Aurelia Butler

WASHINGTON (Reuters) -The breakdown of a key computer system, which resulted in the suspension of U.S. flight departures on Wednesday, is not the first such issue to hinder Federal Aviation Administration (FAA) operations, and happened amid efforts to upgrade technology. The 90-minute halt, which was caused by a problem with an alerting system that sends safety messages for pilots and others, occurred less than two weeks after a different critical air-traffic control system caused flight delays at major airports in Florida. The latest glitch disrupted more than 11,000 flights on Wednesday.The FAA has struggled to modernize some long-standing parts of air traffic control. A 2021 Transportation Department Office of Inspection General (OIG) report repeatedly cited challenges in the FAA’s multi-billion dollar Next Generation Air Transportation System (Next) infrastructure project.The OIG said its work “has shown that FAA has struggled to integrate key NextGen technologies and capabilities due to extended program delays that caused ripple effect delays with other programs.”In October, for example, the FAA said it was working to end a long-ridiculed, decades-old practice of air traffic controllers using paper flight strips to keep track of aircraft. But adopting the change at 49 major airports will take the FAA until late 2029.The FAA has also been trying to modernize the Notices to Air Missions (NOTAM) system “to improve the delivery of safety critical information to aviation stakeholders,” according to its website. The system provides pilots, flight crews, and other users of U.S. airspace with relevant, timely and accurate safety notices. Last April, the FAA began investing $1 billion, out of $5 billion set aside in the infrastructure package signed into law in 2022, in repairing and replacing key equipment in the air traffic control system, including power systems, navigation and weather equipment, and radar and surveillance systems across the country.“There’s a great deal of work needed to reduce the backlog of sustainment work, upgrades and replacement of buildings and equipment needed to operate our nation’s airspace safely,” FAA Deputy Administrator Bradley Mims said at the time.In Florida, a system known as the En Route Automation Modernization (ERAM) used to control air traffic prompted the FAA on Jan. 2 to issue a ground stop order, slowing traffic into airports and snarling hundreds of flights. The problem with the ERAM system at a major regional air traffic control center in Miami was behind dozens of flight delays at the Miami International Airport and flights into other airports in the southern U.S. state.ERAM in 2015 replaced the 40-year-old En Route Host computer and backup system used at 20 FAA Air Route Traffic Control Centers nationwide.House Transportation Committee chair Sam Graves, a Republican, labeled as “inexcusable” FAA’s failure to properly maintain and operate the air traffic control system. The FAA said in 2020 it was more difficult “for the FAA to hire technical talent as quickly and effectively than in the past”.The Department of Transportation, which oversees the FAA, has struggled with information technology. In 2019, a Government Accountability Office report on federal government IT planning found the DOT was one of three major agencies without a modernization plan. More

