Economy

EU leaders have fiercely criticised UK plans to rip up part of the 2020 Brexit deal on Northern Ireland as illegal and damaging, even as British prime minister Boris Johnson described the initiative as a “relatively trivial set of adjustments”.The UK government will on Monday publish draft legislation to rewrite the so-called Northern Ireland protocol by ending the oversight role of the European Court of Justice as well as EU control over state aid and value added tax in the region. It would also break with the Brexit treaty by exempting goods from Great Britain from the need to go through border checks if they stay in Northern Ireland, and would give ministers sweeping powers to change almost every aspect of the text.Simon Coveney, Ireland’s foreign minister, in a tweet after a terse 12-minute call with his British counterpart Liz Truss, accused the UK government of “proposing to set aside international law, ignore majority [opinion] in Northern Ireland & deliberately ratchet up tension with an EU seeking compromise”.“We remain open to dialogue to find agreement but this approach adds to instability & is no fix,” he added.Maroš Šefčovič, the European commissioner for Brexit, who also spoke to Truss, compared the UK’s approach with what he depicted as the EU’s emphasis on “workable solutions”, including proposals to reduce customs paperwork and animal checks for shipments from Great Britain to Northern Ireland. “Unilateral action is damaging to mutual trust and a formula for uncertainty,” he said.While the EU is expected to wait to see if Johnson can get the bill on the protocol through parliament, its first concrete response would probably be to restart legal action against London for failing to implement full border checks in Northern Ireland.But Šefčovič has told MEPs the bloc is ready to take retaliatory measures and the commission is drawing up a list of British goods it could hit with tariffs.The bill is also likely to anger the US, while ministers privately admit the bill could be blocked for months by the House of Lords. Johnson denies the legislation breaks international law, arguing it is necessary to protect the 1998 Good Friday Agreement which brought peace to Northern Ireland after three decades of conflict.“Our higher and prior legal commitment to the country is to the Belfast/Good Friday Agreement and to the balance and stability of that agreement,” the prime minister told LBC Radio on Monday.The DUP, Northern Ireland’s largest unionist party, has refused to restore the power-sharing agreement in the region after the republican Sinn Féin became the largest party in the May elections.“One community at the moment feels very very estranged by the way things are operating, very alienated, and we just have to fix that, it’s relatively simple to do it,” Johnson said. “It’s a bureaucratic change that needs to be made, frankly it is a relatively trivial set of adjustments in the grand scheme.”Johnson also said a trade war between the UK and the EU would be a “gross, gross overreaction”. He added: “All we are trying to do is simplify things, trying to remove barriers to trade to Great Britain and Northern Ireland.”Under current Brexit arrangements, new checks are needed for goods travelling from Great Britain into the region, which remains part of the EU single market for goods.But under the new legislation, goods destined to stay in Northern Ireland would go through a “green lane” with no checks, while goods heading across the open border into the Republic of Ireland would face “red lane” checks.The bill would also create a dual regulatory regime, allowing goods originating in Great Britain to circulate in the region provided they meet UK standards, rather than the EU’s.

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The disconnect is a result of India’s uneven growth, powered and enjoyed by the country’s upper strata.NEW DELHI — On paper, India’s economy has had a banner year. Exports are at record highs. Profits of publicly traded companies have doubled. A vibrant middle class, built over the past few decades, is now shelling out so much on movie tickets, cars, real estate and vacations that economists call it post-pandemic “revenge spending.”Yet even as India is projected to have the fastest growth of any major economy this year, the rosy headline figures do not reflect reality for hundreds of millions of Indians. The growth is still not translating into enough jobs for the waves of educated young people who enter the labor force each year. A far larger number of Indians eke out a living in the informal sector, and they have been battered in recent months by high inflation, especially in food prices.The disconnect is a result of India’s uneven growth, which is powered by the voracious consumption of the country’s upper strata but whose benefits often do not extend beyond the urban middle class. The pandemic has magnified the divide, throwing tens of millions of Indians into extreme poverty while the number of Indian billionaires has surged, according to Oxfam.The concentration of wealth is in part a product of the growth-at-all-costs ambitions of Prime Minister Narendra Modi, who promised when he was re-elected in 2019 to double the size of India’s economy by 2024, lifting the country into the $5 trillion-or-more club alongside the United States, China and Japan.The government reported late last month that the economy had expanded 8.7 percent in the last year, to $3.3 trillion. But with domestic investment lackluster, and government hiring slowing, India has turned to subsidized fuel, food and housing for the poorest to address the widespread joblessness. Free grains now reach two-thirds of the country’s more than 1.3 billion people.Those handouts, by some calculations, have pushed inequality in India to its lowest level in decades. Still, critics of the Indian government say that subsidies cannot be used forever to paper over inadequate job creation. This is especially true as tens of millions of Indians — new college graduates, farmers looking to leave the fields and women taking on work — are expected to seek to flood the nonfarm work force in the coming years.A job fair in Chennai last month.Idrees Mohammed/EPA, via Shutterstock“There is a historical disconnect in the Indian growth story, where growth essentially happens without a corresponding increase in employment,” said Mahesh Vyas, the chief executive of the Center for Monitoring Indian Economy, a data research firm.Among the job seekers despairing over the lack of opportunities is Sweety Sinha, who lives in Haryana, a northern state where unemployment was a staggering 34.5 percent in April.As a child, Ms. Sinha liked to pretend to be a teacher, standing in front of her village classroom with fake eyeglasses and a wooden baton, to fellow students’ great amusement.Her ambition came true years later when she got a job teaching math at a private school. But the coronavirus upended her dreams, as the Indian economy contracted 7.3 percent in the 2020-21 fiscal year. Within months of starting, she and several other teachers were laid off because so many students had dropped out.Ms. Sinha, 30, is again in the market for a job. In November, she joined thousands of applicants vying for much-coveted work in the government. She has also traveled across Haryana seeking jobs, but turned them down because of the meager pay — less than $400 a month.