UK targets Brazilian market for automotive sector growth

By Daniel Hunter

British businesses in the automotive sector were given a boost when the Business Secretary confirmed the opening of a new Vehicle Certification Agency (VCA) office in Sao Paulo. The VCA office will allow manufacturers in the auto sector to export more easily to emerging markets in South America.

Automotive exports from the UK are at an all time high, with five out of every six cars produced in the UK being exported. Brazil has been identified as an important growth market for the sector.

The government is determined to build on the success of the automotive sector and is aiming to publish its automotive strategy in the summer. Ahead of this, the government has taken the decision to open a Vehicle Certification Agency (VCA) office in Sao Paulo, the first to be opened in Latin America.

VCA offices support the automotive industry by verifying that cars and parts imported into local markets from the UK and elsewhere, comply with EU Directives and Regulations, as well as UN environmental and safety standards. The VCA office in Brazil will also allow manufacturers based locally to export from Brazil to the wider region, opening up new markets and further benefiting the UK economy.

"I want to make it as easy as possible for the automotive manufacturers to export to emerging markets," Business Secretary Vince Cable said.

"UK manufacturers are planning to more than double their sales in Brazil in the coming years. By opening a VCA office in Sao Paulo we can make sure exports are not being held up unnecessarily."

Mike Baunton, Interim Chief Executive of the Society of Motor Manufacturers and Traders said: "We are delighted the UK government is taking steps directly to support the export of UK built vehicles, particularly with Brazil being one of the growing global markets. Almost 15% of UK automotive exports go to the Americas but we expect exports to the region to grow as recently launched premium brands and advanced technology vehicles are increasingly sought by Brazilian motorists."

The VCA is already providing safety certification services for automotive components, working with the Brazilian Transport Ministry. It is also in discussions with the Brazilian Environmental Ministry to explore how it can provide additional services, such as providing certification on environmental standards and emissions.

Eleven of the world’s global vehicle manufacturers are based in Britain and 74 per cent of all cars and commercial vehicles manufactured in Britain are exported. Britain is also a world leader for engine production with 2.5 million units produced in 2012 by companies including Ford, Toyota, BMW, Honda, Nissan, Perkins and JCB. 62 per cent of UK engine production was exported in 2012.

The VCA office in Sao Paulo will also open up wider markets for UK manufacturers as countries such as Argentina and Chile base their environmental and safety regulations heavily on the Brazilian legislation.

|International Trade|

 

China to enhance relations with Argentina

Li calls on nations to push forward cooperation in trade and investment

China is seeking to deepen its ties with Argentina "with a more comprehensive and strategic vision", Premier Li Keqiang told a visiting high-ranking Argentine official on Sunday.
Li made the remarks when meeting Julian Dominguez, president of the Chamber of Deputies, the lower house of the Argentine parliament, in Zhongnanhai, the headquarters of the central government in downtown Beijing.

China and Argentina are both important emerging economies and developing countries, and the two should develop bilateral relations "with a more comprehensive and strategic vision", Li told Dominguez during the meeting. He called on the two nations to push forward cooperation in trade and investment and seek joint development.

Li also briefed Dominguez on the economic situation in China, saying the Chinese dream of national revival will become a great opportunity for the world. According to Chinese customs, bilateral trade reached $14.4 billion in 2012. China is Argentina's second-largest trading partner, while Argentina is China's sixth-largest trading partner in Latin America.

Jiang Shixue, an expert on Latin American studies with the Chinese Academy of Social Sciences, said China's business ties with Argentina are in excellent shape, except for Argentina's frequent anti-dumping investigations against China. "In that regard, at the moment it is significant for the two sides to realize the importance of each other," Jiang said.

China is a market with huge potential for Argentina, while Argentina, a G20 member, also plays a big role in China's business in Latin America, he said."And I think Beijing has sent signals that it would like to see the two sides have their eyes more on the comprehensive picture of cooperation and develop it in a strategic way," he said.

