Economy

It was less a decoupling and more a rupture. At a stroke last month, Joe Biden did potentially more to sever trade ties between the US and China than Donald Trump ever managed, despite the ex-president’s bombast. Controls barring US companies from exporting critical semiconductor manufacturing tools to China mark a further junking of the theory that the US could tame Beijing’s geopolitical ambitions through closer trade ties. They are a significant gamble. The measures were unveiled days before China’s party congress, when attention was focused on the coronation of Xi Jinping as essentially ruler-for-life of an increasingly authoritarian Fortress China. No matter the intention, it is hard to see how Beijing would view the controls as anything but a provocation, even if Washington is trying to play down fears of a tech cold war.The White House has framed the measures as an attempt to curb Chinese military use of high-end chips. It is understandable that the US wants to blunt the military ambitions of an increasingly assertive and nationalistic rival. Russia’s invasion of Ukraine, and the economic woes that rippled across the world as a result of soaring energy prices, have prompted a rethink over the wisdom of dependence on regimes that are potential adversaries. But the dual-use nature and ubiquity of chips in daily life — not for nothing are semiconductors dubbed the new oil — means the implications of this action run wider.The sweeping controls extend not only to the export of US semiconductor chips but also to any advanced chips made with US equipment. They target “US persons”, meaning not just citizens but green-card holders too. As a result, companies from Taiwan to South Korea to the Netherlands are now trying to quantify their exposure, let alone those in the US and China. More precision over the scope of the measures — particularly around US persons — is needed. As they currently stand, such measures carry real risks. One is retaliation in kind by China, perhaps over rare metals vital to the modern technology-dependent economy. China processes 65 per cent of the world’s lithium, for instance. The US sanctions would be the least of the world’s concerns if China ever decides to use force to reunify with Taiwan, which dominates global advanced semiconductor manufacturing. The US Navy chief has warned that China could invade the island state before 2024. Quite apart from the misery of war imposed on Taiwan, losing access to Taiwanese chips would affect the supply and price of everything from computers to cars. A Chinese invasion would also trigger a wave of sanctions that would, in turn, hit interconnected economies. This would be an order of magnitude bigger than disruption unleashed by the war in Ukraine. The hope must be that Russia’s botched invasion, and the west’s response, has given China pause for thought.The US semiconductor measures come as other economies, and the business world, are trying to calibrate relations with China. Bankers, says the chair of UBS, are “all very pro-China”. Olaf Scholz, Germany’s chancellor, met Xi in Beijing on Friday in a sign of Germany’s persistent dependence on China and its failure to learn from the mercantilism that has made it hard to shrug off Russia’s bearhug. The US, too, will need to be able to back up its “Made in America” bravado. It may have already spent billions of dollars in setting up domestic chip fabrication plants but analysts estimate it will require as much as $1.2tn in upfront costs, then another $125bn a year, to create fully localised supply chains at 2019 levels of production, all during a cost of living crisis. The bill for decoupling China and America’s economies will carry a heavy cost. More

