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United Nations sanctions on North Korea’s important textiles industry are expected to disrupt a business largely based in China and pose compliance headaches for clothing retailers around the world. The UN security council imposed a ban on North Korea textile exports and a ceiling on the country’s imports of crude oil on Monday, ratcheting up sanctions that are likely to hit the country’s ordinary citizens. “If the goal of the sanctions is to create difficulties for ordinary workers and their ability to make a livelihood, then a ban on textiles will work,” said Paul Tjia, an outsourcing specialist who regularly visits North Korea.
Textiles were North Korea’s second-biggest export after coal and other minerals in 2016, totalling $752 million, according to data from the Korea Trade-Investment Promotion Agency. Nearly 80 percent went to China. Enforcement of the textile ban along North Korea’s 1,400-km (870 mile) border with China – where goods are sometimes smuggled across, often on boats at night – could be challenging, North Korea experts say.
“In the past, we have seen shows of quite convincing enforcement in the major centres, such as at Dandong,” said Chris Green, a North Korea expert at Leiden University in the Netherlands, referring to the largest trading hub on the China-North Korea border. “But further upriver, where press intrusion and interest tends not to be there, we haven’t seen the same degree of energetic enforcement.”
Despite tightening sanctions, trade in non-banned goods including food and other daily necessities continues between China and North Korea carried by hundreds of trucks crossing back and forth every day. “Enforcement will depend a lot on China,” said Tjia. “So far, a lot of the North Korean textiles trade to Europe and other places goes via China.”
“It will be up to Chinese companies that deal in the North Korean textile trade to take action and up to the Chinese government to ensure the Chinese companies are taking action.”
On a recent visit to the Chinese border with North Korea, several Chinese traders told Reuters the Chinese government is strictly enforcing U.N. sanctions to the point that some businesses that rely on trade with North Korea have already gone bankrupt or traders have had to start trading in non-sanctioned goods.
MORAL QUESTION
Another challenge is that clothes can be partly made in China and partly in North Korea with a “Made in China” label attached to the finished product.
“Even if a label says “Made in China”, some parts of the product are allowed to be made in North Korea and other places,” Tjia said. “For example, the buttons may come from Italy, the cotton may come from Australia or India, the labour may come from North Korea or China, the accessories may come from Bangladesh.”
North Korea does not release statistics on the number of people involved in the textiles industry but experts estimate at least 100,000 people are employed at North Korean textiles factories, producing goods both for export and the domestic market. Cheng Xiaohe, a North Korea specialist at Beijing’s Renmin University, estimates the figure may be as high as 200,000 people.
A ban on textiles will not only impact factory workers but also their families who are supported by work in textiles factories, said Green. Wages at textiles factories grew tenfold around 2010 when North Korea was experimenting with economic reforms, according to Green, so people suddenly went from earning 30 North Korean won to 300 won. “They were suddenly getting a reasonable wage. Whereas 30 won or being paid in kind wouldn’t get you very far, if you were suddenly being paid 300 won, it would get you something – until of course inflation kicked in.”
Textiles factories in North Korea are increasingly “run like private businesses and part of the new, evolving social contract is that people get paid a wage and they can live off that wage, which is new to this generation,” said Andray Abrahamian of Choson Exchange, a Singapore-based NGO that trains North Koreans in business skills.
“This year, we’ve entered a realm of sanctions where the effects are really, really going to be felt by ordinary people.”
Archives
Exports up by mere 0.4% to $ 979 m; imports swell by 9% to $ 1.88 b, widening trade deficit to $ 903 m
Year-to-date exports up 5% to $9.87 b; imports by 10.3% to $ 18.7 b, and trade deficit balloons to $ 8.8 b
The country’s external sector came under severe pressure in October as exports struggled and imports jumped, widening the trade deficit further.
The higher growth in imports was despite measures by the Central Bank in September and October to curtail waste of foreign exchange on non-essential goods.
Exports managed to grow by only 0.4% to $ 979 million in October and failed to repeat the crossing of $ 1 billion mark, a feat achieved four times between January and September.
mports in October rose by 9% to $ 1.88 billion, the highest since August.
The twin developments saw trade deficit widen by $ 903 million, as against $ 752 million a year earlier.
Year-to-date, exports have grown by 5.1% to $ 9.87 billion, and imports by 10.3% to $ 18.73 billion, expanding the trade deficit to $ 8.85 billion, up from $ 7.6 billion in the first 10 months of last year.
“Sri Lanka’s external sector continued to be under pressure in October,” the Central Bank said. However, it expects the trend of increasing imports will reduce in the coming months with the lagged impact of recently introduced restrictions on certain import categories.
