All is Not Quiet on the Western Front: Trade is Happening

Whether we are talking about the bestseller, post-World War I book published in 1929, or subsequent epic movie, the title might have lured readers in thinking this was another romanticized war story, emphasizing glory, patriotism, and adventure. However, in reality, the title is an ironic twist; the story depicted in All Quiet on the Western Front set out to portray the horrors of WWI as realistic and horrific as it truthfully was for those who lived through it.

Now, I don’t want to compare the current trade wars to any of the massively destructive World Wars, yet it interests me to consider the comparable regional efforts that are going on simultaneously in Europe and Asia. While most of the world is tuned-into the ongoing tariff battles between the US and China, European nations are using the opportunity to strengthen their relationship with China. Moreover, Chinese manufacturers are coming out on top, putting pressure on US trade negotiators.

While China’s exports recently have been portrayed as being down, this scenario isn’t necessarily accurate. Exports are down, but only slightly to the United States. European demand for Chinese-made products remains strong. According to the European Commission, China is the EU’s second most significant source of imports, just behind the United States; and the EU – China trade volumes rank as the biggest in the world. China’s infrastructure investments in the “Belt and Road Initiative”, the multi-national plan to provide fast and efficient transportation options from inland China to Western Europe is further affirmation of its commitment to open trade. This massive Chinese infrastructure project (under the guidance of The United Nations Conference on Trade & Development or UNCTAD) will connect more than 120 countries in Asia-Pacific, Europe, and Africa. It is more than just building rails and roads; the project also focuses on developing trade relations and agreements, encouraging foreign direct investment (FDI), finance and the digital economy.

Just a few weeks ago, China’s President Xi Jinping spent six days visiting European leaders to forge stronger partnerships. If you recall, preliminary discussions of a potential free trade agreement between the nations took place; it’s clear the two sides chiefly value each other as trading partners. However, the ante is higher now as Italy and China signed a cooperative agreement to further solidify the Belt and Road Initiative, alarming Italy’s US and European allies. This is only the first of many such concords President Xi hopes to execute for ongoing support to the elaborate plan for a cross-border network of ports, railways, highways, and pipelines. Six other major economies are lined up to sign onto the initiative that will pave the way for faster trade with China and Western Europe. The Italian government is softening the jealous hearts of its other trade allies by assuring its continued commitment. Italy’s posturing with China has riled many allies who want to keep adding collective pressure on China to balance trade. “I do think that Italy leading the remaining European countries along the Silk Road could actually entice other countries to join,” said Geraci, the architect of Rome’s openness to China. He added signatories could shape “a European unified strategy” aimed at the development of countries in Africa, the Middle East and along the Silk Road.

Either way, companies in Europe need help managing the maze of complexities that exist in importing from or exporting to China. That help includes tools that determine landed costs, logistics efficiencies and managing duty reduction programs like China’s General and Processing Trade programs.

Trade restrictions in China are some of the most onerous in the world. While the market is showing signs of opening up, many companies who do business there say they’ve seen little or no benefits from China’s most recent economic reforms. In any FTA or bilateral investment negotiations, the EU would likely seek better market access for its products in China, as well as commitments by China to temper the impact of state-owned entities (SOE) in terms of market distortion. In March 2018, the 13th National People’s Congress of China formally approved the State Council’s proposal to implement a massive reformation of many Chinese governmental agencies, with particular emphasis on those managing the operations around import and export. The restructuring plan simplified and integrated many agencies to improve and streamline processes. Ultimately, the government believes it will bolster the economic environment, including customs clearance, market-access measures on product quality, and the investment environment of foreign-invested enterprises.

Following this vote, the China General Administration of Customs (GAC) announced the revision of 71 regulations and abolition of two rules related to customs supervision. This translates into a massive overhaul of import and export activities, as well as trade compliance programs to comply.

Through it all, EU countries reported that 15% of its total imports in 2018 were sourced from China, a number that has tripled from just over 5% in 2000. There’s no sign of slowing down. Companies conducting international trade with China always had a high level of difficulty and complexity, given the differing regulations between regions. In our current trade environment, doing business with China is—and will probably continue to be—an unsettled relationship.

While the trade conflicts between China and the US are negatively impacting supply chains already, companies doing business in Europe might be able to smooth out the ride a bit along this new road. A lot is going on behind the Great Wall and along the Western Front, now is the time to be making modifications to your organization’s supply chain operation.

Gary Barraco, Director of Global Product Marketing, is responsible for developing strategic product marketing direction and presenting the Amber Road brand and solutions worldwide. As the platform evangelist, Gary develops and launches customer insights, go-to-market plans, product messaging and content, and field marketing tactics which establish Amber Road’s solutions as a standard in the Global Trade Management space.  Previously, Gary was VP, Industry Development for ecVision for 9 years prior to its acquisition by Amber Road. He has 20 years of active military service where his primary specialty was providing marketing support to Army National Guard recruiting and retention operations in New Jersey. Gary received a BS from the State University of New York and is currently pursuing a Master’s degree at Moravian College.

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