Aurelia Butler

Kia ora again from the South Pacific where this Trade Secrets writer is having a brief and chilly hiatus from the height of summer elsewhere. Today’s main piece looks at some rare pieces of good news: moves by the Quad partners and the WTO to tackle the ecological and human rights disaster created by the global fishing industry. We give a reality check on the scale of the problems and offer some new solutions. Charted waters is looking at the movement of people and the international competition for talent. Email me at [email protected]. Trade Secrets will be back in two weeks, with my colleague Andy Bounds taking the chair for a guest appearance.Some good news at last, but not enoughOver recent years the Financial Times has documented horrific claims of environmental pillage and modern-day slavery across the global fishing fleet. We’ve written about Taiwanese vessels where Indonesian crews worked 22 hours only to return to sleeping and eating quarters rife with insect infestations. We’ve also exposed the Korean ships that hunted down walruses, seals and dolphins for their livers and genitals. And we’ve reported on China’s distant water fleet — by far the world’s biggest — which stands accused of rapacious illegal overfishing, decimation of endangered species and abuse of south-east Asian fishing crews.Despite the stark risk overfishing poses to the livelihoods of millions of people, a constant complaint from NGOs has been that governments are doing far too little in response. Policing an industry which operates on the high seas — out of sight out of mind — has not been a high priority for many developed nation capitals. Yet in recent months two key wins have been notched in favour of the oceans and marginalised workers.The Quad security grouping of the US, Japan, Australia and India in May launched a new satellite-based initiative across the Asia-Pacific region, a plan mostly targeted at illegal Chinese fishing. The Indo-Pacific Partnership for Maritime Domain Awareness will see the Quad partners fund a commercial satellite-based tracking service that will pass on maritime intelligence to countries in near real-time. US officials told the FT’s US-China correspondent Demetri Sevastopulo that the new system would monitor radio frequencies and radar signals that would allow countries in the region to pick up vessels that have turned off automatic identification systems (AIS) transponders to avoid detection — a key problem in illegal fishing.Then in June, the WTO’s 12th ministerial conference finally — after 20 years of negotiations — reached an agreement to end harmful fisheries subsidies. As Alice Tipping of the International Institute for Sustainable Development neatly surmised: while the exceptions for developing countries are still to be worked out, the rules will at the least force governments to consider the legality and sustainability of the fishing activity they subsidise, something that very few do at present.In a world that has over the past three years lurched from a pandemic to war in Europe, and where big economies teeter on the edge of economic recession, it seems important to note these positive steps when they do occur. That being said, neither the WTO’s breaking of a decades-long bureaucratic impasse nor the Quad partners promising to police the Pacific portend to be a panacea. The scale of the problem, Trade Secrets believes, requires far bolder action. For the uninitiated: the UN estimates that up to 26mn tonnes of fish are caught illegally each year (with a value of about $23bn). Globally, around 20 per cent of all fish caught come from illegal, unreported and unregulated fishing activities. And half of global fish stocks are fished at biologically unsustainable levels (a change from 10 per cent in the 1970s).Yet the fishing industry still enjoys massive subsidies. And it’s not just China. Researchers in academic journal Marine Policy found that China, the EU, the US, Korea and Japan — the top five — account for close to 60 per cent of total global subsidies, at a massive $20bn. They also noted that over the previous decade “the bulk harmful ‘capacity-enhancing’ subsidies, particularly those for fossil fuels have actually increased as a proportion of total subsidies”.What’s more, subsidies classified as harmful still stand at about $22bn, annually. Earlier this year, one of the most extensive investigations into China’s distant water fleet found that 95 per cent of the crew on board reported witnessing illegal fishing. The problems are among their most acute in West Africa, where Chinese trawlers catch an estimated 2.35mn tonnes of fish annually.From a common sense point of view, the Quad’s focus on the Pacific will miss huge swaths of the most problematic areas, especially off the coast of western Africa, but also South America. The focus only on China is also problematic given vessels from the Quad-friendly countries of Taiwan and South Korea have for years faced accusations of widespread environmental plunder and shocking treatment of south-east