“Sometimes, during nights, I really get scared: What if I am not able to get anything?” she said. “All of my friends are suffering because of unemployment.”But for Indian politicians, a high unemployment rate “is not a showstopper,” said Mr. Vyas, the economist, adding that they were far more concerned with inflation, which affects all voters.India’s reserve bank and finance ministry have tried to tackle inflation, which is battering many countries because of pandemic-related supply chain problems and the war in Ukraine, by restricting exports of wheat and sugar, raising interest rates and cutting taxes on fuel.The bank, after raising borrowing rates in May for the first time in two years, increased them again on Wednesday, to 4.9 percent. As it did so, it forecast that inflation would reach 6.7 percent over the next three quarters.Reserve bank officials have also employed an array of fiscal and monetary tactics to continue supporting growth, which cooled in the first quarter of 2022, falling to 4.1 percent. Household consumption, a major driver of India’s economy, has dropped in the last few months.“We are committed to containing inflation,” said the bank’s governor, Shaktikanta Das. “At the same time, we have to keep in mind the requirements of growth. It can’t be a situation where the operation is successful and the patient is dead.”While the Bank of England and the Federal Reserve in the United States have said their countries need to accept lower growth rates because of high commodity prices, India’s reserve bank is not in that camp, said Priyanka Kishore, an analyst at Oxford Economics. “Growth matters a lot for India,” she said. “There’s a political agenda.”Working at a brick factory in Bangalore.Manjunath Kiran/Agence France-Presse — Getty ImagesThe ban on food exports is a sharp turnabout for Mr. Modi. In response to Russia’s blockade on Ukrainian ports, which has led to a global shortage of grains, he had said in April that Indian farmers could help feed the world. Instead, with the global wheat shortfalls driving up prices, the Indian government imposed an export ban to keep domestic prices low.Temporary interventions like these are easier than addressing the fundamental problem of large-scale unemployment.“You have wheat in your godowns and you can ship it out to households and get instant gratification,” Mr. Vyas said, referring to storage facilities, “whereas trying certain policies for employment is far more protracted and intangible.”Those policies, analysts say, could include greater efforts to build up India’s underdeveloped manufacturing sector. They also say that India should ease regulations that often make it difficult to do business, as well as reducing tariffs so manufacturers have an easier time securing components not made in India.Exports have been a source of strength for the Indian economy, and the rupee has depreciated by about 4 percent against the U.S. dollar since the beginning of the year, which would normally boost exports.But inflation in the United States and war in Europe have started to affect sales for Indian-made clothes, said Raja M. Shanmugam, the president of a trade association in Tiruppur, a textile hub in the state of Tamil Nadu.“All the input cost is increasing. Even earlier this industry worked on wafer-thin margins, but now we are working on loss,” he said. “So a situation which is normally a happy situation for the exporters is not so anymore.”The struggles of working-class Indians, and the millions of unemployed, may eventually cause a drag on growth, economists say.Zia Ullah, who drives an auto-rickshaw in Tumakuru, an industrial city in the southern Indian state of Karnataka, said his income was still only about a quarter of what it was before the pandemic.The $20 he used to earn daily was enough to cover household expenses for his family of five, and school fees for his three children.“Customers are preferring to walk,” he said. “No one seems to have money these days to take an auto.”Mr. Ullah, 55, said the cost of food had climbed so much that he had to cut down on meals and take two of his children out of school.“Only one, the elder daughter, goes to school now,” Mr. Ullah said. “The rest look around for work in the area.”Hari Kumar contributed reporting. 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The UK economy shrank in April, missing forecasts and confirming the recovery has stalled since January as surging prices hit household spending and business activity. Gross domestic product fell 0.3 per cent between March and April, data published by the Office for National Statistics showed on Monday, below the 0.1 per cent increase forecast by economists polled by Reuters.April’s growth was hit by the winding down of the NHS test and trace programme, which contributed to a 5.6 per cent drop in health sector activity.The data followed two months without growth in the worst combination of surging prices and lack of economic expansion since the 1970s.Sterling dropped 0.7 per cent against the dollar in early London trading.Chancellor Rishi Sunak said on Monday: “I want to reassure people, we’re fully focused on growing the economy to address the cost of living in the longer term.”However, last week, the Paris-based OECD cut its UK growth forecast for 2023 to zero, the lowest in the G20 excluding Russia, reflecting the impact of high inflation and rising rates.Official data last month showed that consumer prices rose at an annual rate of 9 per cent in April, the fastest in 40 years and the highest of any G7 country.Prime Minister Boris Johnson said on Friday that he did not intend to cut taxes to stimulate growth while inflation was so high. “I understand that we need to bear down on taxation and we certainly will,” he told LBC radio. “But we’ve got an inflationary spike that we’ve got to get through right now, looking after people as we go through that.”

