Trade: 6 things to know about international trade this month

Russia has pulled out of and then rejoined a UN-backed agreement to allow exports of grains and other foodstuffs from Ukraine through the Black Sea.

It quit the Black Sea Grain Initiative on 29 October – leading to accusations from the US that it was “weaponizing food” – but reversed its decision on 2 November following interventions by Turkey. The next shipments of grain will head to Somalia, Djibouti and Sudan, Turkish President Recep Tayyip Erdoğan said.

The deal was first agreed in July and has facilitated nearly 10 million tonnes of shipments, the UN says. It ended a five-month Russian blockade of Ukrainian ports that sparked a surge in food prices.

Shipments under the Black Sea Grain Initiative

The deal is still due to end on 19 November unless those involved agree to extend it.

Luiz Inácio Lula da Silva’s defeat of Jair Bolsonaro in Brazil’s presidential election could boost the Latin American country’s relations with the EU.

Lula – who takes office on 1 January 2023 and was also president from 2003 to 2010 – has said he wants to conclude a deal between the European Union and the Mercosur trade bloc of South American nations within six months, Politico reports. But Lula also says he will seek fair global trade rather than trade deals that "condemn our country to be an eternal exporter of raw materials”.

Greenpeace says that “to protect nature, the climate and the human rights of Indigenous Peoples, the EU and Mercosur countries need to turn the deal on its head, and put environmental and social concerns at the centre”.

Lula’s foreign minister during his first spell as president says his government is likely to want changes to the deal in relation to intellectual property protection and government procurement, according to the Financial Times. “We want to be sure that nothing impedes the technical or industrial development of Brazil,” Lula has said.

The other full members of Mercosur are Argentina, Paraguay and Uruguay.

Many participants at the 2022 IMF-World Bank Annual Meetings in mid-October highlighted a need for trade and multilateral trade cooperation alongside changes to monetary and financial policies to help reduce inflation and restart growth, according to World Trade Organization Deputy Director-General Anabel González.

Trade remains critical in helping countries not just make money to pay for imports and service debt, but adapt in the case of external shocks, WTO Director-General Dr Ngozi Okonjo-Iweala said at the meetings. She explained the need for open supply chains and innovation to lower prices, and said that digital trade – including digitally-enabled services, already boosted by the pandemic – can be an important driver of growth.

Delegates also discussed how trade can help countries tackle climate change, saying that trade cooperation can support the spread and uptake of climate friendly technologies. Cross-border flows of capital, technology and information will be a key part of this.

The WTO also released its latest World Trade Report at COP27, highlighting how trade must be a cornerstone of climate action.

The UK government is looking to save companies time and money by planning to make digital trade documents as legally valid as their paper-based equivalents, the BBC reports. The country currently requires many documents to be printed on paper by law and estimates that removing this need will save British businesses more than £1 billion ($1.1 billion) over 10 years.

The British Chambers of Commerce says the move will “usher in a new era of simplified online trading”, adding that “In the current difficult economic conditions, this can only be a good thing”.

Digitalization has “reduced the costs of engaging in international trade, facilitated the co-ordination of global value chains, helped diffuse ideas and technologies, and connected a greater number of businesses and consumers globally”, according to the OECD.

A study focused on Asia-Pacific found that full implementation of cross-border paperless trade could boost exports by $257 billion a year, while cutting the time needed for export by 44%. Even partial implementation would also have major benefits, it said.

Air cargo has played a relatively small part in global supply chains, but its significance is increasing because of rising levels of e-commerce and customer demand for more rapid deliveries.

“Because of e-commerce… there’s definitely a shift that is structural, that is permanent,” Craig Smyth, the Chief Executive of air cargo handler Worldwide Flight Services (WFS) told the Financial Times. Online purchases account for 20% of WFS’ activity in some regions, and e-commerce growth has led Smyth to downplay pessimistic outlooks for global trade.

Global retail e-commerce sales reached $5.2 trillion in 2021, and are forecast to rise by 56% to hit $8.1 trillion by 2026.

Leading global shipping company MSC has recently started developing an air cargo brand “in response to customer demand”.

China's exports and imports unexpectedly contracted in October, in their first simultaneous slump since May 2020. It came as domestic COVID-19 restrictions and global recession risks dented demand and further darkened the outlook for the country’s economy.

Exports fell by 0.3% from a year earlier, marking a sharp turnaround from a 5.7% gain in September, according to official data. It was their worst performance since May 2020, and well below analysts' expectations for a 4.3% increase.

The decline came despite the yuan weakening since April and the arrival of China’s key year-end shopping season, underlining broadening strains for consumers and businesses worldwide, Reuters reported.

"We think exports will fall further over the coming quarters,” said Zichun Huang, an economist at London-based independent research company Capital Economics. “Aggressive financial tightening and the drag on real incomes from high inflation will push the global economy into a recession next year."

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