Economy

For all the jibes about it being a protectionist bloc, the EU has long been an important force for deeper international trade. The cross-border integration of its own members’ economies is the deepest in history. Internationally, it is the most open economic region. Trade, together with competition, is the bloc’s most successful policy area. It has achieved this by giving negotiating power to an executive — the European Commission — as unencumbered by national vested interests as one can realistically get, and by isolating trade policy from non-commercial considerations. But that very success means the EU is all the more challenged by a world where this isolation is no longer possible. Hardly a day goes by without illustrating how trade relations are entangled with conflicts over values and geopolitics. The EU has recognised that a narrowly commercial trade agenda can undermine its priorities, and has also belatedly discovered the muscle that comes with a large and open market. Forceful sanctions on Russia and the incorporation of climate and labour clauses in trade agreements show that Europe can, when it wants, use that power to shape the world around it. But what is still lacking is a consistent willingness and united strategy for how to do so. Take the frictions over the US Inflation Reduction Act. This piece of legislation involves a subsidy to buyers of electric vehicles, but only those made in North America. The EU has cried foul, which has led to the extraordinary step of two jurisdictions setting up a task force to scrutinise a piece of domestic legislation in one of them. The EU risks protesting too much. While the US subsidy is discriminatory in form, it may not differ all that much in its economic effect from the EU’s own subsidies to battery producers. Europe’s greater interest lies in reinforcing and locking in the belated US commitment to decarbonisation technologies that the IRA represents. Preparing the ground for its own introduction of carbon border tariffs, the EU should coax the US towards the same principle of linking market access to climate change policies. It could encourage Washington to move forward, and go beyond, its interest in “skinny” carbon adjustments for steel.It’s against this backdrop that German chancellor Olaf Scholz went to China last week, business delegation in tow. The question the trip raises elsewhere in Europe is whether Germany has learnt to distinguish its own narrow commercial interests from Europe’s broader strategic ones.Vladimir Putin’s attack on Ukraine means the error of Germany’s dependence on Russian gas is now blatant. Its reliance on China is no less real, but less well understood. A decade ago, only Chinese demand for German goods made it possible to reconcile the three German desiderata of shrinking the eurozone periphery’s current account deficits, maintaining Germany’s surplus and recovering from the global financial crisis through export-led growth. One could fairly say that China saved Berlin from the contradictions of its own Europe policy.No wonder, then, that Scholz does not support “decoupling” from China. At the same time, he recognises strategic imperatives, promising to “dismantle one-sided dependencies”. This is a step forward, and would help the German chancellor catch up with his voters, half of whom already think the country should reduce economic co-operation with China, while two-thirds reject economic interests taking precedence over human rights.Other European leaders, too, are more eager to think strategically. French president Emmanuel Macron reportedly wanted a later joint visit to Beijing by the two leaders. But Paris also often falls short of promoting a trade policy that advances the EU’s united strategic interest rather than its own national concerns. The trade deal with the South American Mercosur bloc has languished largely because of French reservations. The election of Luiz Inácio Lula da Silva as Brazil’s president creates an opportunity to complete the agreement with strong and enforceable commitments on climate change. If Macron is serious about the EU being a player on the world stage, here is a chance for him to create the missing political commitment on all sides.The EU can no longer trade in isolation from strategic imperatives. Neither should the end of strategic naïveté be an excuse for withdrawal. Europe needs to transcend that old dichotomy and embrace the rather un-European approach of using trade policy to pursue political [email protected] More

