The latest News for your perusal (2)

China

China’s Tech Giants Have Chip Ambitions, Too

Beijing is spending vast sums on the strategic semiconductor sector following Huawei’s problems, but private-sector companies also have a big incentive to invest.

By guest author Jacky Wong from Wall Street Journal

Caption courtesy by Wall Street Journal

China has pushed hard to be self-sufficient in semiconductors, and state-backed chip firms have raised huge sums. But Beijing’s ambitions will ultimately depend on the country’s vibrant private sector, too.

Chinese leaders have listed advanced semiconductors among the core technologies they view as choke points vulnerable to foreign pressure, a problem clearly demonstrated by the Huawei saga. China isn’t able to produce the highest-performing chips, and it can’t do so without American technologies, in particular in chip-making equipment and design software.

The government has poured billions into the sector, set up national chip funds and provided tax credits for semiconductor companies. Over 50,000 new Chinese companies related to semiconductors were registered in 2020, more than triple the 2015 number. China’s leading chip maker, Semiconductor Manufacturing International Corp. , said this month that it would spend CAD2.35 billion to build a foundry in Shenzhen with the city’s government.

One consequence is plenty of wasted capital. A recent case in point: Hongxin, a rising star in Wuhan with backing from the local government, has run out of money. Many Chinese companies will suffer similar fates, but a handful may end up achieving some breakthroughs, as they did in solar panels and electric vehicles. It will likely take much longer to catch up in chips, though, given that key technologies are firmly held outside the country.

Importantly, it isn’t just lumbering state firms that are behind the effort. Private companies that buy large quantities of chips also have an incentive to fund domestic suppliers, given rising geopolitical tensions.

www.wsj.com

Companies

lululemon athletica inc. announces Fourth Quarter and Full Year Fiscal 2020 Results

  • Fourth quarter revenue increased 24 % to CAD 1.7 billion
  • Comparable sales increased 21 %, or 20 % on a constant dollar basis
  • Diluted EPS of CAD 2.52, Adjusted EPS of CAD 2.58

lululemon athletica inc. (NASDAQ:LULU) on March 30, 2021, announced financial results for the fourth quarter and fiscal year ended January 31, 2021.

Calvin McDonald, Chief Executive Officer, stated: “I’m proud of how we navigated this past year and delivered for our employees, guests and shareholders. Our continued growth demonstrates the strength of lululemon — before, during and as the pandemic subsides. We are still in the early innings of our growth, fueled by exciting innovations that create even more opportunity into the future. All of us on the leadership team have so much gratitude for our teams and their agility during these unprecedented times.”

We refer to the fiscal year ended January 31, 2021 as “2020” and the fiscal year ended February 2, 2020 as “2019.” The adjusted non-GAAP financial measures below exclude certain costs incurred in connection with the acquisition of MIRROR, and the related tax effects.

For the fourth quarter of 2020, compared to the fourth quarter of 2019:

  • Net revenue increased 11 % to CAD4.4 billion. On a constant dollar basis, net revenue increased 10.
  • Direct to consumer net revenue increased 101 %, and increased 101 % on a constant dollar basis.
  • Company operated store net revenue decreased 34 %.
  • Net revenue increased 8% in North America and increased 31 % internationally.
  • Direct to consumer net revenue represented 52 % of total net revenue compared to 29 % for 2019.
  • Gross profit increased of 11% to CAD 2.5 billion, and gross margin increased of 10 basis points to 56.0 %.
  • Income from operations decreased 8 % to CAD 820.0 million. Adjusted income from operations decreased 4 % to CAD 849.8 million.
  • Operating margin decreased 370 basis points to 18.6 %. Adjusted operating margin decreased 300 basis points to 19.3 %.
  • Income tax expense decreased 8 % to CAD230.4 million. The effective tax rate was 28.1 % for each of 2020 and 2019. The adjusted effective tax rate was 27.5 % for 2020.
  • Diluted earnings per share were CAD 4.50 compared to CAD 4.93 in 2019. Adjusted diluted earnings per share were CAD 4.70 in 2020.
  • The Company repurchased 0.4 million shares of its own common stock at an average cost of CAD 172.70 per share in 2020.
  • The Company opened 30 net new company-operated stores during the year, ending with 521 stores.

For 2020 compared to 2019:

  • Net revenue increased 11 % to CAD4.4 billion. On a constant dollar basis, net revenue increased 10.
  • Direct to consumer net revenue increased 101 %, and increased 101 % on a constant dollar basis.
  • Company operated store net revenue decreased 34 %.
  • Net revenue increased 8% in North America and increased 31 % internationally.
  • Direct to consumer net revenue represented 52 % of total net revenue compared to 29 % for 2019.
  • Gross profit increased of 11% to CAD 2.5 billion, and gross margin increased of 10 basis points to 56.0 %.
  • Income from operations decreased 8 % to CAD 820.0 million. Adjusted income from operations decreased 4 % to CAD 849.8 million.
  • Operating margin decreased 370 basis points to 18.6 %. Adjusted operating margin decreased 300 basis points to 19.3 %.
  • Income tax expense decreased 8 % to CAD230.4 million. The effective tax rate was 28.1 % for each of 2020 and 2019. The adjusted effective tax rate was 27.5 % for 2020.
  • Diluted earnings per share were CAD 4.50 compared to CAD 4.93 in 2019. Adjusted diluted earnings per share were CAD 4.70 in 2020.
  • The Company repurchased 0.4 million shares of its own common stock at an average cost of CAD 172.70 per share in 2020.
  • The Company opened 30 net new company-operated stores during the year, ending with 521 stores.

Meghan Frank, Chief Financial Officer, stated: “In response to the COVID-19 pandemic, our teams reacted quickly to ensure we met the evolving needs of our guests. We pulled forward investments in our direct-to-consumer channel, completed our first acquisition, and tightly managed expenses while also supporting our people. These measures contributed to our strong fourth quarter results, including growing revenue by 24 %, and are helping fuel our even stronger top-line growth projections for 2021. I’d like to thank our teams around the globe for their dedication to lululemon and I’m confident in the long-term trajectory of our business.”

Balance sheet highlights

The Company ended 2020 with CAD1.2 billion in cash and cash equivalents compared to CAD 1.1 billion at the end of 2019. It had CAD 397.6 million of capacity under its committed revolving credit facility at the end of 2020. Inventories at the end of 2020 increased by 25 % to CAD 647.2 million compared to CAD518.5 million at the end of 2019.

Fiscal 2021 Outlook

For the first quarter of fiscal 2021, we expect net revenue to be in the range of CAD 1.100 billion to CAD 1.130 billion. Diluted earnings per share are expected to be in the range of CAD 0.81 to CAD 0.85 for the quarter and adjusted earnings per share are expected to be in the range of CAD 0.86 to CAD 0.90.

For fiscal 2021, we expect net revenue to be in the range of CAD 5.550 billion to CAD 5.650 billion. Diluted earnings per share are expected to be in the range of CAD 6.10 to CAD 6.25 for the year and adjusted earnings per share are expected to be in the range of CAD 6.30 to CAD 6.45.

The guidance and outlook forward-looking statements made in this press release are based on management’s expectations as of the date of this press release and does not incorporate future unknown impacts from the spread of COVID-19. While most of the Company’s retail locations are currently open, tighter capacity restrictions and other precautionary measures are in place in most markets. Further resurgences in COVID-19, including from variants could cause additional restrictions, including temporarily closing all or some of our retail locations again, result in lower consumer demand, and cause disruption in our supply chain. The Company undertakes no duty to update or to continue to provide information with respect to any forward-looking statements or risk factors, whether as a result of new information or future events or circumstances or otherwise. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of risks and uncertainties, including those stated below.

Comparable Store Sales and Total Comparable Sales

The Company believes that investors would typically find comparable store sales and total comparable sales useful in assessing the performance of its business. As the temporary store closures from COVID-19 have resulted in a significant number of stores being removed from its comparable store base during the first two quarters of 2020, the Company believes total comparable sales and comparable store sales on a full year basis are not currently representative of the underlying trends of its business. The Company does not believe these metrics are currently useful to investors in understanding performance, therefore it has not included these metrics in this press release.

