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Yellen Calls for ‘Stabilizing’ U.S. Relations With China Ahead of G20
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Price of Diesel, Which Powers the Economy, Is Still Climbing
Russia’s invasion of Ukraine is one reason that the fuel is scarce. Another is a series of yearslong, intertwined events that cover the globe.HOUSTON — Gasoline prices have dropped as much as a dollar a gallon since early summer, easing a financial strain on many people. But the price of diesel, the fuel that moves trucks, trains, barges, tractors and construction equipment, has remained stubbornly high, helping to prop up the prices of many goods and services.On Wednesday, a gallon of diesel fuel in the United States cost $5.357 on average, according to AAA. That was down from a record of $5.816 in June but well above the $3.642 it cost a year ago. (A gallon of regular gasoline now averages $3.805.)The surge in diesel costs has not garnered the attention from politicians and the public that the jump in gasoline prices did, because most of the cars in the United States run on gas. But diesel prices are a critical source of pain for the economy because they affect the cost of practically every product.“The economic impact is insidious because everything moves across the country powered by diesel,” said Tom Kloza, the global head of energy analysis at the Oil Price Information Service. “It’s an inflation accelerant, and the consumer ultimately has to pay for it.”Sherri Garner Brumbaugh, the president of Garner Trucking in Findlay, Ohio, said the weekly cost of fueling one of her heavy-duty trucks in September was $1,300, more than double the $600 she paid two years earlier. “A good portion gets passed onto my customers with a fuel surcharge,” she said.Both gasoline and diesel prices are tied to the price of oil, which is set on the global market. The price of each fuel immediately shot up after Russia invaded Ukraine in February. But their paths have diverged sharply. Over the last year, the cost of diesel has ballooned by over 40 percent, compared with 11 percent for gasoline.Diesel prices are high because the fuel is scarce worldwide, including in the United States, which in recent years became a net exporter of oil and petroleum products. Oil analysts said there were simply not enough refineries to meet the demand for diesel, especially after Russia’s energy exports fell when the United States, Britain and some other countries stopped buying them.Diesel inventories are always a bit low in the spring and fall, during agricultural planting and harvesting seasons, but this fall supplies are at their lowest level since 1982, when the government began reporting data on the fuel.The tightest market is in the Northeast, where oil refineries have closed in recent years and where the diesel crunch is complicated by winter demand for heating oil. The two fuels are virtually the same but are taxed differently. An especially cold winter could make the situation worse by increasing the demand for heating oil.In Massachusetts, for example, diesel is selling for more than $5.90 a gallon (about $2.33 more than it did a year earlier). In Texas, it costs $4.73 a gallon.Trucks, trains, barges, tractors and construction equipment all use diesel, and its price affects the cost of practically every product.Jim Watson/Agence France-Presse — Getty ImagesWhile Russia’s war in Ukraine sent diesel prices soaring, the current situation is partly the result of an interconnected, slow-building series of events that extends across the globe. Some analysts trace the roots of the U.S. diesel shortage to a fire at Philadelphia Energy Solutions in 2019, which forced the refinery to shut down, taking out one of the Northeast’s important diesel producers.But refineries have been closing elsewhere. Over the last several years, 5 percent of U.S. refinery capacity, and 6 percent of European refinery capacity, has been shut down. A few refineries closed or scaled back because of the collapse in energy demand in the early months of the coronavirus pandemic. Some older refineries were shut down because they were inefficient and their profits weren’t large enough for Wall Street investors. Other refineries were closed so that their owners could convert them to produce biofuels, which are made from plants, waste and other organic material.“Because we shut those refineries down, we don’t have enough capacity,” said Sarah Emerson, the president of ESAI Energy, a consulting firm.As much of the global economy recovered in 2021 and 2022, demand for diesel climbed quickly. But then, after Russia invaded Ukraine, the Biden administration banned Russian oil and petroleum imports, which amounted to 700,000 barrels of diesel and other fuels a day, much of it intended for the Northeast.Diesel prices have also soared so much higher than the cost of gasoline in part because of a decision by the International Maritime Organization several years ago to require most oceangoing ships to replace their high-sulfur bunker fuel with less polluting fuels starting in 2020. That has slowly increased demand for diesel over the last two years.“A substantial amount of diesel is needed in the new bunker blends, and that is a hidden demand for diesel molecules,” said Richard Joswick, the head of global oil analysis for S&P Global Platts. He estimated that the global shipping fleet was now consuming half a million barrels of diesel a day, or roughly 2 percent of the world’s supplies.At the same time, while American refiners are now making tidy profits, 30 percent of their production is being exported. Latin America has become a particularly profitable market, as American diesel replaces fuel from Venezuela, where the state-controlled oil sector has been hobbled by corruption, mismanagement and U.S. sanctions. Some American diesel also goes to Europe.The impact of exports on domestic prices has led some analysts to speculate that the Biden administration could eventually restrict exports to boost supplies at home. But energy experts said that might not have the desired effect because diesel had become a globally traded commodity. Denying Latin America fuel could also backfire because many countries in the region sell crude oil to the United States.“We have a symbiotic relationship with Latin America on diesel and crude,” said Ms. Emerson of ESAI Energy. “We can disrupt that, but it doesn’t immediately fix the problem.”The global diesel shortage was also exacerbated by labor strikes at French refineries this fall. And utilities in Europe have been stockpiling diesel in case they cannot find enough natural gas to fuel their power plants.Russian diesel has continued to flow to Europe since the war began, but stricter sanctions that the European Union plans to impose on Russia in February could potentially cause havoc to the diesel business of traders, banks, insurance companies and shippers.Still, some energy experts said prices could soon begin to ease.Help may be on the way from an unlikely source: China. In recent months, China has been loosening export controls on diesel. Its exports rose from 200,000 barrels a day in August to 430,000 barrels a day in September, and the country has the capacity to sell even more, according to estimates by ESAI Energy.Nearly a third of Chinese diesel exports went to the Netherlands in recent months, taking some pressure off the European market. And oil refineries being built in Kuwait and China could come online as early as next year, further increasing supply.Demand for diesel and its price could also fall if much of the world slides into a recession next year, as some economists and policymakers are expecting.“A deep recession would certainly cut into diesel demand,” said Mr. Joswick of S&P Global Platts. “We don’t forecast a recession, but that is certainly a possibility.” More
