From Lupicinio International Law Firm we bring you the latest news on international trade. This month of March has been marked by the crisis in Ukraine, which has had great effects on the international scene. Especially, the consequences of this crisis have been felt in the energy sector with rising prices throughout the month. Other sectors, such as the food sector, have also been strongly shaken by the conflict.
IRAN AND THE OIEA WANT TO CLOSE OUTSTANDING ISSUES TO RELAUNCH NUCLEAR DEAL
The International Atomic Energy Agency (IAEA) said it wanted to resolve the outstanding issues in a “pragmatic” way, in order to resume the nuclear deal signed in 2015 between Tehran and the major powers.
VISIT OF BIDEN-HARRIS ADMINISTRATION OFFICIALS TO CARACAS
Following the outbreak of war in Eastern Europe, there have been rapprochements between countries that would have been unfeasible under other circumstances, and this has been the case between Venezuela and the United States.
Due to the consequences of the war in Ukraine, products such as oil and/or gas are the order of the day. On 6 March, President Biden imposed a veto on Russia, which affects these products.
Against this backdrop, a rapprochement between the North American country and Venezuela has been perceived, having met during the first weekend of March in Venezuela.
US and Venezuelan officials discussed the possibility of easing oil sanctions on Venezuela, but made little progress toward an agreement in their first high-level bilateral talks in years.
OIL PRICES HIT 14-YEAR HIGH ON RUSSIAN OIL BAN TALKS
Russia is the world’s largest exporter of crude oil and petroleum products combined, with exports of about 7 million bpd, or 7 per cent of global supply.
Oil prices hit their highest levels since 2008 on Monday (7 March) amid market supply fears. The United States and European allies considered a ban on Russian oil imports and the prospects of a rapid return of Iranian crude to world markets.
Global oil prices have soared by nearly 60% since the start of 2022, along with other commodities, raising concerns about global economic growth.
UKRAINIAN PRESIDENT ZELENSKYY SEEKS INTERNATIONAL TRADE EMBARGO ON RUSSIA
Ukrainian President Volodymyr Zelenskyy on Monday (7 March) called for new international sanctions against Russia for its invasion of Ukraine, proposing a boycott of Russian oil and other Russian exports and a halt to exports to Russia.
Western sanctions imposed by the Russian military assault have already isolated Russia to a degree never before experienced by such a large economy.
Zelenskyy said it was necessary to increase economic pressure, in effect calling for an international trade embargo on Russia.
WAR IN UKRAINE: CRISIS IS UNLEASHING ‘HELL ON EARTH’ FOR FOOD PRICES
The head of the World Food Programme has warned that the conflict in Ukraine could send world food prices soaring, with a catastrophic impact on the world’s poorest people.
Ukraine and Russia are two major exporters of basic foodstuffs, and the war has already affected crop production, pushing up prices.
Russia and Ukraine, once dubbed “the breadbasket of Europe”, export about a quarter of the world’s wheat and half of the world’s sunflower products, such as seeds and oil. Analysts have warned that the war could affect grain production and even double world wheat prices.
He said that some countries could be particularly affected by the current crisis because of the high proportion of cereals they currently import from the Black Sea region.
The war has also wreaked havoc on supply lines that are often used to export agricultural products. The Ukrainian military suspended all commercial transport in its ports after the Russian invasion.
SPAIN PRESSES BRUSSELS TO FACILITATE CEREAL IMPORTS FROM ARGENTINA AND THE US
Among the sectors most affected by the crisis in Ukraine is the Spanish countryside, since Ukraine was one of the main markets from which it imported cereals – mainly maize – for the production of feed for livestock.
It is therefore pressing the European Commission to look for alternatives to prevent a further increase in input prices, which would ultimately lead to a further increase in food prices and push up inflation even further.
Spain, through the Minister of Agriculture, Fisheries and Food, Luis Planas, is insisting in Brussels that EU requirements for cereal imports be relaxed, albeit temporarily, in order to counteract the loss of the Ukrainian harvest.