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David Bharier, head of research at the British Chambers of Commerce, a business organisation, said: “Businesses from all sectors are facing unprecedented rises in raw material costs, soaring energy bills, and wage pressures.” He added that the increase to employer National Insurance contributions in April had only added to companies’ woes. Many economists note that UK GDP growth is on course to undershoot the Bank of England’s expectations of 0.1 per cent in the second quarter. However, with inflation forecast to increase further in the autumn, markets expect the Monetary Policy Committee to increase interest rates for the fifth consecutive time by 25 basis points to 1.25 per cent when it meets on Thursday.

“We expect the MPC to tread cautiously,” said Thomas Pugh, economist at leading audit, tax and consultants RSM UK. He forecasts a series of 25bp rises taking interest rates to 2 per cent by the end of the year, rather than big jumps, “which could tip the economy over into recession”. The service sector fell 0.3 per cent, the main contributor to April’s fall in GDP. This was despite wholesale and retail trade rebounding 2.7 per cent and expansion in the accommodation and food services sectors. Output in the recreation sector contracted, but overall the data suggest “that households are prepared to borrow more and save a little less in order to defend their current level of real expenditure”, said Samuel Tombs, economist at Pantheon Macroeconomics.Production fell 0.6 per cent, driven by a sharp contraction in manufacturing as businesses reported the impact of price increases and supply chain shortages.Construction dropped 0.4 per cent, following solid growth in March when stormy weather generated more demand for repair and maintenance.The government announced last month a new package to support households with rising prices. James Smith, economist at ING said that meant “a consumer-led recession may be avoided”, but added that ultimately a lot depended on wholesale energy prices this autumn.The ONS also published data on trade that showed the UK importing £24.3bn more than it exported in the three months to April, the second-largest deficit since records began in 1997 after March.

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Times are tough and inflation is rising. In the US, this has led to calls for President Joe Biden to lift or lower Trump-era tariffs on certain Chinese imports. The Treasury secretary, Janet Yellen, has said that some “reductions may be warranted”. But, as she and many other economists acknowledge, tariffs targeting a mere 3.6 per cent of the US economy are hardly a panacea for inflation. Indeed, the US-China tariffs distract from the real trade tug of war: global competitiveness in key industries.Some new numbers from the Hamilton Center on Industrial Strategy shed light on this. Its index tallied national change in global share of output in seven key industries (pharmaceuticals, chemicals, electrical equipment, machinery, cars, other transport, computers and electronics, and information technology) across 10 countries between 1995 and 2018 (the last year for which OECD data were available). It found that while America remained strong in areas such as pharma, software and non-auto transport (which was mostly about Boeing), its performance in the other sectors was “weak and declining” when measured by both global market share and the size-adjusted global average. The US now ranks 6 per cent below that average. This is a huge problem since these types of advanced manufacturing industries make up the majority of business R&D and also drive national productivity growth and investment. No wonder other countries, from Germany (which has a share of advanced industry 74 per cent above the global average), to Japan (43 per cent above), China (34 per cent), South Korea and Taiwan have all opted to protect such industries in ways the US does not. They have done this not with wasteful subsidies or failed policies such as, say, import substitution, but by putting the laser focus of both the public and private sectors on high-growth industries at crucial times, in ways that the markets (which look for short-term gains, particularly in countries such as the US and UK) aren’t always incentivised to do.It can, for example, take $20bn to build a single new semiconductor fabrication plant, with the cost doubling every two to four years across new product generations. No single private actor is likely to take on such a cost. Most countries that care about advanced manufacturing subsidise 40 to 50 per cent of upfront costs for the companies that are ready to make investments of that length and magnitude, according to a McKinsey Global Institute study on manufacturing. But in the US, Congress has yet to pass and fully fund a bill to underwrite semiconductor production, itself a high-growth strategic industry that fuels all the others. Why would this be, given the fragilities in the market system illuminated in recent years?