Non-GAAP Financial Measures

Constant dollar changes and adjusted financial results are non-GAAP financial measures. A constant dollar basis assumes the average foreign exchange rates for the period remained constant with the average foreign exchange rates for the same period of the prior year. The Company provides constant dollar changes in its results to help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign exchange rates.

Adjusted income from operations, operating margin, income tax expense, effective tax rates, net income, and diluted earnings per share exclude items related to the MIRROR acquisition. We exclude transaction, integration costs, the gain on lululemon’s previous investment in MIRROR, certain acquisition-related compensation costs, and the related income tax effects of these items. The acquisition-related compensation costs primarily relate to the acceleration of vesting of certain stock options upon acquisition, and to deferred consideration of CAD 57.1 million in which is due to certain MIRROR employees subject to their continued employment through various vesting dates up to three years from the acquisition date. These individuals also receive employment compensation separate from the deferred amounts that is commensurate with the services they provide and which we consider to be normal operating expenses within selling, general and administrative expenses. We believe these adjusted financial measures are useful to investors as they provide supplemental information that enable evaluation of the underlying trend in our operating performance, and, enable a more consistent comparison to our historical financial information. Further, due to the finite and discrete nature of these costs, we do not consider them to be normal operating expenses that are necessary to operate the MIRROR business and we do not expect them to recur beyond the expiry of the related vesting periods. Management uses these adjusted financial measures and constant currency metrics internally when reviewing and assessing financial performance.

The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or with greater prominence to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the section captioned “Reconciliation of Non-GAAP Financial Measures” included in the accompanying financial tables, which includes more detail on the GAAP financial measure that is most directly comparable to each non-GAAP financial measure, and the related reconciliations between these financial measures.

www.lululemon.com

Ems Group Investment of more than 300 million Swiss Francs at the Domat/Ems production site

Groundbreaking for a new high-rack warehouse initiates this significant expansion phase

Magdalena Martullo-Blocher announces good news: In the next five years, EMS will invest CHF 300 million in the production site at Domat/Ems (Canton Grisons, Switzerland), and, in doing so, will create at least 50 additional work places. Important contracts will be awarded in the region. The first step, the ground-breaking ceremony for a new high-rack warehouse, went ahead in the presence of Member of the Grisons Government, Marcus Caduff and Mayor of Domat/Ems Erich Kohler.

DCIM\100MEDIA\DJI_0161.JPG

“With the new high-rack warehouse we will achieve rapid expansion of our distribution and storage capacity before the end of this year and continue to supply markets worldwide quickly and flexibly. The project signals the start of considerable expansion investment over the next five years at the Domat/Ems production site. We are planning to invest more than 300 million Swiss Francs and increase our capacity by 70 %, 95 % of which for export. Linked to this investment are contracts in the region to the amount of around CHF 120 million and around 200 work places», explained Magdalena Martullo-Blocher, CEO of EMS-CHEMIE, at the ceremony. An additional CHF 60 million will be invested at other locations in Switzerland. At EMS, around 50 new work places will be linked to the investment. CHF 17.5 million Swiss are being invested now in the new high-rack warehouse. Two thirds of this in the form of contracts awarded to companies in the region.

The dimensions of the new high-rack are also impressive. With a height of 44 metres it will be the highest warehouse in Switzerland, as was the existing warehouse before it. In this way, the EMS-CHEMIE high-rack warehouses are among the top 5 in Europe. When completed, the warehouse will provide jobs for 13 additional logistics employees and training for 15 apprentices.

Erich Kohler, Mayor of Domat/Ems, expressed his pleasure at this future-oriented decision and emphasised the significance of EMS-CHEMIE as one of the largest employers and largest apprentice training company in the canton, as well as a major tax-payer in the municipality. EMS and its innovative, worldwide activities make him very proud. EMS has invested continually in the site over the last 85 years with major contracts being awarded to local businesses. This visionary capacity expansion will safeguard workplaces and enable the town to continue its positive development.

The 300 million Swiss Francs expansion investment by EMS-CHEMIE in Domat/Ems starts with the new high-rack warehouse:(Front row from left) Member of Grisons Governmnent Marcus Caduff, EMS CEOMagdalena Martullo-Blocher and the Mayor of Domat/Ems Erich Kohler, together with(2nd row from left)Rico Erni, owner of Erni construction company, and Thomas Bornhauser, Managing Director of 4e electrical engineering company,at the ground-breaking ceremony.

Member of the Grisons Government, Marcus Caduff, welcomed the courageous trendsetting decision by EMS in a challenging environment. EMS not only offers 1000 workplaces, but also plays an important role in apprentice training for its own 140 apprentices, and more than 100 from other companies in the region. In addition, EMS has a strong social commitment. «The planned and now initiated investment is an important multiplying factor for jobs and added-value in the whole region», continued Minister for Economic Affairs Caduff. This investment in the production site at Ems is the best evidence of the attraction of the Grisons as an industrial location. He expressed his thanks to EMS on behalf of the cantonal government.

www.ems-group.com

Data

How do parents organise childcare in the EU?

In 2019, nearly half (47.1 %) of all the children aged less than three years in the EU were cared for exclusively by their parents, while 35.3 % were in formal care for at least one hour per week and a quarter were cared for by their grandparents, other relatives or professional childminders for at least one hour per week.

The COVID-19 pandemic brought changes to childcare arrangements in 2020 – how was care for small children in the EU organised before social distancing and closing of care facilities?

The share of children under three years of age cared for by only their parents varied considerably across the EU Member States, from a low of 21.2 % in the Netherlands and 22.6 % in Portugal, up to over 60.0 % in Croatia (60.8 %), Slovakia (61.2 %) and Latvia (63.8 %), reaching its peak of 69.9 % in Bulgaria.

Over a third of children under age of three in formal childcare

When children are not cared for exclusively by their parents, they may receive formal childcare, including school-based care as part of compulsory education.

About one third of children (35.3 %) in the EU were enrolled in formal childcare for at least one hour per week with 21.5 % in formal care for more than 30h per week and 13.8 % for less than 30h per week.

Among the EU Member States, Denmark with two-thirds (66.0 %) of children receiving at least an hour of formal childcare per week had the highest share, followed by the Netherlands (64.8 %), Luxembourg (60.0 %) and Spain (57.4 %).

At the other end of the scale, Czechia had the lowest share (6.3 %), followed by Slovakia (6.6 %), Poland (10.2 %), Romania (14.1 %) and Croatia (15.7 %).

A quarter of children in other types of care

Other types of childcare include care by a professional childminder or by grandparents, other household members (excluding parents), other relatives, friends or neighbours. Just over 7 % of children under the age of three in the EU were in this type of care for a minimum of 30 hours per week and an additional 18.7 % of children for less than 30 h per week, for a total of 25.9 %.

For more information:

www.ec.europa.eu/eurostat/  

Swiss Consumer prices increased by 0.3 % in March 2021

The Swiss consumer price index (CPI) increased by 0.3 % in March 2021 compared with the previous month, reaching 100.6 points (December 2020 = 100). Inflation was –0.2 % compared with the same month of the previous year. These are the results of the Swiss Federal Statistical Office (FSO).

The 0.3% increase compared with the previous month can be explained by several factors including rising prices for clothing and footwear due to the end of the seasonal sales. Heating oil also recorded a price increase, as did fuel. In contrast, prices for fruiting vegetables and pasta decreased.

www.admin.ch

World trade primed for strong but uneven recovery after COVID-19 pandemic shock

Prospects for a quick recovery in world trade have improved as merchandise trade expanded more rapidly than expected in the second half of last year. According to new estimates from the WTO, the volume of world merchandise trade is expected to increase by 8.0 % in 2021 after having fallen 5.3 % in 2020, continuing its rebound from the pandemic-induced collapse that bottomed out in the second quarter of last year.

