WTO Slams China for Lack of Trade Transparency

chinatransparencyLos Angeles, CA – China is coming under harsh criticism from the World Trade Organization with members of the 160-nation body asserting that Beijing has failed to live up to key transparency commitments it made when it joined the organization in 2001.

The WTO Secretariat recently released the results of a critical 200-page report on China’s trade policy which concluded that, over the past two years, the country continues to exhibit a lack of clarity, organization and centralization of its trade rules and regulations.

EU ambassador Angelos Pangratis described the lack of clarity on trade issues as “striking,” while Canada’s representative also criticized the “often vague and insufficent information available” from Beijing.

Release of the report came during the WTO’s recent, bi-annual policy review held at the group’s headquarters in Geneva, Switzerland.

Many of the 50 WTO members who took part in the review also criticized Beijing’s use of export restraints and taxes, restrictions on foreign investments and said it must improve protection for intellectual property rights (IPR).

The US Representative to the WTO, Christopher Wilson, said that China’s “apparently retaliatory conduct” in its use of duties, and said the country appeared to ignore a number of WTO findings against it.”

Wilson added, “An enormous amount of work remains if China is to close significant loopholes in its legal framework and reduce the unacceptably high IPR infringement levels.”

Responding to the WTO report, China’s Assistant Minister of Commerce, Wang Shouwen said its findings were “baseless” and that China “has one of the best track records of implementing WTO rulings.”

But, he added, though China “has made great strides to address these issues…it has pledged to do more to improve transparency.”

07/30/2014

Mergers and Acquisitions Touted Over FDI

mergers_acquisitions_headerWashington, DC – For decades, state and local governments have offered packages of tax breaks and other incentives before foreign companies in the hope of luring them to the US to create jobs.

A new study published by the Brookings Institute asserts that strategy is “deeply flawed” and that “mergers and acquisitions are driving foreign investment in the US, not the opening of new establishments.”

Civic leaders, in turn,” would accomplish far more by bolstering industrial amenities to retain overseas companies than by offering rich subsidies designed to attract new ones,” it said.

“Policies that narrowly focus on (new business) openings are probably not going to give you a big bang for your buck,” according to Devashree Saha, a senior policy analyst at Brookings and lead author of the report.

In 2011, only 26 percent of all jobs at US locations of foreign companies were created by the opening of a new factory, office or store, while nearly a third were generated by foreign takeovers of US companies, Saha said, citing data from the Organization for International Investment (OFII) that found that, over the past two decades, 84 percent of foreign companies that came to the US did so through an acquisition.

“Federal, state and local governments should invest more to build strong industry clusters by ensuring an adequate supply of skilled workers, modernizing US infrastructure and increasing investment in research and development, among other initiatives,” the Brookings study said.

According to Nancy McLernon, president of the Washington, DC-based OFII, state and local leaders often ignore foreign companies that come to the US through mergers instead of connecting them with suppliers, customers and skilled workers. “That aftercare is critically important,” she said.

The US share of global foreign direct investment plunged from 37 percent in 2002 to 17 percent in 2012, according to OFII. The US is still the worldwide leader, but emerging markets such as China have grabbed a growing share of foreign dollars.”By recognizing the importance of mergers and acquisitions, we can capture more of that market share,” said McLernon.

Foreign-owned companies employ about 5.6 million workers in the US, or about 5 percent of private payrolls, according to the Brookings paper. Their employment grew steadily from 1991 to 2000, but has stagnated since.

Yet, it said, the firms generate outsize benefits, accounting for a fifth of US goods exports and 15.4 percent of all private research-and-development in 2011 with foreign owners of US operations paying higher wages than US companies — $77,000 vs. $60,000, on average.

07/29/2014

US Sugar Groups Oppose Mexico Trade Deal

sugarcanefieldmexicoLos Angeles, CA – Several national industry groups representing candy makers, soda companies, and other food manufacturers are urging Washington to reject pressure to negotiate a trade deal with Mexico to end a months-long dispute over allegations of cheap sweetener imports from south of the border.

In a recent letter to several top US trade officials, several national business groups including the Coalition for Sugar Reform, the American Beverage Association, and the Grocery Manufacturers Association said any move to restrict imports “could incite retaliation from Mexico on other products, undermine free trade across the continent under the North American Free Trade Act, and threaten over $220 billion in US exports to Mexico.”