By Li Xiaokun (China Daily)

Understanding the hidden costs of international trade

The Trade and Investment Minister Lord Green is campaigning to increase the number of British exporters by roughly a quarter in 2013. If this is achieved, it is estimated that about £36 billion could be added to the UK economy.

Lord Green has been impressed by the way that many firms have seized on the export opportunity since the launch in 2011 of UK Export Week, a national series of events designed to inspire and provide practical advice for new and experienced exporters.

We know that there are £19.5 billion worth of exports generated by companies in London and the South East alone and a recent survey undertaken by workplace solution provider Regus found that of the Berkshire firms that don’t currently trade overseas, 29% are planning to start in the next two years. Clearly there are many benefits to doing business overseas.

A recent research report unveiled by the UK Trade and Investment (UKTI) shows that many UK firms are increasingly venturing beyond traditional export markets such as Europe and the US and into high growth markets in Asia and Latin America. 

The UK has always been a great trading nation and the report shows that those companies that continue this tradition by thinking globally stand to reap sizeable rewards. 58% of entrepreneurs said exporting led to a ‘level of growth not otherwise possible’.

Most economists agree that the biggest story of the twenty-first century will be a shift in the economic centre of gravity from the developed world to high-growth markets such as China, India, Russia and Brazil. Companies of all ages and sizes are increasingly finding success in these markets.

The report also highlighted that two in five small exporters (with less than 10 employees) already do business in at least one high-growth market. Many internationalised firms experience a ‘virtuous circle’ where exporting leads to new innovation, and where those innovations then lead to further exporting. Over half of all the firms surveyed (53%) said that a new product or service evolved because of their business outside the UK.

However, it’s important to recognise that exporting isn’t an automatic passage to growth and a success for everyone. In today’s economic environment it can be a costly mistake for a business to forge ahead with an export strategy simply because growth in its traditional home markets is slowing down, something that UKTI is keen to emphasise.

It must conduct a full and realistic assessment of its business model in the context of the new export markets it wishes to enter; this needs to encompass its products, services and commercial propositions. It is unrealistic to assume that a model that has worked in a traditional, home market can simply be lifted into an overseas one that is likely to be driven by significantly different commercial and cultural characteristics.

Such consideration is particularly true if, like DAV, you are a people based business providing professional services. The European market has a largely consistent and mature view of professional services and, whilst there’s no doubt that competition is driving increasingly sharper deals, it’s still possible to maintain the kind of commercial model that service providers have traditionally enjoyed. But, as we have discovered, it’s a whole new ball game trying to take that model into, say, Asian or Middle Eastern markets which have a very different view of the commercial rates they are prepared to pay.

Unless you are highly differentiated, servicing these markets with UK based staff, with all the cost this implies, is very difficult to sustain, particularly if your people are likely to be deployed in situ over a long period of time. In our experience, this model only works if you are able to establish an ‘in region’ operational presence and have access to suitably qualified and experienced local resources.

Achieving this gives you a commercial model and, if you hire effectively, people that are calibrated to your ‘local’ market. Leaving aside your enhanced competitiveness, this renders you less susceptible to things like currency fluctuations, hidden costs and cultural aspects. It also reduces the likely disruption to UK based staff who may only be at best prepared to work overseas for relatively short periods of time.

So, whilst the UKTI research indicates that exporting offers substantial benefits there are clearly downsides that must be considered. The fundamental principle is that any business thinking of exporting must undertake a thorough due diligence before setting out down this path.

Your export business plan needs to consider a multitude of scenarios specific to your business model and, most importantly, companies need to understand what it is that they are trying to achieve and why, and how well suited their business is to exporting. It is very easy to get carried away with the promise that exporting appears to offer, particularly for firms who are experiencing slower growth rates in their traditional home markets due to the current economic environment. But normal business rules apply and an effective due diligence may show that, in the end, export business may be harder and less profitable than the equivalent generated in this country.
11/04/2013 |www.internationaltrade.co.uk|

Australia Sugar Industry Alliance supports Japan entry to Trans Pacific Partnership negotiations

Media Release: Australian Sugar Industry Alliance

Japan the next to open trade with Australia?

