Economy

The global trade system these days seems ever more like an unsuccessful 12-step programme. The first step is to admit that there’s a problem. Unfortunately, few stakeholders seem willing to say it. The rare exception is the US trade representative Katherine Tai, who, just a few days ago, called for an end to wilful blindness to the failings in the current global trade paradigm.“We cannot just go back to the world in 2015 and pretend like these things didn’t happen,” she said at an appearance at an innovation conference in Munich. She was referring to populist responses — including Brexit and the election of Donald Trump as US president in 2016 — to status quo globalisation and trade liberalisation. But she also had in mind the issues of supply chain resilience and differing political values exemplified by both the pandemic and the war in Ukraine. “I think a number of things have happened,” Tai said, “that cause me to wonder whether this vision for globalisation leading us to a better, more secure world has run its course and if we don’t need a course correction to move us forward.”Let’s be clear: neither Tai nor the Biden administration more generally are channelling a “make America great again” vibe here. Indeed, Biden called MAGA supporters the most dangerous political faction in the US last week in response to the leaked Supreme Court text on abortion rights.

But the US is openly saying what politicians and the public in many countries silently think: the World Trade Organization is broken; global trade liberalisation for its own sake has reached a limit; and there needs to be a new balance struck between international trade and domestic politics.If you look beyond the rhetoric, this truth is at the core of nearly every big trade story of the moment. Consider that more than two years from the beginning of the pandemic, and a year on from the White House announcing its support for a so-called Trips intellectual property waiver on Covid-19 vaccines, the world is still waiting for an agreed-on text, not to mention resources, that would allow poor countries to start circumventing intellectual property barriers to create their own vaccines.Some of this is about pharmaceutical lobbying on both sides of the Atlantic, and some of it is about the spaghetti bowl of international intellectual property interests. The WTO secretariat is trying to push through an agreement (that some think won’t make a difference) in advance of the 12th ministerial conference scheduled for June. But both the virus — and politics — are moving too fast. Even if the WTO were able to orchestrate a meaningful agreement on a waiver, the virus itself is likely to have mutated before the world can receive updated vaccines.All of which underscores the need for a newer, better, faster way to resolve trade disputes — every country wants WTO reform but, of course, on different issues — in particular around intellectual property, which is where the vast majority of global wealth resides.Some of the more contentious transatlantic issues around digital trade, data protections, patents and other sorts of intellectual property rights were meant to be ironed out by the US-European Union Trade and Technology Council, which will be meeting in Paris in a week. Given that both the US and Europe have big but different horses in the race towards the internet of things (American tech platforms versus European industrial companies), the TTC was supposed to be a place to start figuring out who gets what part of the digital wealth pie in the future.But the TTC’s own bandwidth is now being devoted to the fallout from the war in Ukraine and what the US and Europe should do to create more resilience in energy and supply chains. We can expect much of the conversation to be taken up with discussions about what further sanctions or export controls should be placed on Russia, how to delink crucial supply chains from the region, and how to proceed with alternative energy production. Plans for our digital future will be subsumed by emergency measures on the war at hand. Meanwhile, within the US, there is continued wrangling over the merging of the House Competes Act and Senate Innovation and Competition Act, both of which are meant to address resilience within the industrial commons in the wake of the pandemic. Semiconductor subsidies aside, the Senate bill is neoliberal business as usual. The House, on the other hand, emphasises rebuilding domestic manufacturing, as well as focusing more on the environment and labour standards. All this comes as the White House is under pressure to rethink Trump-era tariffs on China.To use another 12-step metaphor, it would be nice if all the wrangling could simply be turned over to a higher power. But that’s the problem — there isn’t one (including the WTO) that has shown itself capable of managing the breakdown of the global trade paradigm. Indeed, we are still struggling with step one — acknowledging the problem. As Tai puts it, globalisation 2.0 must “take into account more than just efficiency” and not simply encourage the free flow of capital and trade liberalisation as an end in and of itself. The problem is how, and where, to negotiate the shape of our new post-neoliberal [email protected] More