Asian crews.And while the US has also promised to increasingly utilise its coastguard to help police Chinese fishing — a move started by the Trump administration and continued under President Joe Biden — sending a few cutters into the vast Pacific, an area of 165mn square kilometres, is not expected to significantly move the dial.Similarly, when it comes to the WTO breakthrough on subsidies, in a speech in late July WTO director-general Ngozi Okonjo-Iweala herself said: “Reaching the agreement was a vitally important step — but implementing it is what will matter.”Implementation is one issue. Enforcement is another. To make serious improvements via the WTO its members will probably have to bring complaints against China, a move that will undoubtedly risk backlash from Beijing.So, what is really needed? Trade Secrets posed this question to Steve Trent, the founder of the Environmental Justice Foundation who has decades of experience advocating for sweeping changes in the fisheries industry.Trent believes a focus on China in the short-term remains “valuable” and he supports the Quad’s initiative given that abuses are “systemic across the Chinese fleet, without independent and consistent monitoring, the likelihood is these abuses will continue, at least in the near term”.But longer term, Trent is clear: “Ultimately, you need transparency across the architecture of global fisheries governance. It is quite simple. Every vessel, we should be able to see who is fishing what, where, when and how”.One of the key first steps, he believes, is for the major market states of Japan, the US and the EU to align their regulation and requirements for market access and exclude from their markets those products where they cannot prove the provenance, when they do not have the transparency that allows surety that it “has not been produced by a slave, caught by a slave, or caught legally or unsustainably”.Alan Beattie writes a Trade Secrets column for FT.com every Wednesday. Click here to read the latest, and visit ft.com/trade-secrets to see all Alan’s columns and previous newsletters too.Charted watersFor today’s Charted waters, I want to focus on the international market for human capital rather than goods and services. My colleague John Burn-Murdoch has (once again) produced some excellent data analysis on the subject.What we can see from the above chart is that the UK has become a younger country, now the fourth-youngest in Europe, but only because of migration.Now for the bad news. The UK’s luck in attracting young foreign workers is on the turn. As the above chart shows, it is not just Brexit. The global competition for talented labour has been increasing for the past decade. The question is what the UK is going to do about this. The concern is that it is going to do nothing. (Jonathan Moules)Trade linksArgentina’s new economy minister has pledged to bring fiscal order to the country and regain market confidence by establishing a “super ministry” to tackle double-digit inflation.The British pound and government bond yields slipped last week after the Bank of England raised interest rates by the most in 27 years to battle surging inflation and warned of a protracted recession.Opec and its allies agreed one of the smallest oil production increases in the group’s history as Saudi Arabia attempted to appease western allies without using up all its unused capacity.Favouring political allies when constructing supply chains is expensive, tricky and possibly self-defeating, according to Alan Beattie.Trade Secrets is edited by Jonathan Moules More

For 2024, further relief is planned with a volume of around 4 billion euros, the report said.The package is set to include an increase in the amount people can earn tax-free and an increase in child benefit.($1 = 0.9817 euros) More

Investing.com — U.S. stocks are set to open higher after the Democrats’ long-awaited and much-diluted tax and spending bill finally cleared the Senate at the weekend. A more comfortable vote in the House of Representatives is due later this week. SoftBank reported a record quarterly loss of nearly $24 billion after its famous (infamous?) aggressive bets on tech stocks soured. Palantir and Tyson Foods report earnings. CVS is looking to buy Signify and BHP is looking to buy Oz Minerals, but both are struggling to find acceptance from boards who think their stock drops are just a blip. Recession fears in Europe and elsewhere continue to weigh on oil and energy prices. Here’s what you need to know in financial markets on Monday, 8th August. 