For China, All Roads (and Belts) Lead to Europe

By: Rafał Grabowski, Key Account Manager, ET2C Poland

 

China Railway Express containers bound for Europe            Source: CFP

China Railway Express containers bound for Europe Source: CFP

 

                     In 2013, a great idea was created: connecting China to Europe by land and developing trasnsport routes that would be able to compete with sea and air routes. The Belt and Road Initiative (BRI, 一带一路in Chinese), as the project was branded, would become the largest infrastructural project in the  history of  the world.

                     The Belt and Road Initiative, also sometimes called ”new Silk Road”, represents a envisioned network of transport corridors that would link China with Europe. This means construction or upgrading of railway trade connections, especially between Europe and Asia, including high speed railways, roads, ports and airports, as well as the creation of the transmission infrastructure (oil pipelines, gas pipelines) and telecommunications. Currently, only 3.5% of Chinese exports goes to the European Union by road. Its main advantage is the cost substantially lower than air transport and significantly shorter time than its maritime alternative. To support the project, Chinese authorities have created New Silk Road Fund with an initial capital of USD 40 billion and is being realized on the basis of cooperation with partners from Europe and Asia.

 

Belt & Road Initiative

Source: The Economist

 

                        Due to its size and location, Poland is seen by China as the most important country in central Europe. This is why a proposal to position Poland as a logistic center of Europe and fully utilize the BRI benefits was created in the IMF-supported project Poland 3.0, which is envisioned an infrastructural project which should help accelerate development of transportation routes and relevant infrastructure in central Europe. It is also the largest cross-border infrastructure project in Europe, implemented through clusters and to the combination of Polish rivers, motorways and railways in one plane of multimodal transport, the construction of a Transnational logistics center in Gorzyczkach, and the BRI with the planned, multimodal logistics center.

China’s president Xi Jinping and Polish preseident Andrzej Duda in June, 2016

China’s president Xi Jinping and Polish president Andrzej Duda in June, 2016 Source: Reuters

 

16+1 Initiative

 

                          Poland is not the only regional country included in the project. Fifteen more countries, under the the 16+1 Initiative by China, are planning at intensifying and expanding cooperation with the Asian giant in the fields of investments, transport, finance, science, education, and culture. This includes 11 EU member states and 5 EU candidates.

 

Source: European Council on Foreign Relations

Source: European Council on Foreign Relations

  • Albania
  • Bosnia and Herzegovina
  • Bulgaria
  • Croatia
  • Czech Republic
  • Estonia
  • Hungary
  • Latvia
  • Lithuania
  • FYR Macedonia
  • Montenegro
  • Poland
  • Romania
  • Serbia
  • Slovakia
  • Slovenia

 

                      In the framework of the initiative, China has defined three potential priority areas for economic cooperation: infrastructure, high technologies, and green technologies.

                      The first 16+1 Summit was held in Warsaw, Poland, in 2012. At the event, the Prime Minister of China announced a comprehensive initiative on cooperation with 16 Central and Eastern European countries, entitled China’s Twelve Measures for Promoting Friendly Cooperation with Central and Eastern European Countries, which is the framework document for the 16+1 format. This was followed by summits in Bucharest, Romania (2013), Belgrade, Serbia (2014), Suzhou, China (2015) and Riga, Latvia (2016).


The BRI and Western
Businesses

                      The Belt & Road Initiative contains two key parts: a land-based “belt” from China to Europe, evoking old Silk Road trade paths and a “road” referring to ancient maritime routes. The initiative should span over 65 countries and the WPC experts estimate the infrastructural investment needs in the region to be valued at over USD 900 billion in the next 10 years. Western multinationals, spotting a bonanza, are selling billions of dollars of equipment, technology and services to Chinese firms building along it.

                      For example, the US-based General Electric (GE) made sales of USD 2.3 billion in equipment orders from the BRI projects in 2016, almost three times more than the previous year. John Rice, the firm’s vice-chair, expects the firm to enjoy double-digit growth in revenues along the BRI in coming years. Other firms, such as Caterpillar, Honeywell, and ABB, global engineering giants, DHL, a logistics company, Linde and BASF, two industrial gas and chemicals  manufacturers, and Maersk Group, a shipping firm, rattle off lists of BRI projects. Deutsche Bank has structured eight trade deals around it and has an agreement with the China Development Bank, one of China’s policy lenders, to fund several BRI schemes.