COLOMBO (Reuters) -The China-backed Asian Infrastructure Investment Bank is considering granting $100 million in emergency support to Sri Lanka, the country’s finance ministry said on Sunday.Sri Lanka has requested foreign-exchange liquidity support for state banks from the lender, it said in a statement.Hit hard by the pandemic, rising oil prices and populist tax cuts by the government of President Gotabaya Rajapaksa, the South Asian island’s economy is in crisis, with usable foreign reserves down to $50 million, Finance Minister Ali Sabry said last week.Shortages of imported food, fuel and medicines have brought thousands onto the streets in over a month of mostly peaceful protests. Rajapaksa declared a second state emergency in five weeks on Friday. The multilateral AIIB, founded in 2014 to promote infrastructure investing throughout Asia, draws most of its funding from China.China is Sri Lanka’s largest bilateral lender, with an outstanding balance of $6.5 billion mostly lent over the past decade for large infrastructure projects, including highways, a port, an airport and a coal power plant. Beijing has extended Sri Lanka a $1.3 billion syndicated loan and a $1.5 billion yuan-denominated swap to boost its reserves. The two countries are in talks for a $1.5 billion credit line and a fresh syndicated loan of up to $1 billion.Colombo said this month that talks had started on refinancing Chinese debt after Sri Lanka suspended some of external debt repayments in April. More

Has US consumer price growth finally started to moderate? The upcoming US consumer price index report is expected to show that inflation continued to grow in April, albeit at a slightly slower pace than in previous months. Economists polled by Bloomberg forecast that US consumer prices rose at a pace of 8.1 per cent year on year compared with 8.5 per cent in March. Inflation at that level would remain close to four-decade highs but would represent the first slowdown in pace since August 2021. So-called “core” CPI, which strips out the effects of the volatile food and energy sectors, is also expected to have slowed compared with April last year. But the data, due out on Wednesday, may still show that core inflation accelerated from the previous month. The category to watch will be shelter costs, according to Greg McBride, chief financial analyst at Bankrate. “Shelter accounts for 40 per cent of the CPI — as it does for many household budgets — and with double-digit increases in rents kicking in, this puts the household budget in a vice even if food and energy costs level out,” he said.This is one of two consumer price reports that will be considered by the Federal Reserve at its June meeting, during which it is widely expected to raise interest rates again by 0.5 percentage points. A big deviation from the CPI forecast, in either direction, could change the Fed’s calculus. Kate DuguidHow much did UK GDP grow in the first quarter?The Bank of England expects the UK economy to have grown by 0.9 per cent in the first quarter, boosted by the easing of all Covid-19 restrictions early in the year.Economists polled by Reuters forecast gross domestic product to have expanded by 1 per cent in the quarter when data is released on Thursday, but they also project output to have grown by 0.1 per cent between February and March. The reading would confirm the slowdown seen in February when growth dropped to just 0.1 per cent from 0.8 per cent in January.“We expect the economy to have eked out some growth again,” said Ellie Henderson, an economist at Investec. She expects a 0.1 per cent expansion in March, driven by services, with manufacturing and construction poised to contract as they did in February. She said a slowdown in Covid vaccinations would be less of a drag, but the rebounds in the recreation and hospitality sector would also have waned.After the first quarter, the BoE expects economic growth to slow “sharply . . . reflecting the significant adverse impact of higher global commodity and goods prices on most UK households’ real incomes and many UK companies’ profit margins”, according to its latest outlook published last week.The BoE forecasts were “distinctly bleak,” said Ross Walker, an economist at NatWest Markets, with quarterly growth expected to alternate from near stagnation to an outright contraction this year and the next. The prospect of UK inflation rising to a 40-year high at the end of this year, largely reflecting surging energy costs after Russia’s invasion of Ukraine, is expected to lead to a drop of almost 1 per cent in economic output in the fourth quarter. And by the second quarter of 2025, the UK economy is expected to be less than 1 per cent larger than it is today. Valentina RomeiWho will fill the gap in the wheat market left by Ukraine?Agricultural commodity markets have been roiled by the war in Ukraine, as buyers of grains and vegetable oils from the country as well as Russia try to find alternative sellers.The jump in food import bills for poorer countries has led to worsening hunger, as well as worries about political instability. Russia is the world’s largest wheat exporter, while Ukraine is the fifth largest. Together they account for 30 per cent of global exports, according to the UN Food and Agricultural Organization. The two countries also account for more than 60 per cent of the world’s sunflower oil trade.“My biggest concern right now for the ag markets is wheat,” said Craig Turner, senior commodities broker at StoneX. India, which had a bumper crop in 2021, has been cashing in on the surge in the wheat price. This year’s harvest was initially forecast to be a record, but the extreme heatwave hitting India could lead to crop damage and trigger export restrictions. “The world needs exportable supplies of wheat, and things could get very tight this summer,” added Turner.The US Department of Agriculture publishes its crop production report on Thursday along with its monthly World Agricultural Supply and Demand Estimates report covering grains, oilseeds and other agricultural commodities. The production report will include estimates of this year’s US winter wheat harvest, while the WASDE will offer some insights into which producing countries can fill the gap in the export markets. Emiko Terazono More