1. Senate passes flagship tax and spending billThe U.S. Senate passed a watered down version of a bill expanding spending on healthcare and renewable energy, among other things, after making key concessions on tax increases to moderate Senators over the last couple of weeks, notably with regard to the tax treatment of carried interest.The bill passed 51-50, with Vice President Kamala Harris needing to use her tie-breaking vote in the face of unified Republican Party resistance. It now passes to the House of Representatives, where the Democrats have a more comfortable majority (for now). A vote is expected by Friday.The bill also creates a new 15% minimum corporate income tax and imposes a 1% levy on companies’ stock buybacks. It aims to reduce the federal budget deficit by $300 billion.2. SoftBank reports record lossJapanese venture capital company SoftBank (OTC:SFTBY) reported a record loss of $23.3 billion for the three months through June as its big bets on technology stocks soured due to rising interest rates.The company’s two Vision Funds, which include some of the most aggressive of those bets, posted investment losses of 2.33 trillion yen ($17.2 billion). Those losses have forced Masayoshi Son’s company to raise liquidity by selling down its biggest and most successful position in Chinese e-commerce giant Alibaba (NYSE:BABA).“For private portfolio companies, the fair value decreased in a wide range of investments, reflecting markdowns of those with recent funding rounds and/or weaker performance, as well as share price declines in market comparable companies,” SoftBank said.3. Stocks set to open higher. Palantir, vaccine makers eyed U.S. stock markets are expected to open in cautiously optimistic fashion after Friday’s wild ride, driven by the much larger-than-expected rise in employment (and stronger-than-expected wage gains) that defied talk of a slowdown and refocused the market squarely on the inflation outlook.The market seemed largely untroubled by reports of China continuing its live-fire drills off the coast of Taiwan past their originally-scheduled end data.By 6:15 AM ET, Dow Jones futures were up 92 points, or 0.3%, while S&P 500 futures were up by a similar amount, and Nasdaq 100 futures were up by 0.5%.Stocks reporting later include Tyson Foods (NYSE:TSN), which will provide an insight into one of the more pressing aspects of current inflation – food prices. Vaccine makers BioNTech (NASDAQ:BNTX) and Novavax (NASDAQ:NVAX) are also due, while Palantir (NYSE:PLTR) and Take-Two (NASDAQ:TTWO) Interactive report after the bell.4. CVS eyes Signify, while BHP is rebuffed by OzCVS Health (NYSE:CVS) wants to buy Signify Health (NYSE:SGFY), according to The Wall Street Journal, aiming to expand its push into the provision of medical services. Its sources suggested that Signify is looking around for rival suitors to help it get a better price.The Democrats’ tax and spending bill contains some far-reaching provisions for the health sector, allowing Medicare to negotiate the prices of certain drugs and capping out-of-pocket drug costs for Medicare beneficiaries at $2,000 a year from 2025 onward, as well as allowing free vaccines for Medicare enrollees from next year. A $35 monthly cap on insulin costs takes effect next year already.Other companies seeking to exploit the opportunity created by the last quarter’s selloff included miner BHP, whose $5.8 billion bid for smaller rival Oz Minerals was rejected on valuation grounds.5. Oil weakens further amid slowdown fearsCrude oil prices fell (along with bond yields), as even the strong jobs report failed to sustain prices at what are still painfully high levels for most of the world.By 6:30 AM ET, U.S. crude futures were down 1.2% at $87.98 a barrel, struggling to hold above last week’s seven-month low. Brent futures were down 1.1% at $93.90 a barrel.Natural gas prices also eased further, as the market prices in expected demand destruction in Europe due to energy-saving measures and an expected recession. European power prices also eased further from last week’s highs, despite no improvement in the supply situation, which has been compounded by a lack of water for hydropower and for cooling nuclear reactors. More

The national wage committee expects to recommend the hike in the daily minimum wage when it meets later this month, committee member Phijit Deesui told Reuters on Monday.The daily minimum wage would be increased to between 329 baht and 353 baht ($9.19-$9.86), pending cabinet approval.The government wants the wage increase to start later this year, rather than early next year, Labour Minister Suchart Chomklin told Reuters.”I want this to happen as soon as possible because people have a lot of trouble with living costs and we haven’t adjusted the wage for a long time,” he said.The minimum wage was last hiked in January 2020, by 1.6%-1.8%.The new figures would put Thailand’s monthly minimum wage – at 9,870 to 10,590 baht – among the highest in Southeast Asia. In Vietnam, a regional manufacturing base, the government’s minimum wage range is between 3.25 million dong ($138.96) and 4.68 million dong ($138.96-$200.10) per month. ($1 = 35.79 baht)($1 = 23,388 dong) More

