The Good Old Days?
June 29, 2020
Author: Guy Soreq
In the good old days, trade was simple and local, albeit limited. Imported goods were sold at a premium, and local producers could easily compete with those imported products. Then, when the wall dividing East and West Germany fell, globalization created opportunities for trade like the world had never seen before, bringing new products to new parts of the world. Local producers suddenly had more markets than ever before to sell their products, and those good old days became a nostalgic remnant of the past.
In those aforementioned days price was decided based on the competitor’s import, or a specific advantage that brought value to the customer. In a globalized world, setting a price has become increasingly more complicated. A manufacturer needs to keep track of hundreds of metrics at any given time to sell successfully in a hyper competitive and complex global market. Understanding the local and global price of your product, its raw materials, and your customer’s product is the absolute minimum. Savvy producers should also consider disruptive factors from technology to weather, economic policy, and yes of course, even global pandemics.
At the start of 2020 (which now also feels like a distant memory) the Coronavirus outbreak caused extended holidays, lower factory output, and limited movement across China. To combat the sharp drop in exports from the country, the Chinese government increased the export rebate for the VAT paid by Chinese importers and manufacturers. The export tax rebate rate of 1084 items rose substantially to 13%, with other products rose to 9%. See the full list here (http://www.chinatax.gov.cn/chinatax/n810341/n810755/c5146338/content.html). In a globalized economy, Chinese producers just became that much more competitive.
There is a saying that a good friend once told me - it goes like this: “There are two fools in every market. One charges too high a price and the other charges too low a price.” In a global market, it becomes even more difficult to assess where you are relative to the rest of the field. While you may not need to keep up with every new development in trade policy, remaining competitive does require constant vigilance on the state of the market.
Glowlit was designed to help you do just that.