Central Bank said the marginal growth of exports in October reflects mainly the decline in agricultural exports by 11.5%, which offset the 4.5% growth of industrial exports.
Under industrial exports, export earnings from textiles and garments increased marginally in October due to higher earnings from textile exports despite the slight decline registered in garment exports. The reduced earnings from garment exports was mainly driven by the lower demand from the USA, despite an increase in exports to the EU market and non-traditional markets, such as India, Canada, Japan and Hong Kong. Further, reflecting the combined impact of both volume and export prices, earnings from petroleum products increased significantly in October.
Export earnings from food, beverages, tobacco, base metals and articles increased substantially during October due to improved performance in most of their sub-categories. In addition, export earnings from animal fodder, machinery and mechanical appliances, and transport equipment rose in October, contributing towards the increase in industrial exports. However, export earnings from rubber products, gems, diamonds and jewellery, leather, travel goods, and footwear declined in October.
Earnings from agricultural exports were lower during the month owing to the poor performance in almost all sub-categories, except seafood, vegetables and rubber. Reflecting lower average export prices and exported volumes, export earnings from tea declined in October.
Export earnings from spices also reduced during the month due to the poor performance in most categories of spices. Further, despite an increase in earnings from coconut non-kernel products, earnings from coconut exports decreased due to the drop in earnings from coconut kernel products, such as desiccated coconut and coconut oil. However, owing to higher exports to the EU market, earnings from seafood exports rose during the month.
Leading markets for merchandise exports of Sri Lanka in October were the USA, India, the UK, Italy and Germany, which accounted for about 50% of total exports.
In terms of imports all three sub-categories–intermediate, consumer, and investment goods – contributed to the growth.
Expenditure on intermediate goods rose due to higher imports of textiles and textile articles – led by fabric and yarn, fuel and wheat and maize imports. Expenditure on fuel imports rose with higher import prices of both crude oil and refined petroleum products despite the reduction recorded in import volume of refined petroleum.
In addition, import expenditure on wheat and maize, chemical products, fertiliser, rubber and articles thereof, and plastic and articles thereof increased in October.
However, import of gold declined significantly, reflecting the impact of customs duty imposed since April.
Import of consumer goods rose, owing to higher imports of personal motor cars less than 1,500 CC, hybrid and electric motor vehicles.
“However, it is expected that the importation of motor vehicles would decelerate in the coming months, reflecting the lagged impact on such imports of the policy measures introduced in September,” the Central Bank said. Expenditure on rice imports declined, indicating the availability of sufficient quantities of domestic supply. Import of categories such as clothing and accessories, telecommunication devices, household and furniture items, and home appliances, too, declined, partly reflecting the impact of restrictions on non-essential consumer goods imports while also responding to relatively larger depreciation.
mports expenditure on investment goods rose mainly due to higher expenditure incurred on machinery and equipment, and building material imports. However, import of transport equipment reduced due to lower imports of commercial vehicles, such as tankers and bowsers, lorries, buses, and commercial cabs.
China, India, Singapore, Japan and UAE were the main import origins in October, accounting for 61% of total imports.
The 8th joint cooperation committee (JCC) meeting between Pakistan and China has set new targets for their bilateral cooperation, making CPEC a true economic corridor with multiple doors.
This was announced by Pakistan’s minister for planning, development and reform Makhdoom Khusro Bakhtiar after the conclusion of 8th JCC proceedings in Beijing on Friday.
The minister said that as per vision of the leadership, work on the China-Pakistan Economic Corridor (CPEC) was accelerated and its scope was expanded by opening its doors for industrial cooperation, agriculture and socio-economic development.
He added that Pakistan and China had agreed to further strengthen the JCC mechanism through increased frequency of exchanges.
“Signing of MoU on industrial cooperation will steer Pakistan into a new era of industrialisation and help expedite development of Special Economic Zones (SEZs) through relocation of Chinese industries,” the minister said.
“Enhancing cooperation to cover diverse industries such as textile, petrochemical, iron and steel, mines and mineral, and automobile is a new target of CPEC.”
He noted that Pakistan-China cooperation in agriculture sector would focus on attracting investment in food production, processing, logistics, marketing and exports through joint ventures between companies of the two sides.
First meeting of the joint working group on agriculture is planned to be held in the first quarter of 2019.
He further said that in the next phase of CPEC, the two sides have agreed to cooperate in the maritime sector, port development and the automobile sector.
Trump said that he would remain in Washington over Christmas instead of going to Florida. ‘I am in the White House, working hard,’ the US President tweeted Saturday morning.