                      The important opportunities are not missed by any key players. Jean-Pascal Tricoire, the Hong Kong-based chief executive of Schneider Electric, a French energy-services firm, says that for his company Belt & Road Initiative is one of the most important plans of this century so far. Honeywell has recently formed a team called “East to Rest” that manages sales and marketing to mainland firms that are expanding abroad. As a goateed singer in Xinhua’s music video promises Chinese viewers, “when Belt and Road reaches Europe, Europe’s red wine is delivered to the doorstep half a month earlier”. For years to come, Belt & Road Initiative looks likely to be the toast of Western boardrooms, too.

The Qatar Crisis: New Trade Opportunities?

By: Zuhal Sari, Key Account Manager, ET2C Turkey

Doha at night

 

                    Turkish Minister of Customs Bulent Tufenkci said that since the beginning of June this year, the country has exported goods and services valued at $32.5 million to Qatar – three times more than in the same period in 2016. Out of this value, $12.5 million went on food exports.

                    What exactly is going on? Saudi Arabia, United Arab Emirates, Egypt and Bahrain have accused Qatar of supporting terrorism and unacceptable foreign policies and cut the diplomatic relations with the fellow-member of the Gulf Countries Council (GCC). The sanctions against Qatar did not involve only severing diplomatic ties: its neighbours imposed a full trade embargo. All products from Saudi Arabia, UAE, Egypt and Bahrain disappeared from the shelves of Qatari supermarkets over night. This has opened new opportunities for businesses from other markets, especially the ones politically and culturally close to Qatar like Turkey and Iran. According to the Turkish and Qatari governments, Turkish companies have exported goods valued at over $20 million with over 200 cargo flights. New joint investment projects are now being planned as well.

                   The success did not come over night though. In 2016, Turkey exported goods valued at $439 million to Qatar, while the imports from the Gulf partner were valued at $271 million, primarily in the electronics sector. Turkish exports in aviation and defense surged 400 percent to $52.2 million, with the total share of Qatari imports in this sector rising to 25 percent. In addition, in the first five months of 2017, exports of jewelry, automotive parts and ready-to-wear goods rose by 50 percent.

Turkish Chicken

                        Then in June this year new opportunities opened up. Although Qatar is a liquefied natural gas exporter, 90% of its food needs are satisfied through imports. That is why the imposed trade embargo by Saudi Arabia, UAE, Bahrain an Egypt has emptied the shelves of supermarkets in Qatar. However, it did not take long for these shelves to be filled with food and beverages from Turkey and Iran, delivered by cargo planes, invoking not so distant memory of Berlin Airlift (Jun, 1948 – Sep, 1949), during which the West Allies airlifted almost 9000 tones of goods to the residents of West Berlin which was under blockade. This does not mean that the Turkish government plans to stop at food exports. After acquiring market positions for meat, poultry, dairy products, fresh fruit and vegetables, it plans to focus on the expansion in electronics, defense and civil aviation sectors.

Opportunities for the companies based in Europe, Asia and the Americas

                        Of course, everything said above does not only refer to Turkey and the businesses based in this country. The newly-created opportunities in Qatar now exist for companies from other markets as well. Although relatively small, Qatar is one of the wealthiest countries in the region and its trade volume is significant. This is why starting and expanding business operations for companies from countries not involved in the dispute can result in acquiring market positions that are to be kept and maintained even when the crisis ends. The Qatari needs are significant: before the dispute, the imports from the GCC countries included chemical products, consumer goods, heavy machinery and metal products. The trade embargo means that these imports are not available anymore from the GCC countries, leaving the opportunity for others – Turkey, European Union, China, USA, Russia, Indonesia and others.

                       However, one has to move fast. The crisis, although not resolved yet, is not expected to last for long and the opportunity to acquire these market positions will not last for long. The Turkish government and companies have been very active in fully exploiting these opportunities. How about you?