The Spanish government has also requested that the sanitary requirements for imports into Europe be made more flexible. In practice, this would facilitate the purchase of cereals from Argentina, for which there are restrictions (due to their content of certain residues of phytosanitary products). And also the import of genetically modified maize and soya from the United States or Brazil, subject to control by the Food Safety Agency.
UNITED STATES BANS IMPORT OF RUSSIAN OIL, GAS AND COAL
President Biden has announced a ban on the import of Russian oil, liquefied natural gas and coal into the United States – a significant action with broad bipartisan support that will further deprive President Putin of the economic resources he uses to continue the war in Ukraine.
The US will now have to replace the loss of its Russian supply, which served two main functions in the US market. First, Russian oil relieved the problems associated with transporting oil to certain states, especially those on the West Coast. Second, crude oil from different regions has different properties and US refineries are not designed to process all types.
THE US RETHINKS RELATIONS WITH VENEZUELA, IRAN AND SAUDI ARABIA
The Biden administration is moving closer to these nations with the aim of extinguishing the West’s dependence on Russian oil and gas. It seeks, among other things, to stabilise fuel prices and tilt these countries more towards the West.
The rapprochement with these countries has been criticised as a marked departure from Biden’s pronouncement upon taking office that democratic values would be the cornerstone of his international policy.
Referring to Iran, the US does not refer to oil directly, but mentions negotiations over Iran’s nuclear programme, which could lead to a possible lifting of sanctions, allowing Iranian oil to flow legally on the market again.
As for Venezuela, the visit of a delegation from the Biden administration at the beginning of the month shows a rapprochement of positions, with the release of two Americans, among others, a few days later, so that the lifting of sanctions on Venezuela is being considered, allowing, as with Iran, the free circulation of its oil.
The problem with the South American country, rather, lies in its oil infrastructure, which, even if an agreement is reached in time, would not be ready to increase its fuel production in time to curb the price rise.
As for Saudi Arabia, even with the strategic alliance the two countries share, the royal family has not shown much interest in collaborating with Biden, due to the president’s intention to make them pariahs in the aftermath of Jamal Khashoggi’s murder.
RUSSIAN SANCTIONS HAMPER SHIPPING, EVEN AS PANDEMIC PRESSURE EASES
Russia’s invasion of Ukraine and global sanctions against Moscow are impacting on logistics and supply chains, creating bottlenecks in the transport of goods and commodities and economically threatening countries and companies close to the conflict zone.
The cost of transporting goods by sea, land and air, which had already soared during the pandemic, is also under pressure as world oil prices surpassed $130 per barrel the week of 14 March.
The most visceral blow is being felt close to the heart of the war zone, in the Black Sea. More than 100 ships and their crews have been stranded in Ukrainian ports since Russia invaded Ukraine.
According to analysts, the problems around the Black Sea are the top of the iceberg, causing disruption to the entire logistics sector and putting pressure on world trade.
MERCOSUR AND ASSOCIATED MEMBERS WANT FERTILISERS OFF RUSSIAN SANCTIONS LIST
Mercosur member countries plus partners Chile and Bolivia want fertilisers excluded from the list of sanctions against Russia.
In particular Brazil, an agricultural powerhouse and the world’s leading importer of fertilisers, argue that crop nutrients, essential for high yields in food production, should not be subject to sanctions. Brazil relies on imports for 85% of the fertilisers it needs for crops and more than a fifth of its imports, totalling 9 million tonnes in 2021, come from Russia.
Brazil’s agriculture minister has called on countries to find a global solution to the issue, saying fertiliser shortages will lead to food inflation and could undermine food security. She hopes to get enough support from the FAO to convince other UN members to back the proposal.
Even before the war in Ukraine, global fertiliser supplies were already dwindling after the US sanctioned Belarus, another major producer.
EU SANCTIONS LUXURY EXPORTS TO RUSSIA
The EU’s fourth package of sanctions, which focuses on trade measures, is the first attack on the energy sector, seeks to strike, albeit symbolically, at the country’s business elites by banning the export to Russia of luxury goods, ranging from high-end cars to sports equipment and even fake wigs and beards.