One reason is there are still some conservatives that believe the state should have no role in the market. As Rob Atkinson, head of the International Technology and Innovation Foundation, which publishes the Hamilton index, puts it, they are afraid to “cross the Rubicon of acknowledging that markets aren’t working as well as they should — once you do that, you are in a whole new world”. Some neoliberal economists likewise want to go back to using lower consumer prices as the sole measure of economic policy success.But among most Democrats and even some Republicans there is a sense that the government does have a role to play in supporting national competitiveness and resiliency. The question is how. Should it focus mainly on skill building? Should it expand the ways in which federal budgets are used to support domestic demand? Should it use fiscal policies to smooth price volatility? California congressman Ro Khanna and other progressives would like to see the government use its purchasing power to stockpile some agricultural commodities, as well as things such as home heating fuel, when they are cheap. They could then be resold to Americans during inflationary periods.Certainly, the supply chain disruptions of the past few years have added to the debate. “When you look at the origin of manufacturing value added in final demand, the US is more reliant on overseas inputs than, say, China,” says Eric Chewning, a McKinsey partner who says the US has plenty of room to grow its domestic sourcing. He points out that the US meets just 71 per cent of its final demand with regional goods; in Germany, the number is 83 per cent, Japan stands at 86 per cent and China at 89 per cent.Achieving parity could add $400bn to US gross domestic product, even before considering the market opportunities of products such as electric vehicles or advanced biotech innovations like, say, gene therapy. The pandemic efforts to fill supply chain gaps in essential products such as personal protective equipment and pharmaceuticals, as well as the administration’s push to increase domestic capacity in strategic areas like electric batteries, semiconductors and rare earth minerals, has created a tailwind for local production of high-value goods.But government has a still bigger role to play. Passing the Bipartisan Innovation Act to support chip production and using federal budgets to support as much domestic demand as possible is a no-brainer. Whatever happens with tariffs and inflation, America’s biggest long-term opportunity and challenge is to rebalance production and [email protected] More

For almost three decades, the World Trade Organization has been lowering barriers to trade and smoothing the path of globalisation. Yet its ministerial meeting in Geneva this week could result in something that would do the opposite: new tariffs.As the summit begins, trade ministers from the WTO’s 164 members have yet to agree whether to continue a 25-year-old moratorium on customs duties for ecommerce. If India, South Africa and Indonesia continue their opposition it will expire at the end of the meeting on Wednesday, permitting countries to impose charges on messaging apps, video calls and data flows.If an organisation whose purpose is to make global trade easier allows a new protectionist measure, says Jane Drake-Brockman of representative group the Australian Services Roundtable, “the WTO will have lost the plot”. Container ships anchored off the port of Los Angeles. The US Democratic party says ‘the global trading system has failed to keep its promises to American workers’ © Mario Tama/Getty ImagesIt might also reinforce fears that the WTO is unfit for purpose in an era of fracturing multinational alliances, isolationist politics and possible deglobalisation.The history of the WTO traces the evolution of globalised trade. Since it was created in 1995, global trade volumes have more than doubled and average global tariffs have fallen to 9 per cent, with billions lifted out of poverty by participating in the global economy. Companies established global supply chains, taking advantage of cheap labour or abundant raw materials in developing countries such as China. But in about 2015, this period of so-called hyperglobalisation began to come to an end. The election of US president Donald Trump in 2016, who inflamed a trade war against China and put tariffs on allies in Europe in the name of national security, threatened to unwind years of integration. Then came the Covid-19 pandemic and its lockdowns, which caused a dramatic fall in global trade. Countries closed borders and imposed export restrictions on face masks, drugs and food to protect supplies when the pandemic shut down factories.Finally, Russia’s invasion of Ukraine, which cut food supplies to countries reliant on its vast grain harvest, exacerbated protectionist trends. Today, many nations are deeply worried about dependency on others and anxious to shorten supply routes. The picture has rarely looked bleaker for advocates of free global trade. Pierre-Olivier Gourinchas, the IMF’s chief economist, this month warned of a world fragmenting into “distinct economic blocs with different ideologies, political systems, technology standards, cross-border payment and trade systems, and reserve currencies”.