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How Finnair’s Huge Bet on Faster Flights to Asia Suddenly Came Undone
Nestled near Europe’s rooftop, Finland spent decades leveraging its location to become a popular gateway for Asian travelers. Its flagship airline, Finnair, offered flights from Tokyo, Seoul and Shanghai to Helsinki that, by crossing over Russia, were hours shorter than flights to any other European capital. Airport chiefs invested nearly $1 billion in a new terminal with streamlined transfers. There were signs in Japanese, Korean and Chinese, and hot water dispensers for the instant noodle packets favored by Chinese tourists.Then Russia sent troops across Ukraine’s border on Feb. 24, and overnight the carefully constructed game table was overturned.Russia closed its airspace to most European carriers in response to bans on Russian planes. What was once a nine-hour flight to Helsinki when routed over Russia’s 3,000-mile expanse would now take 13 hours and as much as 40 percent more fuel because it had to swoop around borders.Finnair’s competitive advantage as the fastest connection from Asia and a travel hub for Europe vanished in a wisp.The sudden disintegration of Finnair’s business model is part of the wide-ranging economic upheaval that the war in Ukraine is causing for businesses around the globe.Companies that invested or traded heavily with Russia were immediately affected, and more than 1,000 have withdrawn operations from Russia, according to a database compiled by the Yale School of Management.Juho Kuva for The New York TimesNearly $1 billion was spent to build a terminal in the Helsinki, Finland, airport to streamline transfers for passengers from outside Europe.When Russia closed its airspace, Finnair could no longer pitch itself as the fastest connection from Asia.“The Asia strategy had been 20 years in the making,” Topi Manner, Finnair’s chief executive, said.High energy prices have blitzed a wider range. The Hungarian Opera House’s Erkel Theater will temporarily close because it cannot pay its energy bill. Hakle, one of the largest manufacturers of toilet paper in Germany, declared insolvency because of soaring energy costs, while ceramic, glass, chemical, fertilizer and other factories across Europe have been forced to scale back or shut down.The snack food industry, unable to get sufficient supplies of sunflower oil from Ukraine, has had to scramble for substitutes like palm oil, forcing manufacturers to rejigger supply chains, production and labeling, since they could no longer boast that their products were “nonallergenic” and “non-G.M.O.”The closed airspace caused Japan Airlines and ANA to cancel flights to Europe. And this month Virgin Atlantic said it was ceasing all traffic to and from Hong Kong because of Russia’s ban. For Finnair, though, the fallout has been extreme.“The Asia strategy had been 20 years in the making,” Topi Manner, Finnair’s chief executive, said from the company’s headquarters, next to the Helsinki terminal in Vantaa. Services were tailored to meet the tastes of its Asian customers. Half of its in-flight movies are dubbed or subtitled in Japanese, Korean and Chinese. Meal offerings include crispy chicken in Chinese garlic and oyster sauce and Korean-style stir-fried pork in spicy sauce with bok choy and steamed rice. The airline’s ground staff in Helsinki are fluent in the region’s native languages.Market Square in central Helsinki.Before the coronavirus pandemic, half of the airline’s revenue was generated by travelers from Asia. Passengers that used Helsinki as a hub to transfer to other destinations accounted for 60 percent of the revenue.But with “no end in sight” to the war, Mr. Manner said, the airline’s management quickly concluded “that Russian airspace will remain closed to European carriers for a long time and we need to adapt to that reality.”This summer, Finnair operated 76 flights between Helsinki and Asia, compared to 198 in the summer of 2019. Overall, the airline is going at 68 percent of its capacity. Operating losses in the first half of this year amounted to 217 million euros.“We really have to regroup,” Mr. Manner said.In some respects, Finnair has been regrouping ever since the pandemic hit in early 2020 and virtually halted world travel. China’s “zero Covid” policy, which continued to lock down Shanghai and other major cities this year, sharply reduced East-West traffic, hampering Finnair’s recovery compared with airlines that have large domestic markets or operate in other regions. Finnair, half of which is owned by the government, fought to survive by furloughing employees, cutting costs and raising 3 billion euros in new financing.Juho Kuva for The New York TimesThe new terminal was expected to draw 30 million passengers by 2030, a projection that has been thrown out by the uncertainty now facing Finnair’s Asia strategy.The project aimed to improve services for the connecting passengers from Asia who would never leave the airport.A 2017 publicity campaign by the state-owned company that runs Finland’s terminals primarily targeted customers from China.“We created a path through the pandemic,” Mr. Manner said, but it always was intended to lead “back to the Asia strategy.”No longer. Last month, the company officially announced an about-face.“We started to pivot our network toward the West,” Mr. Manner said, expanding its partnership with American Airlines, British Airways and other carriers. In the spring, it launched four new weekly flights from Dallas-Fort Worth and three from Seattle. New routes from Helsinki to Stockholm, Copenhagen, Mumbai, India, and Doha, Qatar, have also been unveiled. As jet fuel prices skyrocket, the airline is also renting out planes and crews to other airlines, and it plans to shrink the size of its fleet and staff, and to slash costs.Finnair, which has lost 1.3 billion euros over the past three years, said it hoped to return to profitability in 2024.“It will take some time before the company gets to see if this is the right decision,” said Jaakko Tyrväinen, an airline analyst with SEB, a Nordic financial services group.For the new Helsinki terminal — which opened in June — a strategy shift was also needed.Central Helsinki.An estimated 30 million passengers were expected by 2030, up from the nearly 22 million that the existing terminals handled in 2019. Those projections are now irrelevant, and airport officials say the situation is too uncertain to make any meaningful update to that figure. Next year, 15 million travelers are expected to pass through.Perhaps more pointedly, the project, begun nearly a decade ago, was designed to improve services for transfer passengers from Asia — a majority of whom would never leave the airport.A multimedia publicity campaign that Finavia, the state-owned company that runs the country’s airline terminals, rolled out in 2017 for Helsinki airport — code letters HEL — primarily targeted customers from China. With a nod to the 2004 film “The Terminal,” the campaign, “Life in HEL,” featured Ryan Jhu, a popular Chinese actor and social media influencer, living for a month in the terminal.Now, Helsinki has an expansive new terminal dedicated to non-European transfer traffic but very few travelers.Juho Kuva for The New York TimesThe project to build the new terminal was begun nearly a decade ago.The spacious aukio, or meeting plaza, includes a wraparound video installation depicting Finnish landscapes.The upshot to the changes forced upon Finnair is vastly fewer connecting passengers in a terminal designed for them.On a recent weekday afternoon, the long, snaking lanes created to handle crowds at passport control were deserted. The spacious aukio, or meeting plaza, where passengers could sit and watch a wraparound video installation depicting Finnish landscapes, hosted a lone woman with a backpack. Moomin Shop, which sells merchandise related to the Finnish cartoon characters — particularly popular with Japanese visitors — had no customers. The Moomin cafe, farther down the main hallway, was mostly deserted.