Such a move by Washington, the letter said, would “jeopardize this robust trading relationship [with Mexico] by providing US sugar producers with even more insulation from market forces.”

The joint letter, addressed to US Agriculture Secretary Thomas Vilsack, Commerce Secretary Penny Pritzker and US Trade Representative Michael Froman, cited “troubling rumors” that pressure is being applied on the government to hammer out a deal that would include trade barriers.

The communication is seen as the latest indication of escalating tensions in the US sugar industry between sugar producers that favor restricting imports or implementing dumping duties and end-users who oppose any change to NAFTA that allows Mexico to import sugar duty-free in the otherwise protected American market.

US sugar producers filed a complaint with the International Trade Commission earlier this year charging Mexico with dumping sugar on the US market. Two months later, Vilsack said he would “encourage a negotiated agreement” that “could set a ceiling on Mexican sugar imports, which are currently unrestricted.”

The letter also said an agreement could threaten the completion of negotiations of the Trans-Pacific Partnership, the ambitious Pacific trade pact.

07/28/2014

Starbucks, Juan Valdez in Friendly “Coffee Clash’

coffeeLos Angeles, CA – International coffee purveyors, US-based Starbucks and Colombia’s Juan Valdez, have both announced major expansion plans…in each other’s own front yard.

Starbucks has opened the doors at its first operation in Bogota, Colombia – the South American country synonymous with coffee, while Juan Valdez has countered with a new coffeehouse in Miami, Florida.

The new Bogota Starbucks is a three-floor, 2,700-square foot operation, the first of a planned chain of 50 the company plans to open throughout the country over the next five years. It will also be the only Starbucks in the world to serve exclusively only locally-sourced coffee.

Starbucks’ stores in Colombia will be operated as a joint venture with two of the company’s regional Latin American business partners, Alsea and Colcafe, a subsidiary of Grupo Nutresa, Colombia’s largest food company.

Alsea currently operates more than 520 Starbucks in Mexico, Argentina and Chile, while Colcafe worked with Starbucks to develop ‘soluble coffee’ product.

The company has heavily invested in Colombia, which serves as its primary source of arabica coffee, a mainstay of its menu.

In 2012, Starbucks opened a Farmer Support Center in Manizales, Colombia to deliver training and agronomy support to Colombian coffee farmers.

Last summer, Starbucks announced a public-private partnership with the US Agency for International Development that is investing $3 million to increase Colombian coffee yields and to enhance economic opportunities for Colombian coffee growers, according to the company’s website.

Not to be outdone, Colombia’s own Juan Valdez, the coffee brand backed by the Colombian Coffee Growers Federation (Procafecol), is expanding its footprint in Starbuck’s home turf with the opening of a new coffee house in downtown Miami, Florida.

Procafecol, which represents more than 500,000 Colombian coffee-growing families, said it will work with an unnamed Florida franchisor to open four more stores in Miami by the end of this year with an additional 60 sited throughout the state over the next five years.

The new Florida operation isn’t the Colombian company’s first attempt to build a retail chain in the US. It currently operates seven stores in New York, Washington and the Miami International Airport.

The moves by both companies underscores the nature of the ongoing competition for an upscale market that in the US alone generates $18 billion in business annually.

But, whatever the competitive dynamics of the so-called ‘coffee clash’, Juan Valdez will have a long way to go to match the clout of rival Starbucks in Florida and elsewhere.

Customer Loyalty

With 200 stores in Colombia alone, Juan Valdez has garnered a vast reservoir of customer loyalty, both in its home country and regionally.

It is heavily invested in developing Colombia’s country’s coffee industry, a bulwark of the country’s economy. Since its founding in 2003, the coffee chain has funneled more than $20 million to a national fund that supports the country’s 560,000 coffee-growing families, some of whom also own shares in the company.

Most of its 450-plus current cafes are in Latin American countries, though they span as far as South Korea and Kuwait.

There are, however, more than 400 Starbucks in Florida alone, and, while, Procafecol’s total sales are expected to reach $85 million this year, up from $74 million in 2013 and $67 million the previous year, Starbucks is projecting 2014 sales of $16.5 billion, according to reports released by both companies.

There are more than 20,500 Starbucks locations in 65 countries. In 2002, Starbucks opened its first location in Mexico. Since then, the chain has expanded into Latin America with more than 700 stores in 12 countries including Peru, Brazil, Argentina, Costa Rica, and soon, Bolivia and Panama.

