Economy

The food industry says it is running out of time to prepare for new EU rules to cut carbon emissions from the supply chains of several key commodities, accusing Brussels of issuing proposals that lack detail and will fail to stop deforestation. The rules, which will oblige companies to prove their goods have not been produced on recently deforested land, are due to come into force at the end of 2024 and will make the EU the first region to ban imports of products linked with deforestation. Commodities including palm oil, coffee, cocoa, beef, soy and rubber will be affected.But as crops for 2024-25 are planted, many in the industry argue the EU has left it too late to finalise the details of an initiative that aims to reduce carbon emissions and preserve biodiversity.For example, it has yet to finalise a list of “high-risk” countries whose exported commodities will be subject to extra checks. With the designations set to shape companies’ future supply chains, the selection process has become diplomatically fraught given strong objections from many agricultural nations in the so-called global south.“It is not sufficient [for the EU] to come up with guidelines in December 2024,” said Nathalie Lecocq, director-general of Fediol, the EU’s vegetable oil trade group. “In certain instances, you need to invest . . . you cannot wait until the last minute.”  Louis Dreyfus Company, one of the world’s largest food traders, told the Financial Times that while the firm was “actively working to prepare for compliance”, the sector was still awaiting more guidance from the European Commission “in good time ahead of enforcement by end-2024”.The new rules mean food companies operating in the bloc will have to precisely geolocate the plots of land on which their commodities were produced, and be prepared to hand over these co-ordinates to the EU authorities. The authorities will carry out checks, the number of which will depend on the deforestation risk rating of the producing country. It is not yet clear how strict the EU will be in enforcing the new rules, leading to hesitancy among companies about how stringent their approach will need to be. Nanne Tolsma, business development director at agritech start-up Satelligence, said contract negotiations were being made more challenging by uncertainty over the legislation.Food manufacturers and retailers are seeking to write into their contracts with traders clauses on which party will bear the cost of fines for non-compliance, which could amount to up to 4 per cent of annual turnover. Olivier Tichit, sustainability director at Indonesia-based palm oil producer Musim Mas, accused the EU of “blindly” applying its definition of deforestation, which is broadly defined in the act as “conversion of forest to agricultural use”.Tichit said this would create a two-tier system, under which companies would ship deforestation-free goods to Europe and the rest to other regions.The rules would raise prices for European consumers while not helping to reduce deforestation, said Abiove, the industry body for vegetable oils in Brazil, which is the world’s dominant grower of soyabeans and biggest exporter of beef. The country’s top customer for agricultural exports is China, followed by the EU.NGOs argue, however, that the food industry has had time to prepare. Gert van der Bijl, senior EU policy adviser for Solidaridad, a Netherlands-based NGO focused on sustainability in commodities production, said the regulation had been in the works since 2015.Food companies that failed to prepare might turn to countries with better infrastructure and traceability systems, cutting out smallholders in poorer nations, said van der Bijl, adding that the EU and companies should work with producing countries to prevent this. Musim Mas was already reducing the number of small palm oil suppliers it used, Tichit said. “You find the people who are already complying today . . . and that’s the ones you keep,” he said.Laurent Sagarra, global head of sustainability at coffee producer JDE Peets, said companies should go beyond the EU’s traceability requirements. If not, he said, “you don’t solve deforestation, you just make us in Europe feel good”.Instead of cutting out farmers in high-risk areas to comply with the new rules, Sagarra said the Netherlands-based coffee giant was working with governments and NGOs to make sure all smallholders in the supply chain were included. Chris Beetge, head of the EMENA region for Olam Food Ingredients, one of the world’s largest suppliers of goods including cocoa beans and coffee, said “a whole landscape approach” was needed to bring together “farmers, civil society and especially local governments”.A commission spokesperson said the EU’s executive body was “working very intensively on the implementation of the deforestation regulation, both with partner countries and companies to help them get ready”. Data solutions start-ups that map deforestation have reported a rush of interest since the commission ratified the regulation in June. “Scrambling is