Tradewinds

TRADEWINDS

THE LATEST TRENDS IN THE WORLD OF TRADE

August 1, 2011
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EU-South Korea FTA Implemented July 1

Deal the EU’s first with Asian country

A free trade agreement (FTA) between the EU and South Korea came into force on July 1, marking the first such pact the EU has entered into with an Asian country and the largest trade pact ever negotiated by Brussels.

Trade between the two parties was estimated at €66 billion last year, although that figure could easily rise to €19 billion under the deal.

Ignacio Garcia Bercero, the EU’s chief negotiator, praised the agreement, adding that it was the type of deal that the EU would like to create with other Asian countries. India and Singapore, for instance, have already started free trade talks with the EU.

Under the agreement, tariffs will be eliminated or phased out on 96 percent of EU goods and nearly 99 percent of South Korean goods within three years. Within five years, duties on most industrial goods will be abolished.

In the meantime, the EU’s free trade talks with India are nearly completed and both sides expect that an agreement could be reached by the end of the year.

 

Mazda to Build $500 Million Plant in Mexico

Part of plan to expand in Latin America

Mazda Motor Corp. has announced plans to build a $500 million manufacturing complex in Mexico with capacity to build 140,000 vehicles a year—part of the company’s overall strategy to expand in Latin America.

Production at the plant will start in April 2013 with 3,000 employees working at the plant.

“Since Mazda entered the Mexican market in 2005, our sales results have steadily improved, and in 2010 we set a new record for both sales volume and market share,” Mazda’s CEO Takashi Yamanouchi said in the statement.

Mazda sold 25,116 vehicles in Mexico last year, according to the Mexican Automobile Industry Association. In the first five months of this year, its sales rose 19 percent to 10,902, according to the association.

The new Mexican facility will be in Guanajuato state, about 155 miles northwest of Mexico City.

 

China to Slash Duties on Luxury Goods

Boost high-end purchases domestically

In a dramatic attempt to boost domestic consumption, the Chinese government is expected to reduce or even eliminate its steep tariffs on luxury goodswhich in some cases is as high as 60 percent.

The high duty rates force many affluent Chinese consumers to travel to Hong Kong or other countries to purchase expensive handbags, watches, and other expensive products.

In fact, 56 percent of China’s luxury purchases in 2010 were made overseas, notes a study by Bain & Company published last year.

The new tax system for luxury products is expected to be introduced by October 1, which coincides with the beginning of a week-long holiday for National Day and a shopping frenzy for Chinese consumers.

Chinese officials say they are trying to boost domestic spending and reduce their reliance on exports and investment to fuel the rapidly growing economy.

According to consulting firm PricewaterhouseCoopers, Chinese demand for luxury goods has ballooned in recent years and the country is forecast to be the world’s top buyer of these types of products by 2015.

 

Cargo Theft a Growing Concern in Asia

Malaysia, Philippines reporting more incidents

Although Asia is generally safer than other areas of the world when it comes to the likliehood of cargo theft, FreightWatch International reports that the region is seeing an uptick in theft, especially in Malaysia and the Philippines.

According the organization’s global threat assessment report published in February, “there’s little question that cargo theft and supply chain risk have increased throughout Asia.”

Malaysia, which lies along a number of important trading routes, is getting a lot of unwanted publicity. The country is increasingly used as a transit route for companies shipping goods to and from neighboring Singapore, one of the world’s busiest ports, which is connected to much of the rest of Southeast Asia by a road through Malaysia.

Industry groups say the number of companies taking preventive measures like hiring armed guards to protect their trucks in Malaysia has increased in recent years, amid growing awareness of the threat of cargo theft.

FreightWatch International cited Malaysia and the Philippines as countries in Asia that report frequent occurrences of in-transit cargo hijackings with violence or the threat of violence.

 

FDA Report Shows Agency Under Strain

Not enough inspectors for food, drug imports

A new report released by the U.S. Food and Drug Administration (FDA), entitled “Pathway to Global Product Safety and Quality” shows the agency is under strain to inspect the increasing volumes of food and medicines that are being imported into the U.S.

For example, a decade ago the agency was responsible for overseeing 6 million shipments annually coming through 300 ports. This year, the number of shipments is expected to grow to 24 million, the report noted. At the same time, nearly two-thirds of all fruits and vegetables and three-quarters of all seafood consumed in the U.S. now come from outside the country.

Furthermore, over 80 percent of the active ingredients for drugs sold in the U.S. are made abroad—mostly in plants in China and India that are rarely inspected by the FDA.

Government investigators estimated in 2008 that the FDA would need 13 years to check every foreign drug manufacturing plant, 27 years to check every foreign medical device plant and 1,900 years to check every foreign food plant at its rate of inspections at the time. The number of inspectors required for today’s volumes are undoubtedly much higher.

Currently, the FDA has a few hundred inspectors, which are not even enough to cover every U.S. port.

Meanwhile, the House voted in June to reduce the FDA’s fiscal 2012 food safety budget by 10 percent to $752 million, even as the agency was trying to get more funding to enforce new rules aimed at reducing contamination risks for fresh produce. The FDA estimates that it needs a budget of $1.4 billion. The proposed cut needs to also pass the Senate and get the President’s signature before it becomes final. wt


 

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