International trade: What you need to know this month

The shipping industry is due to lose its exemption from EU competition laws, in a move that could “upend the business of global trade”, according to the Financial Times.

The exemption encouraged shipping lines to form alliances by allowing them to place containers on each other’s ships – a business practice that facilitated the concentration of market power in the hands of a few which in turn helped improve their profits. The EU says this rule is no longer “fit for purpose” and that it will not be renewed when it expires in April 2024.

Removing the exemption will not completely prevent co-operation between shipping lines. But it could have implications for the small group of container shipping companies that dominate the market thanks to alliances they have formed, as agreements between container lines operating in and out of the EU will become subject to antitrust regulations.

“[Shipping] has undergone significant structural changes, such as carriers’ consolidation, global alliances and vertical integration, resulting in new market conditions, which became apparent during the coronavirus pandemic,” said EU Competition Commissioner Didier Reynders. “A dedicated block exemption for shipping lines is no longer adapted to those new market conditions.”

The new rules could help open the shipping sector to greater competition and prevent the spike in freight rates seen during the pandemic.

Further cuts to ship crossings on the Panama Canal are on the way, as drought conditions worsen in the region.

Just 25 vessels a day will be allowed to cross the key global trade route from early November, and this will gradually fall to 18 from February 2024, compared with an average of 36.

In addition, the Panama Canal Authority had to reduce the draft limit (the amount of cargo a vessel can carry without getting stuck) from 50ft to 44ft. For a container vessel, every foot of draft represents around 300-350 containers less cargo. This further decreases the canal’s throughput of cargo and increases operation costs for shipping lines, which are passed on to customers.

The canal’s reduced capacity will leave ships facing longer waiting times. Potential delays of 2-3 days to pass through the waterway could have knock-on effects on some parts of global supply chains.

Climate change has the potential to have profound negative impacts on international trade by impacting key transport corridors, the World Trade Organization notes in its World Trade Report 2022. However, it also says that well-designed trade policies are essential to help create strong climate change adaptation strategies.

Different modes of trade transport could also become more widely used. Mexico is investing $2.8 billion to revive a century-old railway as an alternative container route to the Panama Canal. The 308 kilometre railway could reduce transit time from 10 hours by canal to 6.5 hours, the government says. But critics claim it could take years to build supporting trade infrastructure, and that moving containers from ship to train and back again would add time and costs.

“A train isn’t the same as a ship. You have to consider the proportions. But given the changes we are seeing with climate change it’s a real and increasingly important alternative,” Mexican Economy Minister Raquel Buenrostro told the Financial Times.

China will restrict exports of graphite – a key battery material for electric vehicles (EVs) – to “protect national security”, according to Reuters. The country is the world’s biggest graphite exporter and producer. Its move to require permits for exports will have impacts along critical mineral supply chains. But it could also speed up work on developing alternative materials and supply sources, industry figures say. Firms are already seeking greener supplies of graphite.

The EU is considering postponing tariffs on EV sales between the bloc and its UK neighbour. A 10% tariff is due to enter into force from 1 January for EVs that have substantial parts of their batteries made outside Europe or the UK. A possible one-year delay would give carmakers more time to switch battery suppliers.

Malaysia aims to attract investment to grow its high-tech sectors, including EVs and semiconductors, as it seeks to further its status as a manufacturing hub for global supply chains. The country’s new industrial plan aims to increase high-end manufacturing capacity by 61% by 2023, compared to 2022.

China and close US ally Colombia have upgraded their diplomatic relations to a strategic partnership and signed a number of trade deals. The countries reached 12 cooperation deals during a recent meeting, including allowing Colombian beef imports to China in 2024, and agreed to set up numerous working groups to improve trade.

Six economies have received record-breaking foreign investment (FDI) pledges in 2023, according to fDi Intelligence. Morocco, Malaysia, Iraq, Israel, the Democratic Republic of Congo and Finland have all logged record annual greenfield FDI, according to data going back to 2003.

Trade cooperation between the US, EU and China can help combat the climate crisis, according to a new paper by the Peterson Institute for International Economics. The analysis identifies the trade tensions stemming from differing climate policy approaches and describes policy measures to address them.

Global trade is increasingly concerned with non-economic values, such as sustainability, inclusivity and fair trade systems for all. The Villars Framework for a Sustainable Global Trade System outlines how the sustainability agenda could remake the global trade model.

How are extreme droughts creating problems for supply chains? Here’s how four key river trade routes have been affected and what can be done to prepare for the future.

Global supply chains have faced many disruptions already this decade. Here are five principles for public-private data collaboration that could improve maritime supply chain resilience.