters) followed a long way behind the leaders.

Imports in China increased at an average annual rate of +4.2% from 2007 to 2019. At the same time, Belgium (+7.5%), Germany (+5.3%), Sweden (+4.4%) and Austria (+2.5%) displayed positive paces of growth. Moreover, Belgium emerged as the fastest-growing importer imported in the world, with a CAGR of +7.5% from 2007-2019. By contrast, South Korea (-3.4%) and Japan (-5.4%) illustrated a downward trend over the same period.

In value terms, China ($4.1B) constitutes the largest market for imported saw logs and veneer logs (coniferous) worldwide, comprising 50% of global imports. The second position in the ranking was occupied by Japan ($663M), with a 8.2% share of global imports. It was followed by Austria, with a 7.2% share.

From 2007 to 2019, the average annual growth rate of value in China amounted to +5.5%. In the other countries, the average annual rates were as follows: Japan (-4.0% per year) and Austria (-1.0% per year).

The average import price for saw logs and veneer logs (coniferous) stood at $53 per cubic meter in 2019, shrinking by -3.3% against the previous year. Over the period under review, the import price recorded a relatively flat trend pattern. The pace of growth was the most pronounced in 2008 an increase of 17% y-o-y. As a result, import price attained the peak level of $63 per cubic meter. From 2009 to 2019, the growth in terms of the average import prices remained at a somewhat lower figure.

There were significant differences in the average prices amongst the major importing countries. In 2019, the country with the highest price was Japan ($61 per cubic meter), while Belgium ($34 per cubic meter) was amongst the lowest.

From 2007 to 2019, the most notable rate of growth in terms of prices was attained by Japan, while the other global leaders experienced mixed trends in the import price figures.

Source: IndexBox AI Platform