BEIJING (Reuters) – China’s economic growth is likely to rebound to 4.9% in 2023, before steadying in 2024, a Reuters poll showed, as policymakers pledge to step up support for the COVID-ravaged economy.Gross domestic product (GDP) likely grew just 2.8% in 2022 as lockdowns weighed on activity and confidence, according to the median forecasts of 49 economists polled by Reuters, slower than a 3.2% rise seen in October’s forecast and braking sharply from 8.4% growth in 2021.Chinese leaders have pledged to spur the world’s second-largest economy this year while addressing some key drags on growth – the “zero-COVID” policy and a severe property sector downturn. Strict COVID curbs were abruptly lifted in December, but surging infections are causing some near-term pains.”We expect economic activities and consumption to rebound strongly from March-April onwards, helped by post-COVID re-opening and release of excess savings,” Tao Wang, chief China economist at UBS, said in a research note. “The lack of large-scale income- and consumption-stimulus will likely limit the rebound.” Graphic: Losing steam https://www.reuters.com/graphics/CHINA-ECONOMY/myvmoggzlvr/chart.png The expected 2022 growth rate would be far below the official target of around of 5.5%. Excluding the 2.2% expansion after the initial COVID hit in 2020, it would also be the worst showing since 1976 – the final year of the decade-long Cultural Revolution that wrecked the economy.GDP in the fourth quarter of 2022 likely grew 1.8% from a year earlier as anti-virus restrictions intensified, the poll showed, slowing from the third-quarter’s 3.9% pace.On a quarterly basis, the economy is forecast to contract 0.8% in the fourth quarter, compared with growth of 3.9% in July-September, the poll showed.The government is due to release 2022 and Q4 GDP data, along with December activity data, on Jan. 17 (0200 GMT). At an agenda-setting meeting in December, top leaders pledged to focus on stabilising the $17-trillion economy in 2023 and step up policy adjustments to ensure key targets are hit.China is likely to aim for economic growth of at least 5% in 2023 to keep a lid on unemployment, policy sources said.MORE POLICY STIMULUS IN PIPELINEThe central bank has promised to make its policy “precise and forceful” this year to support the economy, keeping liquidity reasonably ample and lowering funding costs for businesses.Analysts expect the central bank to cut the benchmark lending rate – the one-year loan prime rate(LPR) – by 5 basis points (bps) in the first quarter.On Dec. 20, the central bank kept benchmark lending rates unchanged for the fourth consecutive month, matching the forecasts of most market watchers who nevertheless expect further monetary easing to prop up the slowing economy.The central bank last cut banks’ reserve requirement ratio by 25 bps effective from Dec. 5, its second such move last year.”Economic policy would turn more supportive in 2023. We expect 11-12% credit growth in 2023 vs 9.6% in 2022, thanks to the window guidance on banks and the improved credit demand,” Larry Hu, chief China economist at Macquarie, said in a note.”Fiscal policy could also turn more expansionary with a record quota for local government special bonds.”Consumer inflation will likely quicken to 2.3% in 2023 from 2.0% in 2022, before steadying in 2024, the poll showed.(For other stories from the Reuters global long-term economic outlook polls package:) (Polling by Anant Chandak, Veronica Khongwir and Devayani Sathyan in Bengaluru and Jing Wang in Shanghai; Reporting by Kevin Yao; Editing by Kim Coghill) More

Tesco’s chief executive has warned that UK inflation could rise higher before it comes down later this year as consumers increasingly trade down to cheaper products. “We are not sure that inflation has peaked just yet, but we would hope that by the middle of the year it will start to come down the other side,” said Ken Murphy. He cautioned that factors such as commodity and energy prices, harvests, crop yields and the war in Ukraine could all influence the outcome.In April, Tesco said it would take a £260mn hit to profits in its current financial year as it absorbed some of the cost inflation in the supply chain, rather than passing it on to consumers. At that time, food prices were rising at an annual rate of 5.9 per cent; the latest data shows them more than 16 per cent higher year on year even though there are signs that the headline inflation rate is starting to recede.On Thursday, Tesco said it still expected to make a retail operating profit, which excludes financial services income, of between £2.4bn and 2.6bn for the year thanks to a strong Christmas performance.UK sales grew 7.2 per cent in the six weeks to January 7, similar to the growth reported by its rival J Sainsbury this week and ahead of the average market forecast of 6.4 per cent growth.Group same-store sales, which include operations in Ireland and central Europe along with the Booker wholesale business, were up 7.9 per cent. Tesco shares were slightly higher in mid-morning trade at £2.45.Murphy said the company had planned for a strong festive period after research and customer data suggested that consumers would splash out for the first Christmas in two years not to be disrupted by the Covid-19 pandemic.“We were pretty confident about Christmas at the first half [results],” he said. “But customers shopped in quite an intelligent, responsible way, managing their spend, spreading it a little bit further and looking for better value products.”At the budget end, shoppers are buying more own-label products and more frozen food, with sales of an expanded frozen range up 25 per cent on last year in the week before Christmas.They are also switching from full-range supermarkets to discounters, though Murphy said this was being cancelled out by people switching from other retailers to Tesco and it was gaining customers overall. At the top end, the company’s premium Finest range and its “That’s dinner sorted” promotion have provided consumers with a cheaper alternative to going out to eat or ordering a takeaway.