Trade growth should then slow to 4.0% in 2022, and the effects of the pandemic will continue to be felt as this pace of expansion would still leave trade below its pre-pandemic trend (Chart 1).

The relatively positive short-term outlook for global trade is marred by regional disparities, continued weakness in services trade, and lagging vaccination timetables, particularly in poor countries. COVID-19 continues to pose the greatest threat to the outlook for trade, as new waves of infection could easily undermine any hoped-for recovery.

“The strong rebound in global trade since the middle of last year has helped soften the blow of the pandemic for people, businesses, and economies,” WTO Director-General Ngozi Okonjo‑Iweala said. “Keeping international markets open will be essential for economies to recover from this crisis and a rapid, global and equitable vaccine roll-out is a prerequisite for the strong and sustained recovery we all need.”

“Ramping up production of vaccines will allow businesses and schools to reopen more quickly and help economies get back on their feet. But as long as large numbers of people and countries are excluded from sufficient vaccine access, it will stifle growth, and risk reversing the health and economic recovery worldwide,” she said.

The Director-General added that trade through value chains has helped countries access food and essential medical supplies during the crisis.

“Manufacturing vaccines requires inputs from many different countries. One leading COVID-19 vaccine includes 280 components sourced from 19 different countries,” she said. “Trade restrictions make it harder to ramp up production. The WTO has helped keep trade flowing during the crisis. Now, the international community must leverage the power of trade to expand access to life-saving vaccines.”

Short-term risks to the forecast are firmly on the downside and centred on pandemic-related factors. These include insufficient production and distribution of vaccines, or the emergence of new, vaccine-resistant strains of COVID-19. Over the medium-to-long term, public debt and deficits could also weigh on economic growth and trade, particularly in highly indebted developing countries.

The forecast illustration in Chart 1 shows two alternative scenarios for trade. In the upside scenario, vaccine production and dissemination would accelerate, allowing containment measures to be relaxed sooner. This would be expected to add about 1 percentage point to world GDP growth and about 2.5 percentage points to world merchandise trade volume growth in 2021. Trade would return to its pre-pandemic trend by the fourth quarter of 2021. In the downside scenario, vaccine production does not keep up with demand and/or new variants of the virus emerge against which vaccines are less effective. Such an outcome could shave 1 percentage point off of global GDP growth in 2021 and lower trade growth by nearly 2 percentage points.

For the whole of 2020, merchandise trade was down 5.3 % (Table 1). This drop is smaller than the 9.2 % decline foreseen in the WTO’s previous forecast in October 2020. The better than expected performance towards the end of the year can partly be explained by the announcement of new COVID-19 vaccines in November, which contributed to improved business and consumer confidence. Box 1 below discusses reasons for the forecast upgrade in more depth.

The volume of world merchandise trade plunged 15.0 % year-on-year in the second quarter of 2020 (revised up from -17.3 % in October) as countries around the world imposed lockdowns and travel restrictions to limit the spread of COVID-19. Lockdowns were eased in the second half of the year as infection rates came down, allowing goods shipments to surge back to near 2019 levels by the fourth quarter.

Faster trade and output growth in the second half of 2020 was supported by major government policy interventions, including significant fiscal stimulus measures in the United States. These measures boosted household incomes and supported continued spending on all goods, including imports. In addition, many businesses and households adapted to the changing circumstances, finding innovative ways to sustain economic activity in the face of health-related restrictions on mobility. Effective management of the pandemic limited the extent of the economic downturn in China and other Asian economies, allowing them to continue importing. These actions helped prop up global demand and may have prevented an even larger trade decline.

Trade in nominal US dollar terms fell even more sharply than trade in volume terms in 2020. World merchandise export values were down 8 % compared to the previous year, while commercial services receipts tumbled 20%. Services trade was especially weighed down by international travel restrictions, which prevented the delivery of services requiring physical presence or face-to-face interaction.

The impact of the pandemic on merchandise trade volumes differed across regions in 2020, with most regions recording large declines in both exports and imports (Table 1). Asia was the sole exception, with export volumes up 0.3 % and import volumes down a modest 1.3 %. Regions rich in natural resources saw the largest declines in imports, including Africa (-8.8%), South America (‑9.3 %) and the Middle East (-11.3 %), probably due to reduced export revenues as oil prices fell around 35 %. In comparison to other regions, the decline in North American imports was relatively small (-6.1 %).

In 2021, demand for traded goods will be driven by North America (11.4%) thanks to large fiscal injections in the United States, which should also stimulate other economies through the trade channel. Europe and South America will both see import growth of around 8%, while other regions will register smaller increases.

Much of global import demand will be met by Asia, exports from which are expected to grow by 8.4% in 2021. European exports will increase nearly as much (8.3%), while shipments from North America will see a smaller rise (7.7%). Strong forecasts for export growth in Africa (8.1%) and the Middle East (12.4%) depend on travel expenditures picking up over the course of the year, which would strengthen demand for oil. Meanwhile, South America will see weaker export growth (3.2%), as will the Commonwealth of Independent States (CIS), including certain former and associate Members (4.4%).

BOX 1: WHY TRADE AND OUTPUT DECLINED LESS THAN FEARED AT THE START OF THE PANDEMIC

In April 2020, when over half the global population was under lockdown orders, the sheer extent of pandemic-related uncertainty led the WTO’s trade forecast to explore two distinct scenarios for how COVID-19 would impact global trade: (1) a relatively optimistic scenario, with a sharp drop followed by a recovery starting in the second half of 2020, and (2) a more pessimistic scenario with a steeper initial decline and slower recovery. It quickly became apparent that the optimistic scenario was the one actually unfolding, which the WTO announced in June 2020. Yet even this scenario overstated the extent of the decline: the initial April estimate of -12.9 % was revised upwards to -9.2 % by October. The final decline was -5.3 %. Similarly, the IMF’s projected decline for world GDP at market exchange rates in 2020 went from -6.1 % last June to -4.7 % in October, and finally to -3.8 % in January 2021.

What accounts for the smaller-than-expected contractions in growth and trade?

Strong monetary and fiscal policies by many governments were probably the biggest factors. Much greater in scale and geographic coverage than the response to the 2008-09 global financial crisis, these policies helped prevent a larger drop in global demand, which would have reduced trade further. Fiscal policy in particular boosted personal incomes in advanced economies, allowing some households to maintain relatively high levels of consumption, and supporting more exports than would otherwise have been the case.

Lockdowns and travel restrictions caused consumers to shift spending away from non-traded services and towards goods. Innovation and adaptation by businesses and households kept economic activity from falling even more. Manufacturing supply chains were able to resume operations, and many people shifted to working remotely, generating income and demand. Finally, trade policy restraint by WTO members prevented protectionism from strangling world trade. As WTO monitoring has documented, many restrictive trade measures imposed at the start of the pandemic were rolled back, and new liberalising measures were introduced. Despite continuing challenges, notably around vaccine trade, the multilateral trading system kept trade flowing and prevented worse outcomes, as members were restrained by commitments and economic self-interest. As during the global financial crisis, the foundation of the system proved sound.

Details on trade statistics

The charts in this section illustrate annual and quarterly WTO trade statistics in greater detail and highlight certain noteworthy trade-related indicators.

Chart 2 below shows quarterly merchandise export and import volume indices by region for 2015 to 2020, plus projections for 2021 and 2022. In the second quarter of 2020, North America and Europe saw sharp year-on-year declines in export volumes, down 25.8 % and 20.4 % respectively. By the fourth quarter these regions had recovered much of their lost ground, with respective year-on-year declines of just 3.0 % and 2.4 %. Middle Eastern exports also fell precipitously in the second quarter as oil consumption slumped worldwide due to restrictions on international and domestic travel.