“Mornings are normally slow,” said Liccely Del Carpio, who works at the Moomin store, adding that business often picks up later in the afternoon. “All in all, it’s been OK.”The European terminal was bustling, but most of the shops and cafes that stretched along this terminal’s long hall were empty. Several other spaces were unleased or shuttered.Sami Kiiskinen, the vice president of airport development at Finavia, said that the hundreds of millions of euros in loans used to construct the airport would ultimately be repaid, but that “the schedule of paybacks must be reconsidered.” Negotiations are happening, he said.Yet, despite the likelihood that the war in Ukraine will drag on and Russian airspace will remain closed to European traffic, Mr. Kiiskinen is optimistic.“We still believe in our strategy,” he said. Major infrastructure developments like airports are designed on a 50-year horizon, he said. “Putin is not going to be there forever.”Juho Kuva for The New York TimesOn a recent weekday afternoon, a cafe branded for Moomin merchandise, cartoon characters popular with Japanese visitors, was mostly deserted.Sami Kiiskinen of Finavia, which runs the terminal, acknowledged the problems facing the project’s finances but remained optimistic over the long run: “Putin is not going to be there forever.”The new terminal at the Helsinki airport is just one of numerous commercial ventures across Europe that have been affected by Russia’s invasion of Ukraine. More
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China’s GDP Data Delay Points to Murky Economic Picture
The delay in announcing routine growth data this week was only the latest example of how hard it has become to peer into China’s economy, the world’s second largest.For the past quarter-century, China was run by a well-oiled government bureaucracy that predictably focused on the economy as its top priority.That may no longer be the case.Xi Jinping, China’s top leader, made clear on Sunday at the opening of the Communist Party’s national congress, a twice-a-decade gathering of the country’s ruling elite, that politics and national security were paramount. That point was reinforced the next day when Beijing made the unusual move of delaying what should have been a routine, closely stage-managed release of data on how the economy fared in the past three months.“It does show the primacy of politics in influencing the very competent, institutional technocracy that China has,” said Victor Shih, a specialist in Chinese elite politics and finance at the University of California, San Diego.“The very likely reason the numbers were delayed was the State Council leaders were afraid the numbers would detract from the triumphant tone of the party congress,” he added. The State Council is China’s cabinet.It is extremely rare for any large economy to delay the release of such an important economic report. The data included not just China’s economic growth from July through September but also the country’s factory production, retail sales, fixed-asset investment and property prices for September.Mr. Xi, who is expected to claim a third term in power, has sought to project confidence in China’s outlook. On Monday, a Chinese economic planning official reiterated the Communist Party’s talking points about how well China’s economy was faring, saying it improved in the last quarter.Xi Jinping, China’s leader, speaking during the opening ceremony of the 20th National Congress of the Communist Party of China in Beijing.Kevin Frayer/Getty ImagesBut that optimistic message was quickly undercut by news of the delayed release of gross domestic product data, and how the delay was handled. Reporters who called government employees on Friday and Monday about the release were told they had no information.Contacted again late Monday afternoon, the workers said only that the release had been postponed indefinitely. The National Bureau of Statistics still has not explained the delay or announced a rescheduled date. On Friday, the government also failed to release data on exports and imports for September, and has not said when it would do so.China’s refusal to provide statistics, combined with the haphazard way the postponements were communicated, suggested either that part of the bureaucracy was in disarray or that China’s economy was in worse shape than most people had realized. It also raised questions about the reliability of the data.“It’s a horrible blunder,” said Taisu Zhang, a Yale University law professor who specializes in comparative legal and economic history. “I don’t know if they are massaging the numbers — even if they need to massage the figures, the better thing to do would be to massage them within the usual time frame.”Beijing set a target in March that growth would be “about 5.5 percent” this year. Yet Western economists have estimated that China’s economy grew only a little more than 3 percent in the third quarter.That still would have been better than growth of 0.4 percent logged in the second quarter, when Shanghai was locked down for two months to stamp out a Covid-19 outbreak.Mr. Xi has put a premium on social stability and national security, often with actions that have had a side effect of slowing economic growth and employment. Regulators have clamped down on the tech sector, contributing to widespread layoffs among young employees. Dozens of the country’s private property developers have defaulted on debts this year after Beijing discouraged real estate speculation. Tycoons have been fleeing the country. Municipal lockdowns to stop outbreaks of Covid-19 have taken a heavy toll.A commercial and office complex in Beijing. China’s refusal to provide data on its economy suggests that it could be in worse shape than most people had realized.Gilles Sabrié for The New York TimesQuestions have long been raised about whether China’s economic growth statistics may be inflated somewhat or smoothed from one year to the next. But until recently China had also released more granular data that made it possible to draw conclusions about the economy’s overall health.One such measure is the rising value of new office complexes, rail lines and other investment projects. But last year, China stopped releasing data on inflation in construction costs.That has made it hard to calculate the true value of the new investments, said Diana Choyleva, chief economist at Enodo Economics, a London consulting firm. So while the total money invested is still available, it is no longer clear what that money is buying.Underlying data had been available for China’s international trade, its main engine of growth. But growing inconsistencies started to become apparent over the summer.China’s General Administration of Customs reported sharp increases through August in exports to the United States and Europe. But the number of containers leaving Chinese ports for these destinations was flat.Average prices charged by factories in China to wholesalers have been little changed. Few economists think that China is earning more money from exports through inflation. The plateau in containers even as export statistics are rising is consistent with previous periods of economic weakness in China, as exporters exaggerate the value of their shipments to customs officials as part of complex strategies to move money out of China.There are other signs that actual exports of goods are now in trouble. Taiwan has very similar trade patterns to mainland China, and on Oct. 7, Taiwan reported a sharp, unexpected drop in its imports and exports during September.The cost of shipping each container from China to the United States or Europe has also fallen steeply over the past year. It dropped much further in