Today’s top storiesIndonesia’s president has “strong impression” Putin will miss G20 summitProfits drop at BioNTech as vaccine demand wanesLiverpool FC sale explored by US owners Fenway Sports GroupFor up-to-the-minute news updates, visit our live blogGood evening,The world is “on a highway to climate hell with our foot on the accelerator”, attendees to the COP27 climate summit in Egypt were told today, as two weeks of talks began to wrestle the international agenda back on to the climate crisis.UN secretary-general António Guterres said nations had to “co-operate or perish” as he opened negotiations in Sharm el-Sheikh against a backdrop of war in Ukraine, a cost of living crisis and tomorrow’s midterm elections in the US that could see Joe Biden’s administration significantly weakened.As chief features writer Henry Mance writes in his interview with Kenyan environmentalist Wanjira Mathai, “rich countries are preoccupied by Russia’s invasion of Ukraine and the rising cost of living”, while poorer countries are focused on climate change after extreme weather conditions in Nigeria, Somalia and Pakistan. “We’re only at a 1.2C world. Can you imagine how much worse it will get?” says Mathai.But despite the urgent need for climate action, the effect of the pandemic and the war in Ukraine on the global economy means that wealthy nations have not been forthcoming with climate aid. “Their promise to funnel $100bn of climate aid a year to poor countries remains outstanding, as does a commitment to double funding for climate adaptation to $40bn by 2025,” writes Mance.Former British prime minister Boris Johnson told an event at COP27 today that the UK did “not have the financial resources” to pay “reparations” to low-income countries affected by climate change — despite admitting that, “per capita, people in the UK put a lot of carbon in the atmosphere”. Instead, he said net zero would have to be achieved through investment from the private sector in partnership with the international community.The US is working on a plan to harness cash from the world’s largest companies to help developing countries cut their use of fossil fuels. The new framework would be for carbon credits to be sold to business, with the proceeds used to fund new clean energy projects.The FT editorial board says rich countries need to “dig deep enough into [their] pockets on funding for mitigation and adaptation” in order to “offset increasingly vocal calls from poorer nations for funding to cover loss and damage caused by warming”.As Mance points out, scientists have forecast that increased warming will make parts of sub-Saharan Africa unlivable this century, while agricultural productivity will fall in many areas. This may lead millions of climate migrants to head towards Europe, where governments are already struggling to handle migration from north Africa.In Italy, for example, the new rightwing government has pledged to curb illegal migration. Over the weekend it blocked some migrants from disembarking a rescue vessel at the port of Catania and ordered the ship to leave Italian waters.

Migrants aboard the rescue ship Humanity 1 in the port of Catania, Sicily, on Sunday © SOS Humanity/AFP/Getty Images

Need to know: UK and Europe economyUK chancellor Jeremy Hunt is targeting a £54bn fiscal tightening in his Autumn Statement on November 17, with plans to cut £33bn in public spending while raising taxes by £21bn under draft proposals. Oil companies have hit out at the UK’s “fiscally unstable and complex” regime and warned against raising windfall taxes.Ukraine has received its first Nasams air defence systems from the US and Aspide units from Spain, as Russia continues its missile and drone strikes on electricity infrastructure that have triggered blackouts nationwide.In France, the far-right is seeking to move from the political fringe to the mainstream after selecting a party leader from outside the Le Pen dynasty for the first time in its 50-year history.Need to know: global economyAll eyes are on the US midterms tomorrow and our Big Read explores the Republicans’ strategy of doubling down on Trumpist candidates. Meanwhile, cyber experts are warning of a risk of misinformation on Twitter, presenting a test of how Elon Musk will manage propaganda and hate speech after sacking staff who policed user content.Listen to our crash course on the US midterm elections in this FT News Briefing special for more insights.In China, exports have fallen for first time since 2020, highlighting the nation’s exposure to the global slowdown and the effects of its zero-Covid policy. China has also become the top exporter to Russia.Acts of violence against politicians and a deadly protest in Haiti have led regional neighbours to weigh an intervention.Need to know: businessProfits have fallen at BioNTech as vaccine demand wanes, with net profit falling from €3.2bn in the third quarter of 2021 to about €1.8bn.Global law firms have begun to scale back hiring as they prepare for a deep worldwide recession.Business is looking up for Ryanair as the low-cost carrier swung to a first-half profit and raised its passenger numbers forecast.Apple has warned of iPhone shipment delays after China’s zero-Covid lockdowns caused havoc at a factory run by its main supplier Foxconn.The World of WorkBritish companies have been accused of an “appalling” shortfall of women in executive roles, according to a FTSE board report from Cranfield University and EY. The survey showed there are only nine female chief executives in the FTSE 100.An all-female mine in Zimbabwe is empowering women from a rural community to become financially independent.Retirees in the UK are heading back to work to gain additional income and socialise. Colin Serlin, 76, for example, took a masters degree in psychotherapy after 40 years in the property business and will soon set up his own practice offering courses to the recently retired.

Colin Serlin: ‘People get bored, depressed and even more seriously ill as they don’t know what to do with themselves. I’m hoping to change that’ © Richard Cannon/FT

Get the latest worldwide picture with our vaccine trackerSome good newsIn keeping with the climate theme, researchers have reported using advanced computing technology and artificial intelligence to design a transparent window coating that could lower the temperature inside buildings, without expending a single watt of energy.