definitely happening,” said Thomas Vaassen, chief executive of Meridia, one data firm working with some of the biggest agri-food companies. Companies are thinking “we have way too little time”, he said. “We should have started two years ago and now we are panicking.”Others note there are limits to how much technology can aid compliance. Reluctance by suppliers and traders to publish details of the farms from which they source their commodities meant that supply chains for ingredients such as soy could still be a “black box”, said André Vasconcelos, global engagement lead at Trase, a data-driven initiative tracking supply chains. Calling for more transparency from traders, he added: “We already have all the knowledge and technical expertise when it comes to geospatial data to implement the regulation. The problem is having the political will.” More

Joe Biden and Xi Jinping are expected to hold frank talks about Taiwan when the US and Chinese presidents meet in San Francisco on Wednesday in a renewed effort to stabilise relations between the two powers.One year after their first meeting as leaders — at the G20 summit in Bali, Indonesia — Biden and Xi will resurrect attempts to halt the steep deterioration in ties, which are in their worst state in four decades. Their effort a year ago was derailed when a suspected Chinese spy balloon flew over the US in February.In recent months, the sides have resumed top-level engagement, including a visit by secretary of state Antony Blinken to Beijing and a reciprocal trip to Washington by foreign minister Wang Yi.Washington has welcomed the engagement, but US officials stressed that the summit would not produce big agreements, particularly as tensions remain high over Taiwan, which holds a presidential election in January.“We’re not talking about a long list of outcomes,” said one US official. “The goals here really are about managing the competition, preventing the downside risk of conflict and ensuring channels of communication are open.”The official said the combination of Taiwanese and US elections next year meant 2024 could be “bumpy” for US-China relations, reinforcing the need for top-level communication.They added that Biden would reaffirm the “one China” policy — in which the US recognises Beijing as the sole government of China but only acknowledges its assertion of sovereignty over Taiwan — while making clear to Xi that Chinese political interference in Taiwan’s election “would raise extremely strong concerns”.Rick Waters, who until August was the US state department’s top China official, said both leaders wanted to prevent a further slide in relations “at the lowest possible cost”.“The question is how much they can really stabilise relations given the tests they face over Taiwan, tech policy and other aspects of a fundamentally competitive relationship,” said Waters, now managing director at the consultancy Eurasia Group.The White House told the Financial Times that the leaders would not issue a joint statement, showing that “the two sides remain very far apart on fundamental issues”, said Dennis Wilder, a former top White House China official now at Georgetown University.Over four hours of discussions with simultaneous interpretation, Biden and Xi will discuss a range of issues, from US concerns about Chinese military activity in the South China Sea to China’s anger at export controls designed to stop the People’s Liberation Army from getting US technology.Officials have hinted at a deal to reopen military communication channels that China closed after then-US House Speaker Nancy Pelosi visited Taiwan last year. Washington also wants Beijing to crack down on exports of ingredients for fentanyl, which is responsible for an epidemic in the US.China is seeking an expanded dialogue on artificial intelligence to include other technologies in the hope that engagement would delay further US restrictions, according to people familiar with the preparations.Others said Xi wanted Biden to express opposition to Taiwanese independence instead of the usual stance of not supporting it, but they added that Biden was not considering the move. A second US official said Biden would “amplify” existing messages on Taiwan with “clarity”.Victor Gao, a former Chinese diplomat who translated for late Chinese leader Deng Xiaoping, said Xi wanted to ensure the US was sincere about not “hollowing out” the one-China policy following high-level visits to Taiwan by US politicians and arms sales to the island. “They need to be made fully aware of the consequences.”Jude Blanchette, a China expert at the CSIS think-tank, said Xi would deliver “a very stark message on Taiwan” but was unlikely to hear new language from Biden. “Xi directly communicating how serious this is for Beijing is important for the Chinese strategy,” he said.In another sign of the icy US-China relationship, Biden and Xi do not plan to dine together after their meeting. Xi will attend a dinner with US business executives that Beijing hopes will ease concerns about investing in China at a time when the country is facing stronger economic headwinds. Two dozen residents of Muscatine, Iowa, including Sarah Lande, who hosted Xi for dinner at her house in 1985 when the then-mid-level Communist party official visited the city, are expected to attend.