As Germany’s biggest union, IG Metall, begins discussions on demands for a wage increase of up to 8.2 per cent for the country’s 85,000 steelworkers in the coming weeks, Birgit Dietze expects reverberations for workers across Europe.“When companies are making high profits, as they are at the moment, there can and must be compensation for the sharp rise in prices for employees,” Dietze, IG Metall’s chief negotiator in the east German steel industry, told the Financial Times ahead of a vote by the union’s board later on Sunday, when members are expected to back the proposed rise.The IG Metall discussions, which are set to conclude by the summer, are expected to provide a benchmark for negotiation rounds in other industries tabled for later in 2022. “Everybody who bargains on wages looks very closely at what these negotiations in German industry are doing,” said Esther Lynch, deputy general secretary of the European Trade Union Confederation. A bumper pay deal for Germany’s steelworkers would also raise eyebrows among policymakers at the European Central Bank who are increasingly keen on raising interest rates in July to try to tackle record eurozone inflation of 7.5 per cent in April. Officials fear spiralling pay growth will mean price pressures becoming entrenched, risking a 1970s-style “wage-price spiral”.Yet, with a cost of living crisis looming and unemployment in the 19-country bloc falling to a record low of 6.8 per cent in March, demand for better wages is strong. “I’m now hearing from almost every delegate examples of how low-paid workers can’t even meet the basics of paying for food and electricity, and they want action now,” said Lynch. Unions across the eurozone have called for rises for the region’s worst off. FNV, the biggest Dutch union, which has almost 1mn members, wants the government to increase the minimum wage from €10 to €14 per hour and is pushing all companies to increase pay by €100 per month for all workers to offset the rising cost of living.The German government has already committed to raise the country’s minimum wage from just below €10 an hour to €12 an hour in October. The country’s statistical office said this would affect 7mn workers, mostly women, equal to about one-sixth of the workforce. France’s minimum wage has risen three times in the past year for a total increase of 5.9 per cent, but unions including the leftwing CGT, which represents over 700,000 workers, want it to go up by another 20 per cent to €2,000 per month. In other countries — such as Belgium, Cyprus and Luxembourg — workers receive automatic pay increases when inflation rises.

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The Bank for International Settlements, the central bank for central banks, said last week that, while indexation and minimum wage increases raised the likelihood of a wage-price spiral, the share of workers covered by these contracts was lower than in the past. Coverage had fallen from 24 per cent in 2008 to 16 per cent last year, it said. Union membership in Germany, meanwhile, has dropped from 36 per cent after the country’s reunification in 1990 to 16 per cent in 2019, according to the OECD.Still, a win for IG Metall’s steelworkers could help bring to an end more than a decade of sluggish eurozone wage growth. Until now, pay rises in the region have been meagre, at just under 2 per cent in the fourth quarter from a year earlier. This is a big contrast with the US, where growth in average hourly earnings accelerated to an annual rate of 5.6 per cent in March. But the ECB’s chief economist Philip Lane said on Thursday that the central bank’s new wage tracker, covering the region’s largest economies, showed pay deals agreed since January signalled wages were set to rise this year by around 3 per cent — a level not seen for a decade. Wage growth is already accelerating in the Netherlands, which has one of the lowest rates of unemployment at 3.3 per cent and one of the highest rates of inflation at 11.2 per cent. In April, Dutch companies and unions agreed deals to increase pay by 3.3 per cent on average, the biggest rise since the 2008 financial crisis, according to the employers organisation AWVN. “Wages are indeed increasing and what is being agreed seems to be higher than normal,” said Annika Heerekop of FNV. “It is not inconceivable that inflation will exceed 10 per cent this year. This still means a loss of purchasing power for many people, so as far as we’re concerned, wages need to go up a lot further.”The worsening economic outlook could contain pay, however. Russia’s invasion of Ukraine has already had an impact on some sectors. Unions representing workers in the German chemicals industry — a sector acutely exposed to the conflict due to its reliance on natural gas — postponed talks in return for a one-off payment of €1,400 per worker.Dietze said IG Metall was “monitoring the economic situation very closely and taking it into account when making collective bargaining demands”. However, she noted that while steelmakers are grappling with high energy costs, they were also benefiting from rising commodity prices. “The steel industry is running at full speed,” she said. “The employees quite rightly insist on being included.” More

