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Import tariffs increase seen slowing down global air cargo

Eldoret International Airport
Workers pack goods for transport at the Eldoret International Airport. FILE PHOTO | NMG 

Global air cargo expansion will sharply drop to two percent in 2019 compared to this year’s 10 percent growth, according to a report released last week by the International Air Transport Association (IATA).

The slow growth is attributed to countries increasing their import tariffs to protect local companies. The US has imposed import tariffs on China — 25 percent on steel and 10 per cent on aluminium.

“The 3.7 percent annual increase in cargo tonnage to 65.9 million tonnes is the slowest pace since 2016, reflecting the weak world trade environment impacted by increasing protectionism,” read the IATA report.

“Cargo yields are expected to grow by two per cent. This is well below the exceptional 10 percent yield growth in 2018. Overall cargo revenues are expected to reach $116.1 billion up from $109.8 billion in 2018.”

Higher prices for imported goods could also persuade consumers and firms to switch to locally manufactured products thereby increasing domestic demand and reducing imports.

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However, international firms are countering this by either setting up their business in the markets that have imposed protectionism measures or getting into strategic partnerships with local companies.

According to a 2018 research conducted by financial services institution, HSBC on the impact of protectionism, 28 percent of the global firms surveyed were looking at joint ventures and subsidiary companies to navigate any local barriers.

More than 6,000 firms participated in the survey with 70 percent of the companies in the Middle East and North Africa saying that governments were becoming more protective of their domestic economies.

Some 68 percent of firms in Asia- Pacific noted the same while 61 percent of them in the US and 50 percent in Europe said that there was a rise in protectionism.

Companies are also engaging in e-commerce and electronic supply chains as a strategy of countering the increased import tariffs.

This year Kenya imposed 25 percent import tariff on Tanzania for products such as wheat flour while Dar es Salaam also issued a 25 percent duty on Kenya’s edible oils and cement.

These trade wars between countries could negatively impact the global economy.

In a 2018 study, conducted by management consulting firm, KPMG on the re-emergence of protectionism and its impact, if the rest of the world responds to the introduction of import tariffs on steel and aluminium by the US by implementing retaliatory tariffs of five percent on all manufactured goods, growth in the global economy would slow by approximately 1.3 percent.

Besides, increased tariffs on imports, Kenya is also set to report slowed growth in its air cargo next year due to a shortage of supply of flowers to international markets.

Horticulture exporters have already issued warning that it expects a shortage in flower exports due to delay in production. This will affect the supply to Europe, the country’s biggest market for flowers, during the peak season from December to February.

Moreover, flower export companies such as Oserian flower farm have already issued a notice to their stakeholders announcing that they will be a delay in flower production in the peak season due to delay in fertiliser supply to farmers.

“In the coming season, we expect a significant drop in the flower exports as farmers are getting limited fertiliser from the government which is affecting their production. Supply will be affected from Kenya which is the leading flower supplier to the European Union, holding 38 percent of the market share.

“About 150,000 employees may be rendered jobless due to the shortage,” said Clement Tulezi, the Chief Executive Officer of the Kenya Flower Council.

- African Laughter

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