Australian sugar has welcomed news that Japan is considering entry to the Trans Pacific Partnership Agreement (TPP).

According to the Australian Sugar Industry Alliance, Japan is a longstanding trading partner of the Australian sugar industry. Japan has the reputation of having one of the most protected agricultural and sugar sectors in the world.


"It is important that Japan comes to the negotiations with a strong commitment to the TPP's underlying principles; it must be a comprehensive agreement that delivers commercially meaningful trade outcomes, including for sugar," says Alf Cristaudo, Chairman of ASA.


"This must address the rules of origin that facilitate trade and there must be NO exclusions. Japan must accept progress made to date, with no back trading," he says.

The Australian Sugar Alliance says it is important that Japan's entry does not stand in the way of the timely development of a TPP agreement which facilitates the development of agricultural trade and strengthens production and supply chains throughout the region.

"By eliminating import tariffs, levies and surcharges and other import barriers including quotas, the TPP can improve market outcomes for the region's efficient producers, expand consumer choices, enhance competitiveness, strengthen supply chains and improve the Asia-Pacific region’s food security," says Cristaudo.

"The challenge for TPP negotiators is to break the shackles of protectionism to unleash trade – the most powerful driver of economic growth and development on the planet."

March 21, 2013 |www.sugar.ca|

China set to boost international trade

By LAN LAN

China's trade policies will become more open to boost its sluggish imports and exports this year, despite being set to miss its trade target for 2012, according to a senior official at a top government think tank.

China is losing some advantages, such as low labor costs, but future reforms will intensify its competitiveness, Wei Jianguo, secretary-general of the China Center for International Economic Exchanges, told China Daily.

"It's expected that overall reform, ranging from the tax and fiscal system to the function of the government, will be accelerated in this year," said Wei, the former deputy commerce minister.

This reform will be a "big bonus" to sustaining China's growth in all aspects, he said.



At the 18th National Congress of the Communist Party of China in November, there were indications that China will further promote its trade in a diversified way, said Wei, a guest economist for China Daily.

First, it should further cut import duties on more consumer goods, he said.

The Ministry of Finance has announced that from January 2013, more than 780 products, including milk powder for infants, robots for vehicle production and some rubber products, will enjoy lower import duties.

But Wei said such efforts lack variety, scale and scope.

"As a responsible country, China needs to increase its imports, which is important in building healthy bilateral trade and reducing trade friction," Wei said.

In the first 11 months of 2012, China's exports grew 7.3 percent from a year earlier, while imports grew 4.1 percent, according to the Ministry of Commerce.

The government had set a target of 10 percent growth for exports and imports last year, but it seems the goal will be missed, according to officials.

Increasing imports are helping China raise consumption.

Wei said he believes China will adopt a more proactive attitude in multilateral and bilateral trade negotiations.

"It has become a trend that countries are trying to abandon the multilateral framework and step up efforts in strengthening bilateral mechanisms," he said.

A free-trade agreement between the United States and South Korea took effect in 2012, with agreement on eliminating 95 percent of each nation's tariffs on goods within five years.

The European Union has completed final negotiations on a free-trade agreement with Singapore.

Under such circumstances, as a key Asian trading partner, China also needs to step up negotiations, and could consider establishing a free-trade agreement with the US, Wei said. The US replaced the EU as China's biggest trading partner in 2012.

More credit financing support will be given to enterprises, but unlike in the past, when such financing was frequently used to develop affiliated businesses such as real estate, more supervisory measures will be put in place, Wei said.

Enterprises will also see significant reductions in costs for logistics, customs, transportation and quarantine.

Dampened by weak demand in major markets, some of China's export-reliant companies have improved their innovative capability and exploration in new markets. However, the external environment remains pessimistic for China's imports and exports.