Mexico & China: Closer Than Ever

By: Carolina Pocovi, Project Coordinator, ET2C Mexico

meX-chINA

 

                        As a key player in the North American region, Mexico is a country that has significantly benefited from the US economic development. However, in order to reduce heavy trade dependency on its northern neighbor, rebuilding the country’s key sectors and applying structural reforms has become a priority for the government. Important changes include transformation of the energy sector, telecommunication, integration of workers from informal sectors into the formal economy and more accessible financial loans for consumers. Other government policies include reduction of import regulations and foreign trade barriers due to which the country’s leading economic experts forecast a significant increase in foreign trade volume. As a result, in spite of somewhat unfavorable global uncertainties, the World Bank expects Mexico’s economy to grow over two percent in 2017.

                        This is where business opportunities for Mexico and China lie. The two countries have been cooperating closely over the years, with China being Mexico’s second largest trade partner. However, restrictive trade policies of the new US administration have resulted in Mexico turning to the expansion of its trade with other countries and China is topping this partnership list. With the trade volume between the two countries being valued to over 71 billion dollars, the Chinese government is willing to provide all necessary support for building and launching special economic zones in Mexico. Closer trade and business cooperation can also result in other benefits, such as closer cultural and political ties.

                         Being praised by foreign investors for its favorable policies and attractive trade solutions is nothing new for Mexico. Mexico’s commercial reforms and deep economic transformation on one side, and a possibility of a formal free trade agreement with China on the other side represent a perfect solution for further development of business ties, aligning of common interests and gaining the best from each other.  For China, the benefits from a formalized trade agreement would be on export categories  such as metals, minerals, rubber, plastics, chemical products, leather as well as electro-mechanics and transportation equipment. As for Mexico, industries like the automotive (auto parts) and mining (copper, iron, steel and aluminium) could have an exponential growth and profit abundantly.

                         The upcoming period is probably the most optimal for further strengthening of the business cooperation between Mexico and China and, as expressed during the visit of China’s president Xi Jinping to Mexico, the two governments “can and should work together to offer more significant prosperity, development and opportunities on the basis of trade and cooperation”.

                          In the worst-case scenario, North American Free Trade Agreement (NAFTA) would see the US withdrawal and the effective annulment of what is now the North American free trade zone. However, if Mexico invests a significant effort in reduction of the US trade dependency and increases trade volume with other global partners, especially China, potential NAFTA annulment would cause significantly less harm to the Mexico’s economy. This represents opportunity for Chinese investors not only in the field of consumer goods trade, but also Mexico’s energy reserves. For the Asian dragon this would also represent another opportunity to increase its global footprint and business expansion, while Mexico would benefit from the foreign trade diversification and productivity optimization. It would definitely be a win-win for both countries.

Brazil & China: Long Term Business Partnership

By: Jonas Souza, Key Account Manager, ET2C Brazil

 

China-Brazil-Flags-650x400

 

                   The economic supremacy of the West is a relatively recent phenomenon. When Marco Polo visited China in the late thirteenth century, he was visiting the richest nation in the world. China owned the most productive agricultural system of its time, its industries were creating the most advanced technological products, while the vast market of the nation generated an unprecedented degree of economic activity. According to Greg Clydesdale (“How business changed the world”), China was the world leader in terms of technology and quality of life in the pre-industrial era. The West has dominated the global economy for two and a half centuries, which represents very little time if the whole history of economic activity is taken into consideration.

                    Today, China is the most important trade partner for Brazil and it has been in that position since 2009, followed by the US. China is one of the key sources of foreign direct investment (FDI) in Brazil, leading with investments in energy, mining, steel and agribusiness sectors, followed by telecommunications, automobiles, machinery, banking and infrastructure development. However, it also needs to be said that there are also significant Brazilian investments in China, primarily in aeronautics, agribusiness, motor & auto parts, steel, pulp and paper, and banking services.

                    During the Brazil – China Business Summit in June this year, Chinese Ambassador to Brazil, Mr. Li Jinzhang said that the close bilateral partnership resulted in creation of the cooperation fund for classification of project development in Brazil – a common interest for both countries which should serve as positive reference for other Latin American countries in their bilateral relations with China. This shows not only China’s ambition to deepen trade partnerships with other Latin American countries, but also an opportunity for Brazil to strengthen its regional business leadership.

                    The decision of a company to import or export goods and services begins with an idea, will or need for business expansion, followed by the development of an international business development plan. Both countries have set their eyes on business expansion in overseas markets and their close cooperation will result in even more business opportunities for companies in both countries – they just need to figure out how to use them.