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The question is what the WTO can do in its “MC12” meeting, the 12th ministerial conference in its history, to keep these disparate blocs together — or at least find consensus on some of the key issues under discussion: fishing subsidies, food security, Covid-19 vaccine equity and WTO governance. Ngozi Okonjo-Iweala, the former Nigerian finance minister who took over as WTO director-general in Geneva in March 2021, has staked her reputation on finding an answer. She insisted the meeting should go ahead, despite strained relations and stalled talks. In recent weeks, she has been a whirlwind of activity, popping between negotiating groups to urge progress. In May, she told members to consider what is at stake. “Let us all remember that the WTO is about people — about using trade as a tool to raise living standards, create jobs and promote sustainable development. So, let’s redouble our efforts, let’s deliver results and let’s reinvigorate the WTO,” she told ambassadors from developing countries. WTO economists have estimated that if the world split into two trading blocs it would lower the long-run level of real global gross domestic product by about 5 per cent. Business has issued a similar plea. On the eve of MC12, Business Europe and the US Chamber of Commerce said in a joint statement that the “primary objective” of the meeting must be to “reaffirm multilateralism and rules-based trade as the preferred path to boost global economic growth . . . The WTO also needs to demonstrate that it can respond to the most pressing challenges of our time, particularly health, climate change and food security.”That might sound like a tall order when the WTO is in danger of failing to agree even on averting ecommerce tariffs. But the stakes are too high for businesses and consumers for the organisation to fail, Drake-Brockman says. “This is a dangerous time for trade. We really need ministers to get a quality outcome that signals the WTO is still a pro-trade organisation.” Seeking consensusThe WTO was established by 123 countries on January 1 1995. It has been in crisis almost ever since. In November 1999, huge protests at a ministerial meeting in the US spilled into rioting and fighting with the police, dubbed the Battle of Seattle. Protesters focused on issues including workers’ rights, sustainable economies, and environmental and social issues. No longer could technocrats simply cut tariffs and preach about the economic benefits of comparative advantage. The Uruguay round that created the WTO was the last multilateral trade deal. The Doha round, launched in 2001, collapsed in 2015. A subsequent ministerial meeting, MC11 in Buenos Aires in 2017, also ended without agreement. Its shadow hangs long over MC12 in Geneva, originally scheduled for 2020 but postponed by the pandemic.The geopolitical winds do not look favourable. The invasion of Ukraine looms large; the US, EU and Canada stripped Russia of its most-favoured-nation status, the WTO rule that means you must offer every member the same minimum trade terms. Ambassadors from several countries walk out of the room whenever the Russian ambassador speaks — and ministers have said they will do the same in Geneva. The discord does not end there. Even the EU, historically an enthusiastic cheerleader of open, globalised trade, is pursuing what it calls a policy of “strategic autonomy” in response to aggressive actions by the US and China. The bloc has introduced unilateral trade defence tools, including an anti-coercion instrument, which would allow it to respond unilaterally to new trade barriers without seeking WTO approval, and a carbon border tax, which will put tariffs on imports of steel and other goods where the producer is not paying a cost for emissions. Cecilia Malmström, the EU’s trade commissioner from 2014 to 2019 and now an adviser at law firm Covington & Burling, is worried by the combination. “The EU has always been a big friend of the WTO and has helped it with other allies to reform and change,” she says. But right now it is “focusing much more on trade defence than on opening up trade. And I think that is a real pity.” In the US, Trump may be gone but protectionism is not. Joe Biden’s Democratic party, which also controls Congress, says “the global trading system has failed to keep its promises to American workers”. The Democrats want more subsidies for domestic manufacturing, with goods stamped “Made in America”, and says they will “end policies that incentivise offshoring and instead accelerate onshoring of critical supply chains, including in medical supplies and pharmaceuticals”. Seeking re-election in 2024, Biden has maintained populist messages about protecting workers and bashing China. He has temporarily dropped tariffs on steel from the UK, Canada and the EU but only if they agree within two years to team up to keep out “dirty Chinese steel” with a new agreement to put tariffs on countries without a carbon price mechanism forcing polluters to pay for emissions.“President Biden’s trade agenda in all but rhetoric is exactly the same so far as president Trump’s. It’s still America first,” says Malmström.Don Graves, US deputy secretary of commerce, says Biden “has recommitted to the WTO, has stated his support for working with and through the WTO, working with [US] partners to provide necessary reforms”.Workers pour molten steel at a foundry in Wuyi, China. The EU has introduced a carbon border tax on imports of steel and other goods where the producer is not paying a cost for emissions © AFP/Getty ImagesYet the US has undermined one of the fundamental pillars of the WTO system: dispute resolution. Any member can bring a case against another for breaching its obligations, for example by blocking imports or raising tariffs. A panel of experts rules on the complaint, after which the loser can appeal to the appellate body. The US refuses to allow new members to be appointed to the panel, rendering it useless. Washington was particularly irritated that the WTO partly backed the EU in a long-running dispute over aircraft subsidies to Airbus and Boeing. So countries are reduced to imposing unilateral measures that often provoke a response from the other side. “The US is the problem,” says Arancha González, a former senior WTO official and Spanish foreign minister. “It needs to accept that compliance is not weakness.”China and India’s influenceThe greater threats to rising global trade are in fact the powers that have grown richer on the back of it, according to Chad Bown, a fellow of the Peterson Institute for International Economics in Washington.Exhibit A, he says, is China, whose entry 20 years ago was supposed to prove the relevance of the WTO, bringing the chief beneficiary of globalisation into the system.As it grew richer and more interconnected with the west, so its politics would become more western too, ran the arguments of proponents such as then president Bill Clinton. “It will open new doors of trade for America and new hope for change in China,” he said at the time.But in recent years President Xi Jinping has tightened the grip of the Communist party on all facets of life. The party grants many companies state subsidies and cheap loans. The services economy is