September. The cost of loading a container onto a ship in eastern China for delivery to Los Angeles has plunged by more than half this year, according to Container xChange, an online container logistics platform. This suggests few factories are bidding for space aboard ships.Cargo ships loading containers at the port on the Beijing-Hangzhou Canal. The cost of shipping from China to the United States or Europe has fallen steeply over the past year. Alex Plavevski/EPA, via Shutterstock“The retailers and the bigger buyers or shippers are more cautious about the outlook on demand and are ordering less,” said Christian Roeloffs, the chief executive and co-founder of Container xChange.Another problem is that even when China releases data, it sometimes provides less explanation now of how the data is calculated. Derek Scissors, a senior fellow specializing in China and India at the American Enterprise Institute in Washington, said he used to be able to get answers from Chinese officials on how certain investment statistics were calculated. But in the past couple of years, they are no longer willing to discuss their data.Monday’s postponement of the release of economic data had little discernible effect on Chinese financial markets on Tuesday. Share prices rose sharply in Hong Kong as a change in British tax policy preceded a global rally in stock markets. The Shanghai and Shenzhen stock markets, more insulated from international events and also heavily managed by the Chinese authorities, were little changed.But delays can have a corrosive effect on China’s image in financial markets.“If delays start to become a regular occurrence,” said Julian Evans-Pritchard, the senior China economist at Capital Economics, “then that could reduce confidence in the official economic data and the professionalism of China’s bureaucracy.” More
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With New Crackdown, Biden Wages Global Campaign on Chinese Technology
U.S. officials pushed to choke off China’s access to critical semiconductor technology after internal debates and tough negotiations with allies.WASHINGTON — In conversations with American executives this spring, top officials in the Biden administration revealed an aggressive plan to counter the Chinese military’s rapid technological advances.China was using supercomputing and artificial intelligence to develop stealth and hypersonic weapons systems, and to try to crack the U.S. government’s most encrypted messaging, according to intelligence reports. For months, administration officials debated what they could do to hobble the country’s progress.They saw a path: The Biden administration would use U.S. influence over global technology and supply chains to try to choke off China’s access to advanced chips and chip production tools needed to power those abilities. The goal was to keep Chinese entities that contributed to potential threats far behind their competitors in the United States and in allied nations.The effort, no less than what the Americans carried out against Soviet industries during the Cold War, gained momentum this year as the United States tested powerful economic tools against Russia as punishment for its invasion of Ukraine, and as China broke barriers in technological development. The Russian offensive and Beijing’s military actions also made the possibility of a Chinese invasion of Taiwan seem more real to U.S. officials.The administration’s concerns about China’s tech ambitions culminated last week in the unveiling of the most stringent controls by the U.S. government on technology exports to the country in decades — an opening salvo that would ripple through global commerce and could frustrate other governments and companies outside China.In a speech on Wednesday on the administration’s national security strategy, Jake Sullivan, the national security adviser, talked about a “small yard, high fence” for critical technologies.“Choke points for foundational technologies have to be inside that yard, and the fence has to be high because these competitors should not be able to exploit American and allied technologies to undermine American and allied security,” he said.This account of how President Biden and his aides decided to wage a new global campaign against China, which contains previously unreported details, is based on interviews with two dozen current and former officials and industry executives. Most spoke on the condition of anonymity to discuss deliberations.The measures were particularly notable given the Biden administration’s preference for announcing policies in tandem with allies to counter rival powers, as it did with sanctions against Russia.With China, the administration spent months in discussions with allies, including the Dutch, Japanese, South Korean, Israeli and British governments, and tried to persuade some of them to issue restrictions alongside the United States.But some of those governments have been hesitant to cut off important commerce with China, one of the world’s largest technology markets. So the Biden administration decided to act alone, without public measures from allies.More on the Relations Between Asia and the U.S.Taiwan: American officials are intensifying efforts to build a giant stockpile of weapons in Taiwan in case China blockades the island as a prelude to an attempted invasion, according to current and former officials.North Korea: Pyongyang fired an intermediate range ballistic missile over Japan for the first time since 2017, when Kim Jong-un seemed intent on escalating conflict with Washington. But the international landscape has changed considerably since then.A Broad Partnership: The United States and 14 Pacific Island nations signed an agreement at a summit in Washington, putting climate change, economic growth and stronger security ties at the center of an American push to counter Chinese influence.South Korea: President Yoon Suk Yeol has aligned his country more closely with the United States, but there are limits to how far he can go without angering China or provoking North Korea.Gregory C. Allen, a former Defense Department official who is now at the Center for Strategic and International Studies, said the move came after consultation with allies but was “fundamentally unilateral.”“In weaponizing its dominant choke-point positions in the global semiconductor value chain, the United States is exercising technological and geopolitical power on an incredible scale,” he wrote in an analysis.The package of restrictions allows the administration to cut off China from certain advanced chips made by American and foreign companies that use U.S. technology.President Biden visited an IBM factory in Poughkeepsie, N.Y., last week.Erin Schaff/The New York TimesU.S. officials described the decision to push ahead with export controls as a show of leadership. They said some allies wanted to impose similar measures but feared retaliation from China, so the rules from Washington that encompass foreign companies did the hard work for them.Other rules bar American companies from selling Chinese firms equipment or components needed to manufacture advanced chips, and prohibit Americans and U.S. companies from giving software updates and other services to China’s cutting-edge chip factories.The measures do not directly restrict foreign makers of semiconductor equipment from selling products to China. But experts said the absence of the American equipment would most likely impede China’s nascent industry for making advanced chips. Eventually, though, that leverage could fade as China develops its own key production technologies.Some companies have chafed at the idea of losing sales in a lucrative market. In a call with investors in August, an executive at Tokyo Electron in Japan said the company was “very concerned” that restrictions could prevent its Chinese customers from producing chips. ASML, the