TRADE UPDATE #55

Uncertain Times

17/01/2020

With US-China sealing a deal to ease the trade war, there seems to be a ray of hope for businesses across geographies. China has agreed to boost US imports by US$ 200bn and strengthen intellectual property rules while in exchange, the US has agreed to cut some of the new tariffs it has imposed on Chinese products. Having said that, experts believe there is room for improvement as most of the border taxes remain in place.

On the other side, according to December trade data, India's exports have declined for the fifth straight month. Despite the slowdown, segments like electronic goods, drugs & pharmaceuticals, marine products, and readymade garments have outshined. The US-Iran tension and the increasing trade deficit with China, has alarmed Indian stakeholders. As the countdown to Union budget 2019-2020 begins, the exporters hope that significant allocation is made by the government to boost the sector while paving a way for the upcoming foreign trade policy 2020-2025.


INTERNATIONAL TRADE

Fresh US sanctions on Iran may jeopardize India’s farm exports

Fresh sanctions slapped by the US on Iran on 10th January are likely to have an adverse impact on India’s agricultural exports, as the West Asian nation will not be able to pay for imports in foreign currency, which is the US dollar. “There is uncertainty over payments as the letter of credit issued by Iranian entities earlier against imports from India can’t be honored after the latest round of sanctions,” said an official with a Pune-based sugar trading company.


COMMODITY

A stitch in time: Policy flip-flops have seen India lose in garments exports but, it might not be too late

Over the last year, Gautam Nair, MD of Matrix Clothing and executive committee member of AEPC (Apparel Export Promotion Council), has knocked at the government’s doors. From Cabinet Secretary to revenue secretary, Niti Aayog to finance minister -- he has met them all and has made at least 15 presentations. He has met officials in the Prime Minister’s Office at least thrice. At the textiles ministry, minister Smriti Zubin Irani and textiles secretary Ravi Capoor have supported the industry’s cause.


BILATERAL TRADE

China says taking 'series of measures' to address India's concern over mounting trade deficit

The news article states that China on Thursday assured India that it is taking a "series of measures" to address India's concern over the mounting trade deficit which last year climbed to $56.8 billion, constituting 60% of the total bilateral trade. The trade volume between India and China declined by about $3 billion last year while India's trade deficit continues to be high amounting to $56.8 billion as both countries experienced economic slowdown, according to the data released by the Chinese customs on Tuesday.


EXPORTS

India's exports decline for fifth straight month in December, trade deficit narrows

India’s exports declined 1.8% in December to $27.36 billion as 19 of the 30 exporting sectors showed a decline in outbound shipments. The rate of decline is imports was sharper at 8.83% at $38.61 billion which helped narrow down the trade deficit to $11.25 billion last month from $12.12 billion in November, data released by the commerce and industry ministry showed on 15th January. “The decline in the merchandise trade deficit in December 2019 relative to December 2018 was driven by the relatively broad-based contraction in imports,” said Aditi Nayar, Principal Economist at ICRA.


OPINION

Reverse protectionism: Import curbs the wrong way to tackle economic slowdown. Coming Budget must signal new approach

India unilaterally cut tariffs between 2001 and 2013, which also happened to be a period of robust economic performance. A highlight of India’s economic performance during this phase was an increase in its export intensity of growth. Since then, export intensity of growth has tapered. This has been followed by a reversion to protectionism over the last couple of years, ostensibly to revive domestic manufacturing and promote Make in India.


OTHER NEWS

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