Vietnam: New Sourcing Frontier

By: Mark Bradley, General Manager, ET2C Vietnam

 

MadeinVietnam2

 

 

                        In the minds of many Vietnam is a country known for the unfortunate war fought in 1960s and 1970s, and not much else. However, this notion has been changing in recent years. The country’s recent accelerated development and strong economic growth that reached 6.1 percent in 2016 has caught the attention of international investors and businesses looking for sourcing opportunities.

                        According to the Asian Development Bank (ADB), Vietnam’s public and private sector infrastructure investment averaged 5.7 percent of gross domestic product (GDP) in recent years, the highest in Southeast Asia. The Philippines and Indonesia spend less than 3 percent in average, while Malaysia and Thailand spend even less at under 2 percent. Coupled with a relatively low labour cost, the result of this effort was $15.8 billion in foreign direct investment (FDI) in 2016. The World Bank expects the trend to continue and with the expected average economic growth of 6 percent until 2019, Vietnam will be among the top global performers this decade.

                        Vietnam has been attracting investments in labour intensive products like garments and footwear for more than a decade. However, it is not stopping there: data shows that Vietnam is also increasing its production for global technology companies. Export of electronic products in the first quarter of 2017 saw a surge of 48% comparing to the same period in 2016.

                       With all the remarkable success the country has achieved recently, it cannot be said that foreign businesses do not face challenges. Cultural differences, language barrier and the complex national legislation can easily eat up the forecasted profits and even cause great losses. Competition today is tougher than ever and companies are competing not only against their local peers, but also against global ones. In that aspect, sourcing in countries like Vietnam can significantly increase profit margins and improve efficiencies, but only if it is managed adequately and the risk is reduced to minimum. In order to accomplish this goal, a business needs to either have a buying office employing local staff with adequate experience in sourcing, quality control and partner network or ensure that a reliable and trustworthy partner with an on-ground presence serves as a one point entry for all sourcing and other related needs, such as quality control and logistics management.

                       To inexperienced buyers most sourcing partners in Vietnam look the same and their offering seems strikingly similar. However, experienced sourcing professionals understand that one has to conduct adequate due diligence to ensure that the company’s needs are being taken care of to provide the best value. In addition to profit margin increase and efficiency improvement, this also includes seamless end-to-end sourcing process and brand protection. Without due diligence in finding a reputable sourcing partner, a company can easily end up with profit losses and brand damage, which would require significant investments just to bring the business back to the pre-crisis level. Vietnam is offering important sourcing opportunities, but they cannot be maximized without knowledge of the local market, national legislation and production challenges one needs to overcome to ensure a seamless sourcing process.

Sourcing in India: Should You Do it?

By: Mark Bradley, General Manager, ET2C India                                                                                                                      mark.b@et2cint.co.uk

 

                                   While India has made tremendous progress in some areas, the country is still considered to an underdeveloped society. This brings the risk of wrong expectations. Cultural diversity of India means that local languages and dialects dominate the daily business communication. This is why a language barrier can often prevent efficient communication with foreign partners and can lead to serious misunderstandings. Vendors are often local people close to the source of their product, meaning that they do not set up their businesses in urban, easily accessible areas. In spite of some improvement, Indian administration and tax hurdles remain very demanding and time-consuming, requiring employing full time staff specialized in these administration to ensure complete local regulatory compliance.

                                   This does not mean that India is not offering opportunities for international companies looking for sourcing partners. On the contrary: the country’s economic growth in 2016 was 7.7 percent, making it one the most significant ones in the world and signalling that India is preparing for a more important role in global trade. In order to advance the economy, the government under Prime Minister Narendra Modi plans significant investments in the national infrastructure, including ports and railways, including Chennai Port where shipment costs are already up to 7% lower than the regional competitors.

                                    Top sourcing products in India are textiles, leather, electronics and industrial goods, but this product range is expanding quickly to include other categories, especially the ones that are endemic to India such as spices and generic drugs. The relatively low labour cost allows vendors to manufacture high quality products that require a significant number of man hours at very competitive prices. Based on the volume of orders, these prices can be further reduced, further ensuring higher margins and stronger competitiveness.

