Thursday, February 02, 2017

Trade Is NOT Simple: Vietnam Spinning for China

Lyman Stone tweets, but has a day job, which includes this piece on cotton exports to Vietnam, which are part of a complex web of relationships among cotton-producing country, yarn spinning countries, yarn consuming countries (i.e. China) and multilateral trade agreements. 

Some curious facts:
  • spinning yarn and weaving cloth don't necessarily occur in the same country--I wonder why--the one is simpler than the other and easier to outsource? 
  • US cotton shipped in bales across the wide Pacific is competitive with cotton grown in India. Our growers are currently more efficient than Indian, so able to handle transport costs?
  • China used to have reserves of cotton but are now reducing or eliminating them. Wonder why--moving to less government intervention, if so, why?
Stone's summary paragraph: "If duty-free access for yarn is driving increased spinning in Vietnam, then the China-ASEAN Free Trade Agreement could be pushing U.S. cotton exports higher.  Yarn spinning being shifted from producer-countries like India, Pakistan, Uzbekistan, and to some extent China, into duty-preferred importer countries like Vietnam bodes well for U.S. exports.  Because the China-ASEAN Free Trade Agreement does not require that raw cotton inputs be sourced within the area, U.S. exporters are able to derive an indirect benefit from China’s duty-free ASEAN access."

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