Jan 23, 2021

China/ U.S. Trade Deal: China Coming Up Short

Tradedeal
USChina
Tradeagreement
Laura V. Garcia
2 min
U.S.  and China flags
China comes up short on its agreement to boost U.S. imports by $200bn (£146bn...

Last January China agreed to buy an extra $200bn (£146bn) in US imports over the next two years, as well as strengthen intellectual property rules. In exchange, the US was to cut the new tariffs it had imposed on Chinese products by half on a $120 billion worth of Chinese goods, reducing the rate to 7.5%.

The $200bn agreed to was based on 2017 levels and applied only to specific categories of goods. US data shows that China purchased $130 billion in U.S.goods in 2017 and an additional $560 billion in services.

At the time, the agreement was seen as the first stage of a deal meant to settle the trade war between the world's largest economies. Chinese leaders described the pact as a "win-win" that would promote better relations between the two nations. US President Trump said the agreement would be "transformative" for the US economy and would help to protect US workers. 

However, it now looks like China is falling short of its commitment.

According to the Petersen Institute, the latest number from Chinese customs confirms that China imported just under $135bn from the US in 2020, 58% of the committed amount. Petersen Institute's analysis estimates that China would need to purchase $173bn worth of goods to meet the requirement. 

Meanwhile, due to the global pandemic and the resulting surge in demand for medical goods and WFH equipment, China's US trade deficit has skyrocketed. According to Chinese customs figures, China exported almost three times as much as it imported from the US in December.

As the agreement included only manufactured, agricultural and energy products, approximately $35bn worth of goods didn't count, bringing the total applicable under the agreement to $100bn. China imported 60% of its original target for manufactured products, 64% for agricultural products and 39% for energy products.

Chief commodities economist for StoneX, Arlan Suderman, believes part of China’s reason for coming up short is that many of those purchases made were earlier in the year when commodity prices were lower. “That’s one of the big mistakes that China made was agreeing to a dollar value rather than a tonnage value,” he said. However, Suderman also believes China’s indifference to the pact is another reason for the shortfall. “I really don’t think China is paying a whole lot of attention to it,” said Suderman.

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May 17, 2021

Suez Canal expansion plans greenlit by Egyptian president

Supplychain
Logistics
riskmanagement
SuezCanal
2 min
Work to begin on two-year project that will enlarge narrow sections and extend second lane near the Suez Canal’s southern stretch

The Suez Canal is to undergo a two-year expansion project, following the weeklong closure of the channel by the stranded Ever Given container ship in March.

Plans set forth to expand narrow sections of the Suez Canal have been greenlit by the Egyptian president to safeguard against future blockages.

Dredgers will widen and deepen the single-lane stretch close to the southern mouth of the canal, near where the 400m container ship got wedged earlier this year, while a second lane opened in 2015 will be extended to promote two-way traffic and alleviate the impact of bottlenecks. 

President Abdel Fattah al-Sisi gave the order to “immediately start implementing the proposed development plan and put in place a timetable for completion as soon as possible”, according to reports. It is understood he expects the work to be fully completed within two years. 

Ever Given negotiations rage on 

The Ever Given left hundreds of ships stranded and disrupted an estimated $9.5bn in goods each day when it became wedged across a narrow passage of the trade route in March. After a week of dredging, towing and manoeuvring, it was eventually freed from the banks of the Suez Canal in the early hours of 29 March and set course of the Bitter Lakes holding area. 

There the vessel, its crew and its cargo have remained ever since, while legal action between Egyptian authorities and the ship’s owners rages on, though SCA chairman and Managing Director, Admiral Osama Rabie, refutes allegations that crew have been detained. 

“[There] is no truth in the allegations of detaining the ship crew, pointing to that the SCA does not mind the departure or recrew operations provided the presence of the sufficient number of sailors to secure the vessel and in the light of the presence of the ship captain as he stands as the juridical guardian of the ship and the cargo aboard,” Rabie said in a statement

The SCA initially sought $916m in compensation to cover refloatation costs, including repairs where the channel was damaged to move the vessel, bonuses for the rescue crews who worked throughout the jam, and a package for “loss of reputation”. 

Now the SCA and its chairman and Managing Director, Admiral Osama Rabie, have agreed to reduce the bill by a third. The authority has reportedly offered payment terms for the $600m to the Ever Given’s owner Shoei Kisen. Shoei Kisen has also declared a general average on the goods on board, with shippers liable to shoulder a significant outlay to get the 18,000-plus containers aboard to their final destination in the Nertherlands. 

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