Simon Roberts, chief executive of Sainsbury’s, also reported strong sales of premium ranges and his counterpart at Marks and Spencer, Stuart Machin, said many of its upmarket products had sold out over Christmas.Murphy said Tesco was planning for the customary period of post-Christmas belt-tightening, having already announced price freezes on 1,000 lines through until Easter, but said he was “cautiously optimistic” about the outlook for 2023.“Consumers are weathering the storm and the recession may be a bit shallower than people were thinking it would be — but the truth is we just don’t know”.Machin said that M&S customers, who tend to be slightly older and more affluent than those of mainstream supermarkets, were “slightly more insulated” from cost of living pressures and that they were “letting us know that they are still planning for occasions”. More

TOKYO (Reuters) -The Bank of Japan on Thursday offered a more optimistic view on the country’s economic health and pointed to growing number of firms planning wage increases, underscoring its conviction that Japan is on track to achieve its 2% inflation target.A rebound in overseas visitors, driven by Japan’s re-opening of borders and the weak yen, also boosted service consumption, the central bank said in a report analysing regional economies, a welcome development for Japan’s fragile economic recovery.In the quarterly report, the BOJ raised its economic assessment for four of the country’s nine regions. It maintained its assessment for the remaining five.”Many regions saw their economies pick up, or pick up moderately,” it said.Some firms appeared to struggle increasing pay as rising fuel and raw material costs squeezed profits, the report said.”But there were many cases where companies were increasing winter bonus payments, or plan to hike wages” to cope with a tight labour market and compensate employees for the rising cost of living, it said.The report will be among factors the BOJ’s board will scrutinise in compiling fresh quarterly growth and inflation forecasts at a policy meeting on Jan. 17-18.Sources have told Reuters the BOJ will most likely raise its inflation forecasts next week, in a sign of its growing conviction that conditions could gradually fall into place to dial back its massive stimulus.Japan’s core consumer prices rose 3.7% in November from a year earlier, marking a 40-year high and exceeding the BOJ’s 2% target for eight straight months, as companies continued to pass on rising raw material costs to households.BOJ Governor Haruhiko Kuroda has said wage growth must accompany rising prices for inflation to sustainably hit its 2% target, and allow the central bank to phase out stimulus.”We raised the base salary last autumn and may further raise wages this year in light of recent price rises, and improvements in our earnings,” the report quoted a supermarket in Yokohama, a city south of Tokyo, as saying.A steady stream of tourists visiting from Europe, the United States and Southeast Asian countries is boosting service consumption in the Kansai western Japan, said Hirohide Koguchi, the BOJ’s Osaka branch manager.”Duty-free sales have returned to 70% the level seen before the coronavirus pandemic. If this trend continues, it will underpin not just the Kansai region but entire Japanese economy,” he told a news conference.Japan’s economy shrank an annualised 0.8% in the third quarter of last year as slowing global growth hurt exports, and soaring raw material costs weighed on domestic consumption.Analysts expect a delayed rebound in consumption from the COVID-19 pandemic to underpin Japan’s recovery ahead, though the rising cost of living and China’s slowdown cloud the outlook. More

Good morning. The appointment of Bernard Arnault’s daughter Delphine to run Dior has raised some eyebrows. This is therefore a good time to announce that Elsie Armstrong, now a precocious 13, will be taking over leadership of Unhedged when Rob moves on. We feel this is necessary to ensure the continuity of the brand. Send proxy ballots to: [email protected] & [email protected]. Has Japan overcome deflation?Japan’s long-running quest to slay deflation has had one big, stubborn obstacle: what the Japanese themselves expect. A long history of negligible price growth entrenches the expectation that businesses can’t raise prices. Those that step out of line are punished with falling sales. So companies keep prices down, which leads to puny wage increases. And because prices tend to stay flat, consumers are in no rush to spend their (stagnant) earnings. The whole economy falls into ennui.Breaking this pattern is very hard. But since last year’s commodity shocks, a plausible path out of the deflationary muck has appeared. It might look something like: An exogenous commodity cost shock pushes the price of things such as energy and food way up.The yen weakens as Japan, forced to spend more of its purchasing power on energy and food imports, enters a trade deficit; this increases the price of other imported goods, too.Producer-side inflation rises, but scared of putting off customers, companies bear the higher import costs for a while.But eventually this becomes unsustainable, and as companies are forced to pass along price increases, consumer inflation rises.Consumers, left to reckon with the new inflationary reality, start demanding offsetting wage increases; they put newfound spending power to work, a virtuous wage-price spiral ensues.This, more or less, has happened — other than the last bullet. The chart below shows Japan consumer and producer inflation. Notice that it took PPI reaching 9-10 per cent over many months before CPI even broke 1 per cent:

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Can Japan take the last step? Can imported cost-push inflation, which won’t last for ever, be parlayed into domestic demand-pull inflation? This is what the Bank of Japan wants, and why it has moved mountains to keep its ultra-accommodative yield curve control policy in place. The problem is that inflation still looks mostly cost-driven. Wage growth, though it has risen noticeably, fell in the latest November reading, and remains below the 3 per cent rate the BoJ thinks is needed to sustain 2 per cent inflation: But there is good news. The FT’s Kana Inagaki and Eri Sugiura report:Fast Retailing, Asia’s largest clothing retailer and owner of the Uniqlo fashion brand, will increase employee wages in Japan by as much as 40 per cent as inflation in the country rises at its fastest pace in decades …While many Japanese companies rely on a seniority-based pay structure, the retailer will evaluate employees based on their performance and ability to contribute to the business, it added …To address the higher costs, the group increased the prices of flagship products at Uniqlo stores in Japan last year, with its fleece jackets jumping from ¥1,990 to ¥2,990.Fast Retailing isn’t alone. Ahead of annual union wage talks in the spring, a spate of big Japanese companies have recently announced proactive pay increases, including staid firms such as Nippon Life Insurance (a 7 per cent bump). Bandai Namco, a video game maker (and publisher of my favourite game of 2022), is raising starting salaries by 25 per cent.Pelham Smithers of Pelham Smithers Associates, our go-to Japan watcher, thinks this is all heralding a grand shift in inflation psychology. As he pointed out to us yesterday, the headline inflation rate probably understates how profoundly wage-price dynamics are changing:Two things have happened over the last year. The first is that inflation in Japan has been quite a big media story. It would be very difficult to watch the day-to-day news without getting caught up in the inflation story. The second thing is that high-street [retail] inflation has been essentially running at double the national rate. [In contrast to, for example, rent inflation near zero] if you’re someone shopping on the high street, you’ve seen something around 6 to 7 per cent inflation. So you’ve been feeling like prices have been rising . . . you don’t think, “Oh, my rent hasn’t gone up” as an important factor. You’re just looking at the price of flour and eggs and thinking, “Oh, God” …Because major parts of Japanese household spending haven’t gone up, the headline rate isn’t as high. But the psychology the Japanese have had about inflation is probably worse than the peak in the US or the UK, because they haven’t experienced it for 30 or 40 years.An inflation regime change would likely remake the country’s sluggish stock market: nominal profits, at long last, could expand. That would make the appeal of investing in Japan much clearer for global investors. (Ethan Wu)Are we heading for a corporate debt crisis? (Part 1)Americans for Financial Reform, the consumer advocacy group, is very worried about the proliferation of risky corporate debt, and just released a meaty paper on the topic, “A Giant In The Shadows”. There is plenty in it to agree and disagree with, and it’s worth a read. The author, Andrew Park, thinks the rapid growth low-quality corporate debt is worrisome for five reasons:It is overwhelmingly used for buyouts, dividend payments, refinancings and buybacks — not expanding companies’ productive capacity.Its riskiness is concealed by poor reporting practices: rampant adjustments to ebitda, already a non-GAAP measure, mean regulatory guidelines on leverage are regularly flaunted.It is often issued and/or owned by poorly regulated institutions, rather than banks or mutual funds that operate with proper oversight.Much of it is securitised and/or packaged into collateralised debt obligations, meaning that originators are not eating their own cooking and have incentives to conceal low quality.It is increasingly owned by insurance companies or, worse, private-equity owned insurance companies, which creates systemic risks.Many of these are familiar, as they are echoes of the problems underlying the mortgage crisis that began 15 years ago. And while each of them merits individual attention, I’m most interested in a wider issue that underlies them all: the idea that there is just too much low-quality debt floating around, and it’s going to blow up in our faces sooner or later, or as AFR puts it: The explosion of low-quality lending has brought debt loads in corporate America to record highs, a development that is likely to bring, in the coming years, a wave of defaults, slower growth, future job losses, and potential instability stemming from the utter opacity of this businessI think this is always a good issue to bring up, and it is a particularly good issue to bring up right now. It’s always important because human beings, left alone, will always keep adding debt until something breaks. The return-multiplying power of leverage is enough to ensure this; laws that give debt financing a huge edge over equity make it worse. It is important to think about the question right now because rates have risen quickly, and might stay high. We don’t know how the large stock of outstanding debt, issued when rates were low, will respond to this.The problem with thinking about the problem in general terms is that it is hard to track how much debt there is and how risky it is. AFR estimates that the total US stock of “subprime” corporate debt (junk bonds, leveraged loans, direct lending) is worth $5tn. According to the national accounts, total non-financial corporate debt (bonds and loans) stands at $12.7tn, making low-quality debt just under 40 per cent of the total. But I don’t yet have a time series for “subprime”, so I don’t know how much 40 per cent is relative to history.So what can we say about the riskiness of corporate debt in the US? One thing we can say is that less and less debt is held in the most carefully regulated and supervised entities: banks. Here is a chart of the growth of total loans and leases held by all US commercial banks, since the mid-70s (the data is quarterly, and presented as a three-year rolling average): As the growth in corporate debt has picked up, growth in bank lending has been slowing down. It was crushed after the housing crisis and has not recovered, taken away by the bond and securitisation markets. Park is therefore quite right to say that US corporate debt is regulated more and more loosely. But whether leverage is truly increasing is a more complex question. The next chart shows corporate debt as a percentage of GDP, which is on a clear long term rising trend, and corporate debt as a multiple of profits, which is not:

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Debt to pre-tax profit varies with the economic cycle, as one would expect, but it has not been rising, and is not historically high now. One might be tempted to conclude that American companies have added more debt because they have become more profitable, and can carry more. (Ideally, the light blue line would show debt relative to profits before tax and interest payments, but this is harder to extract from the national accounts. The chart as it is should capture the right trend, but will reflect the impact of lower interest rates, which would be good to exclude. I’m working on it). The chart does not capture changes in the quality of debt over time, which is Park’s point. But it does raise a good question. Instead of asking whether there is too much debt, should we not ask instead whether historically high corporate profits are sustainable?There is much more to be said here, and we’ll say some of it in coming days and weeks.One good readThe suburban identity crisis, or why moving from New York to the ’burbs is hard. More

Aziz Sunderji is a freelance journalist who used to work at the WSJ. Before that he spent 14 years as a strategist at Barclays Spare a thought for the American first-time homebuyer, for whom things have rarely looked so grim. US home prices rose 40 per cent during the pandemic. Mortgage rates haven’t been this high in 15 years. Wages are higher, but not nearly enough to compensate for these factors. You can see the challenges starkly in the Atlanta Fed’s affordability tracker:

Unsurprisingly, this has resulted in US home sales falling off a cliff. The drop has been more rapid than even the decline in 2007-08:

So far, in these respects, this looks like a classic rapid correction from an overheated market. As Jay Powell recently described it at a Brookings event:“ . . . You really had a housing bubble. You had housing prices going up at very unsustainable levels and overheating and that kind of thing. So now, now the housing market’s going to go through the other side of that.” But here’s where things get a bit weird: the bubble is clearly deflating, if not popping, through activity — homes are changing hands at the slowest pace since 2012. But prices have hardly budged. From the peak in June, prices are down only 1 per cent — and they are still up 10 per cent from a year ago.

