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Global Trade: Russia Joins the WTO, India is Poised to Increase Exports, and China Sees Slump in Manufacturing


Plus, an update on the Panama Canal expansion!

MINYANVILLE ORIGINAL The important global trade news this week include three huge players: Russia, China, and India. Plus, a delay in expanding the Panama Canal gives US ports around six more months to complete vital facility updates

Russia Will Reap Full Benefits of WTO Status While the US Waits.

Russia has left its years as a global trade outcast behind, becoming the 156th full member of the World Trade Organization last Wednesday, after nearly two decades of negotiations. With trade barriers falling, the price of foreign goods in the country are set to dip. But it's unlikely that Russia's new status will spark the explosive growth experienced by China after it received membership in 2012. According to Businessweek, Russia is less concerned with proliferating exports (its trade surplus is currently $115 billion thanks to oil and natural gas) than it is with growing its economy through greater efficiency, increased income, and further consumer spending.

While new membership has historically been accompanied by a 1% - 3% boost in a country's GDP, The World Bank estimates that Russia's $1.86 trillion economy will jump 11% annually in the long run.

The Peterson Institute for International Economics has released a report suggesting that the potential benefits of Russia's new status for the US are "substantial," and US exports to Russia could double to $19 billion in the next five years. The only hurdle remaining is a remnant of Cold War era legislation, known as the Jackson-Vanik amendment, which still restricts normal trade relations with Russia 38 years after being signed into law.

Nearly a month ago, the Coalition for US-Russian Trade once again pressured Congress to immediately pass PNTR (permanent normal trade relations) legislation when it returns from summer recess on September 10. The coalition includes dozens of US companies eager for full access to an open Russian market -- Boeing (BA), Microsoft (MSFT), ExxonMobil (XOM), General Motors (GM), and Procter & Gamble (PG), to name a few -- as well as the US Chamber of Commerce and the National Association of Manufacturers.

Unfortunately, it's expected that legislation will remain unsigned until after the presidential elections in November. This means that US manufacturers will be subject to higher tariffs than those in Europe and Asia when exporting to Russia.

Some international businesses, however, may be deterred by Russia's position on the World Banks' Ease of Doing Business list: It's ranked at #120.

Chinese Manufacturing Shrinks at Faster Rate in August.

The HSBC Flash Purchasing Managers' Index fell from 49.3 in July to 47.8 in August, which means China's crucial manufacturing industry has shrunk for the tenth month in a row, as export growth collapsed to 1%, reports Bloomberg. Analysts were certain Premier Wen Jiabao's late-spring stimulus program would spur grow, and July's dismal numbers would see an uptick. This has not been the case.

Part of the problem has to do with what The New York Times describes as a "glut of everything from steel and household appliances to cars and apartments." It seems that a mentality bolstered by thirty years of domestic growth is hard to shake despite falling demand. While the Chinese government is fudging numbers to keep confidence afloat, an HSBC/Markit survey showed inventory stocks of finished goods rising faster than any month since the survey began in April 2004.

Manufacturers have been trying to increase exports, while simultaneously being forced to cut down production in factories. But with some Chinese businesses seeing a 30% drop in sales since last year, the demand to empty out overstuffed inventories just isn't there.

India Wants to Double Exports.

Yesterday, Indian Commerce Secretary S.R. Rao stated that his government is aiming to double his country's exports to $500 billion per year by 2015. Policy announcements should be expected within the next three to four months, intending to capitalize on India's increasing share in global trade flow. He intends to continue focusing on South-South trade, which is trade between developing countries of the global South.

"South-South trade has multiplied more than 10 times in the last two decades compared to global trade, which grew four-fold in this period," Rao said at the Confederation of Indian Industry summit held this week.

India's merchandise trade grew faster than any other country in 2011, according to the WTO, with shipments rising 16.1%. Still, while India's exports recently crossed the $300 billion mark, imports are close to $470 billion, putting the country at a steep trade deficit.

Two Indian industries currently focused on expanding trade are spice producers and wheat producers.

Panama Canal.

The expanded Panama Canal is running late, and its expected date of completion has been pushed back from October 2014 to April 2015, reports the Bulletin Panama. However, this can vary by a few months, according to Panamanian President Ricardo Martinelli.

The delay is being blamed on a $573 million dispute between the Panama Canal Authority and Grupo Unidos por el Canal, which is the consortium in charge of the expansion.

This delay gives US ports in the Gulf and along the East Coast around six more months to complete vital facility updates needed to accommodate ships with nearly three times the capacity of previous vessels that transversed the canal.

For more on the expansion of the Panama Canal and related news, see Double-Wide: Who's Set to Benefit From the Expanded Panama Canal and China and Singapore Latest to Invest In US LNG Facility.

Twitter: @brokawbrokaw
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