Asian exports saw a much smaller decline of 7.2 % in the second quarter, but by the fourth quarter they were up 7.7 % compared to the previous year. Their rapid recovery can be explained by the relatively small impact that COVID-19 had on certain Asian economies, and by the fact that the region has been supplying the world with consumer goods and medical supplies during the pandemic, driving up regional export totals.

In the forecast periods we see a divergence between regions with faster and slower trade growth. On the import side, Africa, South America and the Middle East will continue to see their merchandise trade stagnate while other regions will pull ahead. On the export side, most regions will only see modest gains while Asia continues to supply large quantities of goods to global markets.

Chart 3 illustrates the quarterly evolution of merchandise trade in current US dollar terms over the course of 2020. It indicates that the value of world trade in manufactured goods was 6 % higher in the fourth quarter of 2020 than in the same period of the previous year. This resurgence may be attributable to the resumption of factory operations in alignment with safety measures required to protect workers from COVID-19. Trade in agricultural products was up by a similar amount over the same period. In contrast, the value of Fuels and mining products trade was still down 19 % in the fourth quarter. The value of merchandise trade overall was up slightly compared to the previous year (2 %), but this increase might be exaggerated due to the fact that world trade was already slowing in the fourth quarter of 2019, before the pandemic.

Most categories of manufactured goods saw significant gains in the second half of 2020. This is illustrated by Chart 4, which shows monthly and quarterly year-on-year growth in the US dollar value of world trade by sector. World trade in Iron and steel was down 17% in the third quarter, but this decline was reduced to 2% by the fourth quarter. Iron and steel trade is indicative of broader economic conditions as these products are heavily used in both automobile manufacturing and building construction, both of which were hit hard by the pandemic.

Strong growth in textiles trade in both the third and fourth quarter probably reflects high demand for medical face coverings, which is included in this category. Electronic goods including computers also saw steady growth of 12% in the second half of 2020, reflecting strong demand as households and businesses upgraded equipment to facilitate working remotely.

Chart 5 shows year-on-year changes in world commercial services trade by major category. For the whole of 2020, Travel and Transport services were down 63% and 19%, respectively. Meanwhile, the category Other commercial services (including financial services and computer services) held up well, falling only 2%. Finally, Goods-related services fell 13%. Transport and Travel services were directly impacted by containment measures designed to limit the spread of COVID-19, many of which remain in place or have been tightened in response to the resurgence of the disease.

Detailed quarterly and annual statistics on merchandise and commercial services trade can be downloaded from the WTO’s online data portal at data.wto.org. A statistical supplement showing country ranks and shares in world trade can be downloaded here.

High frequency trade indicators

The WTO has been tracking timely, high-frequency trade-related indicators during the pandemic to better understand current trends in merchandise and commercial services trade. A selection of these are presented below to provide additional context to the forecast and trade statistics. The WTO has also sought to improve country-specific, time-series modelling projections of trade by including available, higher frequency indicators, such as container port throughput, production indicators and measures of financial risk, alongside lower frequency trade and GDP data, using mixed-data sampling techniques (MIDAS) (see Box 2).

Chart 6 shows daily counts of international flights and port calls of container ships, as well as prices of copper futures through 1 March 2021, depending on data availability.

The number of daily international flights fell around 80 % in the first quarter of 2020 as countries closed their borders to reduce the spread of COVID-19. This number gradually picked up as cases declined and people resumed limited travel. The end of 2020 saw an uptick in flights as people travelled to meet friends and family for seasonal holidays, but a resurgence of the virus has reduced flights again in 2021. International flights are closely related to travel services, but also to transport services and goods trade, as passenger aircraft frequently carry air freight shipments.

In contrast to international flights, seaborne transport has been steadier during the pandemic. The number of port calls dipped in February and April of last year as well as in January of this year, reflecting peak periods of infection. The recent dip is worrying since countries have become increasingly reliant on international trade to obtain vital necessities such as food and medicine.

Daily prices of copper futures contracts declined sharply in March 2020 as news of the pandemic spread, but have risen since then, reflecting improving economic prospects. Copper feeds into the manufacture of electronics, demand for which has been strong as people and businesses have invested in technology to allow remote work. An uptick in November of last year probably reflected expectations of stronger economic growth after the announcement of new vaccines against COVID-19. The recent rise in 2021 may reflect expectations that stimulus measures in the US and elsewhere will boost economic growth.

Finally, Chart 7 shows the daily volume and average tone of news reports containing phrases related to “economic activity”, as monitored by the GDELT Project Summary Service. At the height of the pandemic, press reporting increased and the average tone of articles was mostly negative. As the pandemic progressed over the recent months, the number of articles declined but remained above pre-pandemic levels. The tone of reporting became more positive with the announcement of vaccines against the virus in November. A recent flattening in tone and the bottoming out of intensity could be related to the resurgence of the pandemic.

BOX 2: FORECASTING TRADE IN SELECTED ECONOMIES USING MIXED-DATA SAMPLING

In the current forecast, the WTO used a relatively novel technique called mixed-data sampling (MIDAS) to refine import forecasts for Brazil, China, and the United States. MIDAS allows the use of higher frequency data (e.g. monthly or daily) alongside lower frequency data (e.g. quarterly or annual) without the need to average the high frequency values. This avoids loss of information in conventional forecast models, which are limited to using variables of the same frequency. For instance, conventional models might use monthly export orders averaged over each quarter to forecast quarterly merchandise trade. The MIDAS technique makes this averaging unnecessary, allowing analysts to exploit all available information on the dynamics of the higher frequency data. Brazil’s MIDAS estimations used Markets Bond Index Plus (EMBI+) (reported daily) as a high frequency variable. This allowed the inclusion of information through the first week of March of the current year. EMBI+ was chosen because there is evidence that credit and financial conditions are a leading indicator for trade. Monthly data on inward loaded container throughput for the port of Hong Kong was used as a high-frequency indicator for China, while monthly loaded inbound throughput for the ports of Long Beach and Los Angeles were used for the United States. These estimations improved the short-term dynamics of forecasts and had a small but appreciable impact at regional and global levels. In all three cases, GDP and merchandise import volumes were used as low frequency variables. MIDAS is a useful complement to traditional forecasting techniques. The wider use of this and other novel techniques should help continue to refine WTO trade forecasts.

www.wto.org

Considerable decrease in Swiss retail trade turnover in February 2021

Turnover adjusted for sales days and holidays rose in the retail sector by 6.9 % in nominal terms in February 2021 compared with the previous year. Seasonally adjusted, nominal turnover fell by 5.5 % compared with the previous month. These are provisional findings from the Federal Statistical Office (FSO).

Real turnover adjusted for sales days and holidays fell in the retail sector by 6.3 % in February 2021 compared with the previous year. Real growth takes inflation into consideration. Compared with the previous month, real, seasonally adjusted retail trade turnover registered a decline of 5.2 %.

Retail sector excluding service stations

Adjusted for sales days and holidays, the retail sector excluding service stations showed a 6.8 % decrease in nominal turnover in February 2021 compared with February 2020 (in real terms –6.2 %). The result for service stations was a loss of turnover of 8.2 % (in real terms –6.9 %).

While retail sales of food, drinks and tobacco recorded an increase in nominal turnover of 6.8 % (in real terms +7.2 %) the non-food sector registered a nominal minus of 20.5 % (in real terms –19.9 %). The sectors “other goods (clothing, chemists, watches and jewellery)” (–33.6 %; real –33.2 %) and “other household equipment, textiles, DIY and furniture” (–24.0 %; real –23.7 %) were most affected by the crisis. In contrast, the sectors “information and communication equipment” (+28.9 %; +40.2 % in real terms) and “market stalls, retail sale via mail order houses or via internet” (+21.8 %; +22.9 % in real terms) were able to report positive turnover figures.

