What you need to know about international trade this month
World Economic Forum Trade & Investment
Building Better Trade
1. US and EU to start talks on trade of green tech minerals
US President Joe Biden and European Commission President Ursula von der Leyen have agreed to launch talks on their trade of the critical minerals used in electric vehicles (EV) and other green technologies.
Biden and von der Leyen met at the White House in mid-March against a backdrop of European complaints that clean energy subsidies under the US Inflation Reduction Act (IRA) will divert investment away from Europe.
The IRA gives companies in the US tax credits if they buy materials from countries that have a free trade agreement with Washington. The EU and US do not have such a deal, but European officials would like EU supplies of critical minerals to become eligible for US subsidies under the IRA, The Financial Times reports.
Critical minerals include copper, lithium, nickel and cobalt. They are essential for a wide range of clean energy technologies, from EVs to wind turbines, and demand is expected to rise rapidly in the coming decades.
Total mineral demand for clean energy technologies under various International Energy Agency scenarios
Biden and von der Leyen said in a joint statement after their meeting that they intend to "immediately begin negotiations on a targeted critical minerals agreement" to ensure that minerals extracted or processed in the EU would count for clean vehicle tax credits under the IRA.
"This kind of agreement would further our shared goals of boosting our mineral production and processing and expanding access to sources of critical minerals that are sustainable, trusted and free of labour abuses," they said. "Cooperation is also necessary to reduce unwanted strategic dependencies in these supply chains, and to ensure that they are diversified and developed with trusted partners."
The US and Japan also reached a trade deal this month on EV battery minerals. The agreement gives Japanese carmakers more access to US EV tax credits and could act as a template for resolving EV trade concerns.
2. South Korea and Japan end trade dispute
Japan has agreed to lift export curbs to South Korea on some high-tech materials and South Korea says it will restore Japan's fast-track trade status, following a summit in Tokyo that marked a thawing of diplomatic tensions.
Japanese Prime Minister Fumio Kishida says the moves will be crucial for bolstering supply chains in key areas. This includes the semiconductor industry, which will benefit by linking South Korea's manufacturing technology with Japan's edge in materials, parts and equipment, South Korea President Yoon Suk Yeol says.
Yoon's visit to the Japanese capital was the first by a South Korean president in 12 years. South Korea and Japan removed each other from their trade "white lists" in 2019 amid a dispute over a South Korean court order regarding a compensation fund for victims of forced labour during Japan's occupation of the country in 1910-1945. South Korea will now withdraw its complaint to the World Trade Organization about Japan's export controls.
Reuters says the move highlights how the two US allies have been brought closer by North Korea's frequent missile launches and growing concern over China's "more muscular role on the international stage".
Indeed, Japan and South Korea have also agreed to restart a bilateral security dialogue – which has been suspended since 2018 – in view of what they describe as heightened threats to regional security. Yoon declared "complete normalization" of the intelligence-sharing pact, which Seoul threatened to pull out of in 2019.
3. News in brief: International trade stories from around the world
The Ukraine Black Sea grain deal has been extended until mid-May, but Russia says some Western sanctions will need to be lifted to secure any further extensions. The agreement to allow safe passage of grain exports is "critical for global food security, especially for developing countries", says UN spokesperson Stephane Dujarric. Ukraine's Agriculture Minister Mykola Solsky says the country has supplied nearly 500,000 tonnes of wheat for UN aid programmes.
Thailand will ban imports of plastic waste by 2025 as it looks to reverse rising levels of air and water pollution, Earth.Org reports. Only 14 manufacturers in Thailand’s free trade zone that use plastic waste as a raw material will be able to make imports this year. Thailand's imports of plastic waste from rich countries rose after China imposed an import ban in 2018.
The UK is looking to join an 11-nation trans-Pacific trading bloc as it looks to broaden its global commercial ties after leaving the European Union. But it is facing criticisms that joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership will result in it dropping ethical and environmental standards for items such as palm oil – which is linked to deforestation – and pesticides.
Recommended by LinkedIn
A shortage of vegetable oils for use in cooking could emerge because of increasing demand for biofuels, according to Bloomberg. However, shrinking vegetable oil exports and production as a result of Russia's war on Ukraine and extreme weather may also push the biofuels market into a deficit later this year. The US, Europe, Brazil and Indonesia are behind much of the rising use of biofuels, the International Energy Agency says.
Goods heading through Kazakhstan for re-export are to face increased monitoring, amid a drive by Western countries to prevent foreign companies and individuals from helping Russia circumvent sanctions, according to The Financial Times. Russian companies have been flooding their Kazakh partners with requests to help them circumvent sanctions and import badly needed goods, Reuters reports.
One of China's biggest export hubs is suffering a slump in trade amid the global economic slowdown, says The Financial Times. The head of shipping company AP Møller-Maersk has told the newspaper that China’s economic rebound is weaker than expected, but said trading volumes are proving resilient.
South Korea's exports fell by 17.4% in the first 20 days of March compared with a year earlier, with semiconductor shipments sliding by 44.7%, Bloomberg reports. The country is one of the world’s biggest exporters, and its economic health is a key indicator of trends in the global economy.
Uzbekistan is seeking to make "rapid progress" in its talks to join the World Trade Organization (WTO), as it pursues large-scale reforms of its trade and economic regimes. Uzbekistan will "intensify substantive bilateral market access negotiations", says Deputy Prime Minister, Jamshid Khodjayev. The country is importing large amounts of new equipment to modernize its manufacturing sector and infrastructure, the US International Trade Administration says.
Trade has different impacts on men and women, and policy-makers are increasingly recognizing the need to address this, according to the United Nations Conference on Trade and Development (UNCTAD). Its Linking Trade and Gender towards Sustainable Development report says the people who make trade policy have "moved from being gender-blind" and that there is increased use of gender provisions in trade agreements.
4. More on trade from Agenda
Data on international flows of trade, capital, information and people strongly rebuts the notion that globalization has given way to deglobalization, according to the latest DHL Global Connectedness Index. It even sees this resilience as a strong foundation for "re-globalization", in which globalization is reformed to make it work better for everyone.
Intra-African trade has long struggled to cope with the continent's inadequate logistics and freight sector. But, as the African Continental Free Trade Area agreement kicks in, freight and logistics are expected to see an influx of investment to cater for a wider economic expansion on the continent.
Britain and the European Union have officially adopted the Windsor Framework, the new post-Brexit trade deal for Northern Ireland. The framework aims to address trade and border sensitivities by introducing "red" and "green" lanes for imports from the UK mainland.
Upcoming Events
Further Reading
Trade Trivia
Which port is considered the busiest in the world by total cargo tonnage?
Answer here.
Share & Subscribe
Enjoyed this issue of Trade Sketchings? Share it with your network and encourage them to subscribe for future updates.
Trade Sketchings is brought to you by the World Economic Forum's Trade and Investment Team. Until next month, happy trading!