The partial US government shutdown is set to stretch on through Christmas as Congress adjourned Saturday with no deal in sight to end the impasse over funding for Donald Trump’s wall on the US-Mexico border. Due to the shutdown — which saw several key US agencies cease operations at 12:01 am (0501 GMT) Saturday — Trump said that he would remain in Washington over Christmas instead of going to Florida. “I am in the White House, working hard,” the Republican president tweeted Saturday morning. “We are negotiating with the Democrats on desperately needed Border Security (Gangs, Drugs, Human Trafficking & more) but it could be a long stay.”
Trump has dug in on his demand for $5 billion for construction of the wall on the US border with Mexico. Democrats are staunchly opposed, and the absence of an elusive deal meant federal funds for dozens of agencies lapsed at midnight Friday.
The House of Representatives and the Senate held sessions on Saturday, but both chambers adjourned without a deal being reached, and no votes were expected until December 27.
Top Senate Democrat Chuck Schumer blasted the president and blamed him for provoking the shutdown: “President Trump, if you want to open the government abandon the wall, plain and simple.”
“The Trump shutdown isn’t over border security; it’s because President Trump is demanding billions of dollars for an expensive, ineffective wall that the majority of Americans don’t support.”
Most critical US security functions remain operational, but 800,000 federal workers are impacted, with many furloughed just days before Christmas while others deemed essential are working unpaid.
And as many other Americans and tourists began their end-of-the year holidays some national parks have shuttered completely, while others remain open but without any visitor services including restrooms and maintenance.
New York’s governor provided funding to the Statue of Liberty monument and Ellis Island so those key attractions could remain open. It remains unclear how long the shutdown will last, with Washington unable to accomplish one of its most basic tasks — keeping the government up and running.
“This is a dereliction of duty by Congress and the president,” said David Cox, national president of the American Federation of Government Employees. Trump’s own Republican party still controls both the House and Senate, but in January the House comes under Democratic control. Governor Ralph Northam of Virginia — a state bordering the US capital that is home to many federal workers — urged Trump in a letter Saturday to push immediate action to end the shutdown, saying it “inflicts real harm” on workers.
“I share your desire for strong economic growth throughout the United States, but the current partial government shutdown makes it harder to achieve this goal,” the Democratic governor said.
About three-quarters of the government, including the military and the Department of Health and Human Services, is fully funded until the end of September 2019, leaving 25 percent unfunded as of Saturday.
Most NASA employees will be sent home, as will Commerce Department workers and many at the Departments of Homeland Security, Justice, Agriculture and State.
Should they eventually strike a deal, it could swiftly clear Congress and reach the president’s desk, said Senate Republican Bob Corker.
One focus of discussion was the $1.6 billion in border security funding that was a part of pending Senate legislation, number two Senate Republican John Cornyn told AFP.
But conservatives in the House would likely balk at that figure.
“There’s no agreement,” congressman Mark Meadows, chairman of the House Freedom Caucus of ultra-conservatives, told reporters as he left a closed-door meeting on the Capitol’s Senate side.
“There’s a whole lot of numbers being thrown around,” but a maximum $1.6 billion for border security “is not acceptable.”
Trump reversed course Thursday and rejected a measure that had unanimously passed the Senate and was under House consideration.
It would have extended government funding until February 8, but contained no money for a border wall, a pet project Trump has fought for since his presidential campaign.
Democrats painted Trump as the Grinch who stole the year-end deal.
With lawmakers like Meadows and prominent conservative commentators demanding that the president stick to his campaign promises, Trump would not budge on his wall.
The House swiftly passed a bill that fulfilled the president’s demands. It included $5.7 billion in wall funding, and $7.8 billion in disaster relief. But it stalled at the first hurdle in the Senate.
Collector C. Kathiravan said that production of 57.37 lakh saris and 57.23 lakh dhotis for distribution to ration cardholders across the State for Pongal was in full swing in the district.
On Wednesday, he along with officials of Handloom Department inspected the production activities at Bhavani Primary Handloom Weavers Cooperative Society. Addressing media persons, Mr. Kathiravan said that the State Government was distributing free dhotis and saris to the cardholders during Pongal every year of which 60% of the material was produced in the district.
During Pongal 2018, 57.71 lakh saris and 62.85 lakh dhotis were produced in the district and the target for 2019 was 57.37 lakh saris and 57.23 lakh dhotis.
There were 190 handloom cooperative societies in the district with 64,019 members who produced bed sheets, bed spreads, towels and pillow cover with handicraft.
The Collector said that 9,724 weavers in the district were receiving 200 units of free electricity and also receiving various benefits under various schemes.