The southern African country reintroduced a local currency in 2019 after abandoning it in 2009 when it was hit by hyperinflation. However, the Zimbabwean dollar, which is officially quoted at 165.94 against the U.S. dollar, has continued to slide on the black market, where it is trading between 330 and 400 to the greenback. The black market exchange rate has moved from about 200 Zimbabwe dollars at the beginning of the year.President Emmerson Mnangagwa on Saturday announced measures he said were meant to arrest the currency’s depreciation, which he said threatened Zimbabwe’s economic stability.”Lending by banks to both the government and the private sector is hereby suspended with immediate effect, until further notice,” Mnangagwa said in a statement.He accused unnamed speculators of borrowing Zimbabwe dollars at below-inflation interest rates and using the money to trade in forex.Other measures include an increased tax on forex bank transfers, higher levies on forex cash withdrawals above $1,000, and the payment of taxes which used to be charged in forex in local currency.The devaluation of the Zimbabwe dollar’s black market exchange rate, which is used in most financial transactions in the economy, has been driving up inflation.Year-on-year inflation quickened to 96.4% in April, from 60.6% in January. More

LONDON (Reuters) – Chelsea fans arriving at Stamford Bridge a few hours after a private equity-backed deal to buy the club was announced welcomed the prospect of a return to stability but expressed concern about the motivations of the new owners.Chelsea said in the early hours of Saturday that terms had been agreed with a group led by Los Angeles Dodgers part-owner Todd Boehly and backed by Clearlake Capital over a 4.25 billion pound ($5.2 billion) deal for the reigning European champions.Chelsea’s current owner Roman Abramovich put the club up for sale in early March after Russia’s invasion of Ukraine, which led to the British government sanctioning the Russian billionaire.Jeff Oakley, a Chelsea fan since 1969, said he hoped the new owners would continue to plough money into the club, but he wanted more clarity about their plans.”At the end of the day they’re not in here because they love the club, they’re in here because they love the money,” Oakley said as he approached the stadium ahead of Chelsea’s Premier League match at Wolverhampton Wanderers.The BBC reported that the new owners have agreed not to sell a majority stake in Chelsea until 2032 and had given assurances over dividends and debt.Martin Farrier, a long-standing Chelsea season ticket-holder, said he would have preferred a British owner.”But that’s because of the way the Americans appear to have run Manchester United into the ground, and I would hate that to happen here,” he said.The Florida-based Glazer family have owned United since 2005 and have faced fan opposition from the moment they completed their takeover as the club failed to match its previous glittering form.By contrast, Chelsea have been England’s most successful club since Abramovich bought the Londoners in 2003. But the turmoil over its ownership has coincided with a drop in form in recent weeks.Chelsea were knocked out of the Champions League in April and are well adrift of Premier League leaders Manchester City. Next Saturday’s FA Cup final against Liverpool offers them one last chance of silverware this season.Ferdinand Weiss, a 22 year-old student from Austria who came to London to see the team he has supported since he was a boy, said players who have decided to leave Chelsea, such as defender Toni Rudiger, might have stayed without the confusion.”It’s good to bring some still water into the situation,” Weiss said. As for the change in ownership, he said there was no perfect solution for a club as big as Chelsea in the increasingly lucrative world of sports business.”You have to pick oil money, or you have to pick some billionaire from the U.S. There is no saviour out there.” More