                                     While sourcing opportunities for high quality items at the very reasonable cost are significant in India, an entrepreneur should always be aware of the existent regulatory, cultural and language issues. Selecting the right sourcing partner in India can be a challenge: we should always make sure that reliability, experience, dedication and presence in the local market are the key criteria. Remote sourcing management is not the solution for India and it creates significant costs and unexpected problems, often resulting in losses instead of profits. With the right sourcing partner that can ensure that costs are kept at a highly manageable level, India opens new global business opportunities that provide increased effectiveness and high margins for top quality products.

Populism and Politics

In the last few years, the world has been gripped by populist anti-establishment movements demanding change, conservatism and isolation. The extent to which these elections and referendums have played out over social media has not been seen before. Trump’s indelible tweets at 4:00am in the morning and Zuckerberg’s commitment to creating an algorithm to identify fake news being promulgated unfettered on Facebook (e.g. the Pope supports Donald Trump) are evidence of this.

As the dust settles in the United Kingdom and the United States, it is imperative that we take stock and look through the populist rhetoric and unrealistic claims to try and understand how the trading environment will play out based upon objective truths. This is not an easy exercise given the many uncertainties but a useful one nonetheless.

The Art of the Deal

On Tuesday November 8th 2016, the United States elected Donald Trump to become the 45th President. Although the result was a surprise to the majority (Clinton still won the popular vote), in hindsight, it’s more surprising that no one saw the result coming despite the polls pointing to a win for the Clinton machine. The truth is that the world is not as secure or optimistic as it has been in the past. Since the Great Recession, we have seen an increasing frustration at the political establishment fueled by flames of austerity, stagnant growth and terrorism (which in turn has soured the populist perspective on immigration). As a result, nations are withdrawing to the confines of their national borders and away from globalization in return for security and protectionism.

Hardly a promising start to a Presidency for those with vested interests in global trade and, in particular, Asia. Although this article discusses the increased protectionism with relation to Trump, there is a reassuring sense of déjà vu; we referenced the same subject matter when Obama was elected back in 2010 and the fears of protectionism back then in our Newsletter, “The Politics of the Yuan”.

Trump himself recognized in an interview on “60 Minutes” that one has to say certain things to motivate people to vote. That might explain a lot of the political rhetoric on both sides gearing up to the election because not much of the statements were founded in the truth. However, in relation to trade, there are a number of fundamental truths that cannot be ignored:

  • Free Trade is “good” for the US economy. It is basic macroeconomics (e.g. Ricardo’s Theory of Trade) that imposing import tariffs to protect domestic production has a negative impact upon GDP and the country as a whole. Although scholars now believe that Smoot and Hawley’s import tariffs of June 1930, “added poison to the emptying well of global trade,” rather than being the sole cause, the Act certainly did not help America’s clumsy spiral into the Great Depression. Just as a business, which is not competitive in manufacturing a specific product, should not make the product, the same is true of countries. Where the USA is not competitive, the country should not be trying to compete and, instead, should specialize in other categories in which they are competitive and more innovative. If one can purchase goods elsewhere for less, then everyone benefits from it. Trade is a positive-sum game and not a zero-sum game as is sometimes touted.

 

  • Free Trade results in higher standard of living. As an extension to the above, free trade enables consumers to benefit from higher quality product at less expensive prices. If a broad range of import tariffs are imposed, those that are likely to be most affected are the working class due to, amongst other things, the Walmart effect (see The Politics of the Yuan).
  • Globalised Manufacturing is interrelated. Any increase on Import Tariffs would actually reduce the competitiveness of manufacturers that import components as part of a product and, therefore, potentially reduce the number of jobs.
  •   The United States is the 2nd Largest Exporter in the World. Although this subject garners minimal coverage during a political election, the USA does export a significant amount of product and services. Given Trump’s insistence on tearing up NAFTA and TPP (which I believe China would thank him for because it also encourages more competition within Asia), it might come as a surprise that America’s top Import Partners in 2015 were by dollar value: 
    • Canada: US$280 billion (18.6% of total American exports);
    • Mexico: $236.4 billion (15.7%);
    • China: $116.2 billion (7.7%); and
    • Japan: $62.5 billion (4.2%).