© ACS Energy Lett. 2022, 7, XXX, 4134-4141 More

The writer is the director-general of the World Trade OrganizationClimate change is an existential threat. Left unabated, we will see more scenes of desolation like in Pakistan, where recent flooding left a third of the country under water and put food and economic security at risk. Tackling this crisis is an inescapably global issue requiring urgent and bold leadership. Despite forces threatening to pull apart the world community, we simply cannot fragment, decouple economies and create separate trade blocs. At the COP27 UN climate summit this week, I will ask leaders to join forces in creating a trade-related agenda for a just and ambitious response to climate change.The message is clear: the multilateral trading system has much to contribute. But this cannot be delivered without co-operation between countries. At the WTO’s Ministerial Conference in June, nations on opposite sides of deep divisions were able to come together and agree on several trade issues. Most notably, WTO members agreed to curb harmful fisheries subsidies that led to over-exploitation of our oceans. This agreement demonstrated that multilateral co-operation is possible when emphasis is placed on saving our global commons. It must stay that way.Last year’s COP produced serious reflection on the trade community’s contribution to the climate transition. This year, the 2022 World Trade Report on trade and climate change confirms that the cost and disruption inflicted by climate shocks on global commerce are high and rising. For example, the increasing heat pattern in the Horn of Africa has caused crop damage and profound food insecurity. Similarly, low water levels in major rivers are making it difficult to ship goods, from the Danube to the Yangtze and beyond.Ramped-up financing will also be indispensable to a successful response to climate change. Developing countries need the long-promised $100bn of annual climate financing to ensure a just transition to a clean energy future. But even this will not be sufficient. To meet the challenge of moving to net zero emissions by mid-century, we need open and predictable global markets to ensure access to technologies at affordable prices. Expanded trade will also promote sustainable global food systems and resilient supply chains. Fragmentation and decoupling would do just the opposite.The sustainability benefits of an open trading system are clear. In fact, about 40 per cent of the sharp decline in the price of solar panel systems since 2001 was made possible due to scale economies generated by international trade, competition and global supply chains. By lowering tariff and regulatory barriers to trade in environmental goods and services, we can further drive costs down and accelerate even broader clean energy deployment.Likewise, the potential for exports expands the incentives for private companies to invest in renewable power innovation and all of the other cleantech breakthroughs needed to shift the global economy on to a sustainable trajectory. We must trigger a virtuous circle of expanding green trade, investment and innovation. The International Energy Agency estimates that the shift to clean energy could generate 14mn new jobs in renewable power and energy efficiency and 16mn in related sectors globally by 2030.Finally, I call on leaders to join the WTO in laying out a trade road map for a just and ambitious global response to climate change. Building on work that is already under way, we envision a menu of trade actions for countries to draw upon when revising their national climate targets (or nationally determined contributions) — in line with their different levels of development. The menu might include concrete actions to help facilitate trade in environmental goods and services, put a price on greenhouse gas emissions, decarbonise supply chains and make them more resilient to climate shocks, scale up circular business models and promote secure and sustainable food systems. At the WTO, we can transform our Aid-for-Trade initiative into a programme that expands opportunities for sustainable trade, especially in places that have not seen the full benefits of international commerce. COP27 offers an opportunity for us all to commit to a unified response to climate change and to bring the power of the trading system behind the global efforts to reduce emissions and deliver sustainable livelihoods. In the face of the overarching threats posed to the human species, I see no other path forward. More