largely closed.Engineers make semiconductors in Jiangsu, China. Chad Bown of the Peterson Institute says: ‘China’s economic system is not one that works within the WTO’ © AFP/Getty ImagesThere are regular boycotts of companies who speak out on human rights issues, such as Nike and H&M. Indeed, since December China has boycotted an entire country’s produce: Lithuania, after it improved its relations with Taiwan, the independently governed island, which Beijing considers sovereign territory. The EU has filed a complaint at the WTO about China’s behaviour, one of two anti-China cases this year. “China’s economic system is not one that works within the WTO,” says Bown. “They have so many economic policies that nobody else would even think of using.”Then there is India. In trade, Delhi wants the special treatment of a small developing country, Geneva trade officials say. It is helping to hold up a deal on fishing rights by insisting it gets “special and differential treatment”, reserved for the poorest countries, despite having a big fleet. On agricultural subsidies, it insists on the right for the state to buy grain at inflated prices from farmers to stockpile in case of food shortages.Large sectors of its economy are closed to international companies even as its homegrown IT and manufacturing businesses grow in the EU and US. Delhi has recently shown signs of engagement. It signed a partial trade deal with Australia this year and has reinitiated trade talks with the EU. It has also compromised on its demands at the WTO for drug companies to hand over their Covid-19 vaccine recipes for free. (See box.) But its attitude in multilateral talks remains intransigent, diplomats say, and it has a veto power. “As long as there is India you are never going to get anything agreed,” says Bown. ‘The WTO will stagger on’Yet despite all that trade is still thriving, González, who was chief of staff to ex-WTO director-general Pascal Lamy, said this month at a seminar at the European Policy Centre think-tank in Brussels. “When I look at the figures, I don’t see deglobalisation, I don’t see it in trade. I don’t see it in investment and I certainly don’t see it in digital exchanges,” she said. Cross-border trade and foreign direct investment are higher than they were before the pandemic.But she warned of “fragmentation”. The US is seeking to invest in strategic minerals and manufacturing in allied countries, a policy it calls “friendshoring”. China is building a network of African trading partners through its Belt and Road Initiative. Even the EU is looking to friendly states such as Norway and the US for alternatives to Russian oil and gas.This activity illustrates that there is still a role for the WTO to play, she said. “Europe thrives on an open economy and European businesses thrive on having one set of rules, which is what multilateral organisations and agreements bring to Europe and European businesses, as much as they bring it to Chinese businesses and to American businesses.”There are still global issues that can only be solved by multilateral forums, Bown adds. “Look at climate change. We only have one planet.” He suggests countries might form “plurilateral” groups that agree things and have the WTO rubber stamp and perhaps police them. But for all the efforts of Okonjo-Iweala to pursue wider goals at this week’s summit, politics is still likely to get in the way of meaningful progress. In the current environment, democratic governments have a hard time convincing lawmakers and the public to endorse bilateral trade deals, let alone comprehensive multilateral deals. As a result, MC12 is likelier to see incremental deals than maximalist agreements. Ministers are likely to agree to roll over a deal to allow ecommerce to flow freely until the next meeting in two years, for example, but not even attempt a comprehensive framework to manage the fast-growing trade. “The WTO will stagger on,” Bown says. “We will have as much, or more, trade but just going to different places.”It’s possible too that the fragmentation of the multilateral world order is a problem only the members of that order can repair. The International Chamber of Commerce, with more than 45mn companies in more than 100 countries, says it is incumbent on national governments to compromise and bind the trading system back together.“Leaders and ministers have not realised how significant failure to reach outcomes would be for global business,” says ICC secretary-general John Denton. “If ministers can’t spend real political capital in making the WTO work, they risk sinking the organisation into further irrelevancy.” More

Wheat prices are soaring as the Ukraine war sparks a global food crisis. But in Argentina, one of the world’s agriculture powerhouses, farmer Aimar Dimo is cutting back the acreage he devotes to the crop. “As a producer I feel responsible . . . my work should be oriented towards helping the crisis,” said Dimo, who farms 1,500 hectares in Rufino in the north-eastern province of Santa Fe. But “at a time when we should be selling to the world because it needs us more than ever, we have no confidence or incentive”. Argentina produced a record 21.8mn tonnes of wheat last year, compared with 25mn tonnes grown in Ukraine. But despite a pledge by President Alberto Fernández last month that the country would seize the “formidable” opportunity to meet demand, its farmers say they are facing a series of deterrents as the May to August planting season is under way. Chief among them is a strict export quota that Fernández’s leftwing Peronist administration further reduced in March to shore up domestic supplies — a move farmers say runs counter to his pronouncement last month. “Instead of our government stimulating production to make things easier for us, they intervene,” said Hugo Ghio, who farms wheat near the city of Córdoba.The cost of inputs such as fuel and fertiliser has also risen steeply as the war hits supplies and inflation soars in Argentina’s stuttering economy. Meanwhile, the government recently indicated it was considering increasing the 12 per cent tax levied on wheat exports and potentially introducing a new “unexpected profit” tax on companies that analysts say would hit commodity exporters such as farmers.Under Argentina’s export curbs, just 10mn tonnes of the 2022-23 wheat crop can be sent overseas, down from 14.5mn tonnes in 2021-22. Enrique Erize, president of Buenos Aires grain consultancy Nóvitas, said the “disastrous” government decision to reduce the quota meant the world “should not expect anything from Argentina” in terms of helping make up for the big drop in Ukraine’s wheat exports.Farmers in Argentina have in the past been banned from exporting produce to protect domestic supplies and prices. Analysts said such a move was unlikely this year but they had not ruled it out.The country has on average shipped between 12mn and 13mn tonnes annually to Asia, north Africa and other Latin American nations in recent years. Brazil is Argentina’s biggest customer in its home region, buying 6mn tonnes annually. Argentina is also one of the few big producers in the southern hemisphere, so the crop comes to market during the second half of the year, helping to fill the gap once northern countries’ wheat has been sold.