A total of 5,303 weavers were receiving old age pension and 384 beneficiaries receiving family pension. Thus, a total of 5,687 beneficiaries were receiving Rs. 56.87 lakh assistance every month, he added.
The European Union and other allies generally agree with the White House’s criticisms of China, but they disagree with President Trump’s strong-arm tactics, such as tariffs to pressure China
The Americans accused the Chinese of being modern-day mercantilists who steal intellectual property. The Europeans accused the Americans of provoking a crisis in the world trading system, threatening the global economy.
And the Chinese invoked Spider-Man. Unlike Spidey, the Chinese emissary said, America is not using its superpowers with great responsibility.
The trash-talking by otherwise restrained diplomats took place at a normally dull occasion: a review of American trade policies at the World Trade Organization in Geneva.
The reviews, held every two years, usually attract only lower-ranking diplomats. They are intended to allow WTO members to explain their trade policies and for other members to comment and ask questions. But in an age of severe trade tensions, countries sent full-fledged ambassadors and the sessions, which were held on Monday and Wednesday, became a venue for allies and adversaries alike to vent their anger at American policies they said were illegal and destructive.
The debate provided another example of the way the Trump administration’s confrontational approach to international diplomacy has altered the rules of engagement at international institutions like the WTO The niceties of protocol are eroding and the language has become more blunt.
“The multilateral trading system is in a deep crisis and the United States is at its epicenter,” Marc Vanheukelen, the European Union’s ambassador to the WTO, said Monday, the first of two days of debate about United States policies. He was one of more than 60 diplomats who expressed views, often critical.
The United States, by contrast, tried to turn the discussions into a platform to attack China and what the American emissary, Dennis Shea, said was exploitation of WTO rules in a quest for economic hegemony.
“China will force technology transfer, and outright steal it when it sees fit,” Mr. Shea, the deputy United States trade representative, said at Wednesday’s session. “China will subsidize and maintain excess capacity in multiple industries, forcing producers in other economies to shut down. China will dump its products on our markets, claiming that all is O.K. because our consumers pay a bit less.”
The European Union and other allies generally agree with the White House’s criticisms of China. But they disagree with the President Trump’s strong-arm tactics, such as tariffs to pressure China. They have expressed fear that the Trump administration is fomenting a new Cold War with China that will force them to take sides. Many countries in Europe, Asia and Africa depend on trade with both the United States and China.
The tensions between the two countries show no signs of easing. Top advisers to Robert Lighthizer, the United States trade representative, briefed Congress on Tuesday afternoon about the state of the trade talks with China and left staff with the sense that the negotiations were in disarray.
Congressional aides said after the briefing that they were not optimistic about the prospects of reaching a significant deal by March 2, the new date for proposed increases in United States tariffs on China. One aide said that the trade officials, Stephen P. Vaughn, the general counsel of the trade representative’s office, and Jeffrey D. Gerrish, Mr. Lighthizer’s deputy, suggested that the tariffs that the United States had imposed on China would not be rolled back even if an agreement was struck by the deadline. The officials were also unsure about how they would even enforce the concessions that they were pressing China to make.
“The Trump-induced whiplash on China has left more questions than answers,” said Rep. Lloyd Doggett, a Texas Democrat who serves on the House Ways and Means Committee. “One day, he’s ‘Tariff Man,’ and the next, it’s ‘Let’s Make a Deal.’ Congress must get answers from this administration on what success looks like.”
In a plenary hall at WTO headquarters on the shores of Lake Geneva this week, the global stresses were on view. The talks were closed to the public, but the United States and other countries made texts of their speeches available.
Under Mr. Shea, who also serves as the American permanent representative to the WTO, the United States has expressed its views in unvarnished language that has shocked other diplomats at times but is very much in line with Mr. Trump’s view that America is getting a raw deal on global markets.
“For too long, the rules of global trade have been tilted against US workers and businesses,” the United States government said in a report it submitted as part of the trade policy review.
Critics accuse the United States of trying to undermine rules of trade it largely wrote, creating a free-for-all that would undercut global growth.
Mumbai expo showcases China ware
As its trade war with the U.S. intensifies, China has started looking at India as a major market to sell its products and machinery. However, Indian companies want China to share its technology and even partner with them in its growth story rather than treating India purely as a market of its products.
Over 100 Chinese firms displayed their products and solutions at an exhibition in Mumbai this week. It was claimed to be one of the biggest exhibitions of Chinese products in India, indicating growing engagement of China with India.
