Asia offers export potential

  • 2014-08-06
  • Staff and wire reports

RIGA - The European Union at the end of June filed a formal complaint with the WTO against Russia over Moscow’s embargo of pork from the bloc, reports AFP. The move followed a failure to settle the issue in direct talks in April and May, and comes amid a raft of trade disputes between the two sides.
In January, Russia banned imports of live pigs and pork from the EU after the discovery of two cases of African Swine Fever among wild boar in Poland and Lithuania.
The disease can be deadly for domestic pigs, thereby battering countries’ livestock sectors. The swine fever epidemic has rapidly worsened in the Baltic region.

However, while members of the 160-economy WTO are allowed to restrict trade on health grounds, Brussels maintains that the ban is totally misplaced. Critics say Moscow’s quality concerns are a fig leaf for a political move against ex-communist EU members such as Poland and Lithuania that refuse to toe their Soviet-era master’s line. Both are key players in European pork sector dominated by Denmark, Germany and The Netherlands, for which Russia has long been a major market worth an annual 1.4 billion euros.

The EU accuses Russia of acting disproportionately and of trade discrimination, noting that imports from Moscow’s ally Belarus are not banned even though that ex-Soviet republic has also seen cases of African Swine Fever.
Since joining the WTO in 2012, Russia has also slapped bans on dairy products, chocolates and wine from various ex-communist countries - including non-EU members Moldova and Ukraine, as well as Poland and Lithuania.
The WTO polices global trade accords in an effort to offer its member economies a level playing field. It disputes process can last for years, amid appeals, counter-appeals and compliance assessments. Its panels of independent trade and legal experts can authorize retaliatory trade measures by the wronged party.

Look farther east
With an increasingly unreliable trade partner in Russia, as the continual bans across product groups show, Latvia, and the Baltics in general, should widen horizons when it comes to export markets. Asia could be one such future major trade partner.
Taiwan trade Ambassador Gary Ko, speaking with The Baltic Times in June, said that Latvian companies should be doing more when it comes to trade with Taiwan.

One of Latvia’s strengths, he points out is in pork production, and this would meet with high demand in Asia. Beef from Latvia as well, he adds. Considering the pork ban imports routinely imposed by Russia on the Baltics, welcome trade partners can instead be found in Asia.

Ko says that his Taiwan mission in Riga is the first in the Baltics, working to develop stronger trade relations with Latvian companies. Other Latvian sectors he mentions include food products in general, dairy and various wood products.
And Taiwan’s business connections with mainland China, its high GDP per capita of $21,000 and population of 23.3 million people, means a large and growing market awaits.
Andris Parups at LIAA (Latvian Investment and Development Agency) agrees that “Asian exports are the new normality,” in comments to The Baltic Times.

Sixty percent of Latvia’s GDP today is from exports, with 20 percent of exports going to Asia, he says. Latvia is currently working on trade promotion, with a Beijing representative in place already for two years. Latvians are also active as trade promotion agents in other parts of Asia, he says.

Government support
The LIAA provides advisory services for Latvian companies looking to export. It assists with due diligence of Chinese partners, and offers market intelligence services to companies interested. The agency is also in the process of acquiring a database system that will provide highly detailed breakdowns of the market.
And though Chinese companies are showing interest in locating manufacturing in the Baltic region, Parups notes that so far, this sort of investment totals just over 2 million euros, putting China in 48th position in inward investment, and this is mostly in real estate.

Ko mentions that Latvia needs to produce more engineering talent in order to attract manufacturing investment.
Though progress is being made, Parups says that Latvian exporters are still more comfortable working with closer markets. With the greater distance to Asia, he notes, comes greater risk, along with cultural differences that translate into different purchasing habits. People are needed there to overcome this additional complexity.

Lithuania is already shipping pork; Latvia is not, says Ko. He adds that work permits are easier to get in Estonia than in Latvia. It seems that Latvia is sitting back while its neighbors are moving ahead in Asian markets.
Latvia has the know-how for services and distribution, but it needs to send business representatives to Taiwan, as the business is there. “The first step is pork!” emphasizes Ko.

The most difficult part of entering new markets is many times the first step. Lithuania and Estonia have taken the steps. Latvian companies need to follow their example.