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Trade Agreements Could Offer Additional Boost to the Shipping Markets

With the past four years being marred by various trade frictions, the US-China being the biggest one, it’s expected that trade flows could start to normalize, with new agreements in the works able to shift and even enhance flows in the future. In a recent weekly note, shipbroker Allied Shipbroking said that “it has been a year of considerable re-shuffling in global trade, with China’s role progressively enlarges. Traditional trade flows amongst major world economic power houses such as the European Union (EU) and the US seem to be losing ground, while the pandemic of 2020 has surely played a considerable role in this regard. However, the question that arises is if this shift in trade volumes is a short-term event as part of the rapid recovery of China, or if it is a much longer-term fundamental change”.

Source: Allied Shipbroking

According to Mr. Yiannis Vamvakas, Research Analyst with Allied, “Eurostat published last week some very insightful data regarding the trade between the union and the rest of the world, which pinpointed the massive increase of trade between the EU and China. The latter climbed to the top position of trade partnership for the first time (replacing the USA), as imports from Beijing expanded by approximately 5.6%, which translated to an additional trade of 20.5 billion euros in absolute numbers. Previously, the US was the key trading partner for the EU, but now official figures demonstrate that imports from the other side of the Atlantic had fallen to €202 billion in 2020, posting a decline of 13.2%. Imports from the rest of the world had also dropped during 2020, highlighting even further the importance of China for the Continent. A massive decline was noted in imports from other key partners such as the UK, Russia, Japan and Turkey.

Source: Allied Shipbroking

Vamvakas added that “the same trend was observed on the exports front, as EU exports to China ramped up by a rate of 2.2% (around 4.3 billion euros), at the same time that exports to USA (as well other major world players) fell by 8.2% to 353 billion euros. The stronger than expected recovery of the Chinese economy and its production can partly justify this shift, as y-o-y industrial production closed the year with a rise of 2.8%, while its GDP growth for 2020 reached 2.3%, beating expectations. Other major producers and trading partners of the EU, such as the US, UK and Japan saw their industrial production levels plunging, leaving a wide gap for China to fill”.

“However, it is not yet clear if these countries will be able to regain their market share in the second largest consumer market (EU), after the post-pandemic recovery takes place. Meanwhile, these figures are coming to light but a few weeks after the EU-China Comprehensive Agreement on Investment had been agreed, further strengthening their economic relationship. The agreement has not yet been approved by the European parliament, but despite critics, it is expected to come into force sooner or later. The agreement facilitates the investment of EU capital into the Chinese market, while China will benefit from the transfer of technology and know-how”, Vamvakas said.

Source: Allied Shipbroking

According to Allied’s analyst, “as for the other major economies, the US saw imports from China lose some ground in 2020, compared to the previous year (a fall of approximately -3.6%), trimming the trade deficit between the two nations, with China though remaining its key source of imports (accounted for 18.6% of total imports), while still being the third largest destination for US exports. The discussion though between the two sides about the lifting of trade tariffs is likely to boost trade between the two even further in the coming years. Several factors such as the recovery pace of the global economy (excluding China), the bilateral agreements between China and other key players in the world (especially the USA), the implementation of the RCEP agreement and the level of competitiveness that Chinese products manage to retain will be the factors that will inevitably dictate the final picture that will emerge for global trade in the coming years”, Vamvakas concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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