This is obviously bad news for prospective home buyers, but also for the Fed: higher home prices push up rental prices and the imputed cost of owning a home (“owner-equivalent rent”). Together, these constitute more than 40 per cent of core CPI attributed to shelter costs. Real estate folks think supply explains the surprisingly modest price drop. For one, there is a lack of housing inventory. This is partly a long run trend but is getting worse. Given population growth and household formation the US was short of 3.8mn housing units by late 2020, according to Freddie Mac’s chief economist Sam Khater.This secular lack of homes is being exacerbated by cyclical factors. Since you can’t take your mortgage with you, nobody wants to move and reset their loans at much higher rates. Would-be sellers are therefore sitting on the sidelines. From the WSJ:“I like to call it the ‘golden handcuffs’ of mortgage rates,” said Odeta Kushi, deputy chief economist at First American Financial Corp. “You’ve got existing homeowners who are sitting on these rock-bottom rates, and what is their financial incentive to move and lock into a rate that’s potentially as much as 3 percentage points higher than what they’ve locked into?Fannie Mae estimates that at the end of October, more than 80 per cent of all borrowers had a mortgage rate that was at least 200 basis points below market rates, “by far the largest share in decades”. Taylor Marr, deputy chief economist at real estate listings service Redfin, reckons that mortgage rates will help depress home sales down to the lowest since 2011: We expect about 16% fewer existing home sales in 2023 than 2022, landing at 4.3 million, with would-be buyers pressing pause due mostly to affordability challenges including high mortgage rates, still-high home prices, persistent inflation and a potential recession. People will only move if they need to. So homeowners are not opting to sell. But they are not being forced out, either.In the pandemic housing boom, lending standards never dropped to 2008 levels — today’s average homeowner is of much higher quality and sitting on a bigger equity cushion. According to the Mortgage Bankers Association, less than 10 per cent of new mortgages are adjustable rate mortgages. Mortgage resets, the powder keg that set off the 2008 crisis, therefore won’t be a major factor. Here’s Joel Kan, the Mortgage Bankers Association’s deputy chief economist, in Yahoo Finance:“This is a very different environment than the products prevalent prior to the Great Financial Crisis,” Kan says. “The credit quality of borrowers is stronger, and the types of ARMs that are available now are of much lower risk, without the same potential for near-term payment shock.”On the demand side, lower affordability is decreasing demand, but maybe not as much as one would expect. Household balance sheets are in decent shape, and unemployment is (for now) low. Home builders are also helping foot the cost of more expensive mortgages through buy downs.The result is a stalemate: would-be buyers are deterred by high prices and financing costs, and would-be sellers have little incentive to sell at lower prices, or to sell at all.So where do we go from here? Forecasts are all over the map — KPMG is calling for a 20 per cent fall, and Goldman Sachs for a 7.5 per cent drop, while the Mortgage Bankers Association and the National Association of Realtors think prices will actually rise, though not by much. Calling for anything but much lower prices after the recent boom in home prices and soaring mortgage rates does sound a bit insane. But in the 1970s and 1980s — the last time the Fed was ratcheting up rates to deal with inflation — nominal prices didn’t actually fall. So if history repeats itself, it could eventually be lower mortgage rates alone — not lower prices — that eventually puts an end to the stalemate between buyers and sellers. More

A narrative about the US and global trade is being established by disgruntled voices among America’s allies in Europe and Japan, and amplified by adversaries like China. It goes like this: the US is an international scofflaw willing to subvert the world economy with distortive subsidies, degrade the World Trade Organization and use export controls to pursue aggressive foreign policies while benefiting its own companies.These are legitimate, if overheated, critiques, but there remains a fundamental counterpoint. While governments’ ability to use trade as a strategic tool remains unproven, the need for raw military power on occasion to ensure the peace necessary for trade is not. In that aspect of globalisation the US remains the rock on which a striking amount of the superstructure of world trade stands.The decade before Vladimir Putin’s invasion of Ukraine showed the need for hard power to establish the conditions for soft. Faced with an increasingly belligerent dictator in Moscow, the EU tried to pull Ukraine into its orbit in the only way it really knows, via economic integration — the “Deep and Comprehensive Free Trade Agreement” signed between Brussels and Kyiv in 2014. Even after Russia’s subsequent annexation of Crimea, the EU’s policy of “strategic autonomy”, launched in 2020, mainly rested on exerting influence through trade, regulation and values. Warnings from central and eastern European states about the continued threat from Russia were largely disregarded.The US was not alone in arming and training the Ukrainian army after 2014, but it certainly played a leading role. Without that support, Kyiv would quite possibly now be Putingrad, the EU would be in crisis, with its pro-Russia and appeasement elements in the ascendant, and the expansion of its cherished single market would have been permanently blocked on its eastern border. Moreover, an emboldened China would be more confident about annexing Taiwan, with all the catastrophic consequences for trade in the world’s fastest-growing region and the global market in semiconductors. The EU has at least recognised the indispensability of America through this week’s EU-Nato statement, affirming the overwhelming importance of the transatlantic bond. Certainly, economic, political and cultural affiliation to (and cash from) the EU will be a vital part of pulling a liberated Ukraine out of Russia’s orbit. But the guarantee of a secure future will surely rely implicitly or explicitly on Nato and the US.In the old saying about interventions followed by reconstructions — wars in the former Yugoslavia in the 1990s, or indeed the ill-fated invasion of Afghanistan in 2001 — the Americans cook the dinner and the Europeans help with the dishes. (Obviously there are cases like Iraq where the US smashes up the kitchen while some European countries urge it to stop.) It’s slightly surreal for the EU’s vice-president for the European Green Deal, Frans Timmermans, to be tweeting about the imperative of green reconstruction in Ukraine after the war. Restricting yourself to doing the dishes is one thing; but obsessing about the eco-friendly nature of the washing-up liquid takes the elevation of values over security a little too far.Even in calmer geopolitical times, the US’s military contribution to civilian trade is easy to overlook. The most obvious example is the American navy’s decades-old role patrolling sea lanes used by commercial shipping. According to estimates from the Center for Global Development think-tank, the US is by far the biggest protector of sea lanes, spending nearly 0.2 per cent of gross national income against an average among the world’s 40 most powerful countries of 0.015 per cent, which helps put the US’s relatively miserly aid budget into a little more context.Being slightly fanciful, it’s not the first time that a major military power has used force to enable trade in Europe. The Roman empire delivered enough peace (and roads) to expand trade across the continent; the Mongols secured the overland Silk Road, connecting medieval Europe to east Asia.Europe, let alone the world, is not some chaotic free-for-all that requires a global hegemon to provide order. But in certain theatres of conflict and commerce, thanks to expansionist autocracies like Russia, there are more security threats to global trade since the end of the cold war. The US’s attempts to weaponise trade are legitimate subjects for criticism. But its literal use of weapons to secure the conditions for commerce in Europe surely is [email protected] More