     

    In fact, “the world’s second-largest exporter, the United States shipped US$1.505 trillion worth of products around the globe in 2015. That figure represents roughly 8.1% of overall global exports estimated at $18.686 trillion based on 2014 statistics.”[2] The reason that this is significant (and we are not saying that there is no merit to renegotiating trade deals) is because it reinforces the argument that starting a trade war by tearing up existing trade agreements with the members of NAFTA or TPP would not be in the best interests of the United States.

    Although no one (maybe not even Trump himself) knows what the next administration’s trade policies are going to look like, Trump’s cabinet picks might suggest that he is going to take a hardline stance. But, as the Economist argues (“Donald Trumps Trade Bluster” – 10th December 2016), the reality is that it would not be easy to introduce import tariffs across the board without harming exports of American products dramatically. The Economist asks whether the rhetoric and the cabinet picks and the alarmist rhetoric are more reflective of Trump’s self-proclaimed negotiating styles, “I aim very high, and then I just keep pushing and pushing and pushing to get what I’m after.” The world will be eagerly watching Trumps actions to try and anticipate how his trade policies will take effect and whether there is any substance to his threats.

    For example, Trump recently intervened in Carrier’s decision to move a small percentage of their production to Mexico in order to save 800 jobs in return for tax incentives. The media has naturally tried to understand the drivers behind his decision. At the very least, his intervention not only sets a dangerous precedent of picking winners and losers rather than setting a commercial and impartial framework in which all companies compete; but one might also infer that the President-Elect is indeed more interested in how he is perceived by his supporters rather than the outcome of longer term policies.

  • Immigration is not necessarily bad. The formula for the total output of an economy is a function of three core elements: (i) Capital Stock; (ii) Population; and (iii) Productivity. The third limb, Productivity, supports the need for the United States to become more productive through the use of innovative technologies rather than protect industries in which the United States cannot compete. Population is also key and with a population growth rate of 0.72% (2013), the United States needs all the help it can get. A strong argument can be made for a vibrant and cosmopolitan economy with legal immigration an important component of that.

 

Brexit

A lot of people (including the enigmatic Nigel Farage) pointed to Brexit as an indicator that Trump would be elected and with the United Kingdom still suffering from a post-referendum procrastination, it’s interesting to look at the United Kingdom’s position relative to that of the United States. There are some similarities underlying the vote to leave the European Union but the overwhelming position on trade is dramatically different.

Immigration is a common theme behind the votes in both countries. A large proportion of the United Kingdom believe that immigration (and the lack of control over immigration) was resulting in jobs being taken and security threatened. The United Kingdom’s decision was also driven by a desire to take back sovereignty and control of its own destiny rather than being tied to a European Parliament that has become bloated, inefficient and ineffectual. Although not a direct comparison, one might argue that this is “similar” to the populist movement to take back control of the United States from the “establishment” and to “make America great again.”

However, there is a stark difference when it comes to trade. Whilst constitutional lawyers battle to understand how Article 50 works, in contrast to the populist movement in the United States, there is unanimous agreement about the importance of Free Trade in the United Kingdom. The biggest question is how the country is going to separate itself from the largest economy in the world (the European Union) as well as the biggest exporter and importer and, critically, maintain access to the free market. In 2015, the United Kingdom exported 44% (223.3 billion) and imported 53% (291.1 billion) of its Goods and Services to and from the EU. The debate revolves around the trade-off between the perceived negative association with the free movement of people and the benefit of free trade.

 

The main issue at the moment with regards to the United Kingdom’s decision is the uncertainty of how Brexit will play out and over what time frame. It is no surprise given the conflicting, confusing and maybe even misleading statements of intent from the government before and after the referendum that the Pound has dropped dramatically against the Dollar (to which a lot of the Asian currencies are pegged).

 

    Figure: x-rates.com (10th April – 11th December 2016)

As a short-term shock (17.6% drop from peak of 1.479 on 23rd June to 1.219 on 28th October) for those who have not purchased forwards, imports into the United Kingdom have become expensive and are, therefore putting pressure on margins. The converse is that exports have become less expensive and are likely to boost international sales. However, the latter might be a false dawn. As mentioned above in relation to the United States, an increase in the cost of imported components, might actually result in a compression of margin despite increased foreign sales.

