6 Jan, 2021
Global trade policy issues in 2021; pandemic greater than Brexit for UK apparel
By Chris Rogers
The Supply Chain Daily provides a curated overview of Panjiva's research and insights covering global trade policy, the logistics sector and industrial supply chains and draws from global shipping and freight data.
2021 Outlook: Altogether, apart – Global trade policy issues
A change in U.S. presidency and the fallout from Brexit are not the only trade policy issues facing global supply chains in 2021.
Reform of the World Trade Organization will likely have to wait until 2022 with the next ministerial having been delayed until December. In the meantime, the WTO will need to manage down the proliferation of medical protectionism measures with 122 restrictive measures still on the books versus 177 in April.
The EU's wide-ranging environmental policy combined with the return of the administration of President-elect Joe Biden to the Paris climate change agreement will likely put carbon border taxes back on the agenda. Base metals, including steel and aluminum, could be particularly exposed. The EU and U.S., which accounted for 18.3% and 13.4% of global imports in 2019, have significant combined leverage to set the agenda. China which will launch the details of its 14th Five-Year Plan.
Digital services taxes may become more prevalent with an OECD-level agreement planned for mid-2021 with existing DST rates of between 2% and 7.5% of revenues already in place. Actions by the Biden administration regarding retaliation for DSTs will be key given the U.S. represented 56.8% of the top 20 internet firms' revenues with an average 2.2% tax rate on revenues in 2019.
While the Regional Comprehensive Economic Partnership has been signed, it has yet to be ratified, which may occur in 2021 if China takes the lead. An expansion of the CPTPP group may emerge with China, South Korea, Taiwan, the U.S. and the U.K. all potential joiners. Indonesia meanwhile may find value in a bilateral deal with the U.S., with total trade worth 2.4% of GDP in 2019.
The African Continental Free Trade Area has come into force but will require significant investments in logistics infrastructure and domestic legislation to deliver increased trade. Intra-African trade represented just 22.6% of cumulative exports in 2019, though better than 18.3% in 2018.
There are several trade policy brush-fires that could ignite during the year. Existing China-Australia rivalry may prove insoluble during the year and could spread. By contrast, Japan-South Korea tensions may ease under Prime Minister Yoshihide Suga after a slide in trade between the two in 2019 and 2020.
Next not worried about Brexit, global logistics is the issue
Disruptions to U.K. retail by the transition to new EU-U.K. trading and customs arrangements may prove minimal with the CEO of food retailer Wm Morrison Supermarkets PLC, David Potts, stating "there is no issue with the flow of merchandise between mainland Europe."
Similarly, clothing retailer Next PLC has stated it "does not anticipate that Brexit will have a material impact on our ability to import and export stock in the year ahead." Next instead faces challenges from supplies from outside the EU, stating "the pandemic has adversely affected the flow of container traffic from the Far East" with delays of two to three weeks.
The share of total U.K. clothing and footwear imports from the EU has increased to 35.4% in the 12 months to Oct. 31 from 30.2% in 2015 while imports from India dropped to 3.9% from 6.1% over the same period.
Imports from India linked to Next fell by 12.0% year over year in the three months to Oct. 31 while those associated with Primark Ltd. dropped by 33.2%. Multi-line retailers Marks & Spencer Group PLC and Tesco PLC meanwhile have experienced an increase in shipments during the same period.
(Panjiva Research - Consumer Discretionary)
Maersk leads solar shipping as logistics costs complicate tariffs
The U.S. Court of International Trade has ruled that the Commerce Department erred in its choice of shipping cost calculations in setting tariffs on imports of solar panels from China. Commerce reportedly used a shipping rate linked to AP Møller - Mærsk A/S sourced from Xeneta AS on the assumption it included handling charges when they did not.
The case, and others like it, can drive ongoing supply chain uncertainties for solar power project developers. Nonetheless, the impact of tariffs applied by the Trump administration has waned. U.S. seaborne imports of solar panels have climbed 52.0% year over year in 2020, though growth slowed later in the year with imports in the fourth quarter unchanged yearly.
Mærsk was the largest container line shipping solar panels to the U.S. with a 23.3% market share in 2020, putting it ahead of Cosco Shipping Holdings Co. Ltd. and CMA CGM SA. Mærsk's handling also expanded by 76.1% year over year in the fourth quarter, significantly outpacing its peers.
(Panjiva Research - Renewables)
Export order expectation rebound takes a breather
U.S. manufacturing sentiment improved in December, according to the latest ISM survey, dragging up import order expectations to 57.5%, where over 50% indicates expansion, from 55.1% a month earlier. Panjiva's U.S. seaborne data shows shipments likely rose 22.1% year over year in December, supporting the ISM evidence of continued U.S. import growth.
Yet, the export side of the economy may be cooling with export order expectations dipping to 57.5% from 57.8%, the first downshift since April. A similar trend has been seen in China's recent CFLP survey with a decline to 51.3% from 51.5%, the first sign since April that the engine of global trade growth may have paused.
Europe's business managers by contrast are seeing an accelerating improvement in export order expectations in both Germany and France, likely reflecting the avoidance of a hard Brexit.
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