Dutch equipment maker, has expressed criticisms.Chinese officials called the U.S. restrictions a significant step aimed at sabotaging their country’s development. The move could have broad implications — for example, limiting advances in artificial intelligence that propel autonomous driving, video recommendation algorithms and gene sequencing, as well as quashing China’s chip-making industry. China could respond by punishing foreign companies with operations there. And the way Washington is imposing the rules could strain U.S. alliances, some experts say.Top officials in the Biden administration have an aggressive plan to counter the Chinese military’s rapid technological advances.Kevin Frayer/Getty Images“Sanctions that put the United States at odds with its allies and partners today will both undercut their effectiveness and make it harder to enroll a broad coalition of states in U.S. deterrence efforts,” said Jessica Chen Weiss, a professor of government at Cornell University and a recent State Department official.Others have argued that the moves did not come soon enough. For years, U.S. intelligence reports warned that American technology was feeding China’s efforts to develop advanced weapons and surveillance networks that police its citizens.Last October, the intelligence community began highlighting the risks posed by Chinese advances in artificial intelligence, quantum computing and semiconductors in meetings with industry and government officials..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}What we consider before using anonymous sources. Do the sources know the information? What’s their motivation for telling us? Have they proved reliable in the past? Can we corroborate the information? Even with these questions satisfied, The Times uses anonymous sources as a last resort. The reporter and at least one editor know the identity of the source.Learn more about our process.Mr. Sullivan and other officials began pushing to curb sales of semiconductor technology, according to current and former officials and others familiar with the discussions.But some officials, including Commerce Secretary Gina Raimondo and her deputies, wanted to first secure the cooperation of allies. Starting late last year, they said in meetings that by acting alone, the United States risked harming its companies without doing much to stop Chinese firms from buying important technology from foreign competitors.The Trump administration announced restrictions on the Chinese tech giant Huawei and singled out the company as a threat to national security.Qilai Shen for The New York TimesA Diplomatic PushEven as the Trump administration took some aggressive actions against Chinese technology, like barring international shipments to Huawei, it began quiet diplomacy on semiconductor production equipment. U.S. officials talked with their counterparts in Japan and then the Netherlands — countries where companies make critical tools — on limiting exports to China, said Matthew Pottinger, a deputy national security adviser in the Trump administration.Biden administration officials have continued those talks, but some negotiations have been difficult. U.S. officials spent months trying to persuade the Netherlands to prevent ASML from selling older lithography machines to Chinese semiconductor companies, but they were rebuffed.U.S. officials carried out separate negotiations with South Korea, Taiwan, Israel and Britain on restricting the sale and design of chips.Outside of the diplomacy, there was increasing evidence that a tool the United States had used to restrict China’s access to technology had serious flaws. Under President Donald J. Trump, the United States added hundreds of companies to a so-called entity list that prohibited American companies from selling them sensitive products without a license.But each listing was tied to a specific company name and address, making it relatively easy to evade the restrictions, said Ivan Kanapathy, a former China director for the National Security Council.Current and former U.S. officials suspect the Chinese military and previously sanctioned Chinese companies, including Huawei, have tried to gain access to restricted technology through front companies. Huawei declined to comment.Huawei could soon face additional restrictions: The Federal Communications Commission is expected to vote in the coming weeks on rules that would block the authorization of new Huawei equipment in the United States over national security concerns.Biden officials also believed the restrictions issued by the Trump administration against Semiconductor Manufacturing International Corporation, a major Chinese chip maker known as SMIC, had been watered down by industry and were allowing too many sales to continue, people familiar with the matter said.In a call with heads of American semiconductor equipment makers in March, Mr. Sullivan said that the United States was no longer satisfied with the status quo with China, and that it was seeking to freeze Chinese technology, said one executive familiar with the discussion.Mr. Sullivan, who had dialed into the call alongside Ms. Raimondo and Brian Deese, the director of the National Economic Council, told executives from KLA, Applied Materials and Lam Research that rules restricting equipment shipments to China would be done with allies, the executive said.In a statement, the National Security Council said the measures were “consistent with the message we delivered to U.S. executives because the administration has controlled only tools made by U.S. companies where there is no foreign competitor.”A semiconductor plant in Suining, China. The Biden administration took action in August to clamp down on the country’s semiconductor industry.Zhong Min/Feature China/Future Publishing, via Getty ImagesBreakthrough in ChinaAs negotiations with allied governments continued, experts at the Commerce, Defense, Energy and State Departments spent months poring over spreadsheets listing dozens of semiconductor tools made by U.S. companies to determine which could be used for advanced chip production and whether companies in Japan and the Netherlands produced comparable equipment.Then in July came alarming news. A report emerged that SMIC had cleared a major technological hurdle, producing a semiconductor that rivaled some complex chips made in Taiwan.The achievement prompted an explosion of dissatisfaction in the White House and on Capitol Hill with U.S. efforts to restrain China’s technological advancement.The Biden administration took action in August to clamp down on China’s semiconductor industry, sending letters to equipment manufacturers and chip makers barring them from selling certain products to China.Last week, the administration issued the rules with global reach.Companies immediately began halting shipments to China. But U.S. officials said they would issue licenses on a case-by-case basis so some non-Chinese companies could continue supplying their Chinese facilities with support and components. Intel, TSMC, Samsung and SK Hynix said they had received temporary exemptions to the rules.The controls could be the beginning of a broad assault by the U.S. government, Mr. Pottinger said.“The Biden administration understands now that it isn’t enough for America to run faster — we also need to actively hamper the P.R.C.’s ambitions for tech dominance,” he said, referring to the People’s Republic of China. “This marks a serious evolution in the administration’s thinking.”Julian Barnes More
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Biden Administration Clamps Down on China’s Access to Chip Technology