In the longer term, trade agreements with the European Union and other trade partners will be critical to growth of GDP in the United Kingdom. Whether the populist movement is willing to accept it or not, immigration is an important component of a healthy labour market. Ultimately, as a result of the overwhelming requirement to have access to the free market, the United Kingdom will likely have no choice but to follow the Norwegian model and pay for access to the free market with some concessions to immigration. In that sense, as “most other mainland European nations have learned, the hard way, is that splendid isolation is usually an illusion.”

Until the United Kingdom has left European Union (assuming it will), there will be exposure to companies that import components or products from Europe because there is no certainty whether a trade agreement or access to the free market will be achieved. In addition, margins will also be compressed by the weakness of the Pound Sterling against the Dollar, which will, in the short to medium term, impact prices from Asia. That said – Asia still remains the most cost effective place to manufacture product. Companies in the United Kingdom should further engage with their supplier base to understand how to become more streamlined and efficient. There might also be an opportunity to source components or products in Asia that are currently being manufactured in Europe due to the risk of import duties.

Innovation and the Product Life Cycle

The global macro-economic and political landscape is changing, and with that there is a need for more creative solutions to deliver value in a more complex marketplace.  In 2017, ET2C is committed to investing in our clients’ Product Life Cycles and engage with our customers on a number of different levels; beyond simply the sourcing and manufacturing arena.  We recognize that there is still an innovation gap between the Western World and Asia and we are determined to fill this in order to help our clients.  We are currently looking at a number of opportunities and will let you know once we have the initiatives established.  That said, if you have any creative ideas that would help you, please do let us know.

                                                                     

QUALITY matters more in 2016 than ever before.

 

Consumer demands are more relevant.

 

Consumers know that they have the power to make demands of their favorite brands and products; this power resides in consumers’ ability to take their opinion to the Internet and have it spread like wildfire. The rest of the world will know their love or hate of a product, and we’ve all see the force of a negative review.

 

This has created a faster response rate in companies. In some cases, not complying with the consumers’ demands will result in losing not one, but thousands of customers in a short period of time. Saving money on quality will most likely cost your company more in the long run.

As consumers are shopping more and more online, quality is almost always the most important factor in a product review. Why is this relevant? A recent Nielsen study found that 70 percent of global consumers trust online reviews; this has risen by 15 percent within a four-year period. Industry experts project this trend to further increase in the coming years.

 

 

Five product evolution questions you should constantly be asking your team:

  1. How good is the current quality of my product compared to 5-10 years ago? 
You might have had the coolest, best performing, and innovative product of 2007… But what does that mean today? And more importantly, what will that mean five years from now?

 

  1. Should we be using the same materials? As products evolve, raw materials, new compounds and 3D printing prototypes have become real options to explore.

 

  1. Could we improve product design? If you’ve reached product perfection (we highly doubt it), skip this one.

 

  1. Can my current supplier manage upgrades? Once you’ve made up your mind where you want to take your product, it’s time to check if your current supplier is the right one to execute those changes.

 

    5.Are my products sustainable? As we become more environmentally conscious, this becomes a bigger issue in people’s minds and their purchasing decisions.

 

 

If there are no metrics to measure, there is no way to improve…

When it comes to production, if your company is just scratching the surface of the problem, then the developing product strategy will most likely have a short term range. If you want to implement a more long term strategy, where decisions make an actual impact on your quality, then you HAVE to measure data.

 

Developing, testing, and the goods and the bads…all need to be measured. 
By analyzing past production data, it’s easier for your planning team to predict and forecast future sales with a higher accuracy, thereby obtaining a higher ROI.




 

 

Quality is remembered long after price is forgotten

 

One way of ensuring your quality standards is to always aim for the re-buy. Put yourself in the shoes of the consumer and review your product experience – from the moment they engage with your product to the moment they need to replace it. You will then have a transparent idea of what you need to improve and change. This is a great way to ensure that your products will go beyond your clients’ expectations and come back for more. 


 

“Quality isn’t something that can be argued into an article or promised into it. It must be put there. If it isn’t there, not even the finest sales task will save you.

 

 

Quality Measuring Quality

 

We listened to our clients’ needs and created the ET2C Quality Control APP.
We deliver your reports in real time with photos. Additionally, there’s the digital signature from the supplier and the GPS location of the inspection, all through our APP installed in our inspectors’ tablets.

