Aurelia Butler

Australia’s prime minister Anthony Albanese embarks on a state visit to China this weekend that will underline a dramatic turnaround in relations between the countries, which had rapidly deteriorated in recent years over issues ranging from trade to security.Ties had reached a 50-year nadir, with Beijing imposing tariffs and sanctions on Australian goods and detaining Australian citizens, while officials in Canberra called for investigations into Chinese political influence and the origins of the Covid-19 pandemic.The Labor prime minister’s state visit marks the culmination of a recent rapprochement, driven by business weariness with trade tensions and a desire to depart from his predecessor’s more hostile stance.But Albanese faces the challenge of continuing to repair relations with Australia’s largest trading partner even as his administration forges closer security ties with the US to counter Beijing’s influence in the region.Richard Maude, senior fellow at the Asia Society Policy Institute, said the rapid thaw represented a surprising reversal from the “very, very deep lows of a few years ago” but would not undermine Australia’s co-operation with the US. “There is no shift in Australia’s position on Indo-Pacific security and its role in creating a balance of power,” he said.Albanese’s China trip, the first for an Australian prime minister since Malcolm Turnbull’s in 2016, comes on the heels of a visit to Washington last month. In a speech to top US officials, Albanese said Australia needed to be “clear-eyed” about its relationship with China, highlighting his government’s “patient, calibrated and deliberate” approach.His task will be to maintain that balance even as the Biden administration continues to increase pressure on China, imposing export controls on next-generation semiconductor equipment and strengthening security co-operation in Asia through alliances such as Aukus, which aims to give Canberra access to nuclear-powered submarines.US president Joe Biden, left, shares a toast with Australia’s prime minister Anthony Albanese during a state dinner in Washington last month More

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen on Thursday sought to reassure Asian countries that the U.S. approach to China would not lead to a ‘disastrous’ division of the global economy that would force them to take sides.In a speech ahead of the U.S.-hosted Asia Pacific Economic Cooperation Summit in San Francisco later this month, Yellen said that a full de-coupling of the U.S. and Chinese economies was “simply not practical,” especially given the complexity of Asian supply chains and the region’s deep economic ties to China.Her comments sought to assuage growing concerns about geopolitical fragmentation of the global economy into U.S.-led and China-led factions amid growing national security-driven export and technology controls between the world’s two largest economies.”A full separation of our economies, or an approach in which countries including those in the Indo-Pacific are forced to take sides, would have significant negative global repercussions,” Yellen said. “We have no interest in such a divided world and its disastrous effects.”Yellen said the U.S. instead was pursuing the “de-risking and diversifying” of its economic ties to China, by investing in manufacturing at home and by strengthening linkages with allies and partners around the world, including Indo-Pacific countries.Yellen said the U.S. would not compromise on national security actions, but aimed to keep them narrowly targeted, not for the purpose of “choking off growth in China.” Her remarks to an Asia Society event came as the U.S. is preparing to host leaders and other top officials from APEC countries in San Francisco from Nov. 11-17. The White House wants to schedule a meeting between U.S. President Joe Biden and Chinese President Xi Jinping alongside the summit. TRADE, INVESTMENT LINKSYellen said the Biden administration was committed to expanding trade and investment with Indo-Pacific countries, emphasizing the region’s strategic importance ahead of the APEC gathering.Deeper economic links with Indo-Pacific countries will help make U.S. supply chains more resilient and tap into a dynamic and growing market for U.S. exports, she said.”As we look toward APEC later this month, let me state unequivocally: Claims that America is turning away from the Indo-Pacific are wholly unfounded,” Yellen said in the excerpts. “We are deepening our economic ties across the region, with tremendous potential benefits for the U.S. economy and for the Indo-Pacific.”The Biden administration also has called a seventh negotiating round for its Indo-Pacific Economic Framework for Prosperity (IPEF) initiative next week in San Francisco, aimed at reaching some agreements in time for the APEC summit.IPEF, while far short of a traditional free trade agreement, is the Biden administration’s signature initiative to engage economically with Asian countries and provide them a trade and investment alternative to China.Yellen said deeper integration with Indo-Pacific countries would benefit the region and the U.S. She noted that U.S. two-way trade with the region reached a value of $2.28 trillion in 2022, up 25% since 2019, with the region taking nearly a quarter of U.S. exports.”The economic case for our expanding trade and investment is clear. The Indo-Pacific is a dynamic and rapidly growing region. As it grows, we gain a fast-expanding customer base for U.S. firms and workers,” Yellen said.SUPPLY CHAIN SECURITYPart of the reason for increased trade with the region has been the migration of U.S. supply chains away from China, a trend that started with tariffs imposed by former President Donald Trump in 2018 and accelerated since the COVID-19 pandemic.Yellen said economic engagement with Indo-Pacific countries, including Vietnam, is “crucial to bolstering our supply chain security” to avoid bottlenecks and shortages that occurred as the world emerged from the pandemic. She repeated her desire to diversify supply chains to countries in the region through “friend-shoring” or using trusted allies as sources of supply.”And achieving resilience through partnering with Indo-Pacific countries means gains for Indo-Pacific economies as well,” Yellen said. More

