Flipping the E-Commerce Cart

E-commerce and digital trade are certainly upending retail patterns globally.  It is important to note that these changes are not a random act handed down from the heavens.  Instead, these changes flow from millions or even billions of companies and consumers increasingly demanding goods and services to be delivered digitally. The plan in India is to stop firms like Flipkart from selling goods in the market.  This—it must be assumed—will help keep small, largely inefficient shops in business for longer and keep consumers spending more on products than they clearly would like.  After all, if consumers did not want e-commerce goods, they would not be buying off Flipkart in the first place and would not be driving demand for more goods. Customers have clearly expressed their preferences.  They are unlikely to completely abandon the corner shop, but their purchases are becoming increasingly diversified and digital orders play a key role. While India represents the more extreme end of regulations on e-commerce, other governments are starting to take actions to increasingly constrain the actions of players.  Most are still aimed at large firms with limited understanding of the collateral damage to small firms and consumers.

Looking Ahead: Trade in 2019

Looking Ahead:  Trade in 2019

1.      US-China:  The biggest story is likely to remain the ongoing battle between the United States and China.  The most immediate deadline is March 1, when the US has promised to impose 25% tariffs on $200 billion in Chinese imports that are currently subjected to 10% tariffs, if the two sides cannot successfully negotiate their way out of the complaints lodged in the Section 301 case. Chinese officials are meant to travel to the US later in January to continue discussions, followed by more talks in mid-February.  Given the rapidly closing timeline, however, getting a satisfactory conclusion to the long list of US objectives is unlikely.  Three scenarios are possible: 1) US President Donald Trump accepts an outcome that does not really address the systemic complaints at the heart of the Section 301, but goes for a package that includes more Chinese purchases of US agricultural and energy goods plus some limited commitments on Chinese reforms; 2) the timeline is extended, as talks are making headway with a resolution closer to filling most of the Section 301 demands possible by mid-year; or 3) talks collapse and tariffs are imposed on the $200 billion in goods, ramping up to include all Chinese imports to the US before the end of the year.

Where Does Brexit Go From Here?

Where Does Brexit Go From Here?

Ignore, for the moment, all the issues attached to anything other than trade.  On the trade side alone, the lack of a deal with the EU to handle trade amounts to more than just “additional paperwork.”  Because the UK has been part of the EU for so long, with seamless trading in place with zero tariffs, no customs checks, no paperwork, limited services barriers, ease of moment of people and so forth, this situation feels normal.  In a hard Brexit scenario, none of these conditions will apply. As many firms outside the EU would be happy to describe, doing business with the EU can be a complicated and costly process.  Tariffs into the EU for non-member firms can be high.  The customs and compliance formalities are tricky.  Most UK companies currently meet EU standards for products, but should expect significantly greater inspections at the border.

A New Year’s Present from CPTPP: Double Tariff Cuts and Everything Else

A New Year’s Present from CPTPP: Double Tariff Cuts and Everything Else

The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) is finally springing to life at the end of the month.  Despite doubts from many quarters, companies and consumers will start receiving benefits within days. In their rush to become one of the first signatories, in fact, CPTPP members have actually delivered an unexpected, early New Year’s gift.  Not only does the entire agreement begin on the first day, but most firms will get double tariff cuts by January 1, 2019. What does this mean? Start with the basics: on December 30, 2018, the full legal text of the CPTPP will come into force for Australia, Canada, Japan, Mexico, New Zealand, and Singapore.  Vietnam joins on January 14, 2019. Every single provision in the 583 pages will become active on the very first day.

US-China: Kicking the Can Further Down the Road

US-China:  Kicking the Can Further Down the Road

The much anticipated G20 meeting between US President Trump and Chinese President Xi finished without a total disaster.  Both sides finished dinner, in fact, with a rudimentary agreement in place and managed to emerge with smiles all around. But does the “deal” signify anything of substance?  In short, the signs are not great.  Bets could easily be taken now on whether or not we will return to the exact same spot at the end of February.   The early signs are not good.  While people leaving the table in Argentina managed to argue that they achieved win-win outcomes, immediately afterwards both sides seem to have different interpretations of what, exactly, was agreed. The Americans have stressed a 90-day timeline for resolution of significant issues in the relationship.  In that timeframe, the US will refrain from increasing tariffs on $200 billion in goods from 10% to 25% on January 1 as promised earlier.  In exchange, the Chinese will make substantial purchases of agriculture, energy and other industrial goods. The Chinese, by contrast, have made no mention at all of the timelines for discussion.  The tariff discussion inside China suggests that all tariffs will be eliminated during dialogue.  And no commitments have been made for what, exactly, is to be bought or in what quantities or how quickly.