As a side panel follow-on to our previous Supply Chain Matters commentary underlining key developments from last week’s G-20 Summit meeting, there were other noteworthy developments coming out of last week’s meeting.

Among those highlighted here:  Global Trade Actions

European Union Signs Trade Deal with Vietnam

Japan Curbs Certain Exports to South Korea

Apple Moving Mac Pro Production to China

 

European Union Signs Trade Deal with Vietnam

The European Union reached a trade deal with Vietnam that according to a report by The New York Times, underscores the bloc’s commitment to opening up its market and trading freely “in the face of rising protectionism and trade tensions around the world.

The trade deal came on the heels of another, far larger deal with four Latin American countries announced days earlier.

Negotiations reportedly began in 2012 and were completed last year. The deal essentially eliminates 99 percent of tariffs on goods and services among both parties, while some agricultural products would be limited by stated quotas. The government of Vietnam praised the agreement as a “historic moment.”

The trade deal is now subject to ratification by both the European Parliament and the parliaments of the EU’s 28 member states, along with Vietnam’s National Assembly.

 

Japan Curbs Certain Exports to South Korea

The government of Japan will tighten export controls related to South Korea as the two countries continue with ongoing tensions related to events during World War II. In October, South Korea’s Supreme Court ruled that Japan’s Nippon Steel must compensate South Koreans for forced labor during the war. Japan argues that any claims were previously settled in 1965 when the two countries restored diplomatic ties.

According to The Wall Street Journal, Japan’s Prime Minister Shinzo Abe: “took a page from President Trump’s playbook by hitting a perceived rival nation not just with political or diplomatic actions but also with economic punishment against the rival’s core industry.

Japan is restricting exports of certain chemicals used in the manufacture of flexible smartphone displays and in etching circuits onto silicon wafers to form semiconductors. Japanese exporters of these chemicals will need to apply for export permission each time they want to ship product to South Korean based customers. According to the report, LG Display and SK Hynix are among South Korean companies that could be affected by the tightened controls. Samsung Electronics declined comment to the publication.

South Korea’s trade ministry held an emergency meeting with local semiconductor and display companies this week to discuss countermeasures. South Korea also denounced Japan’s move as a violation of global trade rules and the principles of the World Trade Organization (WTO).

 

Apple Moving Mac Pro Production to China

The Wall Street Journal, citing informed sources, reported last week that Apple will manufacture its new Mac Pro computer in China, rather than the United States.

The computer had been one of the very few Apple hardware products assembled in the U.S. and now the consumer electronics icon has tapped contract manufacturer Quanta Computer to begin manufacturing in a facility near Shanghai.

The move reportedly is being made to save on shipping costs of components from China to the U.S., but beyond public relations, the move is likely more to do on mitigating the financial impacts of added U.S. import tariffs on components.

Apple’s lack of a significant U.S. manufacturing presence remains a flash point with the company and the Trump Administration. The Mac Pro had been assembled at a contract manufacturing facility located near Austin Texas, and according to the report, has experienced many ongoing challenges with the U.S. workforce. Since demand for the computer have declined, the WSJ report indicates that the China move is not likely to affect many existing U.S. workers.

What remains unclear at this point is whether this move by Apple will provoke President Trump to further callout of Apple or whether the move has already been telegraphed to U.S. officials. Also unclear is whether the move is one to appease China as Apple reportedly evaluates moving some portion of iPhone production out of China to other parts of Asia.

In either case, Apple continues to walk a tightrope in the shadows on the ongoing trade conflict among the two economic powers.

 

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