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This article is an on-site version of our Britain after Brexit newsletter. Sign up here to get the newsletter sent straight to your inbox every weekGood afternoon. After last time’s marathon effort on the UK state aid regime after Brexit, I’ll keep the message from Brexitland a bit shorter — but alas not that much sweeter — this week.I was struck by a report that the Oxford Economics consultancy did for the British Beauty Council on the UK cosmetics and personal care industry that showed how exports to the EU have declined since Brexit.Since 2017, according to the beauty council’s analysis, personal care exports to the EU have fallen from £3.6bn in 2017 to £2.7bn in 2022 — a decline of about £850mn over the five-year period — whilst to the rest of the world they’ve held much steadier with only a £73mn fall.Because Brexit is largely kept out of political headlines by both main parties, it remains the case that ongoing impacts of leaving the EU for business — and particularly small and medium-sized enterprises (SMEs) — are still not understood at an emotional level by the public in the wider Brexit conversation.You might think that, over time, the effects fade away as business adjusts to the new regime, but they don’t, as the report attests. It will be three years in January since the UK-EU Trade and Cooperation Agreement came into force, and the barriers the deal erected remain unchanged.As Oxford Economics drily summarised in the report:“The trade barriers that arise from increased costs and complexity of trading with Europe since Brexit have created obstacles to growth of the personal care industry. As an industry with a high representation of SMEs, the personal care industry is likely greatly affected by the impacts of Brexit in increasing the costs and complexity of dealing with Europe.”But unless you actually own a business, you don’t feel that pain. And yet it is real, as the leaders of the cosmetics industry told Kevin Hollinrake, the minister for enterprise, markets and small business, at an industry event last week.The Oxford Economics report reminded me of an interview I’d done over a year ago with Sam Martin, the founder of Apothecary 87, a small business in Doncaster, that makes premium beard oils and male personal grooming products.Martin started his business in 2012 to cash in on the ‘beard boom’ of the late noughties and was exporting to over 130 countries within his first year, with Europe (particularly Spain, Italy and Greece) a big part of those exports.Since Brexit that’s pretty much all stopped. Martin told me that he’s basically retrenched to the UK and pivoted to the domestic market, opening a couple of stores. He’s doing fine, he says, and has just adapted to the reality of the UK’s new trading environment.But what gets missed is the counterfactual. The one where Martin continued to grow his international business, expanding his exports into the EU, adding revenues but also resilience, since the more markets he can access, the more recession-proof he’ll be.His exports have been largely killed because EU customers now need a licence to import cosmetics from the UK, which makes the cost of buying products from the UK non-viable for individuals and small salons.Martin could get an EU representative for VAT and an EU distributor, but by the time he’s paid handling and processing costs and the distributor’s made their margin, he’d be selling the product at an 80 per cent discount against the recommended retail price. It’s also very hard for a small business like Apothecary 87, which employs 11 people, to find reliable distributors and marketing agents who can represent their brands in EU countries. Before Brexit, Apothecary’s products could be bought and shipped straight off the internet.Martin is a positive, ‘can-do’ guy, as evidenced by his thriving business, so he doesn’t wallow in ‘what might have been’. But when I spoke to him again this week he was still smarting from the  impact Brexit has had on his business — which has lessons for the entire UK economy.“It’s a tough one. If we’d kept doing what we were doing I think we’d be thriving. As a business we’re fine, we’ve tweaked our plan and we’re managing to grow locally and I’m excited — but my original vision for the company was more grand, more global and I’d love to get back to that, but we have to cut our cloth to the world as it is now.”That’s one business, from one industry, but it speaks to a much broader story about how Brexit has muffled the exporting ambitions of UK small businesses.As it happens, SMEs make up a very significant proportion of the UK cosmetics industry. Oxford Economics estimates that more than nine out of 10 (95 per cent) of personal care SMEs have fewer than 10 employees, so the hit to the industry has been particularly stark.The impact on bigger businessesBut Brexit has also impacted larger businesses, like the London-based skincare brand Sarah Chapman, which employs 60 people. Its CEO, Simon Lee, explains how the business has battled both border bureaucracy (individual labels for each country) and labour shortages since a lot of the staff in their skincare clinic in Sloane Square were from eastern Europe.Lee says the “breadth and depth of expansion” of the Sarah Chapman brand in Europe has definitely slowed (the business is now looking at setting up a new distribution network inside the EU) while struggling for skilled labour.“The whole industry is fishing in a smaller pool for that kind of talent, so we’re paying higher wages for less experienced people,” he says.Lee says that Hollinrake’s team at the Department of Business and Trade is helpful and solicitous, but the reality is that there are limited things any British minister can do to fix the problems caused by the TCA — and that will apply to Labour too for as long as it sticks to its current red lines.In his speech, industry insiders say that Hollinrake pointed to the introduction of new border controls on imports from the EU to the UK next April as a potential medium-term lever for easing border frictions.The hope is that when EU exporters start to feel the same pain as UK businesses, there will be fresh motivation in Brussels to get round the table and ease the frictions. Perhaps, but that rather misses the asymmetry of the problem. Around half of total UK trade is still with the EU, so the urgency is very much on this side of the Channel. Equally likely, a lot of EU exporters (like their UK counterparts since 2021) will give up bothering with exports to the UK, which will have an impact on UK companies reliant on supplies from the EU. I’ll be sure to let you know how that goes when the time comes.Brexit in numbersThis week’s chart comes courtesy of YouGov. Earlier I noted the muted nature of the Brexit debate in wider politics, something that is perhaps reflected in the fact that “none of the above” is beating both Labour and Tories when it comes to who voters think would be best at handling Brexit. The sudden crossover in the latest poll is a result of a five-point increase among Remain voters saying “none”, which might potentially reflect growing disillusionment among Remain voters with Labour’s cautious approach to Brexit. Matthew Smith, the head of data journalism at YouGov, is rightly cautious about reading too much into one poll which he warns could just be a “random blip caused by sampling noise” that you occasionally get in polls — but it will be one to watch.Rob Ford, politics professor at Manchester university, is also cautious, noting that there is stronger evidence of disaffection among Leavers than Remainers, and that it will require more polls like this to establish a trend.“It could suggest both sides of the Brexit divide are becoming exasperated with the options on offer, which is not a stable equilibrium: Leavers losing faith in Tory Brexit vision, Remainers no longer on board with Labour’s cautious approach,” he said.Britain after Brexit is edited by Gordon Smith. Premium subscribers can sign up here to have it delivered straight to their inbox every Thursday afternoon. Or you can take out a Premium subscription here. Read earlier editions of the newsletter here.Recommended newsletters for youInside Politics — Follow what you need to know in UK politics. Sign up hereTrade Secrets — A must-read on the changing face of international trade and globalisation. Sign up here More

