Business Beyond the Reef » Japan

South-South FTAs

Steve — Mon, 30 Jan 2012 10:28:45 +0000

Say “FTA” to the average American and you get a blank stare. The politically aware may realize that you mean “Free Trade Agreement” and will assume you refer to NAFTA or the U.S. FTAs with South Korea, Panama and Colombia. They are likely not aware of the fifteen other FTAs the United States has negotiated over the years. If it occurs to them that other countries might have FTAs, they probably think of the agreements that the European Union has negotiated, blissfully ignorant of the 214 agreements currently in force that have been reported to the World Trade Organization.

Those 214 agreements are not all with major developed countries. In fact, more and more of them govern trade among developing countries (so-called south-south FTAs). The WTO has a great database of these agreements that can be fun to play with. Who knew, for instance, that Peru has an FTA with Iceland, Liechtenstein, Switzerland and Norway? Or that there is a Pan-Arab Free Trade Area (PAFTA) covering much of North Africa and the Middle East?

Hmm...what can we sell in India?

Two south-south FTAs have been in the news. Thailand and India negotiated a deal back in 2004 that cut customs duties on 82 products to zero. They have been working to expand this FTA and expect to announce tariff cuts on another 1,000 tariff items in the near future. Thailand’s sales to India grew 36% in 2011 (over 2010) to US$5.18 billion, while purchases from India grew 30% to US$3 billion. You can’t say that all of that is due to duty-free access on a mere 82 line items, but it indicates that there is good growth potential for the new 1,000 items. Thailand expects that two-way trade will double by 2014 to about US$16 billion.

The Malaysia-Chile FTA is brand new and involves two of the parties in the negotiations for a Trans Pacific Partnership (TPP). Chile’s 2010 exports to Malaysia were only about US$200 million so it will be a while before the impact of this agreement is seen. Still, Chile anticipates that the FTA will lead to more projects in Chile by Malaysian South-South Corp Bhd (MASSCORP), a consortium of 86 Malaysian corporate leaders. And Malaysia expects the agreement to open the door to building Latin American sales for Malaysia’s Proton cars. Expect to see Malaysian solar panels arriving in Chile, and Chilean wines sipped in Malaysia.

By the way, the WTO’s list of trade agreements is about to grow some more. Not only will the three U.S. FTAs with South Korea, Panama and Colombia be added this spring, but a brand new FTA between Japan and Peru goes into effect in March, freeing up nearly all of their trade in both directions over the next decade.

City Of Evil Speculators

Steve — Fri, 27 Jan 2012 10:11:25 +0000

Journalists in Hawaii live for the moments when Governor Neil Abercrombie goes “off script”. An intelligent man, the former college professor has a propensity for off the cuff remarks about things he doesn’t know much about. The nation’s least popular state governor often provokes hilarity and amusement.

Governor Abercrombie went off the reservation Monday when he delivered his annual “State of the State” address to the Hawaii Legislature. While discussing energy issues, he suddenly departed from his text to blame Singaporean speculators for Hawaii’s problems.

We are totally in the hands of oil speculators in Singapore.
- Hawaii Governor Neil Abercrombie

Rather than the usual giggles, the crowd responded with a collective “hunh?”.

Can you see all the evil speculators?

There is a lot that’s just wrong here. First is the assumption that anybody in Singapore controls energy prices in Hawaii. Yes, Singapore is a sort of headquarters for oil companies in S.E. Asia, but I’ve worked with these folks and they don’t sit around discussing how to hurt Hawaii. Second, as Honolulu Civil Beat points out, Singapore doesn’t have a futures market in oil so any speculation isn’t happening there. Third is Abercrombie’s implicit assumption that speculation must, by its nature, be bad – an assumption made by politicians and beleaguered CEOs worldwide. Have you noticed, though, that politicians blame speculators when prices rise, but CEOs blame speculators when prices go down?

Fact is, “speculator” is merely a derogatory term for somebody who buys and sells stocks, bonds or commodities and doesn’t intend to hold them for a long time. They provide a lot of the liquidity that allows markets to function efficiently. Some bet that prices will go up, others make the opposite wager, and they often offset each other. If you sell stock in an oil company, there is a good chance that you sold it to one of those evil speculators. And what does that make you?

The price of oil in Hawaii was once driven by supply from the mainland United States, but not so much anymore. We always compare our gasoline prices to the mainland and we usually run about a dollar a gallon more than most Americans pay. Many in Hawaii haven’t noticed yet, but our oil prices now are more dependent on demand in Asia. Economic growth in China has driven the price up, but our local price surged when Japan shut down most of its nuclear reactors following the Fukushima disasters last year. That’s where the blame lies for our spiking electricity bills, but somebody on his staff needs to tell the governor.

Over The Rainbow?

Steve — Wed, 07 Sep 2011 10:14:11 +0000

See what's really at the end of the Rainbow?

We still can’t sell Rainbows in Japan, but we may be close. It was triumphantly announced by the U.S. Department of Agriculture in April 2010 that Japan had decided to approve imports of the first GMO crop in its history, the Rainbow papaya, in what could be a huge boost to one of Hawaii’s industries. But it didn’t happen. Hawaii’s farmers waited … and waited.

My post from May 2010 tells all about the delicious Rainbow papaya, why it was needed and how safe it is. Suffice it to say that, despite being genetically-modified to withstand disease, it is chemically identical to natural papayas, with all the same nutrients and minerals. (And it tastes great!) Developed jointly by the University of Hawaii, local growers, Cornell University, the USDA, and Pharmacia & Upjohn, the Rainbow has been approved and become a best-seller in the United States and Canada since 2003. Efforts to obtain Japanese approval were launched in 2001.

“It’s a big deal. It’s kind of exciting. Things are happening,” said Kenneth Kamiya, an Oahu papaya grower.

Ten years on, we have a second announcement that Tokyo has agreed to allow the Rainbows in. This was front-page news last Friday in the Honolulu Star-Advertiser. The paper said that Rainbows had been okayed the day before by Japanese “consumer affairs officials” and that regular shipments should begin by December. The first 25 boxes of Rainbows are being shipped this week for a ceremony (and, presumably, a celebratory papaya tasting) at the American Embassy in Tokyo. Maybe there is something at the end of the Rainbow …