2013-01-04 |China Daily|

Japanese carmakers have to put quality and safety first in supply chain contracts

By Daniel Hunter

Supply chain expert Mark Johnson believes Japanese carmakers have been slow to react and should put quality and safety first in negotiating contracts with suppliers.

Toyota, Honda, Nissan and Mazda have had to recall 3.4 million vehicles across the world because of faulty airbags supplied by Takata Corp, which are at risk of catching fire or injuring passengers.

It has been reported that the problem was first raised in October 2011 and the issue again shows how risky huge global supply chains are.

Dr Johnson, Associate Professor of Operations Management at Warwick Business School, says firms should not just look at cost when considering their supply chain.

“Perhaps the answer to this is to put quality and safety first when negotiating contracts for safety critical parts,” said Dr Johnson.

“As more and more firms focus on what they are good at – their core competences – then their suppliers will be trusted for greater proportions of the design and manufacturing of sub-systems and components.

“This comes with a cost, and that is the loss of control of their supply chains as they cede responsibility to their suppliers while procuring parts at a low price.

“It is unlikely that carmakers will ever bring certain things – airbags being a prime example – in-house, it’s simply not in their interest as costs are already competitive and they need to find new ways of managing the relationship so that they can have visibility of any issues.

“This means moving to contracts based on relationships – which give transparency into operations – as opposed to those where price is the be-all and end-all.

“Takata have paid the price in a reduced share price and will no doubt find themselves under pressure when contracts are negotiated. Toyota, and others, will pay the price through an expensive, and public, recall.”

But Dr Johnson believes if the car manufacturers had acted quicker they could have lessened the damage to their brand.

“The age of the affected vehicles suggests that this is something that was known previously and the carmakers have been slow to respond,” said Dr Johnson.

“The blame has been firmly placed on Takata, who saw a slump in their share price.

“Swift resolution of a fault can be beneficial, after all firms can be viewed in a positive light if they act swiftly and decisively when customers perceive there to be a risk.”

 12/04/2013 |www.internationaltrade.co.uk|

Japan, U.S. agree on Tokyo joining Trans-Pacific trade talks

By  Kaori Kaneko and Doug Palmer

(Reuters) - Japan and the United States on Friday agreed on a deal paving the way for Tokyo to join talks on an Asia-Pacific free trade agreement, increasing the economic weight of the proposed pact and triggering a loud protest from U.S. automakers.
The deal brings Japan closer to entering talks on the Trans-Pacific Partnership (TPP), which the United States, Canada, Mexico, Peru, Chile, Vietnam, Malaysia, Singapore, Brunei, Australia and New Zealand hope to finish this year.

"I think Japan's national interests are protected under this U.S.-Japan agreement," Japanese Prime Minister Shinzo Abe told reporters on Friday after a meeting with Cabinet ministers.
Abe, who took office in December, is making the regional free trade pact a keystone of his strategy to open Japan's economy and spur long-sought growth. He is pursuing the agreement, despite fierce opposition from Japan's politically powerful farm lobby, as part of a "third arrow" in his "Abenomics" policy triad, after fiscal spending and drastic monetary policy easing.
President Barack Obama's administration sees the TPP as part of U.S. economic rebalancing toward Asia.

"Having Japan in TPP and contributing to the high standards of TPP is good for the U.S., it's good for the Trans-Pacific Partnership as a whole and its very good for the multilateral trading system itself," Mike Froman, White House international economic affairs adviser, told reporters in Washington.
With the entry of Japan, the world's third-largest economy and fourth-largest U.S. trading partner, the final TPP pact is expected to cover nearly 40 percent of global economic output and one-third of all world trade, Froman said.