“If the optics go right, Xi Jinping glad-handing [Apple chief executive] Tim Cook after a successful summit with Biden will be a sugar high,” said Blanchette.Apple declined to comment on whether Cook would attend the dinner.Bonnie Glaser, a China expert at the German Marshall Fund, said China’s economic situation raised incentives to work with the US to ease tensions.“Beijing wants to buy time to cope with China’s economic problems and boost innovation in technologies hampered by American restrictions. The US wants to demonstrate the efficacy of its proposed model for managed competition with China, which the administration hopes will last at least through the 2024 US presidential election.”Paul Haenle, a former White House China official who runs the Carnegie China think-tank, said the summit would help ease concern in the Indo-Pacific.“There’s a demand signal in the region, and I think globally for the US and China, to be more responsible in managing the growing tensions,” said Haenle. “That would be, I think, something positive to come out of it.”Evan Medeiros, a former top White House Asia official now at Georgetown University, said the summit marked the acceptance by both sides that they were in the opening phase of long-term geopolitical competition.“They are now beginning the complex process of negotiating the terms of this competition — where and how to compete, what risks to run and what costs to pay. This summit is central to this negotiation,” said Medeiros. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Diplomats from the European Union and UK have been accused of trying to “kill” proposals that seek to give more voice to developing countries in international tax negotiations.Countries are in talks at the United Nations over plans to give the UN more of a role in global tax discussions — a measure being pushed for by low and middle income countries. The OECD has convened countries over international tax matters for decades, but it has attracted criticism from officials in some developing economies who believe it does not reflect their interests.Last year, a group of 54 African countries, frustrated at the OECD process, successfully brought a resolution at the UN general assembly. This recommended that the UN secretary-general produce a report assessing ways to strengthen the “inclusiveness and effectiveness” of international tax co-operation, including options that gave the UN more of a role on the global tax stage. The measure was adopted unanimously in November 2022 and the UN secretary-general published a report in the summer listing three potential options that would give the UN more of a role in international tax co-operation: two legally binding and one voluntary option.But a negotiator from a developing country told the Financial Times that representatives of the EU and the UK had been vocal in their opposition to backing any of them. “The resolution called for a report. They’re rubbishing that report and they’re out to rubbish the entire process and just kill it. They don’t want to bring taxation matters here [to the UN],” the person said.“We’ve tried to negotiate in good faith. The EU and the UK are not willing to do that and are trying to delay the process,” another negotiator from a developing country said. “It’s a grand scheme to keep the status quo and keep developing countries at the periphery [of global tax discussions].” Developing countries, including Nigeria, Ghana, India and Brazil, have been pushing for a legally binding role for UN tax negotiations. European countries, however, are concerned that a greater role for the UN would undermine existing procedures at the OECD and fragment the international tax system. In 2021, the OECD unveiled a groundbreaking tax deal to tackle corporate tax avoidance. However, its implementation has been beset by delays and doubts over ratification.In September, EU finance ministers said EU member states “could consider . . . working at the UN on a non-binding multilateral agenda for co-ordinated actions”. This voluntary option would “avoid duplication with existing international tax agreements and brings concrete benefits to the participating countries, while facilitating parallel and sustained progress at the OECD”, they wrote at the time.However, negotiation documents seen by the FT, showed that those representing the EU, along with other nations, had sought to row back from supporting even the voluntary option presented by the secretary-general’s report.Instead they have backed the creation of a new working group which would propose alternative options for a UN role, and bring these back for discussion at the 80th UN general assembly which starts in September 2025.