KUALA LUMPUR ( Thomson Reuters (NYSE:TRI) Foundation) – A new alliance of rainforest nations – sought by Brazil’s President-elect Luiz Inácio Lula da Silva – could be key to unlocking conservation funding and bolstering a flagging global forest pact at the COP27 climate summit, environmentalists say.Before narrowly winning Brazil’s run-off election vote on Oct. 30, Lula began reaching out to Indonesia and the Democratic Republic of Congo (DRC) about forming a united front of tropical forest countries, according to a top aide of the leftist leader.In the run-up to the COP27 U.N. climate summit, taking place in Egypt from Nov. 6-18, green groups urged Brazil and other forest nations to team up to increase their bargaining power during talks with potential donors over rainforest protection.”An alliance of countries such as Brazil, Indonesia and the DRC – who all face similar threats – can put pressure on richer countries to accelerate efforts to stop deforestation,” said Annisa Rahmawati, head of Indonesian conservation group Satya Bumi, noting Lula’s pledge to put forest protection at the heart of his economic plans and policies.Cutting down forests has major implications for global goals to curb planetary warming, as trees absorb about a third of the climate-heating carbon emissions produced worldwide, but release the carbon they store when they rot or are burned.Forests also provide food and livelihoods, clean the air and water, support human health, are an essential habitat for wildlife, regulate rainfall and offer flood protection.But as forest-rich countries grapple with energy and food price pressures linked to Russia’s war on Ukraine, on top of fiscal pain from the COVID-19 pandemic, tapping into natural resources is seen by many as a solution.Last year, an area of tropical forest the size of the Netherlands was lost, according to monitoring service Global Forest Watch, with Brazil seeing the highest rates of deforestation. Lula hopes to turn that around, promising in his election victory speech to tackle the illegal logging, mining and land-grabbing that have driven surging Amazon (NASDAQ:AMZN) deforestation over the past four years under far-right President Jair Bolsonaro.”Having such a strong voice (like Lula) in any future alliance would amplify and accelerate efforts to shift to just and climate-friendly economic development, while ensuring our forests remain standing,” said Rahmawati.NORWAY CASH RETURNSBrazil, Indonesia and the DRC were among more than 140 nations that agreed to halt and reverse deforestation and land degradation by 2030 at last year’s COP26 climate summit in Glasgow.The deal, which has seen slow progress so far, was underpinned by $19 billion in public and private funding commitments to invest in protecting and restoring forests. Since then, Germany has pledged 1.5 billion euros ($1.5 billion) per year in international biodiversity finance, while Norway agreed a new funding pact with Indonesia to cut its carbon emissions by conserving the rainforest – potentially opening the door to more support from other donors. Norway’s environment minister said in a social media post this week that it is also set to resume a deal to pay Brazil for results in Amazon forest protection, frozen after destruction of the world’s largest rainforest soared under Bolsonaro.Carbon markets, meanwhile – which are another tool to slow deforestation – have been hampered by low prices, said James Deutsch, CEO at Rainforest Trust, a U.S.-based nonprofit.If the three most important potential government sellers of forest carbon credits join forces, however, that could help boost the price paid per tonne of avoided CO2 emissions, he added.”It is an intriguing and potentially powerful strategy to increase monetary flows, reduce deforestation, and slow climate change,” he said.The three countries also have a tremendous amount to teach the world on forest conservation, said Amy Duchelle, a senior forestry officer at the U.N. Food and Agriculture Organization.Brazil was the climate-change success story of the early 2000s when its government – led then by Lula – slashed deforestation rates in the Amazon, she said. “Indonesia has (also) shown recent success in reducing deforestation,” noted Duchelle, adding that there is a huge opportunity for these countries to lead by example and demand more forest-friendly policies from other governments.SHARED CHALLENGESAnother positive factor in forging a new rainforest alliance is that net-zero targets and climate action are far stronger than ten years ago, when a first effort to form such a partnership failed, said Rod Taylor, global director for forests at the World Resources Institute, a Washington-based think-tank.There could now be a larger pool of finance and political momentum for the three countries to tap into “if they play their cards right”, he added.But enforcing forest protection laws in remote areas is a problem for all three, conservationists said, while Bolsonaro’s allies form the largest bloc in Brazil’s Congress, which could hinder Lula’s policy push.Toerris Jaeger, executive director of the Oslo-based Rainforest Foundation Norway, said the potential partners “face many of the same issues”, including how to monitor deforestation, stop illegal activity and support forest peoples.Other forest nations – like Colombia – could also take part in talks and join any new alliance at COP27 to create a “more robust and effective” coalition, he added.”Done right, collaboration and exchange of experience between rainforest countries can help in tackling deforestation,” Jaeger said.($1 = 1.0227 euros)Originally published at: More