MYANMAR AUTHORISES USE OF THAI CURRENCY IN BORDER TRADE
Myanmar’s military administration has agreed to accept the Thai baht as the official currency in border trade transactions and plans a similar agreement for the use of the Indian rupee, seeking to limit the country’s dependence on the US dollar in trade.
Myanmar’s economic crisis worsened after the military seized power in February 2021 from the elected government of Aung San Suu Kyi. Opposition to the military takeover has turned into armed resistance that some UN experts have described as civil war.
The turmoil, sanctions against the military leadership and the pandemic have combined to strain the country’s ability to earn foreign currency. Meanwhile, the value of the kyat has plummeted.
Thailand is Myanmar’s second largest trading partner after China, with border trade at five checkpoints amounting to $4.3 billion in fiscal year 2020-2021.
2022 KICKS OFF WITH SPANISH EXPORTS REACHING A NEW RECORD HIGH IN JANUARY
In January 2022, both exports and imports reached historic figures for the month of January. The former reached a total of 25,543 million, while the latter reached 31,666 million, these figures being a reflection of the dynamism that foreign trade has shown throughout 2021.
If we compare with some countries, Spanish exports grew by 24.6% compared to January 2021, while, considering the same period, exports from Germany grew by 11%, in the United States by 15.2%, and in China by 13.6%. France and the United Kingdom have shown somewhat higher figures than Spain, with 25.7% and 28.8% respectively.
Exports to the EU-27 accounted for 65.4% of the total and increased by 28.8%. Those to the Euro zone (57.6% of the total) increased by 29.6% and those to the rest of the European Union (7.8%) of the total, grew by 23.3%. The main partners? Portugal (37.8%), France (21.8%) and Germany (6.4%).
INDIA AND AUSTRALIA CLOSE TO SIGNING A “MINI FREE TRADE AGREEMENT“
India and Australia are expected to sign an interim free trade agreement this March, a major step towards consummating their economic relationship at a time when both nations are desperate to reduce their dependence on China.
New Delhi and Canberra began negotiating the agreement in 2011, but the lack of alignment of their priorities repeatedly caused the talks to stumble.
The two sides complement each other – India needs essential Australian minerals for new sectors such as electric vehicle development, while Australia needs the skilled labour that India can offer.
JAPAN TO INVEST $42 BILLION IN INDIA TO STRENGTHEN ECONOMIC TIES
Japan’s Prime Minister Fumio Kishida said his country will invest $42 billion in India over the next five years in a deal that is expected to boost bilateral trade.
Kishida met his counterpart, Narendra Modi, in New Delhi during his first visit to India since taking office. The two leaders held talks ranging from the economy to security cooperation.
Japanese investments in India reached $32 billion between 2000 and 2019, mainly in the automotive, electrical equipment, telecommunications, chemicals, insurance and pharmaceuticals sectors.
Bilateral trade between India and Japan for 2019-20 exceeded $11.87 billion, according to government data. India’s exports from Japan amounted to $3.94 billion, while India’s imports from Japan stood at $7.93 billion.
INVASION OF UKRAINE: MARITIME TRADE CHAOS OVER WAR WORSENS GLOBAL GRIDLOCK
With the invasion of Ukraine and the imposition of a veto on the invader, major shipping lines have not hesitated to join in the measures against Russia. However, following this decision, many cargo ships bound for the Eurasian country have found themselves with tons of cargo on board with which they no longer know what to do. In addition to this, there is also the factor of the carriers’ strike, which means that the option of storing these goods in alternative ports to their original destination is ruled out. Only one type of product, perishables, has been exempted from these measures: foodstuffs, medicines and humanitarian aid have been the only ones able to circumvent the boycott.
The International Maritime Council reports that one in seven (1/7) seafarers is either Russian or Ukrainian: out of 1.89 million, 10.5% are Russian (2nd nationality) and 4% Ukrainian (6th).
WAR COMPLICATES RUSSIA’S ROLE IN SUPPLYING RAW MATERIALS TO CHINA
The trade relationship between China and Russia has been complicated since the war began more than three weeks ago, raising questions about the future flow of energy, metals and crops between the two powers.