Excluding service stations, the retail sector showed a seasonally adjusted decline in nominal turnover of 6.6% compared with the previous month (in real terms –6.3 %). Retail sales of food, drinks and tobacco registered a nominal minus of 0.7 % (in real terms –0.3 %). The non-food sector showed a minus of 12.3 % (in real terms –11.8 %).

www.statistics.admin.ch

Hourly labour costs ranged from EUR 6.5 to EUR 45.8 across the EU Member States in 2020

In 2020, average hourly labour costs in the whole economy (excluding agriculture and public administration) were estimated to be EUR 28.5 in the EU and EUR 32.3 in the euro area, up compared to EUR 27.7 and EUR 31.4 respectively in 2019. These estimates come from data on labour costs levels published by Eurostat today.

Lowest in Bulgaria, highest in Denmark

The average hourly labour costs mask significant gaps between EU Member States, with the lowest hourly labour costs recorded in Bulgaria (EUR 6.5), Romania (EUR 8.1) and Hungary (EUR 9.9), and the highest in Denmark (EUR 45.8), Luxembourg (EUR 42.1) and Belgium (EUR 41.1).

Hourly labour costs in industry were EUR 28.8 in the EU and EUR 34.8 in the Euro Area. In construction, they were EUR 25.6 and EUR 29.0 respectively. In services, hourly labour costs were EUR 28.2 in the EU and EUR 31.1 in the Euro Area. In the mainly non-business economy (excluding public administration), they were EUR 29.7 and EUR 33.1 respectively.

The two main components of labour costs are wages & salaries and non-wage costs (e.g. employers’ social contributions). The share of non-wage costs in total labour costs for the whole economy was 24.5 % in the EU and 25.0 % in the Euro Area.

Hourly labour costs increased most in Portugal

Between 2019 and 2020, hourly labour costs at whole economy level expressed in EUR  rose by 3.1 % in the EU and by 2.9 % in the Euro Area.

Within the Euro Area, hourly labour costs increased in all Member States except Malta (-4.7 %), Cyprus and Ireland (-2.7 % each). The largest increases were recorded in Portugal (+8.6 %), Lithuania (+7.5 %) and Slovakia (+7.0 %), the smallest in Luxembourg (+0.5 %), Finland (+0.7 %) and the Netherlands (+0.8 %).

For Member States outside the Euro Area, the hourly labour costs expressed in national currency increased in all Member States in 2020 except in Croatia (-1.0 %), with the largest increases recorded in Hungary (+7.9 %), Bulgaria (+7.8 %), Czechia (+7.4 %) and Romania (+7.2 %). They increased least in Sweden (+1.1 %) and Denmark (+2.0 %).

In 2020, most Member States introduced a number of support schemes to alleviate the impact of the COVID-19 pandemics on enterprises and employees. They mainly consisted of short-term work arrangements and temporary lay-offs fully or partly compensated by government. Those schemes were generally recorded as subsidies (or tax allowances) recorded with a negative sign in the non-wage component of labour costs.

In general, the number of hours actually worked decreased more than wages while taxes less subsidies fell, thus limiting the impact on the hourly labour costs.

For more information:

  • Total Labour Costs refer to the total expenditure borne by employers in order to employ staff. They cover wage and non-wage costs less subsidies. They do include vocational training costs or other expenditures such as recruitment costs, spending on working clothes, etc. Wage and salary costs include direct remunerations, bonuses, and allowances paid by an employer in cash or in kind to an employee in return for work done, payments to employees saving schemes, payments for days not worked and remunerations in kind such as food, drink, fuel, company cars, etc. Non-wage costs include the employers’ social contributions plus employment taxes regarded as labour costs less subsidies intended to refund part or all of employer’s cost of direct remuneration.
  • Labour costs data presented in this news item cover enterprises with 10 or more employees (including apprentices). Estimates are obtained by extrapolating the 2016 Labour Cost Survey hourly labour cost data expressed in national currencies using the quarterly Labour Cost Index (LCI) transmitted by the Member States. In order to calculate monetary estimates in € and derive European aggregates, average annual exchange rates have been used. The LCI not adjusted for calendar effects is used, except for Denmark, Sweden and Norway where only calendar-adjusted data are available.
  • Data for Austria, Denmark, Spain and Iceland are taken from national sources.
  • The whole economy (except agriculture and public administration) includes NACE Rev. 2 sections B to N and P to S
  • Eurostat Statistics Explained article on hourly labour costs
  • Eurostat website section dedicated to labour cost statistics
  • Eurostat database on labour costs

www.ec.europa.eu/eurostat/

Mergers

EU Commission announces evaluation results and follow-up measures on jurisdictional and procedural aspects of EU merger control

The European Commission has published on  March 26, 2021, a Staff Working Document that summarises the findings of the evaluation of procedural and jurisdictional aspects of EU merger control. Following the results of the evaluation, the Commission decided to adopt a communication providing guidance on the application of the referral mechanism between Member States and the Commission set out in Article 22 of the Merger Regulation, and launch an impact assessment on exploring policy options for further targeting and simplification of merger procedures. The objective of the evaluation was to assess the functioning of selected aspects of EU merger control to understand how the rules have worked in changing market realities. In view of the findings of the evaluation, the Commission intends, in certain circumstances, to encourage and accept referrals in cases where the referring Member State does not have initial jurisdiction over the case, where the criteria of Article 22 are met. The objective of the Article 22 Guidance adopted today is to facilitate and clarify the Commission’s approach in this respect and to complement the guidance provided in the Commission Notice on Case Referral. The Commission has committed to focus its resources on relevant cases and reduce administrative burden where possible without compromising effective enforcement. In view of this and the results of the evaluation, the Commission has also launched today an impact assessment on the revision of certain procedural aspects of EU merger control. The initiative will assess policy options to achieve further targeting and simplification of the procedures through a revision of the Merger Implementing Regulation and the Notice on Simplified Procedure. The Commission has launched today a public consultation, with a view to gather further information and seek views from stakeholders. Stakeholders are invited to submit their views on the Commission’s consultation website until 18 June 2021. Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The EU merger procedures have served us well so far. Our evaluation however has identified some areas for improvement. A number of transactions involving companies with low turnover, but high competitive potential in the internal market are not reviewed by either the Commission or the Member States. A more frequent use of the existing tool of referrals under Article 22 of the Merger Regulation can help us capture concentrations which may have a significant impact on competition in the internal market. In parallel, we are also looking at the possible revision of certain procedural aspects of EU merger control. To this end, we invite input from stakeholders on different policy options to achieve further targeting and simplification of the EU merger control procedures.”

The European Commission has published today a Staff Working Document that summarises the findings of the evaluation of procedural and jurisdictional aspects of EU merger control. Following the results of the evaluation, the Commission decided to adopt a communication providing guidance on the application of the referral mechanism between Member States and the Commission set out in Article 22 of the Merger Regulation, and launch an impact assessment on exploring policy options for further targeting and simplification of merger procedures.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The EU merger procedures have served us well so far. Our evaluation however has identified some areas for improvement. A number of transactions involving companies with low turnover, but high competitive potential in the internal market are not reviewed by either the Commission or the Member States. A more frequent use of the existing tool of referrals under Article 22 of the Merger Regulation can help us capture concentrations which may have a significant impact on competition in the internal market. In parallel, we are also looking at the possible revision of certain procedural aspects of EU merger control. To this end, we invite input from stakeholders on different policy options to achieve further targeting and simplification of the EU merger control procedures.”

Findings of the evaluation of procedural and jurisdictional aspects of EU merger control

The objective of the evaluation was to assess the functioning of selected aspects of EU merger control to understand how the rules have worked in changing market realities. The evaluation focused on two topics in particular:

  • the effectiveness of the turnover-based jurisdictional thresholds in capturing concentrations which may have a significant impact on competition in the internal market, and
  • the effectiveness of simplification measures introduced in 2013.

To inform the evaluation process, the Commission carried out a public consultation, held numerous meetings with stakeholders, carried out extensive research into deal activity and analysed its own enforcement practice. The Commission also relied on evidence from a separate work stream on the effects of digitisation on competition policy, and closely monitored the introduction and application of additional jurisdictional thresholds based on transaction value in some of the Member States.