Despite the David and Goliath caste to the parallel developments, Procafecol is, at least outwardly, welcoming the competition with the group’s Director of International Sales, Alejandra Londono, was quoted as saying, “There’s room in the market for us both.”

07/25/2014

 

 

 

 

 

 

 

 

 

 

 

KCS, Global Partners To Develop ‘Oil Train’ Terminal

oiltrainKansas City, MO – The Kansas City Southern Railway (KCS) is partnering with New England-based Global Partners LP to develop a unit train terminal in Port Arthur, Texas.

The waterborne terminal, which will be constructed on a 200-acre parcel leased from the KCS by Global Partners, will initially serve as a destination for heavy crude from Western Canada utilizing 340,000 barrels of initial storage capacity.

When fully operational with the commencement of unit train service, the terminal is expected to have an initial capacity of up to 2 unit trains per day.

Construction of the terminal is contingent upon Global Partner’s receipt of all necessary permits.

“The Port Arthur terminal represents a significant opportunity to capitalize on strong demand for the movement of Western Canadian crude initially to one of the world’s premier refining centers in the US Gulf Coast,” said KCS President and Chief Executive Officer David L. Starling.

“Through their established base in the Northeast, North Dakota, Western Canada and the Pacific Northwest, Global,” he said, “has built an outstanding reputation for the quality of its logistics and terminal operations.”

Headquartered in Kansas City, Missouri, Kansas City Southern has railroad investments in the US, Mexico and Panama. Its primary US holding is the Kansas City Southern Railway Company, serving the central and south central US.

Its international holdings include Kansas City Southern de Mexico, S.A. de C.V., serving northeastern and central Mexico and the port cities of Lázaro Cárdenas, Tampico and Veracruz, and a 50 percent interest in Panama Canal Railway Company, which provides ocean-to-ocean freight and passenger service along the Panama Canal.

The railway’s North American rail holdings and strategic alliances are primary components of a NAFTA Railway system, linking the commercial and industrial centers of the US, Mexico and Canada.

Headquartered in Waltham, Massachusetts, Global Partners LP is a purchaser and seller of and logistics provider for domestic US- and Canadian-sourced crude oil and other products by rail across its “virtual pipeline” from the US Midwest and Canada the East and West Coasts for distribution to refiners and other customers.

The company owns, controls or has access to refined petroleum product and renewable fuel terminal networks throughout the US Northeast, and also distributes gasoline, distillates, residual oil and renewable fuels to wholesalers, retailers and commercial customers in New England and New York.

With a portfolio of approximately 900 locations primarily in the Northeast, Global also distributes natural gas and propane, and serves as the independent owner, supplier and operator of gasoline stations and convenience stores across the country.

07/24/2014

Giant Russian Steelmaker Shutters US Operations

SeverstalNorthAmericaColumbus1lowresLos Angeles, CA – Russian steelmaker Severstal is divesting itself of its steel production and coal mining operations in the US.

The move was reportedly motivated by the company’s fears that the increasing tensions between Washington and Moscow over the crisis in Ukraine will reduce, or even cut off, its access to loans from Western financial institutions.

Russia’s second largest steel maker said it would sell its two US steel facilities in Mississippi and Michigan for $2.3 billion to US rivals Steel Dynamics and AK Steel, respectively. Both plants produce steel products for the automotive sector.

According to a statement released by the Severstal, the company reported a $100 million loss on revenue of $3 billion last year, a development that it hopes will be offset by the US divestment.

“The sale of Columbus and Dearborn unlocks substantial value to Severstal’s shareholders,” said Alexey Mordashov, Severstal’s chief executive.

The ‘mini-mill’ in Columbus, Mississippi, is considered one of the most modern in the US, and is expected to increase its operating base by as much as 40 percent.

Steel Dynamics said the $1.6 billion purchase of “one of the most modern mini-mills in North America,” in Columbus, Mississippi, will expand its operating base by 40 percent.

The $700 million purchase of the Dearborn, Michigan, steel plant, “will add about one-third additional capacity to the company’s operations,” said AK Steel.

At the same time, Severstal said that it would sell US coal producer PBS Coals to Toronto, Canada-based Corsa Coal Corp. for a reported $140 million.

The sale comes after the Russian company paid about $1 billion for PBS in 2008 to provide a steady supply of coking coal for its US steelmaking operations.

