Trade Wrap March 2018 issue

Trade Wrap


A Billion Dollar Deal

Kazakhstan and China have signed a trade agreement that is expected to generate revenues worth $1 billion for the former. Under the agreement, which has been signed between Kazakhastan’s JSC KazTransGas and China’s PetroChina International, Kazakhstan will export 5 billion cubic meters of natural gas to China. The deliveries, which began on October 15, 2017, will be carried out over the course of one year. Interestingly, this is not the only deal of its kind in the region. Reports state that Russian oil producer Rosneft is also looking to increase its oil exports to China, through Kazakhstan, from 10 million tonne (MT) per year to 18 MT per year. Kazhakstan is one of the largest exporters of petroleum gas and other natural gases to China. Currently, China relies on Turkmenistan, Australia and Qatar for natural gas imports. China and Kazakhastan hope that the deal will result in increased trade links and routes within the Eurasian region.


Fresh from the Farm

In a bid to boost exports of bluefin tuna from the country, Japanese trading house Toyota Tsusho and Kindai University will soon began shipping fully farmed bluefin tuna to Southeast Asian countries. Currently, the two partners produce around 4,000 ‘Kindai’ tuna per year for domestic market. While they hope to increase the production to about 6,000 tuna in the next three years, they are aiming to export 2,000 tuna by 2020. The Pacific Bluefin tuna, considered to be an endangered species, is popularly used in South Asia region as an important ingredient in Sashimi. The duo also hope to increase production and exports of farm-raised red sea bream, Japanese yellowfin tuna and white trevally. Interestingly, Japan also happens to be a leading importer of bluefin tuna. Other markets with a taste for this fish are Thailand, Korea, US and EU.


Protectionism at Play

While China is viewing the latest anti-dumping ruling by European Union (EU) as a form of protectionism, the EU states have started taking steps towards a newer agreement to prevent further dumping in the coming days. The EU nations have announced a decision to treat all WTO members as the same when it comes to applying anti-dumping duties, except in case of significant market distortions. Under normal circumstances, dumping would be considered when the domestic price is higher than the export prices but when it comes to these specific cases, the EU has agreed to compare export prices with certain international benchmarks. While EU has not mentioned China specifically, it will be releasing a report on countries that are being accused of such trade distortions in which China is expected to be included. Over the last year, China has been reiterating its demand for a change in status in the WTO where according to an agreement China was to be accorded Market Economy status on completing 15 years as part of the WTO. US and EU have objected to this change. Currently, China is accorded a Special Non-Market Economy status. According to WTO, a country is a market economy when prices and production are determined by competition and market factors and not by the government. EU has accused China, time and again, of dumping a variety of products, from steel to solar panels and recently even e-bikes.


Racing to the Top

The isolation of Qatar in middle East has proven to be a boon for many countries. One of them is Australia. Latest analysis hints at Australia, the world’s second-largest exporter of LNG, racing ahead of Qatar, by 2020. Qatar has been facing quite a few problems in the recent past.

Saudi Arabia, Egypt, UAE and others have cut ties with Doha because of its alleged support of terrorist activities. This has created an opportunity for other players in the LNG market. Australia, not to miss on this opportunity, too plans to increase its LNG exports in FY2018. In fact, Australia has recently entered into a large number of natural gas projects such as Chevron Group’s Gorgon project, which is being touted as one of the world’s largest natural gas projects. Australia will be exporting 74 million tonne (MT) of LNG by 2019. Qatar exported 77.6 MT last year. All this indicate Aussies might just become top dog in this market in a few years.


A Booster Dose

A consignment of crude oil that arrived earlier in October from the US Gulf Coast to Paradip Port in Odisha was the first Indian import of crude oil from US since 1975, the year when US banned the export of crude oil. The ban was however lifted in 2015 by the then US president Barack Obama. The cargo of 1.6 million barrels of oil was consigned to the state-owned Indian Oil Corporation (IOC) and is a part of the commitments to US oil purchases by IOC and Bharat Petroleum (BPCL) – both companies have placed orders for over 2 million barrels of crude oil from US. According to reports, crude oil trade will increase the annual bilateral trade between the two countries by at least $2 billion.


Eying the Prize

One of Saudi Arabia’s largest exporters of oil is making headways into India with a plan to set up a major refinery on India’s west coast. Saudi Aramco, according to its CEO Amin Nasser, plans to set up a “fully integrated business consisting of partnerships with local Indian companies.” The company has already held talks with Indian Oil with regards to setting up of a refinery in Maharashtra with a capacity of 60 million tonne. Saudi Aramco has set up an office in India to market its crude oil as well as to provide technology and infrastructure to its Indian partners.


India made, China owned

China-based Fosun Pharma announced that it has acquired a 74% stake in Gland Pharma, a Hyderabad based pharma company. The acquisition is valued at $1.08 billion. Initially it wanted to acquire 86% of Gland Pharma for $1.26 billion. The share was decreased after concerns were raised by the Cabinet Committee for Economic Affairs about ownership by a Chinese entity. Shanghai-based Fosun is also reportedly looking to acquire a stake in Indore-based Symbiotic Pharma.


Change is Good

Three months post the implementation of GST, the Ministry of Trade and Commerce has announced some much-awaited changes to the rules. These changes aim to ease compliance-related burdens being faced by Indian SMEs. One of the major changes came in the form of easing tax filing requirements for SMEs. The council announced that a change was being brought about to the composition scheme with the threshold being increased to Rs.1 crore from Rs. 75 lakh. Also, SMEs will now only need to file their taxes on a quarterly basis. Under the composition scheme, traders will pay 1% tax, manufacturers will pay 2% and suppliers of food and drinks will pay 5% in tax.

The other major change was the reduction in tax rates for 27 items including manmade yarn which saw its GST fall from 18% to 12%. Two pre-GST schemes have found their way back into the current GST rules. Under the new regulation, for imports under Advance Authorisation Scheme, the EPCG scheme and for 100% EOUs the payment of IGST and Cess has been waived. For merchant exports, a taxation of 0.1% will be levied, however exporters can apply for a refund for this. This, the government hopes, will help overcome the issues of capital blockage. A big boost for the manufacturing and textile industry has come in the form of reduction in GST on job works from 12% to 5%. This reduction is also applicable to printing items, imitation jewellery and food items.


Creating a warm Welcome

Looking to attract investments from British small and medium enterprises (SMEs) and help them manoeuvre through the various legal and tax requirements, the Indian High Commission in UK along with the UK India Business Council (UKIBC) announced the launch of Access India Programme (AIP). The programme, which is free, aims to provide initial market access support to smaller British companies on a variety of investment aspects – from legal to accounting. As part of the AIP, the two bodies will also be conducting six mentoring programmes and workshops for businesses and entrepreneurs. They hope to begin the programme with at least 50 British companies. A February 2017 study by PwC and UKIBC estimated that UK was the largest G20 investor in India. According to the UK-based National Federation of Self Employed and Small Businesses (NSB), small businesses account for at least 99.3% of all private sector businesses in UK out of which 99.9% were SMEs. On the other hand, India is the fourth largest investor in UK. The Indian High Commission in UK is hopeful that the initiative will provide a boost to India-UK relations in the coming days.

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