The White House issued sweeping restrictions on selling semiconductors and chip-making equipment to China, an attempt to curb the country’s access to critical technologies.WASHINGTON — The Biden administration on Friday announced sweeping new limits on the sale of semiconductor technology to China, a step aimed at crippling Beijing’s access to critical technologies that are needed for everything from supercomputing to guiding weapons.The moves are the clearest sign yet that a dangerous standoff between the world’s two major superpowers is increasingly playing out in the technological sphere, with the United States trying to establish a stranglehold on advanced computing and semiconductor technology that is essential to China’s military and economic ambitions.The package of restrictions, which was released by the Commerce Department, is designed in large part to slow the progress of Chinese military programs, which use supercomputing to model nuclear blasts, guide hypersonic weapons and establish advanced networks for surveilling dissidents and minorities, among other activities.Alan Estevez, the under secretary of commerce for industry and security, said his bureau was working to prevent China’s military, intelligence and security services from acquiring sensitive technologies with military applications.“The threat environment is always changing, and we are updating our policies today to make sure we’re addressing the challenges posed by the P.R.C. while we continue our outreach and coordination with allies and partners,” he said, referring to the People’s Republic of China.Technology experts said the rules appeared to impose the broadest export controls issued in a decade. While similar to the Trump administration’s crackdown on the telecom giant Huawei, the new rules are far wider in scope, affecting dozens of Chinese firms. And unlike the Trump administration’s approach — which was viewed as aggressive but scattershot — the rules appear to establish a more comprehensive policy that will stop cutting-edge exports to a range of Chinese technology companies and cut off China’s nascent ability to produce advanced chips itself.“It is an aggressive approach by the U.S. government to start to really impair the capability of China to indigenously develop certain of these critical technologies,” said Emily Kilcrease, a senior fellow at Center for a New American Security, a think tank.Companies will no longer be allowed to supply advanced computing chips, chip-making equipment and other products to China unless they receive a special license. Most of those licenses will be denied, though certain shipments to facilities operated by U.S. companies or allied countries will be evaluated case by case, a senior administration official said in a briefing Thursday.It remains to be seen whether the Chinese government will take action in response. Samm Sacks, a senior fellow at Yale Law School who studies technology policy in China, said the new rules could push Beijing to impose restrictions on American companies or firms from other countries that comply with U.S. rules but still want to maintain operations in China.“The question is: Would this new package cross a red line to trigger a response that we haven’t seen before?” she said. “A lot of people are anticipating it will. I think we’ll have to wait and see.”More on the Relations Between Asia and the U.S.Taiwan: American officials are intensifying efforts to build a giant stockpile of weapons in Taiwan in case China blockades the island as a prelude to an attempted invasion, according to current and former officials.North Korea: Pyongyang fired an intermediate range ballistic missile over Japan for the first time since 2017, when Kim Jong-un seemed intent on escalating conflict with Washington. But the international landscape has changed considerably since then.A Broad Partnership: The United States and 14 Pacific Island nations signed an agreement at a summit in Washington, putting climate change, economic growth and stronger security ties at the center of an American push to counter Chinese influence.South Korea: President Yoon Suk Yeol has aligned his country more closely with the United States, but there are limits to how far he can go without angering China or provoking North Korea.The measures come at a particularly sensitive moment for Beijing. Chinese leaders will hold a major political meeting beginning Oct. 16, where leader Xi Jinping is expected to secure a third leadership term, becoming the country’s longest-ruling leader since Mao Zedong.Liu Pengyu, a spokesman for the Chinese Embassy in Washington, said the United States was trying “to use its technological prowess as an advantage to hobble and suppress the development of emerging markets and developing countries.”“The U.S. probably hopes that China and the rest of the developing world will forever stay at the lower end of the industrial chain,” he added.The Chinese government has invested heavily in building up its semiconductor industry, but it still lags behind the United States, Taiwan and South Korea in its ability to produce the most advanced chips. In other fields, like artificial intelligence, China is no longer significantly behind the United States, but those technologies mostly rely on advanced chips that are designed or fabricated by non-Chinese firms.Jack Dongarra, a computer scientist at the University of Tennessee, said some of China’s most advanced supercomputers depended on chips made by California-based Intel or Taiwan Semiconductor Manufacturing Company, which uses U.S. technology in its production process and so would be subject to the new rules.The restrictions limit U.S. exports of high-tech chips called graphic processing units, which are used to power artificial intelligence applications, and place broad limits on chips destined for supercomputers in China. The rules also bar U.S.-based companies that make the equipment used to manufacture advanced logic and memory chips from selling that machinery to China without a license.Perhaps most significant, the Biden administration also imposed broad international restrictions that will prohibit companies anywhere in the world from selling chips used in artificial intelligence and supercomputing in China if they are made with U.S. technology, software or machinery. The restrictions used what is known as the foreign direct product rule, which was last deployed by former President Donald J. Trump to cripple Huawei.Another foreign direct product rule bans a broader range of products made outside the United States with American technology from being sent to 28 Chinese companies that have been placed on an “entity list” over national security concerns.Those companies include Beijing Sensetime Technology Development, a unit of a major Chinese artificial intelligence company, SenseTime. Also included are Dahua Technology, Higon, iFLYTEK, Megvii Technology, Sugon, Tianjian Phytium Information Technology, Sunway Microelectronics and Yitu Technologies, as well as a variety of labs and research institutions linked to universities and the Chinese government.In a briefing with reporters, senior administration officials said the measures would be limited to the most advanced chips and not have a broad commercial impact on private Chinese businesses. But they conceded that the limits could become more restrictive over time, given that technology will begin to outpace the advanced technological standards spelled out in the rules.Industry executives say many Chinese industries that rely on artificial intelligence and advanced algorithms power those abilities with American graphic processing units, which will now be restricted. Those include companies working with technologies like autonomous driving and gene sequencing, as well as the artificial intelligence company SenseTime and ByteDance, the Chinese internet company that owns TikTok.New limits on sales of chip-making equipment are also expected to clamp down on the operations of China’s homegrown chip makers, including Semiconductor Manufacturing International, Yangtze Memory Technologies and ChangXin Memory Technologies.The actual impact of the restrictions will hinge on how the policy is carried out. For most of the measures, the Commerce Department has the discretion to grant companies special licenses to continue selling the restricted products to China, though it said most would be denied.Some Republican lawmakers and China hawks have criticized the department for being too willing to issue such licenses, allowing U.S. companies to continue selling sensitive technology to China even when national security may be at stake.