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But like other farmers, Dimo said that this year he was likely to sow “well below” the amount he planted in 2021. Farmers have also been hit by Argentina’s struggling economy. Cut off from most sources of international finance after a record-breaking IMF bailout veered off track in 2019, the government has resorted to printing money to help fund its deficit — fuelling inflation that soared past 65 per cent in April. While the IMF board signed a new $44bn debt refinancing plan with Argentina in March after nearly two years of talks, analysts say it remains to be seen whether the government can deliver on the loan conditions and secure additional financing from other sources.Meanwhile, the poverty rate has risen to nearly 43 per cent of the population this year, up from 35 per cent when Fernández took office, according to a report by the Social Debt Observatory of the Pontifical Catholic University of Argentina. This has prompted a series of official price freezes on basic goods such as bread and flour that have cut the money farmers can get for their grain in the domestic market.Wheat cultivators are already switching to other crops such as sunflowers and barley, according to Agustín Tejeda, chief economist at the Buenos Aires Cereals Exchange (BCBA). Such foods are not as widely consumed in Argentina as wheat so are seen as less at risk of state intervention. They also require less fertiliser and water, making them cheaper to produce, he said. Farmers said the overall costs associated with the upcoming wheat harvest had increased by 40 per cent. Meanwhile, big distortions in the local exchange rate are adding to the pressure on salaries and transport costs.

The price of chemical fertilisers has led Ghio to reconsider how much wheat to plant this month. “It’s our biggest cost,” he said. “We have enough fertiliser for now, but I’m unsure how much to use.” Some farmers are already applying less fertiliser than they should, Tejeda warned, putting the size of the crop at risk. Even if fertiliser prices were to stabilise or restrictions ease, weather conditions would be another challenge as the country emerges from a period of severe drought that ended in February, said Ghio. “There’s not enough humidity in my soil,” he added. “Our autumn was dry, so if I don’t see enough water I don’t plant.”Back in Santa Fe, Dimo said Argentina should do “everything within reach” to help ease the global grain shortage, adding: “It is our duty as a food-producing nation.” More

For hundreds of years, since early Maori explorers first landed their waka in the sheltered bays of the Marlborough Sounds, the area’s cool blue waters have provided a seemingly limitless source of fish.So, in April, New Zealanders were stunned to learn that the country’s largest salmon farming operation had, for months, been taking hundreds of truckloads of its prized export-bound Chinook species and dumping them in a nearby landfill — victims of a rapid rise in water temperatures.Grant Rosewarne, chief executive of New Zealand King Salmon, told the national broadcaster that, in terms of global warming, cold-water fish are just the canary in the coal mine.The US president’s top climate envoy, John Kerry, was similarly direct when he told an audience of global leaders in Davos last month that the world was atop a “precipice”. He pointed to the disastrous effects of the planet’s addiction to fossil fuels, including 15mn annual deaths from air pollution and the gathering pace and intensity of natural disasters including droughts, fires, mudslides, floods and storms.“We’re dealing with a crisis here, folks,” Kerry said. “It is a crisis made by human beings.” He was speaking to members of the World Economic Forum high in the Swiss Alps but, on almost every metric, the battle to stop global warming will largely be won or lost far to the east: in Asia-Pacific.Investors and environmental watchdogs worry that the warnings are not getting through to Asia’s factories, energy providers, corporate boardrooms and corridors of power.The region and its businesses, they say, are failing to respond with sufficient urgency to combat climate change.The world’s most populous region and its most important growth engine is responsible for more than half of global greenhouse gas (GHG) emissions. From lossmaking steel mills in China’s northern rustbelt to India’s swelling power sector, from South Korea’s semiconductor fabrication plants to Japan’s automakers, fossil fuels — mainly coal — still underpin the bulk of economic activity.Most governments in the region have made long-term pledges to cut emissions, as have many of Asia’s biggest corporate polluters and energy users, including South Korean electronics group Samsung, Japanese car manufacturer Toyota, and India’s largest conglomerate, Tata.But, at its current rate, environmental groups warn, the transition to renewable energy in Asia is nowhere near fast enough to arrest the rise in temperatures — as the mass fish deaths in the Marlborough Sounds demonstrate.Bernadette Maheandiran, a research and legal analyst with Australia-based shareholder activist group Market Forces, cites the huge gap between Japanese companies’ promises of mitigation and concrete actions by executives in Tokyo.“After the Japanese government made their net zero commitment, you saw a slew of Japanese corporations make similar commitments,” she says. “But what we’re seeing is the absence of an actual pathway to meet those commitments.” The sentiment is echoed loudly and publicly by campaign groups across the region — and more quietly and privately by concerned policymakers and corporate environmental, social and governance (ESG) teams. Many express growing frustration at inaction in the higher echelons of government and business.According to investors and environmentalists, one of the most important keys that will unlock change in the region is simple: data.Rather than paying lip service to the problem, companies could show they are serious about tackling emissions by releasing transparent data that can catalyse change. It would make them attractive to institutional investors and to increasingly environmentally focused consumers.“We don’t have an issue with companies with big emissions [profiles] . . . because that is where there is the biggest scope for change,” says Anders Schelde, chief investment officer at Denmark’s Akademiker Pension, a member-owned pension fund. “The first step to take action is to start measuring. It really is a problem.”The FT’s inaugural Asia-Pacific Climate Leaders list, compiled with Nikkei Asia and data provider Statista, aims to draw together what data there is, and to encourage companies to supply more of it. It identifies the 200 Asia-Pacific businesses that made the biggest cuts to their Scope 1 and 2 GHG emissions — arising respectively from a company’s own operations and from the energy it purchases — relative to revenue between 2015 and 2020.