Following the invasion, Chinese officials have said they did not agree with the unilateral sanctions and would continue to maintain normal trade relations with Russia. However, banks have stopped financing purchases and traders are grappling with logistics, while more recently China’s foreign minister said Beijing does not want to be affected by the sanctions.
Following the invasion, Chinese buyers, and the lenders that finance their purchases, have largely avoided Russian shipments of coal and LNG, as well as crude oil. This hesitation may be temporary, given that the end point of international action against Moscow is unknown. But it may also reflect deeper business concerns about being caught up in sanctions that could affect global banking arrangements, as well as government fears of being shut out of much more important markets for Chinese goods.
USA AND UK BEGIN TALKS TO STRENGTHEN TRADE TIES
US and British officials began two days of meetings on Monday (21 March) to strengthen trade ties, underlining transatlantic cooperation at a time when Western countries are increasing pressure on Russia over its war in Ukraine.
Both sides would work to identify mutual trade priorities and promote “innovation and inclusive economic growth for citizens on both sides of the Atlantic”.
The talks in the port city of Baltimore mark a broad effort to take stock of the $260 billion bilateral trade relationship, while specific disputes will be dealt with separately and formal talks on a free trade agreement remain frozen.
This week’s meetings do not mark the resumption of formal free trade talks held under the previous Trump administration that were suspended once President Joe Biden took office, much to the chagrin of business leaders on both sides of the Atlantic. Washington has hit the pause button on such deals.
The two sides will meet again this spring in Britain.
VENEZUELAN OPPOSITION PRESSURES US NOT TO CONSIDER OIL IMPORTS
The South American country’s opposition is pressing Washington to condition any easing of oil sanctions on political concessions, adding new hurdles for oil companies hoping to resume operations there. If accepted, the opposition’s proposal would put any consideration of US imports of Venezuelan oil on hold.
US diplomats have been trying to find energy supplies around the world that can help replace Russian oil and gas. US officials met with Venezuelan President Nicolas Maduro in Caracas for the first bilateral talks in years earlier this month.
The oil sanctions imposed by the US in 2019 were aimed at toppling Maduro. The US officials’ visit to Venezuela took the opposition by surprise and provoked a backlash from US Republicans and some of Biden’s fellow Democrats in Congress.
WORLD TRADE ORGANISATION CALLS FOR ‘GLOBALISATION’ TO FIX SUPPLY CHAINS
Ngozi Okonjo-Iweala, head of the World Trade Organisation, spoke on Monday of the need to address bottlenecks in global supply chains by bringing more countries into global manufacturing networks, something she called “reglobalisation”.
He said that small businesses have been hit hard by the pandemic and that poor and landlocked countries risk being pushed out of global value chains.
International supply chains remain congested more than two years into the pandemic, with companies and customers around the world experiencing delays and higher costs of shipping goods. The Russian invasion of Ukraine and Western sanctions on Russia have added to these disruptions.
“The global amount of commodity trade has almost quadrupled between 1990 and 2019, and current techniques must be adapted to deal with threats such as pandemics and local climate change,” he said.
SPAIN ACCOUNTS FOR 24% OF MOROCCO’S FOREIGN TRADE AND 11% OF ALGERIA’S
The Western Sahara region, and more particularly its autonomy, has been at odds between Morocco and Algeria for some time now, but Pedro Sánchez’s support for Moroccan monarch Mohammed VI’s plans for the region could have important repercussions for Spain. On the one hand, Spain is Morocco’s largest trading partner, accounting for 24.1 per cent of its foreign trade, but we are also Algeria’s third largest importer with 10.97 per cent. Looking at these figures, it seems easy to position oneself between the two states, but the reality is not so easy.
Although Morocco is our main trading partner in Africa, we cannot omit, and even less with the state of relations with Russia due to the invasion of Ukraine, the importance of Algeria for Spain, knowing that we buy 47% of the gas it exports: in 2020, fuel imports from Algeria accounted for 92% of total Spanish imports.