“If you want to stop it, you can just stop it,” said Derek Scissors, a senior fellow at the American Enterprise Institute. “When you create a licensing requirement, you are announcing to the world: We don’t want to stop it. We are just pretending.”With its vast ecosystem of factories, China continues to be a huge and lucrative market for U.S. chip exports. The tiny technologies are crucial to the smartphones, laptops, coffee makers, cars and other goods that Chinese factories pump out for domestic consumption and export to the world.Many American companies have long argued that their sales to China are an important source of revenue that allows them to reinvest in research and development and retain a competitive edge.But doing business with China has become much more fraught in the last few years, as the tensions between the United States and China have morphed into a cold war competition. The Chinese government has sought to blur the line between its defense sector and private industry, drawing on Chinese firms that specialize in fields including artificial intelligence, big data, aerospace technologies and quantum computing to fuel the country’s military modernization.Chinese military drills aimed at intimidating Taiwan, and China’s alignment with Moscow after the Russian invasion of Ukraine, have strengthened the case for technology regulation.Still, industry executives and some analysts argue that cutting China off from foreign chips will accelerate Beijing’s push to develop them itself and cause U.S. companies to lose out to foreign competitors, unless other countries also impose similar restrictions.The Semiconductor Industry Association said Friday that it was assessing the impact of the export controls on the industry and working with companies to ensure compliance.“We understand the goal of ensuring national security and urge the U.S. government to implement the rules in a targeted way — and in collaboration with international partners — to help level the playing field and mitigate unintended harm to U.S. innovation,” it said in a statement.In remarks last month, the Biden administration signaled that it would get tougher on technology regulation. Jake Sullivan, the national security adviser, said the U.S. government’s previous approach, of trying to stay a few generations ahead of competitors, was no longer sufficient.“Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible,” he said.Kevin Wolf, a partner at Akin Gump who led export control efforts during the Obama administration, said the move was “a fundamental shift in the use of export controls” to address broader national security objectives. Since the Cold War, most countries had used export controls more narrowly, focusing on regulating specific items that were necessary to produce or deploy weapons.Mr. Wolf said the new measures were likely to be highly effective in the short and medium term. “How effective they will be over the long term will be a function of whether allies ultimately agree to impose similar controls,” he added.Edward Wong More
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Shock Waves Hit the Global Economy, Posing Grave Risk to Europe
The threat to Europe’s industrial might and living standards is particularly acute as policymakers race to decouple the continent from Russia’s power sources.Russia’s invasion of Ukraine and the continuing effects of the pandemic have hobbled countries around the globe, but the relentless series of crises has hit Europe the hardest, causing the steepest jump in energy prices, some of the highest inflation rates and the biggest risk of recession.The fallout from the war is menacing the continent with what some fear could become its most challenging economic and financial crisis in decades.While growth is slowing worldwide, “in Europe it’s altogether more serious because it’s driven by a more fundamental deterioration,” said Neil Shearing, group chief economist at Capital Economics. Real incomes and living standards are falling, he added. “Europe and Britain are just worse off.”Several countries, including Germany, the region’s largest economy, built up a decades-long dependence on Russian energy. The eightfold increase in natural gas prices since the war began presents a historic threat to Europe’s industrial might, living standards, and social peace and cohesion. Plans for factory closings, rolling blackouts and rationing are being drawn up in case of severe shortages this winter.The risk of sinking incomes, growing inequality and rising social tensions could lead “not only to a fractured society but a fractured world,” said Ian Goldin, a professor of globalization and development at Oxford University. “We haven’t faced anything like this since the 1970s, and it’s not ending soon.”Other regions of the world are also being squeezed, although some of the causes — and prospects — differ.Gazprom, Russia’s state-owned energy company, said this week that it would not resume the flow of natural gas through its Nord Stream 1 pipeline until Europe lifted Ukraine-related sanctions.Hannibal Hanschke/EPA, via ShutterstockHigher interest rates, which are being deployed aggressively to quell inflation, are trimming consumer spending and growth in the United States. Still, the American labor market remains strong, and the economy is moving forward.China, a powerful engine of global growth and a major market for European exports like cars, machinery and food, is facing its own set of problems. Beijing’s policy of continuing to freeze all activity during Covid-19 outbreaks has repeatedly paralyzed large swaths of the economy and added to worldwide supply chain disruptions. In the last few weeks alone, dozens of cities and more than 300 million people have been under full or partial lockdowns. Extreme heat and drought have hamstrung hydropower generation, forcing additional factory closings and rolling blackouts.A troubled real estate market has added to the economic instability in China. Hundreds of thousands of people are refusing to pay their mortgages because they have lost confidence that developers will ever deliver their unfinished housing units. Trade with the rest of the world took a hit in August, and overall economic growth, although likely to outrun rates in the United States and Europe, looks as if it will slip to its slowest pace in a decade this year. The prospect has prompted China’s central bank to cut interest rates in hopes of stimulating the economy.Understand the Decline in U.S. Gas PricesCard 1 of 5Understand the Decline in U.S. Gas PricesGas prices are falling. More
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Climate Change Could Worsen Supply Chain Turmoil