The writer is US ambassador to the Court of St JamesIt’s an important time for the UK, which means it’s an important time for the US and the relationship between our two countries. As Prime Minister Rishi Sunak gets started in Number 10, President Joe Biden and I send America’s congratulations.Now begins the next chapter of our partnership. The US and UK face significant and shared global challenges, from mounting economic pressures to the climate crisis and threats from state and non-state actors alike. We confront these challenges together, driven by our common values and desire to build a brighter future for our citizens. First, we must look to the economy. The task in front of us is to address present economic challenges, while making the global economy stronger and more resilient for years to come. The US and the UK share the world’s largest bilateral foreign direct investment relationship, topping $1.5tn. This stable flow of transatlantic investment brings enormous benefits to both of our countries, and we must look to capitalise on it. The Biden administration is particularly focused on sustainable, inclusive growth that creates jobs and opportunities for communities that haven’t traditionally prospered from international trade.Indeed, the US recently made the largest investment to fight climate change in our nation’s history — $370bn — with the aim of supercharging our potential to drive clean growth, bringing down costs for families and giving rise to high-quality jobs for years to come. This legislation proves how committed we are to accelerating the global clean energy economy and will serve as a platform for our work over the next two weeks at COP27 and beyond. As a diplomat and businesswoman, it is a priority of mine to broaden and deepen our collaboration with the UK on climate change. Second, our security co-operation should remain unparalleled. The US and the UK have worked in close partnership to support Ukraine in response to Russia’s unprovoked aggression, providing critical security assistance and economic support to Ukraine while holding Russia accountable through sanctions and export controls. As the war moves into winter, we will continue to work in lockstep with our UK partners to support Ukraine’s heroic defence against Putin’s war of aggression. Through bilateral security co-operation, as well as through Nato and Aukus, we will defend the rules-based international order and the principles we hold dear: freedom, democracy, universal rights and the rule of law. Third, the US believes that the EU and UK must work constructively and quickly to resolve the challenges over the implementation of the Northern Ireland protocol.I recently visited Belfast, where leaders from several industries told me a stable and predictable political climate is essential for the future growth of their businesses and communities. Northern Ireland is poised to attract new investment, but companies require certainty and clarity. A prolonged stalemate or an agreement with convoluted and burdensome regulations risks sapping the region of its great potential.Next spring, we will mark the 25th anniversary of the Belfast/Good Friday Agreement. It remains a stunning achievement to this day, and a reminder of the economic and social progress that only peace and stability can deliver. We recognise that there are differences of opinion over the implementation of the protocol, but we also know that an agreement is possible if all sides bring renewed energy to the task. The US urges all parties to continue negotiating in good faith and keep Northern Ireland’s best interests at heart.The US has no closer ally than the UK. Our militaries train together, our businesses innovate and grow together, our scientists make discoveries together. Students from all corners of the UK learn at our universities and vice versa. We celebrate each other’s victories because we know our prosperity is linked. That’s what makes our special relationship so special. We will face challenges ahead, but throughout our long alliance, the foundation of our success has always been the result of close co-operation and friendship. More than anything else, deepening the bond between our countries will be my greatest priority. More

Indonesia’s president has said he has a “strong impression” that Vladimir Putin will not attend next week’s summit of G20 leaders in Bali, the first meeting of the world’s largest economies since the Russian president launched his full-scale war against Ukraine. The suggestion from Joko Widodo, who will host the summit, comes after the US rejected an offer by Indonesian officials to arrange a bilateral meeting between Putin and US president Joe Biden at the event, a senior US official said last month.There has been speculation for weeks about Putin’s potential attendance at the Bali gathering, amid heightened tensions between Russia and western powers over Ukraine. If the Russian president were to attend, it would be his first meeting since the start of his invasion in February with Biden and other Nato leaders, who have provided tens of billions of dollars in military support to Ukraine and imposed myriad economic sanctions on Moscow.Widodo spoke to Putin last Wednesday about the G20 event and as a result of that call believed the Russian leader would not be attending, the Indonesian president said in an interview with the Financial Times.Dmitry Peskov, Putin’s spokesperson, did not immediately respond to a request for comment. Peskov told reporters earlier on Monday that the Kremlin would make a decision about Putin’s attendance this week.Putin said last month: “Russia will definitely be represented [in Bali] at a high level. Maybe I will go, too. I will think about it.”Widodo emphasised that the Russians remained welcome to attend the G20 meeting and that Indonesia hoped to facilitate international dialogue to counter what he called a “very worrying” rise in international tensions. He also expressed frustration that geopolitical tensions would overshadow the summit: “The G20 is not meant to be a political forum,” he said. “It’s meant to be about economics and development.” The Indonesians intend to put food and energy security at the centre of next week’s discussions, two issues that have become global concerns as a result of Putin’s invasion.