Corsa said it will pay $60 million in cash, assume $60 million of reclamation and water-treatment liabilities, and give the former Russian owner the balance of $20 million “in collateral for other liabilities.”

The sale of PBS Coals is expected to be completed by mid-August, Severstal said.

PBS is located about 60 miles from Pittsburgh, Pennsylvania, and has 13 developed and three active mines that produced 1.7 million tons of coal last year.

07/23/2014

US Beef Exports Up 6 Percent Overall, Says USDA

beef exportsWashington, DC – US beef exports through May 2014 are up 6 percent from a year earlier, according to the US Department of Agriculture’s Foreign Agricultural Service (FAS).

Exports have strengthened to Hong Kong and Mexico, offsetting weaker shipments to Canada, Japan, and Taiwan.

Although exports to Japan had been running above year-earlier levels through April, they weakened in May. Imported beef stocks in Japan are well above year-earlier levels and consumption is stable.

Exports to Mexico have risen this year with shipments during May 48 percent higher than the previous May. Second-quarter exports were raised by 10 million pounds due to stronger demand from Hong Kong and Mexico, the FAS said.

The forecast for US beef exports in 2014 is 2.518 billion pounds, almost 3 percent lower than 2013.

Despite stronger shipments during the first 5 months of the year, exports are expected to fall during the remaining months.

Production is forecast to fall nearly 5 percent in 2014 and then 1 percent in 2015 due to reduced cattle inventories and higher heifer retention for herd rebuilding.

Prices, which have risen as a result of lower supply, the agency said, are likely to dampen export demand over the forecast period. The forecast for exports during 2015 is 2.425 billion pounds, 4 percent lower than 2014.

07/22/2014

US High Tech Trade Tops $1 Trillion: White Paper

sunmicro1Los Angeles, CA – The trade in US-produced technology goods and services currently tops more than $1 trillion, according to a new industry white paper published by the TechAmerica Foundation (TAF).

Tech imports totaled $351 billion compared to $205 billion in exports in 2013, while tech service exports exceeded imports $303 billion to $161 billion in imports in 2011, the most recent year complete data are available, the group said.

Many of the goods imported into the US “are part of a global supply chain, where US multinational companies create and design tech products in the US and produce the finalized product overseas,” according to the paper.

In these cases, “the bulk of the profit from the products is accrued to the US firm. Often the importation of a technology good represents an ‘intra-company’ transfer as US firms brings their products into the United States for sale from their overseas production facilities,” it added.

The US currently has a tech trade surplus of nearly $5 billion when both tech goods and services are combined, with $501 billion in exports compared with $496 billion in imports.  Goods exports and imports have been fairly flat for the last three years after rebounding as a result of the 2009 global market crash.

“The largest destinations for tech goods go to our closest trading partners, Mexico and Canada, which is a testament to the importance of free trade agreements to the American technology industry,” said Burak Guvensoylar, manager of government affairs at the TAF.

The US has free trade agreements with 20 countries, and is looking to create two new large scale agreements – the proposed Trans-Pacific Partnership (TPP) and the Transatlantic Trade & Investment Partnership (TTIP).

These new agreements, in addition to the Trade in Services Agreement, and the expansion of the Information Technology Agreement, could expand US free trade markets to 53 countries, “creating significant opportunities for US technology companies” by “increasing market access, eliminating tariffs, strengthening intellectual property rights, and ensuring the movement of data across the globe,” said Guvensoylar.

Telecommunications, Texas Lead the Way

According to the white paper , the US telecommunications sector, in particular, feeds the rate of tech goods and services exports, noted by the 9 percent increase in telecommunications services from 2011-2012 and the 6.6 percent increase in communications goods from 2012-2013.

Other key tech services include systems design, software, research and development, testing, and Internet services such as cloud computing and mobility strategy, it said.

From a state-by-state perspective, Texas continued to build on its status as the leading state by tech goods exports, growing from $45.1 billion in 2012 to $48.2 billion in 2013, a 6.7 percent growth rate, compared to a national growth rate of 0.8 percent.

California is a close second to Texas in revenue of exports, but the state saw a 5.1 percent decline in year-to-year exports. Texas and California combine to account for 44 percent of the country’s overall volume of tech good exports.

The TechAmerica Foundation is a non-profit technology industry research group headquartered in Washington, DC.