Brussels is seeking to end a Europe-wide medicine shortage by stockpiling drugs and obliging manufacturers to guarantee supplies. The EU will also try to reduce reliance on China and increase domestic production capacity, the European Commission told the Financial Times.A surge in winter sickness in the northern hemisphere and reduced exports from China have meant patients have found it difficult to get hold of some basic medicines such as penicillin and paracetamol. Almost all 27 EU member states and the UK have reported shortages.Under pressure from governments, the commission has said it will intervene to ensure “strategic autonomy” in basic medicines through a “systemic industrial policy”.It said it would soon propose legislation to “secure access to medicines for all patients in need and to avoid any market disruption of medicines”. The reform would require “stronger obligations for supply, earlier notification of shortages and withdrawals and enhanced transparency of stocks”, the commission said.The move is the latest in a series of EU measures to reduce reliance on imports after the Covid-19 pandemic disrupted supply chains. The bloc has proposed huge subsidies for domestic silicon chip production and emergency export bans on strategically important products.It is likely to be fiercely resisted by the pharmaceutical industry, which says governments should pay more for drugs and loosen labelling and market authorisation rules if they want to boost supply.

The commission said the shortages were not a temporary problem but “a systemic challenge with numerous vulnerabilities”, including overreliance on a few countries for certain products, and the way drugs are regulated and bought. The EU’s Health Emergency and Response Authority (Hera), established in response to the Covid-19 pandemic, could organise joint procurements for several countries to improve supply.Health commissioner Stella Kyriakides outlined the plan in a reply to Greek health minister Thanos Plevris, who had demanded action in a letter to her last week. “There is a shortage in certain branded drugs containing paracetamol, antibiotics and inhalers . . . particularly for children,” Plevris said at a news conference last week where he announced a series of measures that would tackle the shortages. The Greek moves include an export ban — something the EU is not considering for the moment. Many wholesalers buy drugs in Greece because it has low prices and then sell them on to other EU countries. Those companies now have to provide a list of inventory and stockpiled products. Another Greek measure was to list alternatives to the drugs that are in short supply, a tactic also adopted by the UK and other countries. Kyriakides said in a written statement that the commission was suspending some regulations and working with EU companies to increase capacity. “Discussions with industry have already taken place and they are aware that they must rapidly step up production of these medicines,” she said.Industry trade groups said the main cause was a surge in demand because of a high rate of respiratory conditions and infections, especially among children.The Covid lockdown meant that many were not exposed to infections to build up immunity.Doctors are also prescribing antibiotics more often, according to the International Generic and Biosimilar Medicines Association (IGBA), a Brussels-based industry group.It called on governments to share more information about their disease forecasts and loosen trade restrictions to allow drugs and raw materials to move more freely to countries with shortages. They should also force wholesalers, pharmacies and hospitals to stop stockpiling antibiotics.“The current policy models are not conducive to investment in sustainable production for the future,” it said. The European Federation of Pharmaceutical Industries and Associations, another Brussels-based trade group, told the FT that China’s export operation was “gradually improving as the domestic supply situation is getting better”. More