In a statement, China’s commerce ministry said it urged Canada to stop politicising economic and trade issues. More

No one has won the jackpot since Aug. 3, allowing the prize money to mushroom and generating lots of business at gas stations and newsstands around the United States, where Americans buy Powerball tickets for $2 a pop.To win the big prize, a player must guess all six lucky numbers, including the final “Powerball.” Players have a 1 in 292.2 million chance of winning the jackpot, and a 1 in 24.9 chance of winning a smaller prize, according to lottery officials.Winners may elect to receive their money as an annuity, paid in 30 graduated payments over 29 years, or a lump sum cash payment. Both types of winnings are subject to federal and local taxes. The drawing will occur at 10:50 p.m. EDT on Saturday (0250 GMT on Sunday) in the Florida state capital of Tallahassee. It will be the 40th Powerball drawing since the Aug. 3 win. The longest run in the history of the lottery ended on Oct. 4, 2021, when a California ticket holder won a $699.8 million jackpot after 41 drawings. More

The state pension in western Germany will rise by 3.5%, while in former East Germany it will increase by 4.2% according to the draft, as the government continues to narrow the gap between the two regions.The final decision on pension increases will depend on wage growth data released in early 2023. More

BRASILIA (Reuters) – Brazilian President-elect Luiz Inácio Lula da Silva’s transition team has invited two economists, Persio Arida and Andre Lara Resende, who helped design the Real Plan that stabilized the economy in the 1990s, two sources with knowledge of the matter said on Saturday.The sources, who spoke on condition anonymity, added that another economist Guilherme Mello, who leads the team drafting economic proposals for Lula at the leftist Perseu Abramo think tank, was also invited to the transition group. The three names were first reported in the Brazilian newspaper O Estado de S.Paulo. Lula, who takes office on Jan. 1, won a runoff election last Sunday against President Jair Bolsonaro but he has been questioned for not providing details of his economic program.Lula has not yet said who will head the Finance Ministry in his government, causing broad speculation in the markets of Latin America’s largest economy.Vice President-elect Geraldo Alckmin had already stated that the transition team members would be announced on Monday. Some of them are expected to be further appointed by Lula to Cabinet posts. Arida, an orthodox economist well regarded by the market and close to Alckmin, was appointed to the transition team by him, one of the sources said.Arida has already held positions in public administration in the 1990s, including the presidency of the central bank and development bank BNDES.Lara Resende, a frequent interlocutor of economists from Lula’s Workers Party (PT), was appointed as a counterpoint to Arida’s more traditional economic views, the source said. Lara Resende has already argued that a constitutional spending cap strangled public investments, which he sees as a mistake.Lula has repeatedly said he will end the spending cap, without detailing which fiscal anchor will replace it. Mello and Arida did not immediately respond to a Reuters request for comment, while Lara Resende could not be immediately reached. More