07/21/2014

China to Invest in Louisiana Methanol Plant

methanolVacherie, LA – China’s Yuhuang Chemical CEO has said it will inject a $1.85 billion capital investment in a methanol production complex on the Mississippi River in Louisiana’s St. James Parish.

The project by Yuhuang Chemical Inc., a subsidiary of Shandong Yuhuang Chemical Co. Ltd., represents the first major foreign direct investment by a Chinese company in the state.

Announcement of the investment was made this week by Louisiana Gov. Bobby Jindal and Yuhuang Chemical CEO Charlie Yao.

More than 400 new direct jobs, with an average annual salary of $85,000 plus benefits, and an additional 2,365 new indirect will be created, according to the Louisiana Economic Development (LED).

Construction will begin in 2016, with the first phase of the methanol project beginning operations by 2018.

After the first methanol plant is completed, the company will build a second methanol plant and reach an annual capacity of 3 million metric tons of methanol per annum. A third phase will include a methanol derivatives plant that will produce intermediate chemicals.

Most of the project’s methanol will be exported by oceangoing vessels for use in the parent company’s production of downstream chemicals in China, with approximately 20 percent to 30 percent of the methanol to be shipped by barge and rail and sold to North American customers.

“Following such historic foreign direct investment projects as Sasol in Southwest Louisiana and Benteler Steel/Tube in Northwest Louisiana, our state continues to raise the bar for attracting high-quality, world-class foreign direct investment projects,” said Jindal.

Discussions on the project between the LED and Yuhuang Chemical began in February 2014.

To secure the project, Louisiana offered the company a competitive incentive package that includes two performance-based grants: $9.5 million to be paid over five years beginning in 2017 to offset infrastructure costs of the project and $1.75 million to be paid over 10 years to partially defray the costs of necessary riverfront access and development.

In addition, the company will receive the comprehensive workforce solutions of LED FastStart, ranked the No. 1 state workforce training program in the country, and Yuhuang Chemical also is expected to utilize the state’s Quality Jobs and Industrial Tax Exemption programs.

One of China’s largest chemical companies, Shandong Yuhuang Chemical generated more than $4 billion in 2013 sales and employs more than 5,600 people worldwide.

Its newly formed Yuhuang Chemical subsidiary will make its first major US investment in St. James Parish, where it has secured an option to purchase more than 1,100 acres for a three-phase project next to the Plains All-American

Yuhuang Chemical has selected China Huanqiu Contracting & Engineering Corp., known as HQC, to complete engineering work for the project.

The company has licensed methanol technology from Air Liquide Global E&C Solutions. Hiring will begin in 2015, with employment reaching 200 by 2017 and 400 six years later.

Foreign direct investment projects, said Jindal, “add great value to our state by creating high-paying jobs, increased levels of international trade and extraordinary career opportunities for the families of Louisiana. Our efforts reforming government, lowering taxes, and improving our state’s business climate are paying off.”

07/18/2014

BRICs Meet in Brazil, Create Bloc Development Bank

BRICS1Los Angeles, CA – Leaders of the BRICS group of emerging powers – Brazil, Russia, India, China and South Africa – have decided to create their own development bank as a counterweight to what they perceive are “western-dominated” financial organizations like the US-based World Bank and International Monetary Fund.

The move came during the BRICS Summit earlier this week in Fortaleza, Brazil. The summit comes as the five countries, whose economies together represent 18 percent of the world total, are experiencing sharp slowdowns in their once fast-paced rates of growth.

The new development bank will reportedly be based in Shanghai and is expected to be functional within two years. It will be capitalized at $50 billion, a figure that could grow to $100 billion to fund infrastructure projects. The fund would also have $100 billion at its disposal to weather economic hard times.

The new development bank’s first director will reportedly be from India.

“We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness,” the group said in a joint press release.

The BRICs leaders are now in the Brazilian capital of Brasilia, meeting with their counterparts from Argentina, Chile, Colombia, Ecuador, Venezuela and several other Latin American nations to discuss future economic and trade cooperation.

BRIC giant China is particularly interested in Latin America. After this week’s discussions, Chinese President Xi Jinping will stay in Brazil to launch a China-Latin America forum with the leaders of several regional countries including Cuba, Argentina, Ecuador, and Venezuela.

China is growing in influence in the region. Last year, the country, two-way trade with the region amounted to more than $261 billion.

07/17/2014