A summary of the most important trade news stories from the past week. This summary is emailed to our subscribers every Monday morning, along with the latest comment and analysis from The Channel Group. If you would like to receive this direct to your inbox, you can sign up at the bottom of this article or click here.
€2bn bill for Chinese customs fraud
The UK faces a €2bn bill from the EU following Chinese customs fraud. The EU’s anti-fraud unit, OLAF, said that Chinese textiles importers had escaped paying customs duties by falsely declaring the value of goods. The UK reportedly failed to act on repeated warnings. The problem is significant for the EU, as customs duties from the common external tariff constitute a high proportion of the EU budget. An estimated €3.2bn revenue was lost between 2013-16. This issue could become a bone of contention as both sides try to work out a financial settlement following Brexit.
Customers urge shipping companies to raise prices
The global shipping industry has been described as “broken”, as customers are regularly asking to pay more for international shipping than quoted. The problem arises from both low, volatile rates for shipping TEUs – some firms have reported paying as little as $25 for a trans-Pacific journey. Although average prices have risen since a low in 2016, prices remain unstable. The low prices are due to oversupply in the market and mean that it is simply not profitable for companies to ship or unload containers that they have been paid for. With the collapse of Hanjin shipping – and the knock-on effect of thousands of adrift TEUs – customers are seeking to pay sensible rates to reduce the risk associated with transporting their goods.
End of the German trade surplus?
Germany’s trade surplus, which stood at €253 billion in 2016, has been a cause for concern for some time, but the situation is coming into a star focus as Angela Merkel prepares to visit the USA. President Trump’s trade advisor, Peter Navarro, has accused Germany of using a “grossly undervalued Euro” to “exploit” the United States.
The explanation for Germany’s surplus is the high domestic savings rate. Mario Draghi, head of the ECB, has criticised this, saying that “There is simply not enough demand for capital elsewhere in the world to absorb that excess saving without declining returns”. However, the low appetite in Germany for debt means that returning to a balanced – or deficient – level of trade is a difficult political argument to win. But with tens of billions in unspent taxes, the Government is coming under pressure to cut taxes and increase public spending – two actions that could close the trade gap.
The meeting of Trump and Merkel will be especially interesting given recent events. Mr Trump has been at the centre of ‘fiery’ discussions amongst members of his team over his trade policy. The difference of opinion between Mr Navarro and more moderate members of the team – mainly from business or finance backgrounds – has been widely reported in recent weeks. Insiders have commented that Mr Navarro’s choice of hardline stance is coming under threat as he becomes more isolated.
UK trade deficit remains unchanged
The UK trade deficit remained almost unchanged at £2 billion in January after revised figures were released. A decline in Sterling has led to both exports and imports rising. The Department for International trade welcomed the increased exports but instead that there was more to do.
The ONS noted:
“At the commodity level, machinery and transport equipment (mainly electrical machinery and cars) and chemicals were the largest contributors to the increase in exports.”
Campaign Group Rebrands as Economists for Free Trade
The campaign group Economists for Brexit, a prominent campaigner for Brexit, has rebranded as Economists for Free Trade. One of its founders, Roger Bootle said “Saying you are in favour of Brexit is beside the point. It is all about what type of Brexit now.” The change in name highlights a growing division between Brexit campaigners – those that want an outward-looking global Britain and those that want to see greater protection for national interests.
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Before this, he worked for GlaxoSmithKline and as a theatre producer. Thomas enjoys playing cricket, cycling, and reading.