Warren Buffett’s Berkshire Hathaway is quickly becoming one of the principal beneficiaries from the sharp increase in interest rates in the US, as its fortress-like balance sheet begins to generate hundreds of millions of dollars in income for the sprawling conglomerate.The interest the company earns on its $109bn cash pile nearly tripled from a year before to $397mn in the third quarter, it disclosed on Saturday, noting the gain was “primarily due to increases in short-term interest rates”. Berkshire holds the vast majority of its cash in short-term Treasury bills, deposits at banks and in money market accounts, where interest rates have been rapidly rising as the Federal Reserve has tightened monetary policy. Last week the US central bank lifted rates to between 3.75 and 4 per cent, up from near zero at the year’s start, and traders expect that rate to top 5 per cent next year.While tighter policy has sent shockwaves through financial markets — even bludgeoning the value Berkshire’s mammoth stock portfolio — it is finally beginning to pay dividends for companies and consumers holding cash. Data from the Investment Company Institute showed that cash parked in money market funds that cater to everyday retail investors has swelled to a record high.Buffett and Berkshire vice chair Charlie Munger have over the past decade presided over a significant expansion in Berkshire’s cash holdings, which they believe is critical given the potential catastrophic payouts the company’s insurance businesses could one day need to make.It was a point underlined by third-quarter results that showed Berkshire was hit by a $3.4bn pre-tax loss from Hurricane Ian, which killed more than 100 people as it tore through parts of Florida. US president Joe Biden has said it will take years, not months, for the region to recover.Berkshire’s insurance unit suffered an operating loss of $962mn during the quarter, with Geico warning that higher used auto parts prices and an increase in accidents were weighing on its results. Buffett and Munger have long been able to stomach large losses in its insurance division because of the sizeable “float” — insurance premiums it collects before it must ultimately pay claims on obligations. That float has helped fuel its investments in stocks and fund the company’s acquisitions of businesses. The sell-off in financial markets hampered Berkshire’s equity portfolio, which includes large stakes in Apple, American Express, Chevron and Bank of America. The company said its portfolio slid in value to $306.2bn from $327.7bn at the end of June.Those declines pushed it to a net loss of $2.7bn in the period, or $1,832 per class A share, from a profit of $10.3bn a year before, worth $6,882 a share. Buffett has long characterised the swings in its investment portfolio — which it must recognise in its profit and loss statements due to accounting rules — as “meaningless”.The dozens of businesses it owns, which are widely-watched for signs of the health of the American industrial and business complex, laid bare the resilience of the US economy while also signalling the potential slowdown engineered by the Fed. Berkshire’s results also showed the effects of inflation and the fights over better wages as real living standards come under pressure from higher prices.Revenues at its BNSF railroad surged 17 per cent to $6.5bn, but profits slid as the volumes of freight it shipped declined and it paid higher wages to its employees. The railroad became a flashpoint earlier this year as more than 30,000 unionised workers at BNSF threatened to strike, pushing back against conditions and demanding a boost to pay. A tentative agreement in September delivered concessions to employees and BNSF said pay costs rose 27 per cent in the third quarter from a year earlier. The energy businesses within Berkshire’s utility division reported a 17 per cent jump in revenues, boosted by higher power costs. But the company’s real estate brokerage unit saw sales tumble by nearly a fifth, and operating profits at the unit plummeted 72 per cent from the year before as the housing market cooled and it sold fewer homes. Berkshire said higher mortgage rates were also expected to pressure its handful of businesses in the housing sector. During the quarter, however, those businesses — including the brick maker Acme and flooring group Shaw — were able to raise prices and registered strong demand.Overall, operating earnings rose to $7.8bn from $6.5bn a year earlier. The results were helped by larger profits in its manufacturing and services business lines.Berkshire, which this year bought a 21 per cent stake in energy company Occidental’s common stock, disclosed that in the fourth quarter it would begin reporting earnings from the oil and gas giant as part of its results.The company also said it had spent just over $1bn in the quarter buying back its own stock.Berkshire’s class A shares, which are down 4.1 per cent this year, have far outperformed the broader market. The benchmark S&P 500 has declined 20.9 per cent while an investor in US Treasuries has lost 15.3 per cent, according to Ice Data Services. More

A package containing 31 proposals was introduced in Brussels on Wednesday targeting individuals and institutions in the security sector as well as companies responsible for suppression in Iran, the magazine reported.Measures include the freezing of assets and travel bans, the magazine said, adding the package had a good chance of being approved by EU foreign ministers at their next meeting on Nov. 14.The German government had no immediate comment.Ties between the Islamic Republic and the West are increasingly strained as Iranians keep up anti-government protests. More