 

Our QC rate is only $190 USD per man day, send a message to amy.h@et2cint.com and book your inspection right now!

News on Indian Textiles

India’s history and traditions are woven with the spectacular art and skill that is involved in making textiles produced by thousands of weavers across the country. This mastery of the cloth is not only beautiful, but also extremely beneficial for the Indian economy.

It would almost seem that India textile makers do not even know how great their industry is. For each of the three preceding fiscal years, India has overachieved target sets for textile exports. In fiscal year 2011-12, India exported textiles and apparels totaling US $32.74 billion, well over their target of $28.13 billion for that year. 2012-12 saw similar growth and success, with total exports amounting $34.93 billion over a target of $31 billion. The story was the same in 2013-14, with exports coming to $39.45 compared to a $34 billion target.

Consistently overshooting their target would suggest that Indian textile makers are setting numbers too low, but this type of demand and production demonstrates the quality and consistency of Indian cloth. Reports indicate that these numbers are of course set to grow over the next five years, which will bring more textile options to Western consumers. Production is set to increase up to 112 billion square meters by 2017, which is nearly double the rate it from measurements conducted in 2011. As development continues in the country, India is deemed to have the capacity to produce textiles due to impressive changes within in its economic and demographic development. This will align and create favorable conditions for growth in several categories such as home textiles, apparel and a wide range of other technical textiles. The Indian government is capitalizing this production as part of the ‘Made in India’ campaign by creating more textile parks across the country as well.

Clearly, India has a superior capability to make quality textiles, however the government is also making strides in order to get the product out of the country faster. Recently India and the European Union have reopened a trade agreement known as the Broad-based Trade and Investment Agreement. The BTIA would be the first major economic engagement between the 27 nation EU and India, and if passed it will liberalize merchandize trade for both parties.

Please contact ET2C today for more information about sourcing and procuring Indian textiles.

 

Tertiary Results of Vietnam’s Economic Growth

2014 has been quite a breakthrough year for the Vietnamese economy and manufacturing sector. The Southeast Asian nation is at last receiving proper recognition for their sound economic policies and efforts to bolster their manufacturing sectors. Standard & Poor’s, Fitch, and Moody’s has upgraded the county’s credit rating earlier this year with applause for Vietnamese efforts towards strong macroeconomic stabilization.

The rating upgrade was well deserved, as the Vietnamese economy continues to expand and create jobs. The GDP growth rate is up 5.62 percent when compared to same time last year and in October, the Vietnam’s Purchasing Managers Index (PMI) was rated at 51.0, indicating a positive outlook for the manufacturing for the country. HSBC forecasts that exports will account for nearly 80 percent of the country’s gross domestic product this year, making Vietnam one of the region’s fiercest competitors with their low cost labor and generous tax benefits for foreign buyers.

Due to this frenzy in manufacturing, logistics companies are receiving a massive increase in orders from Vietnam to various destinations throughout the world. Currently the country has one of the world’s fastest growth rates in airborne shipment rates and it is enticing the region’s biggest cargo airlines to shift more attention to the country. Earlier this year DHL opened a $10 million shipping facility at Ho Chi Minh City’s Tan Son Nhat International Airport to meet an increasing export demand in the country, while Korean and Cathway Airlines have expressed similar keens interest in expansion. In reference to a fully packed plane, a DHL representative was quoted as saying, “This symbolizes the rest of trade in Vietnam. We are going to have a good fourth quarter.” Surely his statement is accurate, as the American Chamber of Commerce in Vietnam reports that shipments may increase by 19 percent for ($29 billion) this year.

ET2C’s Vietnamese office has taken notice of this manufacturing upheavel, and in fact, our clients’ orders are actively contributing to this economic expansion. With focuses on a variety of hardgoods and softgoods, our Vietnamese office has been serving clients since 2007 from Ho Chi Minh City. In recent years we have seen increases in orders from Vietnam’s suppliers due to lowered labor costs, which can at times be 20% cheaper than neighboring countries. ET2C is also able to take advantage of Vietnam’s very low import and export tax duties, which in turn lowers costs for our clients. Contact us today to find out how we can set up value-added sourcing solution for your needs.

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