Nafta talks are set to take centre stage in Washington tomorrow; where representatives from the US, Canada, and Mexico are expected to discuss the likes of: cutting the US’ trade deficit with Mexico, Canada’s wish to retain the ‘essential’ Chapter 19 panels, ‘rules of origin’, ‘Buying America’, climate talks, the digital revolution... amongst others. Some pretty high profile and strongly opinionated figures including Wilbur Ross and Bob Lighthizer will be pushing for both Canada and Mexico to increase their US imports, for example.
Firstly, our condolences go out to all those affected by the terror attacks in Paris on Friday evening. Our thoughts are with you all.
In September of this year China eclipsed Canada to become the U.S.’s biggest trading partner for the first time in history. Trade between the U.S. and China hit USD 442 bln in the first nine months of the year while U.S.-Canada trade totalled USD 438 bln, according to U.S. government data. The main reason for the reversal is the drop in crude oil, now half what it was in 2014, which equates to a 32 per cent drop in the value of Canada's trade in energy products in September alone compared to the previous year. However this is not to dismiss the meteoric rise in trade between the economic superpowers since the mid 1980s. Since 1985, trade between the US and China has ballooned over 7,500%. Indeed globally China now accounts for about 15% of global GDP, however its contribution to global growth last year was in the region of 40%, one of the reasons economic leaders take such a close interest in the health of the Chinese economy.
In a recent report a Commodities Research Consultancy predicts that over the next 5 years China’s coal imports could fall dramatically. The independent research group Capital Economics believes that coal imports will fall to ‘virtually nothing’ by the end of this decade. In the report they say the three main factors for this fall are a slowing economy, a move to greener fuels and the government’s protection of the local mining industry. Coal imports in the first half of 2015 are already down 38 percent year on year, on track to decline by more than 80 million tons from 2014. Added to this, as we have written before, China is on a huge renewable energy push. In 2014 electricity produced from hydro rose 5.7% and nuclear power 33.9%.