“We [India and China] are in a better time today and increasing economic exchanges. We are not only bringing home appliances but also getting machinery products to India,” said Tang Guocai, Consul General of China in Mumbai.
To a question, Mr. Guocai said: “We are in a globalised world. There are different crisis in different regions in different times. As far India and China are concerned, it is a better time for cooperation.” On the issues of trade imbalance, he said: “ We are now seeing growing imports from India, mainly agriculture products, pharmaceuticals and manufacturing.
“More Chinese manufacturing companies coming to India. From a competitive background, the situation is changing. Both the leaderships of India and China are determined to bring the two countries closer.”
Focus on manufacturing
However, Vandan Shah, co-chairman, CII western region, said: “The Chinese firms have come here to expand their market but we should not be only focussing on buying. We should rather focus on how to manufacture these products by borrowing the newer technology, machinery and trends from China.”
“We don’t want to make the machinery. We actually want to sell those parts in the U.S. and Germany which the Chinese are already selling. So, we want to partner with such manufacturers as extra duties are now being levied on them. So let the Chinese become our marketing partners,” he said. He said the Chinese companies should now consider investing in Indian companies on a profit-sharing mode.
Sets rule-based dynamic limit
The Reserve Bank of India (RBI) on Thursday has announced a cap for funds raised via external commercial borrowing (ECB) at 6.5% of the country’s GDP.
Based on GDP figures for March 31, 2018, ‘the soft limit works out to $160 billion,’ the central bank said in a statement.
Outstanding stock
“It has been decided, in consultation with the Government of India, to have a rule-based dynamic limit for outstanding stock of external commercial borrowings (ECB) at 6.5% of GDP at current market prices,” the RBI said. The outstanding stock of ECB as on September 30, 2018 was $126.29 billion.
ECBs refer to commercial loans in the form of bank loans, securitised instruments buyers’ credit, suppliers’ credit availed of from non-resident lenders with a minimum average maturity of three years.
Christmas and New Year handloom fair began here on Thursday under the aegis of the District Industries Centre and the Handloom Development Committee. Industries Minister E.P. Jayarajan inaugurated the fair. Thirty weavers’ cooperative societies are participating in the fair. Kannur Mayor E.P. Latha presided. P.K. Sreemathy, MP, was the chief guest.
Volatility in six months distorted business strategy, margins to improve post March quarter
Synthetic textile manufacturers are set to see their profit margins improve in the January–March quarter, due to a sharp fall in the price of crude oil, the key raw material used extensively to produce industrial inputs like man-made fibre, yarn, fabric and textiles.
Brent crude oil prices have risen by 22.5 per cent to $86 a barrel in October from the level of $66.72 a barrel in March. Brent has declined by 37 per cent from its peak to stabilise at this year’s low of around $60 a barrel in December, resulting in huge volatility following political instability in Saudi Arabia and a cut in output from Opec members. Experts believe that the volatility has disrupted the business strategy of synthetic textile makers more than any other factor, including the ongoing working capital squeeze, resulting in weak financial performance across the sector the past few quarters. But the profit margins are set to begin improving from the later part of March 2019 quarter with its full reflection June quarter onwards.
“Crude oil prices are back to the level from where they started moving up a few months ago. In between, they went up by around 35 per cent, which damaged the industry in terms of business strategy. With crude prices at normal levels, things are gradually stabilising. High crude oil prices would have hurt the synthetic textile business badly. At current prices, however, things have started stabilising with its impact in January–March quarter onwards,” said O P Lohia, Managing Director, Indo Rama Synthetics (India) Ltd.
Volatility in crude has impacted the financial performance of synthetic textile manufacturers in the last two quarters of the current financial year. Indo Rama, for example, posted a net loss of Rs 326.20 million on a total income of Rs 3,955.9 million in the September quarter. The company has been incurring losses for the several quarters in a row.
Similarly, JBF Industries posted losses of Rs 495.7 million and Rs 4,323.5 million in the June and September quarters, respectively. “Crude oil prices have been increasing consistently over the last few months. In addition, the rupee has been depreciating rather rapidly. Both these factors pose a double whammy for fuel inflation in India,” said Madan Sabnavis, Chief Economist, Care Ratings.
While the increase in crude prices tends to affect fuel prices in India, rupee depreciation against the dollar also exerts pressure on these prices. Thus, there is a two-fold impact on domestic fuel prices.
Crude oil is the major raw material for synthetic textile manufacturing. Prices of man-made fibre (MMF), yarn and fabric move in tandem with the movement in crude prices. While upsurge in crude impacts synthetic textile inputs with a lag of a month or even more, its decline affects demands as consumers await a price cut of final products.
