Trade tensions dog WTO as ministers meet in Abu Dhabi

Today’s top stories

• Sweden overcame the last remaining hurdle in its bid to join Nato after Hungary’s parliament voted to approve Stockholm’s application to become the 32nd member of the military alliance.

• Palestinian Prime Minister Mohammad Shtayyeh offered his resignation in a long-anticipated move that could set up a new technocratic government responsible for the reconstruction of Gaza. The international community, led by the US, has called on President Mahmoud Abbas, who leads the West Bank-based Palestinian Authority, to accept the resignation.  

• Microsoft announced a new agreement with French artificial intelligence start-up Mistral in an attempt to diversify its relationships beyond ChatGPT-maker OpenAI, an alliance that is being reviewed by competition watchdogs in the US, EU and UK.

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Good evening.

The biennial ministerial conference of the World Trade Organization begins in Abu Dhabi today amid increasing frictions as China accelerates efforts to develop an alternative trade architecture insulated from US influence and focused on the developing world.

As our new Big Read explains, China’s main trade strategy is to reinforce ties with the “global south” via its $1tn Belt and Road Initiative, an investment programme launched in 2012 and involving more than 140 countries in Asia, Africa, Latin America and elsewhere. Bilateral and regional free trade agreements allow for trade at low tariffs while also promoting direct investment. None of the FTAs include the US or EU member states.

The push from Beijing reflects its fears about the waning of the post-second world war global trading system, a trend that gained impetus after the 2008 financial crisis and began to intensify in 2018 when then US president Donald Trump slapped heavy tariffs on trade with China. If Trump wins a new term in November, US intervention is likely to be even more dramatic.

Other recent developments include accusations from the EU that China is unfairly subsidising sectors such as electric vehicles (although Chinese auto group BYD said today that the industry’s success stemmed from superior technology rather than state aid). The US this month vowed to take action if China tried to ease its industrial overcapacity by dumping EVs and other cheap exports on international markets.

Washington has also been increasing efforts to restrict Chinese access to sensitive technology. Chinese companies meanwhile have become adept at circumventing US and EU tariffs by, for example, delivering goods via third countries such as Mexico.

“Nearshoring” — the relocating of production to closer and more politically friendly countries is another growing trend in world trade. China is directing investment into countries such as Malaysia and Indonesia while western businesses are looking to move more capacity to Europe.

FT senior trade writer Alan Beattie in today’s Trade Secrets newsletter (for Premium subscribers) says for all the criticisms levelled against it (he’s not generally a fan) the World Trade Organization plays a useful role in identifying problems and defusing them through negotiation, as well as resolving disputes, although perhaps not as efficiently as it ought to.

One overwhelming issue that world trade needs to address is the environment, writes Beattie, and carbon emissions in particular. Slow and iterative litigation through the WTO looks the most promising route to a global carbon pricing regime, he argues.

The bigger picture on world trade, writes FT columnist Rana Foroohar, is that the hopes of economist John Maynard Keynes, who in 1944 foresaw a system that would “target persistent imbalances between surplus and deficit countries, rather than policing one-off trade violations”, have been dashed.

Instead, “the long-term imbalances between the deficit countries and the surplus nations have created unsustainable economics and politics around the world”, she argues. “Fixing this requires more than incremental tweaks; it calls for a radical reorganisation of the global trading system.”

Need to know: UK and Europe economy

Some British boardrooms are uneasy about plans from the UK’s opposition Labour party to improve workers’ rights should it win power in the general election. Planned reforms include strengthening the role of unions in workplaces, banning zero-hour contracts and “fire and rehire” tactics, and giving staff protection against unfair dismissal from day one.

Petrochemicals billionaire Sir Jim Ratcliffe hit out at the EU’s “suffocating bureaucracy” and environmental red tape, which he said would drive away investment from the bloc.

EU leaders are meeting in Paris to shore up support for Ukraine. Its president Volodymyr Zelenskyy has told the US that his country needs the $60bn aid at present stuck in a congressional stand-off within a month. Nato chief Jens Stoltenberg said at the weekend that it was inevitable that Ukraine would become a member.

Ministers of EU countries urged Brussels to increase funding for the €60bn-a-year Common Agricultural Policy subsidy scheme in an attempt to quell protests from farmers.

Need to know: global economy

FT analysis suggests the global downturn in house prices is over. Across the 37 industrialised OECD countries, nominal prices grew 2.1 per cent in the third quarter of 2023 compared with the previous three months, up from near stagnation at the start of last year. UK housebuilders are in regulators’ crosshairs over information sharing.

Donald Trump moved another step closer to becoming the Republican presidential nominee when a political group backed by conservative billionaire Charles Koch said it would stop funding the campaign of Nikki Haley, Trump’s last rival standing. Trump heavily defeated Haley in South Carolina’s primary on Saturday.

Israel plans to raise about $60bn in debt this year, freeze government hiring and increase taxes as it doubles its defence spending to support its war in Gaza. The country’s economy shrank almost 20 per cent on an annualised basis in the last quarter of 2023. Israel today launched air strikes near the northeastern Lebanese city of Baalbek in the deepest attack into Lebanese territory since its war in Gaza triggered renewed hostilities with the Hizbollah militant group.

French miner Eramet warned that Indonesia’s low-cost nickel suppliers would wipe out rivals in the next few years, confirming the country’s status as the dominant producer of the metal vital to electric car batteries, accounting for more than three-quarters of world supplies.

Need to know: business

The EU took its first steps towards a formal investigation into Apple over the iPhone maker’s decision to cut off access to some applications that bypass its app store.

European banks are set to return more than €120bn to shareholders in the form of dividends and share buybacks thanks to high interest rates boosting their 2023 results.

The growth in data centres for Big Tech’s AI products is fuelling concerns over water consumption. Academics suggest AI demand will drive up water withdrawal — where water is removed from ground or surface sources — to up to 6bn cubic meters by 2027, or about half the amount consumed by the UK each year.

Cut-throat competition among Chinese electric-vehicle makers is producing some interesting new developments in in-car entertainment, such as big-screen cinema displays for back-seat passengers. Toyota’s bet on hybrid vehicles, after a long period of criticism from investors and environmentalists alike, appears to be paying off.

A UK vaccine start-up has raised £14mn to develop AI-boosted adaptable jabs that can be modified to counter new variants of pathogens.

The world of work

The post-pandemic business landscape has a new focus: “purposeful travel”. Thousands of business people have changed their travel schedules as video conferencing becomes commonplace, environmental concerns increase and employers look to cut costs.

The human resources department is often the target of flak from senior leaders and rank-and-file staff alike. What can be done to improve its lot?

One area of focus, suggests FT columnist Pilita Clark, might be to tackle the menace of overblown job titles. Current examples range from captain of moonshots at Google and chief underpants officer at Joe Boxer to technoking of Tesla (Elon Musk, in case you were wondering).

Some good news

Researchers have discovered more than 100 new species living on underwater mountain chains off the coast of Chile, including deep-sea corals, glass sponges, sea urchins, amphipods and squat lobsters

Source: Economy - ft.com