As regards the jurisdictional thresholds, the evaluation results showed that at this stage, the turnover-based jurisdictional thresholds, complemented with the referral mechanisms, have generally proved effective in capturing significant transactions in the EU internal market. Recent market developments, however, have resulted in a gradual increase of concentrations involving firms that play or may develop into playing a significant competitive role in the markets despite generating little or no turnover at the moment of the concentration. Accordingly, a number of transactions which could potentially have an impact on competition in the internal market have not been reviewed by the Commission or, in some cases, by any Member State. This includes in particular concentrations involving nascent competitors and innovative companies, including in (but not limited to) the digital, pharmaceutical, biotechnology and certain industrial sectors. While informative, the value of the transaction may not always be sufficiently correlated with the transaction’s potential competitive significance. Therefore, encouraging and accepting more referrals under Article 22 of the Merger Regulation – notably where the transaction does not meet the national merger control thresholds – could give Member States and the Commission the flexibility to target concentrations which merit review at EU level, without imposing notification obligations on transactions that do not.

As regards the simplification measures, the evaluation has shown that the 2013 simplification package has been effective in increasing the application of simplified procedures to unproblematic mergers and in reducing administrative burden both for businesses and the Commission in terms of resources and time spent on the merger review, while ensuring effective enforcement of the merger rules. However, there is still room for further simplification and targeting of the rules.

The findings of the evaluation of procedural and jurisdictional aspects of EU merger control are summarised in a Staff Working Document.

Article 22 Guidance

In view of the findings of the evaluation, the Commission intends, in certain circumstances, to encourage and accept referrals in cases where the referring Member State does not have initial jurisdiction over the case, where the criteria of Article 22 are met.

The objective of the Article 22 Guidance adopted today is to facilitate and clarify the Commission’s approach in this respect and to complement the guidance provided in the Commission Notice on Case Referral.

In particular, the Article 22 Guidance describes the categories of cases which may constitute suitable candidates for a referral in situations where the transaction is not notifiable under the laws of the referring Member State(s). It also sets out the criteria that the Commission may take into account in exercising its discretion to accept such referrals.

More specifically, cases that will normally be appropriate for such a referral consist of transactions where the turnover of at least one of the companies concerned does not reflect its actual or future competitive potential. This could be the case of a start-up or recent entrant with significant competitive potential or an important innovator. It can be also the case of an actual or potential important competitive force, or of a company with access to competitively significant assets or with products or services that are key inputs or components for other industries.

Impact assessment on revision of procedural rules

The Commission has committed to focus its resources on relevant cases and reduce administrative burden where possible without compromising effective enforcement. In view of this and the results of the evaluation, the Commission has also launched today an impact assessment on the revision of certain procedural aspects of EU merger control.

The initiative will assess policy options to achieve further targeting and simplification of the procedures through a revision of the Merger Implementing Regulation and the Notice on Simplified Procedure. The objective is to:

  • identify additional cases that are highly unlikely to raise competition concerns and could therefore be assessed under the simplified procedure (as the obligation to notify the concentration applies irrespective of the likelihood of competitive effects);
  • ensure sufficient safeguards so that the simplified procedure does not apply to cases that merit a more detailed review;
  • ensure effective, efficient and proportionate information gathering;
  • explore possibilities to reduce the average time needed to obtain a clearance decision for non-problematic cases; and
  • simplify the notification of concentrations, including via electronic notifications.

The purpose of impact assessments is to analyse the extent to which there is an existing gap which should be addressed by an action at EU level and to analyse the possible options and tools through which any such gap could be addressed. As a first step of that process, the Commission has launched today a public consultation, with a view to gather further information and seek views from stakeholders. Stakeholders are invited to submit their views on the Commission’s consultation website until 18 June 2021.

Background

EU merger control aims to ensure that major corporate reorganisations do not result in lasting damage to competition in the internal market. To achieve this aim, the EU Merger Regulation grants the Commission exclusive jurisdiction to review whether such concentrations may significantly impede effective competition in the internal market or a substantial part of it.

The scope of application of EU merger control is determined using turnover thresholds. If the merging companies’ turnover at worldwide, EU and Member State level exceeds certain thresholds, they have to notify their concentrations to the Commission and must not implement them before receiving approval. Concentrations not captured by EU merger control may still come within the jurisdiction of one or several EU Member States. To ensure that the most appropriate authority carries out the assessment, and as long as certain conditions are met, the review can be referred from the Commission to the Member States or vice versa under the Merger Regulation’s referral system.

Article 22 of the Merger Regulation allows Member States to ask the Commission to examine any concentration that does not have an EU dimension but which affects cross-border trade and threatens to significantly affect competition within the territory of the Member State(s) making the request irrespective of whether such transaction is notifiable under the national merger control rules of the referring Member State. The Commission has in the past used its discretion under Article 22 to discourage referrals where the concentration fell outside the referring Member State’s national merger control thresholds. This practice was based on the experience that such transactions were not generally likely to have a significant impact on the internal market. In recent years, however, market developments have resulted in a gradual increase of concentrations involving companies with low turnover, but high competitive potential in the internal market.

For More Information

See the dedicated webpage of DG Competition, which contains all stakeholder contributions submitted in the context of the evaluation, summaries of the different consultation activities, the Staff Working Document and the Guidance on Article 22 referrals. See also the Have your say webpage on the impact assessment which contains the inception impact assessment and the link to the public consultation questionnaire.

www.ec.europa.eu

Shoes

Nike files Lawsuit over Lil Nas X’s Satan Shoes

Sneaker giant says custom Nike Air Max shoes were produced without its approval and it has no relationship with rapper.

By guest author Allison Prang from Wall Street Journal

All captions courtesy by the Wall Street Journal

Nike Inc. NKE filed a trademark infringement lawsuit against a small marketing company that released a customized pair of its sneakers with satanic themes in collaboration with Lil Nas X to promote the rapper’s new song.

The red-and-black Satan Shoes caused a social-media uproar on Monday and quickly sold out. The company that released them, MSCHF Product Studio Inc., said it made 666 pairs and sold them for USD 1018 apiece.

The sneakers have a red liquid in the sole that MSCHF claimed included a drop of blood. There is a reference to the Bible passage Luke 10:18 stitched on the side and a bronze pentagram on the laces.

“The Satan Shoes were produced without Nike’s approval or authorization, and Nike is in no way connected with this project,” the company said in a written statement. The apparel giant said it has no relationship with Lil Nas X or MSCHF.

MSCHF, pronounced “mischief,” is a small Brooklyn-based company known for publicity stunts and viral product marketing. Its past projects include a pair of customized Nike sneakers that it called “the Jesus shoes” and said were filled with holy water, decapitated-swan pool floats and an app for stock picking based on astrological signs. MSCHF didn’t respond to requests for comment.

The release of the Satan Shoes coincided with Lil Nas X’s latest single, “Montero (Call Me by Your Name),” and a music video for the song. In the video, the rapper appears to be in the Garden of Eden and falls into hell, where he gives the devil a lap dance. The video was released March 26 and has been viewed more than 43 million times on YouTube.

Lil Nas X, who rose to fame through social media and viral remixes of his megahit “Old Town Road” in 2019, appeared to address conservative Christian critics of his new song and video. He wrote on Twitter on March 27: “i spent my entire teenage years hating myself because of the s— y’all preached would happen to me because i was gay. so i hope u are mad, stay mad, feel the same anger you teach us to have towards ourselves.”

Days after his “Montero” video premiered and MSCHF tweeted the sneakers, Lil Nas X posted a video on YouTube titled, “Lil Nas X Apologizes for Satan Shoe.” Rather than apologize, the rapper cuts to a clip of the lap dance from his music video. On Monday he tweeted about a contest for someone to win the 666th pair of Satan Shoes.

Lil Nas X didn’t respond to a request on Twitter seeking comment.