WITHDRAWAL OF MOST-FAVOURED-NATION STATUS FOR RUSSIA
Since the beginning of the war in Ukraine, the Asian country has received numerous international sanctions from the international community. Among the latest EU sanctions, dated 15 March, is the elimination of the most favoured nation status in the WTO. According to this principle, basic to the WTO, if a WTO member country is granted more favourable treatment than another, all member countries are entitled to benefit from the same conditions, but this privilege has been withdrawn.
This privilege, which is present in most WTO texts (GATT, TRIPS, etc.), nevertheless has mechanisms that legitimise its suspension, such as the security exception in Article XXI, which applies if it is “necessary for the protection of essential security interests”, see “in case of war or other emergency situations in international relations”.
The withdrawal of such privileges will undoubtedly have consequences for Russia. The end of its WTO membership privileges means that it will be able to impose much higher customs duties than other WTO members, without such a measure constituting a violation of international law. Along with the rest of the measures, the aim is to put pressure on Russia to immediately withdraw its troops from Ukraine and halt its invasion if it wants to avoid a commercial, financial and economic disaster.
WTO TRADE TALKS AMID TENSIONS WITH UKRAINE
Western countries are refusing to engage with Russia at the World Trade Organisation (WTO) in Geneva in a coordinated move that has already brought negotiations to a standstill in several sectors.
Trade delegates now fear that the 13 June meeting of trade ministers – originally scheduled for 2020 but delayed twice because of the coronavirus pandemic – will not be able to reach agreement.
This situation has so far affected negotiations on fisheries and agriculture, as well as e-commerce and investment facilitation,
PUTIN WANTS “HOSTILE” COUNTRIES TO PAY FOR RUSSIAN GAS IN ROUBLES
President Vladimir Putin declared on Wednesday 23 March that Russia will ask to be paid in roubles for gas sold to “hostile” countries. Gas prices in Europe soared on concerns that the move will aggravate the region’s energy crisis.
Europe is heavily dependent on Russian gas for heating and power generation, accounting for around 40% of Europe’s total consumption.
Putin’s message was clear: if you want our gas, buy our currency. However, it is unclear whether Russia has the power to unilaterally change existing contracts agreed in euros.
The rouble spiked briefly after the announcement, reaching a three-week high above 95 dollars.
CUBA PUSHES THROUGH NEW CUSTOMS MEASURES FOR TRAVELLERS AND TRADE
These measures are taken in an attempt to stimulate export activity and facilitate the payment of obligations for the entry of goods into the country, according to the authorities.
The head of the General Customs of the Republic indicated that the objective of these regulations is to achieve a streamlined, secure and transparent process in the transport of cargo and the flow of passengers and the streamlining of foreign trade.
The measures concern activities involved in the sale and import of various products, ranging from engines for small marine vessels used for fishing, tobacco – an important national export product – and even medicines.
CHINA EXPECTS U.S. TO REMOVE ALL TARIFFS ON ITS PRODUCTS
Following the reinstatement of 352 Chinese tariff exclusions by the United States, the Chinese Ministry of Commerce expects all tariffs on Chinese products to be eliminated as soon as possible.
Shu Jueting, a spokesman for the ministry, commented on the US move during a press conference, saying the move was beneficial and that he hoped bilateral trade relations would return to normal.
ALGERIA AND MOROCCO ARE DOOMED TO REACH AN ECONOMIC UNDERSTANDING WITH SPAIN
Despite the tensions, Morocco and Algeria have such important trade links with Spain that a breakdown in relations would cost any of the three countries millions. But these ties extend beyond the balance of trade, although they also come in the form of money. As of last year, the debt between the two with Spain amounted to 29.71 million, put into what the government calls Debt to Investment Conversion Programmes (Programas de conversión de Deuda en inversiones).
According to ICEX data, mutual dependence is a fact. On the one hand, 47% of all the hydrocarbons that Spain buys are Algerian, while Algerian customs data place Madrid as the fifth largest supplier, behind China, France, Italy and Germany.
As for Morocco, it is a fundamental partner for Spain, as the latter is both its first client and its first supplier: the flow of investments between the two countries generates around 25,000 direct jobs.
Analysing these facts, then, we see that bringing the Western Sahara diplomatic crisis into the economic arena can only hurt everyone, including the hydrocarbon issue.
