Monthly Archives: January 2010

Weekend Hits

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  • Lest you think that all trade disputes are between the United States and China, Washington filed a case against the Philippines last week, protesting that the Philippines’ excise tax on distilled spirits discriminate against imports.  The Philippines levies a lower tax on spirits made from local products, such as sugar or palm, than it does if the same spirit is made from non-tropical products, such as wheat.  The Americans argue that the differential tax rates illegally protect local spirits producers, while Manila will say – with an innocent look – that foreign spirits made from sugar or palm get the same low rate, so there is no discrimination.  I expect the European Union and perhaps Japan will join the United States’ filing.
  • Micronesians are trying out their muscles in Europe in what could prove a landmark case in the environmental business.  A Czech power company has applied for approval to renovate an old coal-fired power plant to extend its life, but the Federated States of Micronesia has filed a motion with the Czech review body to deny the power company’s request.  The Micronesian argument is that anything that will raise or extend the growth of greenhouse gasses is a danger to the very existence of some Micronesian islands.
  • I was so excited about the new China-ASEAN free trade agreement that I totally missed the January 1 start of the Russia, Kazakhstan and Belarus customs union.  A customs union isn’t the same as an FTA, generally requiring that its members have identical customs duty structures as well as free trade.  The European Union is a customs union, and there are a few others, but I am skeptical that that the new one will work.  It just seems so lopsided, it is hard to imagine that Moscow isn’t calling all the shots.  I expect that Kazakhstan and Belarus will see a surge of Russian products, but that shoppers in their big neighbor won’t notice much.  Kyrgyzstan and Tajikistan are said to be considering joining.
  • This is for my real estate friends, who are always looking for new sources of business.  Realtors in Scotland are reporting a surge in interested buyers from Georgia (no, not the one in the United States).  Russia, China and India, too.
  • The United States is dropping in the freedom standings.  The Heritage Foundation and the Wall Street Journal have released their 2010 Index of Economic Freedom, which purports to measure things such as freedom to trade, invest, establish a business, own property and other good stuff.  The winners are Hong Kong and Singapore, so one reflects that the index has nothing to do with political freedom.  Still, it is disappointing that the United States has fallen to #7, reflecting tighter regulation of business during the recession backlash.  Who is last on the list?  Coming in at #179, drum roll, please – North Korea.
  • I’m late on this, but it got so little notice that I didn’t notice it.  On December 28, President Obama signed a bill that extends the life of the Generalized System of Preferences for another year.  Now GSP expires December 21, 2010.  So we have to get the attention of the Congress again next fall.

Second Hand Trade

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Global Yard Sale

Trade in used products has an image problem, despite a largely honorable history.  Most of us imagine shady characters passing off shoddy goods.  But recessions have a way of changing things.  Just look at the growth of thrift shops in the United States, growing at five percent a year for the past three years to more than 25,000 stores.

The second hand trade is big business around the world.  Back in the 1970s and before, there was money made in shipping used clothing from North America and Europe to the poorer countries in Africa.  Some of this was done by charities, but much of it was by companies peddling used shirts, cast-off pants or even moving seconds and overstocks (that now go to outlet malls).  Later on, shipments of used factory equipment from the United States to Latin America grabbed the headlines.  Sale or lease of second-hand aircraft around the world is common.  Many of the warships found in developing countries are in their second or third lives after being decommissioned by more developed fleets.

Opposition to the used good trade is widespread.  Many countries seem insulted that they should buy used products, though it can make wonderful sense when financing is scarce.  Some routinely ban used clothing as a perceived health risk, as others ban used cars.  Often, restrictions on used goods reflect local pride more than real problems.

It shouldn’t surprise us that the recession has generated more demand for used goods in international trade, nor that the Internet has spurred the trade.  The South China Morning Post (subscription required) reports a surge in buyers searching for used goods on Alibaba.com, the China-based business-to-business portal.  Alibaba.com says that searches by U.S. buyers looking for used goods rose by 113% between November 2008 and November 2009.  U.S. companies were looking for things as diverse as used sailboats, second-hand cars from Korea or Japan, used clothing, laptops, golf carts and car parts.  (I’m not sure I’d put used car parts on my car, but that’s just me.)  One Shanghai-based purveyor of used vehicles and construction machinery reports that inquiries via Alibaba.com have risen 20-30% in the past year.  Alibaba boasts more than two million used products on its site.

Elephant Steps

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Cambodia's National Road No. 6

Cambodia’s new highways are being rolled out quickly – and may have a profound impact on regional trade in S.E. Asia.  Refurbished highways between Phnom Penh and Thailand were opened December 28, and are only a small part of the tremendous road building going on in Cambodia.  Ten projects, totaling 730 miles, are currently underway and at least another eleven projects are in the pipeline.  Good business for those who can get there.

Prime Minister Hun Sen calls these roads “elephant steps, not mouse steps” in terms of their speed and their potential impact on his country.  Clearly, the roads will benefit tourism, making it easier to visit sites such as Angkor Wat from Bangkok.  Cambodia will make money out of day-trippers from Thailand, plus the roads will encourage more tourists to stay in Cambodia to see sites that have been unreachable from Thailand.

The new roads are already easing logistics and spurring trade, linking Cambodia to the highway systems of its neighbors.  Thai firms are already pushing everything from construction materials to instant noodles into Cambodia.  Japanese companies are using the new routes to link operations in Bangkok to Ho Chi Minh City.

The competition to build Cambodia’s new highways is intense, reports the New York Times.  The Asian Development Bank is financing some of the roads, while China is building others.  The new road to the Thai border was built by a Thai company using ADB funds.  Mr. Hun Sen has commented how the Chinese build more quickly than do the companies doing the ADB projects.  I wonder what he will say when the maintenance bills come in.