The list has limitations. Mainland China is excluded because of the unreliability of some corporate data. And Scope 3 emissions — from those parts of the value chain not covered by Scopes 1 and 2, and typically most of a company’s GHGs — are insufficiently disclosed to be factored in.But the companies included are at least making a start — and some of those not featuring, such as Toyota, are striking. Schelde says across Akademiker Pension’s portfolio, fewer than half the companies provide reliable emissions data. But, in Asia, including more developed markets such as Japan, the world’s third-biggest economy, there remains firm resistance to shareholder engagement and activism over climate change.“My impression is the culture is less mature than in Europe and the US — companies are less used to investors approaching them and being critical,” he says. “In our part of the world, it is part of the way we do business.” Maheandiran adds that companies in Asia must not only improve disclosure of their own emissions and be more transparent about their carbon pricing assumptions, but do so “across their entire supply chains”. These shortcomings appear to be reflected within corporate hierarchies. While companies have hired ESG specialists, they lack the clout of their European and US counterparts.“The whole thing about sustainability and purpose and corporate responsibility, it is much more in the boardrooms in our part of the world,” says Schelde.However, national policies and history are also partly to blame.Governments across the region — including those of China and India, the biggest GHG emitters — have long bristled at being urged by the west to implement costly overhauls of their energy and industry sectors before achieving the levels of development seen in Europe and the US. They point out that the same western countries that are now among the loudest climate campaigners enjoyed growth underpinned since pre-industrial times by coal and oil. The US, for example, is the world’s biggest emitter historically, and still second only to China today. They note, too, that the west has benefited for decades from cheap manufacturing in Asia, while overlooking the fact the region’s industries are powered by coal. Last year, as the international community rallied to make more ambitious national emissions reductions at the COP26 UN climate change conference in Glasgow, Asia’s coal-fired power plants and energy-intensive factories were intensely busy, serving a post-pandemic rebound in industrial demand. Emissions surged.Little wonder that China and India, insisted — successfully — that COP26 water down a proposed commitment to “phase out” coal so that it became one to “phase down” its use.While the amount of coal power plant capacity under development declined in most regions in 2021, advanced economies in East Asia were the exception, according to data from a network of non-governmental organisations, including Global Energy Monitor, Solutions for Our Climate and the Sierra Club.“There is simply no carbon budget left to be building new coal plants,” says Flora Champenois, an analyst at GEM. “We need to stop, now.”Vladimir Putin’s invasion of Ukraine and the disruption to Russian oil and gas supplies have further complicated the outlook, with rocketing inflation and fears of commodity shortages prompting governments to reprioritise energy security over the climate response. Still, environmentalists and investors are holding out hope the transition to renewable energy can be fast tracked in Asia. They say this can be achieved by leaps into low-cost solar and offshore wind generation and adoption of electric transport fleets, along with efficient use of capital and carbon pricing.

Investors, too, are eagerly hunting for opportunities to support the transition to renewables and cleaner fuels — despite their frustration over the distance between countries’ climate commitments and the reality of massive fossil fuel dependency and deforestation in the region.Li Shuo, an energy expert with Greenpeace in Beijing, suggests there is still cause for optimism as Asia could “spearhead the clean tech transition” in energy sectors including solar and electric vehicles.“The solar industry did not exist in China 10 years ago; now it is the dominant player on the world stage,” Li points out. “That demonstrates how Chinese companies are good at leveraging favourable government policies [and] its domestic market, and [at] perfecting complex supply chains to be cost competitive.”“It is not an exaggeration to say companies in Asia hold the key to our climate challenge. If the polluters don’t move, we are doomed. If the innovators accelerate, the world benefits from the solutions they provide.” More