The G20 comprises 19 states and the EU. None of the governments sided with Russia to oppose a UN general assembly resolution condemning Moscow’s attempted annexation of four regions of eastern Ukraine last month. Just three G20 members abstained: China, India and South Africa.Widodo has also invited Ukrainian president Volodymyr Zelenskyy to the summit as a guest. Zelenskyy said last week that he would not attend if Putin did.Since launching the war Putin has made foreign trips to four former Soviet states in Central Asia — Tajikistan, Turkmenistan, Uzbekistan and Kazakhstan — and Iran. More

Newscasts showing Chinese workers scaling fences to escape the world’s biggest iPhone factory have proved to be a leading business indicator. Apple has warned that shipments of its latest smartphone models will undershoot forecasts. The difficulties facing Apple and its contractor manufacturer Foxconn are just the start of industrial ill-effects from China’s drastic zero-Covid policy.Chaos has reigned inside a Zhengzhou plant run by main supplier Hon Hai — the name under which Foxconn is listed in Taiwan. Employees fled harsh living conditions. Some reportedly walked 25 miles to get away from the campus where 200,000 of them live and work. Global shipments of the high-end iPhone 14 Pro and iPhone 14 Pro Max will be delayed. Analysts had not accounted fully for this in their forecasts. They already expected iPhone production to fall as much as 30 per cent last month at the Foxconn plant due to lockdowns.Now, even when lockdowns ease, a lack of workers could mean prolonged disruption.Foxconn, which accounts for 70 per cent of global iPhone shipments, has increased the bonuses for employees that work without taking any leave for the month by a maximum of 10 times the previous figure. It has offered as much as a 75 per cent increase on base salaries. That will be unsustainable for a business with razor-thin operating margins — less than 2.5 per cent last year.The fourth quarter is a crucial period for sales. Apple will receive a smaller boost than typically follows the launch of new models — this year from the iPhones 14 series.It is not just Apple and Foxconn that will suffer. All China-based manufacturers and their customers are exposed. China’s exports and imports unexpectedly fell in October, the first such decline since 2020. Exports dropped 0.3 per cent, significantly missing market expectations of a 4.3 per cent increase. Beijing’s tough line on containing coronavirus is unlikely to soften to accommodate businesses in the US and Europe with which it is at loggerheads. The economic damage can only worsen. More

WARSAW (Reuters) – Poland’s central bank is expected to raise its main interest rate by 25 basis points to 7.00% on Wednesday, a Reuters poll showed, as analysts bet that forecasts of rising inflation will outweigh fears over slowing growth.The National bank of Poland (NBP) surprised markets in October by leaving its main rate on hold at 6.75%, but Governor Adam Glapinski said the decision did not mark the end of the tightening cycle and that further decisions would depend on data.Rate-setters will see the NBP’s latest economic forecasts at their meeting on Wednesday.”We still have growth in inflation, it is not slowing down… there are broad price pressures and that is the main argument (for raising rates),” said Jakub Szczepaniec, an economist at Alior Bank, which is forecasting a 25-basis-point hike.Inflation in Poland was 17.9% in October, according to a flash estimate from the statistics office.Szczepaniec also pointed to the weak zloty currency and policy tightening by major central banks as factors making an increase in rates likely.Of 21 analysts polled by Reuters, 11 expected the main rate to rise by 25 basis points. Eight expected no change and two expected a fifty-basis-point hike.Those expecting rates to stay on hold point to the risks of a dramatic slowdown in growth next year, fears that were fuelled by an interview with NBP Deputy Head Marta Kightley, who said that the bank’s November projections for growth would be lower than in the last set of forecasts.”It’s a very close call,” said Marta Petka-Zagajewska, Head of Macro Research Team at PKO Bank Polski. “However, taking into account the recent comments …pointing at a high probability of a significant downward revision in GDP growth we assume that the MPC will be hesitant to continue with tightening.” More

KYIV (Reuters) – Ukraine is set to finalise new agreements with the International Monetary Fund after a new IMF mission from Nov. 11-17, Ukrainian central bank governor Andriy Pyshnyi said on Monday. The governor told a briefing Ukraine had already held substantive and constructive talks with the IMF in Vienna on a whole range of issues. More