The United States also plans to launch free-trade talks with the 27-nation European Union in coming months. With world trade talks dead in the water, regional initiatives have become the main forum for trade liberalization.
The TPP talks have been under way for three years and Japan hopes to participate in the negotiations beginning in July. But that requires a formal decision by all 11 countries currently taking part in the talks. The U.S.-Japan agreement was applauded by the U.S. Chamber of Commerce and the Business Roundtable, but it got a chilly reaction from Detroit-based automakers that have lost substantial market share to Japanese competitors over decades.

AUTO INDUSTRY CONCERNS

Ford Motor Co has fought hard to keep Japan out of the pact, arguing the U.S. ally has repeatedly failed to follow through on promises to import more cars, and that the Japanese government has been driving down the value of the yen to help its automakers export more cars.
"It is stunning that the U.S. government would endorse a trade policy that puts the industry at a competitive disadvantage and comes at the cost of American auto jobs," Matt Blunt, president of the American Automotive Policy Council, said in a statement on the U.S.-Japan deal. "We urge the administration to reconsider its position."

The United Auto Workers said it was concerned that U.S. government efforts that helped the U.S. auto industry recover in recent years "could be threatened by Japan's entry into Trans-Pacific Partnership (TPP) negotiations."

"Despite decades of efforts by Japan's trading partners to open the Japanese market to imported automobiles, Japan remains the most closed automotive market in the world, with import penetration of less than 6 percent, despite a Japanese automotive import tariff that is already at zero percent," the union group said.

Powerful U.S. lawmakers from Michigan, the traditional heart of the U.S. auto sector, also expressed concern. Representative Dave Camp, the Republican chairman of the House of Representatives Ways and Means Committee, said he would not support Japan's entry into TPP without "airtight assurances" it will address longstanding barriers to U.S. auto, insurance and agricultural exports.
Representative Sandy Levin, the top Democrat on the Ways and Means Committee, who is also from Michigan, said the deal announced on Friday "does not provide an adequate basis for Japan's entry into the Trans-Pacific Partnership."

Levin vowed to use the next several months to push for tougher preconditions for Japan to join the talks. U.S. trade officials said Tokyo agreed to a separate set of negotiations, in parallel with the TPP talks, focused on a number of regulatory and non-tariff barriers believed to keep U.S. autos out of the Japanese market.

"For the first time ever, we have the opportunity to negotiate a resolution of these issues in a way that is subject to binding and enforceable dispute settlement," Acting U.S. Trade Representative Demetrios Marantis said.

Japan also agreed the United States could phase out its auto tariffs, which are 2.5 percent on cars and 25 percent on trucks, over the longest period possible in the future TPP deal. Levin criticized the commitment in that area, saying any phase-out of the U.S. tariffs should be linked to measurable improvement in sales of U.S. cars in Japan.

The Japanese Automobile Manufacturers Association welcomed Friday's announcement, but said the protracted process for eliminating U.S. tariffs was "regrettable." "We look forward to the Japanese government's entering the TPP negotiations on a sure footing of promoting national interests and taking into account the views of our industry," said Akio Toyoda, the group's chairman.

Tokyo also pledged to expand its "preferential handling procedure" for imports, a simpler and faster certification method used by U.S. auto manufacturers to export to Japan. That would allow U.S. companies to export up to 5,000 vehicles of each type of vehicle under the program, compared with the current annual ceiling of 2,000 for each vehicle type.

The White House still needs to give Congress 90-days notice before formally beginning talks with Japan. Marantis said it was premature to say when that would happen since some other TPP countries still have outstanding issues with Japan. New Zealand Trade Minister Tim Groser said last month the TPP member nations could formally decide whether to allow Japan into the talks when trade officials gather in Indonesia on April 20-21 for the annual meeting of the 21-member Asia-Pacific Economic Cooperation forum.

(Additional reporting by Ben Klayman in Detroit; Editing by Linda Sieg, Edmund Klamann, Nick Zieminski and Xavier Briand)

       
|Americaneconomicalert.org |TOKYO/WASHINGTON | Fri Apr 12, 2013 7:34pm EDT