Nike’s lawsuit, filed Monday in the U.S. District Court in the Eastern District of New York, asks a federal judge to prevent MSCHF from selling customized Nike sneakers and seeks unspecified financial damages. It doesn’t name Lil Nas X, born Montero Lamar Hill, as a defendant.

“There is already evidence of significant confusion and dilution occurring in the marketplace, including calls to boycott Nike in response to the launch of MSCHF’s Satan Shoes based on the mistaken belief that Nike has authorized or approved this product,” according to the complaint.

Mark McKenna, a professor at the University of Notre Dame’s law school who specializes in intellectual property, said it is a close call as to who would win the lawsuit. MSCHF purchased Nike’s products and then altered them for resale.

“There are nontrivial legitimate things that the defendants are going to be able to say here that puts them in the zone of the first-sale doctrine,” Mr. McKenna said, referring to the rule of trademark law that allows the resale of purchased items. “Whether the changes they’re making…are creating material differences is also not a trivial question.”

Win or lose, he said, the lawsuit could benefit Nike. “They’re going to get the [public-relations] benefit of showing their customers that they don’t want this,” Mr. McKenna said.

MSCHF was officially launched in 2016 when its young founder, Gabriel Whaley, a former BuzzFeed staffer, developed a marketing campaign for online mattress brand Casper Sleep Inc. MSCHF created a way for people to trick their Snapchat friends into thinking they were having a fun night out and released a chatbot for insomniacs.

In a podcast interview in 2019, Mr. Whaley described his company as “an attention and fame machine.” He said he was “addicted to trolling people online in a healthy, positive, uplifting manner” and sought ways to take “technology and devices around me to create experiences that just get a ton of attention.”

MSCHF drops a new stunt or campaign on its website every two weeks. The company has raised venture capital from Founders Fund and Canaan Partners, according to PitchBook. Mr. Whaley didn’t respond to a request for comment.

Tim Calkins, clinical professor of marketing at the Kellogg School of Management at Northwestern University, said the buzz that has surfaced around the Satan Shoe is what MSCHF wanted to happen.

“The more excitement and the more controversy they generate, the more they’re successful at doing what they set out to do,” he said.

Publicity attempts can be taken too far by becoming too polarizing, Mr. Calkins said. “They’re pushing the line a little bit,” he said. “The idea that there’s a drop of blood in the shoe is a little bit disturbing and yet not in a gross or really polarizing kind of way.”

www.nike.com

www.wsj.com

Rail

European Year of Rail: Hop on the Connecting Europe Express

The Connecting Europe Express, one of the European Year of Rail 2021’s most emblematic initiatives, is being presented today during the official European Year of Rail kick-off conference, organised in cooperation with the Portuguese Presidency of the Council of the EU.

The event takes place on the eve of an informal meeting of EU Transport Ministers focusing on different ways to accelerate a modal shift to rail. As of September, the Connecting Europe Express will travel across the EU and stop in most European capitals to promote the many benefits of rail – for passengers, freight and the environment. 

The project will also raise awareness of the importance of financing sustainable infrastructure such as rail, and EU support for such investment, including through the recently agreed new Connecting Europe Facility (CEF), worth EUR 33.7 billion, as part of the next long-term EU budget 2021-2027. The train’s journey is possible thanks to good cooperation between European rail operators and infrastructure managers.

Commissioner for Transport, Adina Vălean, said: “The Connecting Europe Express will be a real, tangible example of the power of rail to connect. At each of the almost 40 stops, events will bring together the rail sector at large, as well as civil society organisations, local and regional authorities, and the wider public, to discuss the benefits of rail, as well as what still has to be done so that rail can become the number one option for passengers and business.”

www.ec.europa.eu

Trade

Director-General urges WTO members to deliver concrete results this year

WTO Director-General Ngozi Okonjo-Iweala called on members to deliver concrete results that promote the WTO’s founding objectives: using trade to improve the living standards of ordinary people, creating better jobs, and contributing to sustainable development. She was speaking at an informal General Council meeting on March 30, 2021.

The meeting was called by General Council Chair Ambassador Dacio Castillo (Honduras) to initiate a process of consultations on the nature of the prospective outcome document for the Twelfth Ministerial Conference (MC12), which will take place in Geneva the week of November 29, 2021.

He described the options in front of members, based on the documents that emerged from earlier Ministerial Conferences: a consensus Ministerial Declaration, a summary issued under the conference chair’s own responsibility, and a “hybrid” document containing elements of the two.

Members “may wish to start thinking about what type of outcome document we might realistically envisage for MC12, including its structure and elements,” the General Council Chair added, announcing he would begin consultations on these issues with interested delegations. He cautioned that this process should not divert attention from ongoing substantive negotiations.

With only seven working months until MC12, DG Okonjo-Iweala called on members to “create a recipe for success upfront,” starting with “two or three or four concrete deliverables” in areas such as fisheries and agreeing on work programmes for other items where differences remain.

She noted that MC12 would come at the end of a series of international policy discussions aimed at “examining the lessons from this pandemic and trying to put the framework for tackling the next.” If trade ministers emerge at the end of the year  “with no agreement, no contributions to the meaningful issues that are being faced by the world today, nothing to add in terms of a framework for tackling the next pandemic, it will not look good.”

“My wish is for all the Ambassadors, Ministers and Leaders on trade to come out of MC12 looking good. Looking good means being seen by the world as having delivered for today’s problems,” she said.

DG Okonjo-Iweala also said that she plans to convene an event in mid-April to discuss ramping up COVID-19 vaccine production and how the WTO can contribute to a more rapid and equitable distribution of vaccines.

The event, to be held under Chatham House rules, will include all regional member groups, representatives from vaccine manufacturers from developing and developed countries, civil society groups working on access to medicine, and other relevant stakeholders.

“The idea is to move us along on our quest to solve this unacceptable inequitable access of poor countries to vaccines,” she said. “At the bottom of this is a very serious scarcity in supply. And how to solve it is to look at how we expand manufacturing in all its ways.”

She stressed that the event would help advance global discussions on access to vaccines. She expressed hope both for increased vaccine manufacturing in the short- to medium-term, and a longer-term framework agreement that would provide for automatic access to vaccines and other medical products for developing countries in future health crises, including a way forward on the TRIPS waiver proposal many of them support.

“We also need to look to the future and agree a framework where countries do not need to stand in the queue in order to get access to life-saving vaccines, therapeutics, and diagnostics,” she said, emphasizing that this can be done while still incentivising research and development.

www.wto.org

WTO Blockchain forum looks at how to accelerate digitalization to facilitate trade

The 2021 Global Trade and Blockchain Forum held on 30 March brought together policy-makers, trade officials and business representatives to discuss how to leverage blockchain technology to enhance the transparency and efficiency of supply chains and trade processes. It also looked into the role of governments in unlocking the potential of these technologies. The event included the launch of a new publication on trade digitalization co-published by the WTO and Trade Finance Global and a new online course on blockchain for trade.

The event, entitled “Accelerating Trade Digitalization through distributed ledger technology”, reviewed the latest developments in blockchain and how digital technologies such as distributed ledger technology (DLT) can help address the risks and inefficiencies in global supply chains to the benefit of all.  A distributed ledger is a digital list or database shared among nodes in a distributed network. Blockchain is one type of distributed ledger. More details on the event is available here.  

In his opening remarks, Deputy-Director General Xiaozhun Yi said: “The pandemic has brought to the fore the archaism of trade processes still largely based on paper, with dire consequences on business operations in times of lockdowns. It has brought into sharp focus the need to urgently digitalize these outdated paper-based processes. The last 12 months have shown that going digital is no longer optional. It is a matter of survival for many companies, in particular the smallest ones who have been hit very hard by the current crisis.” DDG Yi’s full remarks are available here.

In his keynote speech, the Secretary General of the International Chamber of Commerce, John Denton, said: “The economy cannot be simply put on ice indefinitely. Why prolong the human and economic pain of doing so, when existing technologies can be readily deployed to restore cross-border economic activity while guarding against unfettered spread of the virus? We have spoken for years about the potential for digital platforms and blockchain solutions to democratize access to the global trading system. With struggling SMEs desperately needing new sources of demand, it is high time to finally deliver on that promise if we are to deliver a truly resilient and durable recovery in the years ahead. Governments must lead from the front in this regard.”