THE UNITED STATES TO SELL MORE LIQUEFIED NATURAL GAS TO EUROPE TO HELP IT REDUCE ITS DEPENDENCE ON RUSSIA
The United States will supply more liquefied natural gas to the European Union to help it reduce its dependence on gas supplies from Russia, President Joe Biden said on Friday (25 March).
“Today we have agreed on a joint game plan to achieve that goal and accelerate our progress toward a clean and secure energy future,” Biden said in a statement.
“This initiative focuses on two key issues: helping Europe to reduce its dependence on Russian gas as quickly as possible, and reducing European gas demand in general,” he added.
SWITZERLAND BANS THE EXPORT OF GOODS AND SERVICES RELATED TO THE RUSSIAN ENERGY SECTOR.
The Swiss government has imposed a ban on the export of goods and services for the Russian energy sector, as well as on the import of steel and iron products from Russia. Participation in companies active in the energy sector and the granting of loans or other financial resources to such companies is also prohibited.
Switzerland had already imposed a series of sanctions in line with the EU. With these latest measures, it joins the sanctions adopted by the European Union on 9 and 15 March.
UAE WELCOMES BROADER TRADE AGREEMENT BETWEEN INDIA AND GCC
The free trade agreement between India and the United Arab Emirates will facilitate the movement of service professionals between the two countries, UAE Minister of State for Foreign Trade Thani bin Ahmed Al Zeyoudi said in an interview, with just over a month to go before the agreement comes into force.
The agreement is structured to facilitate greater investment flows for both countries and the bilateral trade deal also keeps open the possibility of a broader pact with the six members of the Gulf Cooperation Council (GCC).
India and the UAE signed the Comprehensive Economic Partnership Agreement (CEPA) on 18 February. The agreement, negotiated in a record 88 days, will initially give zero-duty access to 90 per cent of Indian goods and 65 per cent of UAE goods.
In the next 10 years, 97% of Indian products will have duty free access to the UAE market and 90% of UAE products will have duty free access to the Indian market.
BORRELL ASSURES THAT THE NUCLEAR AGREEMENT WITH IRAN “IS A MATTER OF DAYS”
Iran has been in talks in Vienna for several months to revive the 2015 agreement that was supposed to prevent Tehran from acquiring the atomic bomb in exchange for the lifting of sanctions that stifle the Iranian economy.
International negotiating powers say they are close to reaching an agreement to revive the 2015 nuclear deal, which began to crumble after the United States abandoned it in 2018.
The High Representative of the Union for Foreign Affairs and Security Policy on the Iran Nuclear Deal “We want to develop a stronger partnership with the Gulf countries, not only because we need to diversify our energy sources”.
THE WTO AND THE DIGITALISATION OF FOREIGN TRADE
The WTO (World Trade Organisation) together with the ICC (International Chamber of Commerce) published the first toolkit to help businesses and government agencies adopt available standards to accelerate the digitisation of business processes.
The purpose of such a measure is to provide the international community with a comprehensive overview of foreign trade standards that can be used to reduce the use of paper. To this end, the guide lists close to 100 available standards, aimed at getting businesses and state entities to speak the same universal language, thus facilitating transactions.
The system seeks to establish interoperability of all those involved in foreign trade transactions while eliminating the use of paper in trade processes.
USA: INTERNATIONAL TRADE DEFICIT FALLS TO $106.6 BILLION IN FEBRUARY
The US trade deficit, down from $107.6 billion in January to $106.6 billion, was reduced by $1 billion, as reported by the US Census Bureau.
In terms of market impact, it appears that such an addition has not had a very noticeable impact on the dollar’s performance against its rivals. The US dollar index was last seen up 0.4% on the day at 99.20.
US IMPOSES NEW SANCTIONS AGAINST NETWORK OF COMPANIES FOR SUPPORTING IRAN’S WEAPONS DEVELOPMENT
The new restrictions are part of a strategy to prevent Iran’s development and use of ballistic missiles. Even with a return to the nuclear deal, the US will continue to ‘target those who support the missile programme’.
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