Bankruptcy Protection
A Giant Sinks Into Red
South Korea’s biggest shipping company Hanjin Shipping Co. Ltd. finally succumbed to dire global trade conditions, as it recently filed for bankruptcy protection in US and Seoul courts to protect its vessels from being seized by the creditors. Hit hard by the woes swamping the global shipping industry, including a glut of bulk ships, overcapacity, low freight rates and sluggish demand, the company had been struggling to clear mounting debts ever since it started suffering losses, each year, from CY2011. In fact, according to industry reports, debt on the company totaled $5.5 billion by the end of June 2016. And not to say, Hanjin had to file for bankruptcy protection as creditors started seizing its ships, while terminal operators refused to handle its cargo, stranding the liner’s container ships loaded with good worth billions of dollars across deep seas.
However, the company has received some reprieve after bankruptcy courts in US and South Korea granted it protection, paving the way for a company vessel to unload a part of its $14 billion worth of cargo stranded across the globe at Port of Long Beach. It’s worth noting that with a 2.9% market share, Hanjin is the world’s seventh-largest container shipping line by capacity. It operates 132 container and bulk ships on 60 regular routes world wide. The predicament reflects the severity of the weak international trade that has claimed a big victim and underlines the weak financial health of the shipping industry. Meanwhile the ship liner is working on a restructuring plan, which if court approves, will see Hanjin turning into a much smaller company.
Economic Partnership Agreement
Moving a step closer to secure unlimited duty-free access to the European market, Kenya along with Rwanda had signed the East African Community-European Union Economic Partnership Agreement (EPA) with European Union (EU) last month. However, the conclusion of the deal is now being threatened as the other EAC members, including Tanzania, Uganda and Burundi, have declined to sign the accord saying that it does not augur well following the Brexit. EPA, which intends to guarantee EAC members duty-free and quota-free access to EU for opening up of 80% of the region’s market to European products is being negotiated since 2007. It was finally initiated in October 2014. While Kenyan Trade Ministry says that by signing the EPA it has sent a strong signal of EAC’s commitment to the accord, the reluctance by other partner states acts as a barrier in implementing the agreement. If the deal is not concluded, Kenya will be the only country to be charged with extra taxes on its exports to EU since it’s a middle income economy.
Mercosur Membership
All is not well in the Latin American trade circuit. The founding members of the South American trading bloc, Mercosur (Argentina, Brazil, Paraguay and Uruguay), giving an ultimatum to Venezuela, have set December 1, 2016 as the deadline, by which Venezuela has to comply with Mercosur’s membership requirements or risk being suspended from the trade bloc. This decision comes in the wake of Venezuela’s failure to ratify a large number of rules governing trade, politics and human rights. Experts believe ideological difference with Venezuelan President Nicolas Maduro was also an influencing factor. Interestingly, the country was to take over the presidency of Mercosur, as per an alphabetical rotation, in June 2016 – a move that was blocked by all members except Uruguay. This bickering over leadership and other differences between member nations have also put to question the relevance of Mercosur as a trade bloc and a vehicle that can foster trade.
Bilateral Ties
Iran and China seems to be taking progressive steps to increase bilateral trade ties. For, Tehran recently hosted China Trade Week (CTW), China’s first exhibition in Iran, at the Shahr-e-Aftab International Exhibition Center. The trade show is expected to further bolster trade ties between the two nations. In August, Iran had signed two agreements with two major Chinese banks – the Export-Import Bank of China (CHEXIM) and Chinese Development Bank (CDB) – on financing its key development and infrastructural projects, and boosting bilateral cooperation. Under the deal, the loans provided by the Chinese side will embrace a low-interest rate and a long-term payback period.
In yet another deal, Central Bank of Iran (CBI) agreed to open two euro and yuan accounts in CHEXIM in order to facilitate settlement of banking transactions. It must be recalled that CHEXIM earlier this year had signed another agreement with Iran to award loan to a high-speed train service between Tehran and Mashhad in the north-eastern province of Khorasan Razavi. According to official data, over a period of four months between March and July, China was the main exporter of goods to Iran, with exports to the Islamic Republic accounting for 22.86% of Iran’s total imports. Now that’s something worth taking a note of!
Export Ban
Come 2017, and all the unprocessed wood logs from Mozambique will be out of bounds for the rest of the world as the Government of Mozambique has proposed a total ban on the exports of whole wood logs, regardless of tree species. Once imposed, a complete export ban on timber logs means that the forest inspectors would no longer have to determine the variety of wood being exported since exports of all kind of logs would be illegal. With the blanket ban in effect, the government expects to reduce illegal logging, harmonise market prices of wood logs and help develop a sustainable timber market in Mozambique, an industry which is losing millions of dollars every year due to illegal logging. Going by estimates, illegal logging coupled with unsustainable deforestation and forest fires account for a loss of 220,000 hectares of forest every year in Mozambique. Interestingly, China has been a major driving force behind the booming illegal logging in Mozambique. According to International Institute for Environment & Development, China accounts for about 90% of Mozambique’s wood exports.
PORK IMPORT DISPUTE
In what can be termed as a setback for Russia, the World Trade Organisation (WTO) has recently backed the European Union in its dispute with Moscow over the ban on imports of live pigs and pork, declaring the ban as illegal in the light of international trade rules. The Russian government now intends to appeal the WTO ruling, going so far as to suggest that the decision was purely political. Starting early 2014, Russia had imposed a ban on pigs and pork imports following a handful cases of African Swine Fever (ASF) in some EU areas. Russia’s move invoked sanitary and phytosanitary measures allowed under WTO rules. While the WTO panel found the ban to be discriminatory, Moscow is of the opinion that the ban was fully justified, arguing that the outbreak still continues in Poland and other baltic states. Russia believes that supplies from these markets could pose a threat to the Russian pig industry. Russia has 60 days to appeal the ruling that was made on August 19, 2016.
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