The Moscow Exchange said on Friday it would allow clients from “friendly” jurisdictions – or those that have not imposed sanctions against Russia over its actions in Ukraine – to start trading after an almost six-month hiatus. But it later said this would apply only to the derivatives market, not the main stock market, and did not say when the wider access would be permitted. Analysts said the delay was partly due to concerns that investors from the European Union, United States and Britain – which are currently banned from trading in Moscow – might be able to use the resumption of trading by “friendly” nations as a back-door to offload any Russian stocks they still hold. The central bank said on Monday it was blocking Russian depositories and registrars from executing transactions with securities received from foreign counterparts – including from “friendly” countries – for six months. The regulator said it had seen brokers offering the option to purchase securities from non-residents in foreign jurisdictions and then transfer the assets to a Russian depository – a move which it described as risky and with “no guarantee of obtaining the expected financial result”.Western sanctions have severely restricted Russians’ access to global stock markets, while countermeasures from Moscow have also blocked most foreigners from buying and selling Russian shares. More

(Reuters) – Business investment appears to be an early victim of red-hot U.S. inflation and rising interest rates.Nonresidential fixed investment, which is how the Commerce Department lumps together things like spending by businesses on new buildings and renovations of existing ones, slipped 0.1% on an annualized basis in the second quarter. This acted as a drag on gross domestic product, the broadest measure of U.S. economic output. It also ended a seven-quarter run of outsized additions to GDP that on average were more than double the category’s historic contributions to growth.The cutbacks hit every industry except mining and drilling.Economists are watching closely to see how inflation hits different parts of the economy. Consumer spending has softened in the face of higher prices but still added to growth in the second quarter. Business investment stalled in the second quarter: https://graphics.reuters.com/USA-ECONOMY/INVESTMENT/jnvwenwewvw/chart.png And even as companies curtailed adding new buildings and other expansions, they kept hiring. U.S. job growth accelerated in July, and the U.S. job market has now recovered to the level it was before the pandemic. Meanwhile the stress on global supply chains eased last month to its lowest level since January 2021, according to the New York Federal Reserve.The pullback in business spending “is more of a pause than a sign of structural weakness,” said Andrew Hunt, who heads the Center for Real Estate at Marquette University in Milwaukee.Hunt said a surge in rents and construction costs earlier this year – part of a wave of price increases that have pushed inflation to a four-decade high – caused some businesses to postpone adding new space. But the pullback will be temporary, he predicts. He noted that demand for space is so high and available space in such short supply that vacancy rates are below 5% and in some markets there is essentially no space available.”People said, ‘Let’s see if the Fed does what they said they were going to do – and see how things stabilize as we move into the fall.'”The Fed has lifted interest rates at each of its meetings beginning in March, including back-to-back outsized increases of three-quarters of a percentage point at its last two policy gatherings. Far-larger-than-expected payrolls gains for July, data for which was issued on Friday, puts a third hike of that size squarely in play for the next Fed meeting in September. CBRE Group Inc (NYSE:CBRE)., which tracks industrial property trends, also views the pullback on business spending as temporary – and concentrated only in some pockets of the industrial sector. The real estate company noted in a recent report there was a record-breaking 626.6 million square feet of new industrial construction underway nationally in the second quarter – nearly a third of which was already leased.”Last year was the biggest industrial leasing year ever – over 1 billion feet in the U.S.,” said John Morris, president of the logistics business for the Americas at CBRE.”This year looks like it won’t be quite as big,” he said, noting they project 850 million square feet will be leased. That would still mark the second-biggest year in their records.Morris said the slowdown appears concentrated in smaller companies, rather than the big-name e-commerce and retail firms that gain the most attention for their investments in giant warehouses. Leasing of the biggest warehouses – those over 700,000 square feet – is up 25% in the first half of this year, compared to 2021, said Morris, while leasing of warehouses of 50,000 square feet or less is off 21%.”If you think about who typically is leasing those (smaller) buildings,” it is more likely to be smaller companies, he said, adding that those firms may be more sensitive to costs like rising rents.Craig Meyer, president of industrial for the Americas at Jones Lang LaSalle Inc., said surging costs have curbed investments in industrial space. But he remains optimistic.”We talk to all our brokers about what will happen to the end of year. And all of their pipelines seem to be solid,” he said. More