The writer is a professor at Cornell, a senior fellow at Brookings and author of ‘The Future of Money’The Indian economy is doing exceptionally well, with many reforms undertaken in past years finally paying off and paving the way for solid growth. Still, there are several blemishes on this growth and the government could yet squander a favourable constellation of domestic factors and geopolitical realignments. The good news is compelling. India is likely to register the highest growth rate among major economies this year, and some prognosticators give its economy short odds of one day rivalling America’s in size. The nation boasts political stability, a young and growing labour force and a rising middle class, all of which have made it the darling of foreign equity investors.It is a landing spot for manufacturers looking for alternatives to China as supply chain bases, and prime minister Narendra Modi’s government has adroitly staked out the country’s independence in pursuing its own economic interests.India’s economic success is thanks to a number of reforms the Modi administration has undertaken, building on some measures taken by the previous government. A national goods and services tax has led to the elimination of state-level taxes that acted as barriers to interstate commerce. Labour regulations have been streamlined, with many states taking advantage to ease restrictions on hiring and firing workers. Government spending has upgraded the physical infrastructure, from roads to ports. Macroeconomic policies are also largely in order. The banking system is in decent shape thanks to the Reserve Bank of India’s effective oversight. The operational independence given to the central bank to run monetary policy has helped stave off runaway inflation. The government seems committed to fiscal discipline and to reining in the high level of public debt.  Most of all, the digitisation of the economy has been transformational. Digital payments have become the norm and even low-income households have access to bank accounts for managing savings and credit. The government now makes cash transfers to indigent households rather than subsidising their food and energy purchases, which was an inefficient use of state money and fuelled corruption. The formalisation of the economy has reduced various frictions to doing business.Extrapolating India’s current growth into the future is, however, a fraught exercise. The country’s infrastructure still has many gaps in supporting a vibrant manufacturing sector. The educational system is not equipping young people with the vocational and technical skills needed for a modern economy. Job growth has been weak, with little net employment creation in the manufacturing and services sectors. A young labour force with dim prospects of economic advancement raises risks of social instability, turning one of India’s boons into a curse. Endemic corruption continues to hold back overall business dynamism. A few politically well-connected conglomerates have accounted for a significant share of growth, leading to a concentration of economic power. Small businesses still face the tedium of dealing with corruption at many levels of government. Weak private investment, including in infrastructure, and the recent fall-off in foreign direct investment inflows, are indicators of the problems that still bedevil enterprise in the manufacturing and services sectors. Agriculture remains important to the Indian economy and accounts for large fractions of employment and recent employment growth, which is discouraging as it is intrinsically a low-productivity sector. The Modi government looked willing to pay the political price for much-needed agrarian reforms, including to the government-managed procurement and pricing systems. But it backed off in 2021 when the political price proved too high. This is a troubling portent. In the run-up to national elections next year, the unfinished reform agenda could take a back seat to the government’s nationalistic and conservative social agenda. Another concern is the attrition of India’s institutional framework. A well-functioning legal system, a free press, and other checks and balances are key to maintaining investor confidence. Each of these pillars has been eroded in recent years by a government prickly about criticism, hampering oversight of the corporate sector and limiting government accountability. India’s enormous promise will go wanting if the government switches into triumphalist mode rather than pushing forward with the unfinished economic reform agenda and bolstering its institutions. There is much work ahead to ensure that the nation’s moment in the sun does not prove fleeting.  More

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