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From Chip Disputes To The EU’s Carbon Border Tax: 6 Things To Know About International Trade This Month

From chip disputes to the EU’s carbon border tax: 6 things to know about international trade this month

From chip disputes to the EU's carbon border tax: 6 things to know about international trade this month

The shift to a greener economy is expected to alter the balance of global trade in 2023. The Big Picture Crowdsource Innovation This monthly roundup brings you a selection of the latest news and updates on global trade. Top stories: Key factors that will affect trade in 2023; EU carbon tax faces WTO questions; Countries look to bring home semiconductor manufacturing; EU and Chile strike minerals deal. Global trade is expected to have hit a record $32 trillion in 2022 , with goods trade up 10% on the year to $25 trillion, and trade in services up 15% to $7 trillion, according to the UN Conference on Trade and Development (UNCTAD). But trade growth took a hit in the second half of last year, with third-quarter goods trade dropping by 1% compared with three months earlier. The likely causes were “geopolitical frictions, persisting inflation and lower global demand”, all of which are expected to negatively affect global trade in 2023 , UNCTAD says. Trade growth slipped in the second half of 2022. Image: UNCTAD UNCTAD lists the key factors likely to affect trade in 2023 as: Negative factors: lower economic growth forecasts; high prices for traded goods; record levels of global debt and increasing interest rates. Positive factors: improved logistics as ports and shipping companies have adjusted to COVID-era challenges; new trade agreements are coming into force. Other factors: the reshaping of global supply chains, including the diversification of suppliers, reshoring, near-shoring and friend-shoring; the shift to a greener global economy. 2. EU carbon border tax raises trade questions The EU has agreed what will be the world’s first carbon border tax , but questions have been raised about whether it could lead to a breach of World Trade Organization (WTO) rules. The Carbon Border Adjustment Mechanism (CBAM) means that companies in the EU that import goods produced outside the EU will have to buy CBAM certificates to cover the emissions generated in the production of those goods. It is intended to stop “carbon leakage”, where firms in the EU meet emissions rules by shifting production to countries outside the EU with less strict environmental regulations. The EU’s trading partners have labelled the CBAM protectionist . And the CBAM could break WTO rules if it runs alongside current EU emissions trading systems (ETS) rules, which give EU companies in some sectors with hard-to-abate emissions a number of free ETS allowances. “Keeping free emissions allowances for European products, while also requiring the purchase of CBAM certificates for like imported products, would unquestionably be a violation of the [WTO] national treatment rule ,” says think tank the Cato Institute. “In effect, it would provide double protection for the European products.” The free allowances are due to be phased out between 2026 and 2034, but EU industry representatives say this will cripple certain sectors and pose particular challenges for exports . The CBAM will initially cover a number of specific products in some of the most carbon-intensive sectors : iron and steel, cement, fertilizers, aluminium, electricity and hydrogen, as well as some precursors and a limited number of downstream products. The EU and Chile have reached a trade deal that will give the bloc improved access to lithium, copper and other minerals critical to the energy transition. It will also see Chile end tariffs on all imports except sugar. Chile is the world’s biggest copper producer , with 29% of global production. It is also the second-largest lithium producer, with 22% of the total. Lithium used in electric vehicles and batteries, while copper is used extensively across many clean energy technologies . Lithium trading volumes and prices soared in 2022 due to supply tightness and rising demand due to the energy transition. The same is expected to happen with copper this year . The agreement comes as Europe increases its shift away from Russian gas and oil following the outbreak of Moscow’s war on Ukraine. The EU, the G7 and Australia agreed in December to a $60-per-barrel price cap on Russian seaborne crude oil , leading Russian President Vladimir Putin to ban shipments of crude oil and oil products in February-June to any nation implementing the cap. 4. The chips are down in semiconductor trade Semiconductor chips may only be small, but they are causing big waves right now. The US’ CHIPS and Science Act came into effect at the start of this year – CHIPS stands for Creating Helpful Incentives to Produce Semiconductors – with the aim of boosting domestic manufacturing […]

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Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

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