“It is counterproductive and aimed at kicking the can down the road,” one of the developing country negotiators said of the suggestion. “They are trying to talk this to death and obstruct the process,” another person with knowledge of negotiations said. A UK government spokesperson said the UK had “long worked with partners to find international co-operation on tax” and had a “strong record” of working with developing countries. In September it announced a new £17mn package to help developing countries collect taxes owed to them.“We are negotiating in good faith. Our approach reflects that we believe it is possible to have a UN process that enhances the international tax system without duplicating the work of the OECD,” the spokesperson added. A spokesperson for the European Commission declined to comment. Additional reporting by Henry Foy in Brussels and Kana Inagaki in Tokyo More

SYDNEY (Reuters) – Australia’s financial position will be more precarious and credit rating at risk should the government succumb to the temptation to spend the sovereign wealth fund on political projects, its outgoing chair said in a speech on Monday.The A$205 billion ($130 billion) Future Fund will come under pressure to fund state priorities as an aging population reduces taxpayers and consumes a larger chunk of spending, Chairman Peter Costello said on Monday at a UBS conference in Sydney.”As government’s financial position declines, I expect we’ll see more plans to spend it,” he said. “Once it is spent there is nothing to offset government sovereign debt, unfunded pension and unfunded military claims. Once it is spent the pressure to raise taxes and borrow more will accelerate.”The comments come amid calls from the centre-left Labor government for the A$2.4 trillion pension sector to invest in domestic priorities ranging from renewable energy to social housing, although the sector has said investments cannot supersede fiduciary duties to members.Costello, who previously served as treasurer in centre-left Liberal governments, said the Future Fund’s existence was a “buttress” for Australia’s AAA credit rating.Costello will step down in February after two terms as chairman.The Future Fund, set up in 2006 with the proceeds from the privatisation of state telco Telstra (OTC:TLGPY), missed its mandated 10% return target last financial year and underperformed several of the country’s largest pension funds.The fund held more cash and less equities than peers and Costello has previously said markets were downplaying the risk of higher-for-longer inflation and the China slowdown. ($1 = 1.5716 Australian dollars) More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.India is considering a request from Tesla to lower tariffs for imported electric vehicles, according to Indian government officials, as Elon Musk’s company explores setting up a plant in the country. Tesla has asked New Delhi for an initial tariff concession that would allow it to offset India’s steep customs duty of 70 per cent for cars worth less than $40,000, and 100 per cent for cars worth $40,000 or more, according to two officials with knowledge of the matter.“Their view has always been that they need some tariff concessions at least in the interim period,” one of the officials said. He added: “It would have some kind of sunset clause.”Tesla had requested the concession as a precondition to building a plant in India. The lowered tariffs would apply to all EV makers. The officials said the reduced rate under consideration would be 15 per cent for EVs of all prices, but added that the policy had not been agreed within India’s government yet. “We want to create a package which is good for India and which doesn’t become a curated package for one company,” one of the officials said of the proposed EV scheme. “Others are free to take advantage of this window, subject to meeting these kinds of requirements.” Tesla executives have met Indian government officials at least three times in the past year. In June, Prime Minister Narendra Modi met Musk in New York during a state visit to the US and asked him to consider India as a manufacturing base. Piyush Goyal, India’s commerce minister, is set to travel to San Francisco this coming week to attend meetings of the Indo-Pacific Economic Framework for Prosperity, a US-led scheme, and the Asia-Pacific Economic Cooperation forum, a summit being held in San Francisco this week where there is expected to be a rare meeting between the US and Chinese presidents. One Indian official said that Goyal may meet Musk while there. A bet on India would be a bold but risky one for Tesla. India’s EV market is in its early stages and focused largely on two-wheel vehicles, and any automobile would need to be competitively priced to gain traction in the world’s largest developing market. In their talks with India’s government, Tesla said it could make a vehicle for less than $30,000 that the company would sell in India and potentially export to the rest of the region, using the country as a production hub. Tesla did not immediately respond to a request for comment.An Indian factory would be Tesla’s sixth vehicle plant — including its upcoming Mexico facility — and mark an expansion into a vast car market that is dominated by lower-cost vehicles. Musk previously suggested Tesla would make a cheaper model than its $39,000 Model 3, which is provisionally called the Model 2. The electric-car maker is expanding factories globally as it heads towards an unofficial target of making 20mn cars a year by the end of the decade — an ambition that would see it become larger than current industry leaders Toyota and Volkswagen combined. India is looking to narrow the commanding lead held by China, its wealthier northern neighbour and geopolitical rival in developing EV and semiconductor technology. India’s high tariffs on motor vehicles, meant to boost local production, have been a lingering issue for foreign carmakers, and the UK is pressing it to cut car tariffs as part of the two countries’ talks on a free trade agreement.  More

TOKYO (Reuters) -Japanese wholesale inflation slowed below 1% for the first time in just over 2-1/2-years, data showed on Monday, a sign that cost push pressures that had been driving up prices for a wide range of goods were starting to fade.The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, increased 0.8% in October from a year earlier, roughly matching a median market forecast for a 0.9% gain but cooling significantly from a 2.2% rise in September.That marked the 10th straight month of slowing wholesale inflation with the year-on-year growth rate coming in below 1% for the first time since February 2021, the data showed.The slowdown was due to declines in prices for wood, chemical and steel products, the data showed, highlighting the impact of falling global commodity costs.The spike in wholesale inflation has prodded many Japanese firms to pass on higher costs to households, a trend that led the Bank of Japan to upgrade its inflation forecasts in quarterly projections released in October.But the BOJ has said the recent cost-push inflation must be replaced by price rises driven more by robust domestic demand, and accompanied by wage growth, in order for it to consider ending ultra-low interest rates. More

Average asking prices for homes fell by 1.7% between Oct. 8 and Nov. 4, a bigger fall than is typical for the pre-Christmas period, Rightmove said.The Rightmove data is not seasonally adjusted.”Buyers are still out there, but for many their affordability is much reduced due to higher mortgage rates,” Rightmove director Tim Bannister said.Britain’s housing market boomed during the COVID-19 pandemic but lost much of its momentum as the Bank of England raised interest rates 14 times in a row between December 2021 and August this year. It paused its increases in September. Rightmove said asking prices were 3% below May’s peak while agreed sales were 10% below their pre-pandemic level in 2019, a less severe fall than in the month to early October. There were signs that the shortage of homes for sale was easing with properties for sale only 1% behind their 2019 level, it said. More

Speaking at a UBS conference, Reserve Bank of Australia (RBA) Assistant Governor Marion Kohler said inflation was still expected to decline but not expected to reach the top end of the RBA’s 2%-3% target until the end of 2025.”We now expect this to be a more gradual process than we previously thought, due to the still-high level of domestic demand and strong labour and other cost pressures,” said Kohler, who is acting head of the RBA’s economics department.There was also risk high inflation now could feed into wage and price-setting behaviour and require even tighter policy to counter it, she added.Concerned that inflation was not subsiding fast enough, the RBA last week raised interest rates a quarter point to a 12-year high of 4.35%. Markets imply around a 50-50 chance it will hike again sometime in the first half of next year. Consumer price inflation ran at 5.4% in the third quarter, down from a peak of 7.8% last year but above RBA expectations. As a result, the central bank revised up its forecasts for inflation and economic growth in its quarterly statement on policy released last week.Falling goods prices have led the slowdown in inflation, but domestically generated costs continued to rise, Kohler said.”Still-strong levels of demand have allowed businesses to pass on cost increases to customers,” said Kohler. “Wages growth has also picked up over the past year, but now appears to have broadly stabilised and is forecast to decline gradually over the next couple of years.”Activity in the economy had been supported by strong public and business investment, while a rapid rebound in the number of international students and tourists had contributed to robust growth in overall consumer spending domestically, she said.Economic growth was still expected to be below trend over the year ahead, she added.”This is mainly because of subdued growth in household consumption as cost-of-living pressures, higher interest rates and higher tax payable all continue to weigh on disposable incomes for a time.” More