LONDON (Reuters) – Ukraine’s creditors vote this week on a government proposal to defer payments on the war-torn country’s international bonds for 24 months as Kyiv hopes to swerve a $20 billion messy default.Bondholders have until 5 p.m. New York time (2100 GMT) on Tuesday to decide whether to back or vote down the proposal by Ukraine’s government, which faces a $5 billion monthly financing gap and liquidity pressures following Russia’s invasion on Feb. 24. Time is precious: the country has a $1 billion bond maturing on Sept. 1. Creditors will likely wait until relatively close to the deadline to vote, said a person familiar with Ukraine’s thinking. Investors are expected to support the debt standstill, the person added.When announcing its proposal, Ukraine’s finance minister Sergii Marchenko said it had “explicit indications of support” from some of the world’s biggest investment funds including BlackRock (NYSE:BLK), Fidelity, Amia Capital and Gemsstock.Creditors of Ukravtodor and Ukrenergo, two state-owned firms that have government guarantees on their debt, also have until Aug. 9 to vote on a plan similar to the sovereign. IS THIS A DEFAULT?The two-year moratorium on external debt payments would allow Ukraine to avoid a contractual or legal default, as any amendment on the bonds’ terms would have the creditors’ backing, Rodrigo Olivares-Caminal, professor of banking and finance law, at Queen Mary University of London, told Reuters.However, creditors could ask whether a default insurance known as credit default swaps (CDS) should kick in, as a deferral of payments might be considered a credit event by the International Swaps and Derivatives Association (ISDA). Investors are sitting on about $221 million of insurance on Ukraine’s debt, according to Depository Trust & Clearing Corporation (DTCC) data on the CDS.  Credit rating agencies might also classify this as a “selective default” or “default”. “A contractual default, a credit event and a credit rating default are three different albeit related concepts,” Olivares-Caminal said. “Incurring any of the three doesn’t mean that the other two will trigger.” While investors are expected to back the freeze it is unclear whether the country may still need a debt restructuring in the medium term.”It is just a pause button – we do not know what shape Ukraine will be in a few months or a few years down the line,” said Luiz Peixoto, emerging markets economist at BNP Paribas (OTC:BNPQY) in London. “Investors are already preparing for a debt restructuring.”The dollar-denominated bonds trade at deeply distressed, some as low as 17 cents in the dollar. Battered by the war, which Russia calls a “special military operation”, Ukraine faces a 35%-45% economic contraction in 2022, according to estimates from the government and analysts, and is heavily reliant on foreign financing from its Western partners. Ukraine aims to strike a deal for a $15 billion-$20 billion programme with the International Monetary Fund before the end of the year. Ukraine restructured its debt in 2015 after an economic crisis linked to a Russia-backed insurgency in its industrial east. The deal left it with a large number of payments due annually between 2019 and 2027, and it returned to international markets in 2017 with a $3 billion hard-currency debt issuance. For the foreign debt freeze plan to be successful, the so-called consent solicitation requires the support of investors holding two-thirds across the 13 Eurobonds maturing from 2022 to 2033, and at least 50% of the holders of each note.The government launched a separate proposal on its $2.6 billion of outstanding GDP warrants, a derivative security that triggers payments linked to its economic growth. In late July, Ukraine’s state-energy firm Naftogaz became the first Ukrainian government entity to default since the start of the Russian invasion. Naftogaz’s bonds are not guaranteed by the sovereign. (This story corrects first name in paragraph 12 to Luiz ..not.. Luis) More

The biggest losers of a trade war with China would be the automotive industry with a 8.47% loss of value-added, manufacturers of transport equipment with a 5.14% loss and mechanical engineering with a 4.34% loss, the Ifo said.The authors of the study, commissioned by the vbw industry association, said companies should pivot towards other countries to reduce dependency on certain markets and authoritarian regimes.The goal of German and EU economic policy should be “to establish strategic partnerships and free trade agreements with like-minded nations such as the U.S.,” co-author Florian Dorn said.The analysis simulated five scenarios, including a decoupling of Western economies from China combined with a trade agreement between the EU and the United States.While such an agreement could cushion the effects of a trade war with China, it would not offset them entirely. Rather, it would result in the net costs of a trade war equalling roughly the expected costs of Brexit, Ifo said. More