In his keynote speech, Lew Chuen Hong, CEO of Infocomm Media Development Authority of Singapore, said: “While the trade and economic landscape as it stands today remains challenging, all of us are looking beyond the pandemic so as to emerge stronger both as governments and as business and I believe the move towards trade digitization is a key pillar. We must try to harmonize our policies and legal frameworks, and align to open technology standards. These are all the basic foundations for ubiquitous digitalization.”

The event is the second edition of the Global Trade and Blockchain Forum. The first was held in 2018. More information is available here.   

New publication

Accelerating Trade Digitalization to Support MSME Financing”, launched, seeks to identify some of the most pressing challenges related to trade financing for micro, small and medium-sized enterprises (MSMEs) and explores the potential application of digital technologies to  address these challenges. The publication is based on interviews and surveys with experts in the field of MSME financing, including trade financing, and explores the ways that technology can be used to enhance access to financing.

The technologies discussed include cloud computing, optical character recognition , the Internet of Things, big data analytics, artificial intelligence, quantum computing, distributed ledger technology and application programming interfaces.

The publication examines some of the challenges related to MSME financing and the impact of the COVID-19 pandemic in this area. It examines key digital technologies and their potential benefit to MSME financing and presents case studies of companies utilizing these technologies, the challenges they face, and recommendations for overcoming these challenges.

The publication highlights the need for a multi-pronged approach to unleash the potential of digital technologies to facilitate MSME financing. This includes the need for the development of globally accepted standards and a common framework for leveraging data to better assess financing risk. There is also a need for an enabling regulatory framework that recognizes e-signatures and e-documents and is in line with the UNCITRAL Model Law on Electronic Transferable Records. Also needed is a trusted global digital identity system for companies. In addition, the publication highlights the importance of bridging the digital divide and raising MSME awareness through education.

The publication can be found here.

www.wto.org

WTO Members discuss SPS Ministerial Declaration, address large number of trade concerns

At a meeting of the Committee on Sanitary and Phytosanitary (SPS) Measures on 25-26 March, WTO members discussed a possible SPS Declaration for the WTO’s 12th Ministerial Conference (MC12) to be held in Geneva at the end of the year. Members also addressed a large number of specific trade concerns and were updated on COVID-19 and SPS issues.

With over 230 delegates attending remotely, the meeting once again saw a high level of engagement, including on the discussion concerning the proposal for a Sanitary and Phytosanitary Declaration for the 12th Ministerial Conference (G/SPS/GEN/1758/Rev.5). The SPS Declaration is co-sponsored by 22 delegations: Argentina, Australia, Belize, Brazil, Burkina Faso, Canada, Chile, Colombia, Costa Rica, Côte d’Ivoire, Dominican Republic, Ecuador, Guatemala, Mexico, Paraguay, Peru, Senegal, Singapore, Tajikistan, the United States of America, Uruguay and Viet Nam.

These members explained that the Declaration provides an avenue for the SPS Committee to raise the profile of its work and establish a forward-looking and proactive agenda for the coming years. They emphasized the timeliness for the Committee and WTO members to underline the benefits of the SPS Agreement and take stock of the evolving nature of the global agriculture landscape since 1995, in particular the new opportunities and pressures relating to international trade in food, animals and plants. These include adapting to population growth, climate change and technological innovation. The need to reinforce the message that trade in general — and particularly, trade in food — must take place in full compatibility with sustainable development was also underlined.

Some members proposed including additional aspects in the proposal, such as sustainable food systems, biodiversity, animal welfare and consumer expectations, and to frame the text within the wider context of other WTO agreements. Other members highlighted certain aspects of implementation for improvement, such as risk assessment, raising of the same specific trade concerns (STCs) in Committee meetings, regionalization and equivalence.

A group of members supported the co-sponsors’ views on the importance of science-based measures and improving transparency through timely notifications. They noted the call for members’ strengthened adherence to supporting international trade while ensuring human, animal and plant life or health, which was especially relevant during COVID-19 times. While some delegations reiterated their reservations and said they were still considering their position on the Declaration, they expressed their willingness to participate in the process and to contribute to revising the text ahead of MC12.

Specific trade concerns

Members raised 46 trade concerns, 11 of them addressed for the first time in this committee. Discussions addressed a variety of topics, including restrictions and approval procedures for imports of animal and plant products, pesticide policies and maximum residue levels (MRLs), and actions related to COVID-19 that affect trade. Members also discussed certification requirements for food derived from genetically modified organisms, approvals for new listing and reinstatement of export establishments, the renewal of authorizations for plants, fishery and livestock enterprises, and administrative delays in approval procedures.

Both new and previously raised issues can be found in the password protected eAgenda system for members, which allows them to submit agenda items, statements and STCs online. Further information can also be found in the publicly available SPS Information Management System.

COVID-19 and SPS issues

The WTO Secretariat provided updates on COVID-19 and SPS issues, reporting a total of 86 SPS notifications and other communications related to COVID-19 submitted by members. Attention was drawn to the assessments by the World Health Organization (WHO), the Food and Agriculture Organization (FAO) and other bodies, which found no evidence that food could be a source of COVID-19. Some members expressed concern regarding testing and certification requirements for imported food products implemented by other members, and requested that they share data, studies or risk assessments supporting such requirements.

Members highlighted the value of the revised WTO Secretariat note Standards, regulations and COVID-19 — what actions taken by WTO members?, available on the COVID-19 gateway of the WTO website.

SPS Agreement Fifth Review

As part of the follow-up to the Fifth Review of the Operation and Implementation of the SPS Agreement, a thematic session on African swine fever (ASF) was held on 23 March. The objective of the event was to provide members with an opportunity to increase their awareness of regionalization principles, and to learn from each other by sharing experiences about the challenges and benefits of defining safe trading conditions for pigs, pork and pork products.

The WTO Secretariat presented the work of the SPS Committee on this topic, highlighting the importance of adaptation to regional conditions, including recognition of disease free areas and areas of low disease prevalence. The World Organization for Animal Health (OIE) presented an overview of the international standards relevant to the disease and the epidemiological situation worldwide. Representatives from the FAO provided data on the economic impact of ASF on global meat and feed markets and global pork supply, highlighting the significant economic losses experienced by farmers.

Members from Asia, Europe, Africa and the Americas, ranging from territories where the disease is endemic in wildlife to others where it is absent, shared their trade strategies. Preparedness, research, regionalization measures based on science and in line with international standards, public awareness, international cooperation, and the availability of transparent information to trading partners were underlined as vital to ensure safe trade.

Also, in the context of the Fifth Review, members advanced discussions on the Workshop on Risk Assessment, Risk Management and Risk Communication proposed by Canada, which will be held in July 2021 before the next Committee meeting. Separate proposals for a thematic session on pesticide maximum residue limits (MRLs) and a thematic session on international harmonization following a proposal  to modernize the Committee’s procedure for monitoring the process of international harmonization were also discussed.

The Committee was informed of the work of the Working Group on Approval Procedures (G/SPS/W/328/Rev.1), which concluded its first round of discussions. It will move to the second round with written exchanges and a subsequent meeting to take place on the margins of the July 2021 SPS Committee meeting. The development of a common understanding of “approval procedures” or otherwise clarifying the scope of work was considered by some members as an essential first step to have convergence in discussions within the Working Group. Some participants highlighted that the discussions should be centred on the implementation of the SPS Agreement as it relates to approval procedures. Others stressed the focus of the work should be on the implementation challenges that members face with approval procedures and on developing good practices or tools to help address these challenges.

Next meeting

The next regular meeting of the SPS Committee is tentatively scheduled for 15-16 July 15-16. 2021.

The World Trade Organisation (WTO) deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.

www.wto.org