Thai law prescribes punishments of up to 15 years in jail for each offence if found guilty of defaming, insulting or threatening King Maha Vajiralongkorn and his closest family.The video, which has since been taken down, was promoting Lazada’s May 5 sale and featured a woman dressed in a traditional Thai costume sitting in a wheelchair and playing the role of an influencer’s mother. Royalists complained the woman in the wheelchair was a veiled reference to a royal family member. The video did not use the language used by the royal family, nor mention any of its members. In videos posted on Facebook (NASDAQ:FB), the influencer, Aniwat “Nara” Prathumthin, said the clip was a parody of a famous Thai soap opera and told critics the perceived royal insult was “all in your imagination”.Lazada, the Southeast Asian arm of Alibaba (NYSE:BABA) Group Holding, in a statement apologised for the “emotional damage” the video had caused and said it should have been more careful. Government spokesman Thanakorn Wangboonkongchana said such content risked damaging the reputation of brands.”Let us warn marketers, influencers and content creators to be careful about presenting content or promotions that reference appearances or individuals of the institution that all Thais worship and love,” Thanakorn said in a statement.”This is inappropriate, and will not only upset every Thai in the country, but also destroy the image and reputation of the brand. It could also be against the law.” The incident follows an April Fool’s prank tweeted by a staff member at budget airline Thai Vietjet Air, an offshoot of Vietnam’s Vietjet Aviation JSC, about a new route to Munich that stirred anger among royalists, who said it was a hidden joke about the Thai king spending time in Germany. The airline apologised. More

SHANGHAI (Reuters) -China’s capital Beijing kicked off a fresh round of mass testing for COVID-19 on Saturday and shut more bus routes and metro stations, as it seeks to avert the fate of Shanghai, where millions of residents have been locked down for over a month. The draconian movement curbs on Shanghai, an economic and financial hub, have caused frustration among its 25 million residents and triggered rare protests over issues such as access to food and medical care, loss of income and crowded as well as unsanitary conditions at central quarantine centres. While some people have been let out for light and air in recent weeks, residents for the most part say they still cannot leave their housing compounds. Beijing is striving to avoid an explosion in cases like that of Shanghai, China’s largest city, by conducting rounds of mass testing, banning restaurant dining-in services in multiple districts and shutting more than 60 subway stations, about 15% of the network. Shanghai cases have fallen for eight days and the city says its outbreak is under effective control, allowing it to shut some of the makeshift hospitals it raced to build as case numbers ballooned. But authorities have also indicated that a full easing is still far off, warning against complacency to stick to China’s zero-COVID goal. Underscoring that expectation, Shanghai officials on Saturday postponed the city’s “gaokao” university entrance exam by a month to early July. The last time that happened was in 2020, during the initial coronavirus outbreak. The city’s top Communist Party official, Li Qiang, a close ally of President Xi Jinping, told a Friday government meeting that it was “necessary to issue military orders at all levels, and take more resolute and powerful actions to overcome the great war and great tests,” according to an official statement.The number of infections in Shanghai outside areas under lockdown – a gauge of whether the city can further reopen – fell to 18 on Friday from 23 the day before. Total new cases declined slightly to around 4,000, data released on Saturday showed.Shanghai is also building thousands of permanent PCR testing stations, in line with other cities, as China looks to make regular testing a feature of everyday life.CAR SALES TUMBLE China’s COVID policy is increasingly out of step with much of the rest of the world, where governments have eased restrictions, or dropped them altogether, in a bid to live with COVID even as infections spread.But Chinese leaders this week reiterated their resolve to battle the virus, threatening action against critics of their strict measures. Beyond Shanghai, dozens of cities have imposed full or partial lockdowns, relaxing and tightening curbs at various times. The measures are exacting a mounting economic toll that has fuelled complaints from global industry groups and businesses at home. China’s auto association on Friday estimated that sales plunged 48% in April from a year earlier, as zero-COVID policies shut factories, limited traffic to showrooms and put the brakes on spending in the world’s largest car market.In Shanghai, although the government has provided guidelines on how companies can restart operations, a survey of Japanese firms in late April found most still struggling to restart due to the onerous requirements.Since Friday, organizers have cancelled, postponed or relocated a slate of major international sporting events set to take place in China in the second half of the year, including the Asian Games set for Hangzhou in September and Diamond League athletics meets originally scheduled for Shanghai on July 30 and Shenzhen on Aug. 6.The moves, which followed a government meeting on Thursday chaired by Xi that called for doubling down on the zero-COVID approach, defy a global sporting calendar that has largely returned to normal. On Saturday, Beijing kicked off the first of three new rounds of daily testing in five districts including the biggest, Chaoyang, home to embassies and large offices. Beijing officials said that while they had figured out the main COVID transmission chains, they still believed there were hidden infection sources in society and that the city could not lower its guard. The capital reported 45 new symptomatic COVID-19 cases for Friday, down from 55 a day earlier. It recorded eight asymptomatic cases, which China counts separately, versus 17 a day earlier. More