The dynamic world trade environment is a place where rules, agreements and regulations tend to change regularly. John Rodriguez, Vice President of Customs, Schenker, Inc. says, “Keeping up with these shifts isn’t always easy and requires companies to pay close attention to what’s going on in the countries where they operate and those that they import from or export to.”
Here are some of the top changes that have taken place in the last few months, set to go into force in 2022 or that are currently being discussed. Companies should factor these into their plans for the year ahead:
The Regional Comprehensive Economic Partnership (RCEP)
The US and China aren’t part of this trade deal, which goes into force in January 2022, according to CNBC. Calling the RCEP the “world’s largest trade deal,” the news outlet says that Australia and New Zealand were the latest to ratify it. Other countries that have ratified RCEP are Brunei, Cambodia, Laos, Singapore, Thailand, Vietnam, China and Japan. Covering a market of 2.2 billion people and $26.2 trillion of global output, the RCEP creates a trade grouping that covers about 30% of the world’s population, as well as the global economy.
Asia Times says the new trade agreement will provide:
- A single set of trade and investment rules across the entire RCEP region.
- The opportunity for the country’s exporters to get their products into RCEP-wide regional value chains.
- More market access opportunities, especially for services and investment into China and some ASEAN member states.
- Less red tape for exporters, and more streamlined trade.
- New rules on government procurement, competition policy and e-commerce.
No Section 301 Relief On the Near Horizon
When it comes to relief from Section 301 China tariffs, Supply Chain Dive reports that analysts and economists don’t expect a Christmas miracle for U.S.-based importers. Section 301 of the Trade Act of 1974 grants the Office of the United States Trade Representative (USTR) a range of responsibilities and authorities to investigate and take action to enforce U.S. rights under trade agreements and respond to certain foreign trade practices.
China faces a deadline of December 31 to meet its purchase agreements specified under the phase 1 trade deal. China agreed to purchase $200 billion more in goods and services from the U.S. from January 1, 2020 to December 31, 2021. “When the countries brokered the deal in December 2019, they also canceled an upcoming tranche of tariffs set to take effect, primarily on consumer goods,” Supply Chain Dive reports. As of a couple of months ago, China had only met 62% of its target imports. “And without a breakthrough in the years-long trade war,” the publication adds, “respite from the Section 301 China tariffs remains unlikely.”
In Where Is the US-China Relationship Heading in 2022? Brink discusses the future of this strategic-yet-strained global partnership during the coming year. It also talks about the different “minilateral initiatives” that are either already in effect or on the table. The enhanced trilateral security partners (AUKUS), for instance, launched in September, supports Australia in acquiring nuclear-powered submarines and will involve deeper information and technology sharing. This is the clearest of signals of U.S. commitment to the Indo-Pacific.
And, the Quadrilateral Security Dialogue or “Quad” is focused on balancing and countering China’s “assertive behavior and protecting the rules-based regional order,” according to the publication. “President Biden seized upon the informal grouping as a ready-made vehicle for democratic countries to work together,” it adds. “He initiated the first-ever Quad summit, which was held virtually in March of this year, with the second summit taking place in person on September 24, 2021.”
China’s Ongoing Zero-COVID Policy
It may not be specific to logistics and trade, but China’s Zero-COVID policy may continue to impact shippers in the coming months. China was the first country to impose restrictions to combat this pandemic and BBC News expects it to be one of the last to ease them. Based on a “not a single infection is acceptable” philosophy, the policy has been contributing to production shortfalls, a current contraction of global trade and logistics bottlenecks.
On a positive note, trade credit insurance provider Euler Hermes expects global trade to grow by 5.4% (in volume) in 2022 and 4.0% in 2023 (after +8.3% in 2021). It warns companies to be on the alert for increased global imbalances. “The US will register record-high trade deficits (around $1.3 trillion in 2022-23), mirrored by a record-high trade surplus in China ($760 billion on average),” it points out. “Meanwhile the Eurozone will also see a higher-than-average surplus of around $330 billion.”
Rodriguez concludes, “Based on the industry sector, Euler Hermes expects energy, electronics and machinery & equipment to continue to outperform in 2022, but notes that the main export winner globally in 2023 should be automotive, thanks to its current backlog of work and lower capital expenditures (CAPEX) for 2021.”