A drought that has crippled economic activity in southwestern China hints at the kind of disruption that climate change could wreak on global supply chains.Chinese factories were shuttered again in late August, a frequent occurrence in a country that has imposed intermittent lockdowns to fight the coronavirus. But this time, the culprit was not the pandemic. Instead, a record-setting drought crippled economic activity across southwestern China, freezing international supply chains for automobiles, electronics and other goods that have been routinely disrupted over the past three years.Such interruptions could soon become more frequent for companies that source parts and products from around the world as climate change, and the extreme weather events that accompany it, continue to disrupt the global delivery system for goods in highly unpredictable ways, economists and trade experts warn.Much remains unknown about how the world’s rapid warming will affect agriculture, economic activity and trade in the coming decades. But one clear trend is that natural disasters like droughts, hurricanes and wildfires are becoming more frequent and unfolding in more locations. In addition to the toll of human injury and death, these disasters are likely to wreak sporadic havoc on global supply chains, exacerbating the shortages, delayed deliveries and higher prices that have frustrated businesses and consumers.“What we just went through with Covid is a window to what climate could do,” said Kyle Meng, an associate professor at the Bren School of Environmental Science and Management and the department of economics at the University of California, Santa Barbara.The supply chains that have stretched around the world in recent decades are studies in modern efficiency, whizzing products like electronics, chemicals, couches and food across continents and oceans at ever-cheaper costs.But those networks proved fragile, first during the pandemic and then as a result of Russia’s invasion of Ukraine, with companies struggling to source their goods amid factory and port shutdowns. With products in short supply, prices have spiked, fueling rapid inflation worldwide.The drought in southwestern China has also had ripple effects for global businesses. It drastically reduced hydropower production in the region, requiring power cuts to factories and scrambling supply chains for electronics, car parts and other goods. Volkswagen and Toyota curtailed production at nearby factories, as did Foxconn, which produces electronics, and CATL, a manufacturer of batteries for electric cars.The Yangtze River, which bisects China, dipped so low that the oceangoing vessels that typically traverse its upper reaches from the rainy summer into early winter could no longer run.Companies had to scramble to secure trucks to move their goods to Chinese ports, while China’s food importers hunted for more trucks and trains to carry their cargo into the country’s interior. The heat and drought have wilted many of the vegetables in southwestern China, causing prices to nearly double, and have made it hard for the surviving pigs and poultry to put on weight, driving up meat prices. Recent rainfall allowed power to be temporarily restored to houses and businesses in western China. But drought persists across much of central and western China, and reservoirs remain at a third of their usual level.Read More About Extreme WeatherHeat and Destruction: A heat dome over California sent temperatures to all-time highs, making it harder to fight the wildfires burning in various parts of the state.Big Hail: Hailstones of record size are falling left and right, and hailstorm damage is growing. But there is surprisingly little research to explain why.Water Crisis: Aging infrastructure and underinvestment have left many U.S. cities’ water systems in tatters. Now flooding and climate shocks are pushing them to failure.Flooding in South Asia: Amid a relentless monsoon season, deadly floods have devastated Pakistan and inundated Bengaluru, India’s Silicon Valley.That means less water not only for hydropower but also for the region’s chemical factories and coal-fired power plants, which need huge quantities of water for cooling.China even resorted to using drones to seed clouds with silver iodide in an attempt to trigger more rain, said Zhao Zhiqiang, the deputy director of the Weather Modification Center of the China Meteorological Administration, at a news conference on Tuesday.At the same time, the coronavirus, and China’s insistence on a zero-Covid policy, continue to pose supply chain risks by restricting movement in significant portions of the country. Last Thursday, Chinese authorities locked down Chengdu, a city of more than 21 million in southwestern China, to clamp down on coronavirus outbreaks.These frequent disruptions in Chinese manufacturing and logistics have added to concerns among global executives and policymakers that many of the world’s factories are far too geographically concentrated, which leaves them vulnerable to pandemics and natural disasters.The Biden administration, in a plan released Tuesday outlining how the United States intends to bolster its semiconductor industry, said the current concentration of chip-makers in Southeast Asia had left the industry vulnerable to disruptions from climate change, as well as pandemics and war.But setting up factories in other parts of the world to offset those risks could be costly, for both businesses and the consumers whom companies will pass their costs on to in the form of higher prices. Just as the pandemic has resulted in higher prices for consumers, Mr. Meng said, so could climate change, particularly if extreme weather affects large areas of the world at the same time.Companies could also face new costs from carbon taxes when shipping goods across borders, as well as higher transport costs for moving products by sea or air, experts say. Both ocean and airfreight are major producers of the gases contributing to climate change, accounting for about 5 percent of global carbon emissions. Companies in both sectors are quickly trying to find cleaner sources of fuel, but that transition is likely to require big investments that could drive up prices for their customers.Natural disasters and coronavirus lockdowns in China have been particularly painful, given that the country is home to much of the world’s manufacturing. But the United States has also felt the rising impacts from extreme weather.A multiyear drought in much of the Western United States has weighed on American agricultural exports. West Coast wildfires have jumbled logistics for companies like Amazon. Winter storms and power outages shut down semiconductor plants in Texas last year, adding to global chip shortages.A wildfire burned through farmland near Mulino, Ore.Kristina Barker for The New York TimesWhite House economists warned in a report this year that climate change would make future disruptions of the global supply chains more common, citing research showing that the global frequency of natural disasters had increased almost threefold in recent decades.“As networks become more connected, and climate change worsens, the frequency and size of supply-chain-related disasters rises,” the report said.The National Centers for Environmental Information, a federal agency, estimates that the number of billion-dollar disasters taking place in the United States each year has skyrocketed to an average of 20 in the last two years, including severe storms, cyclones and floods. In the 1980s, there were only about three per year.Academics say the effect of these disasters, and of higher temperatures in general, will be particularly obvious when it comes to food trade. Some parts of the world, like Russia, Scandinavia and Canada, could produce more grains and other food crops to feed countries as global temperatures rise.But those centers of production would be farther from hotter and more densely populated areas closer to the Equator. Some of those regions may struggle even more than they do now with poverty and food insecurity.One danger is that increasing competition for food could encourage countries to introduce protectionist policies that restrict or stop the export of food, as some have done in response to the pandemic and Russia’s invasion of Ukraine. These export restrictions allow a country to feed its own population, but tend to exacerbate international shortages and push up food prices, further aggravating the problem.The World Trade Organization, citing the damage that protectionist policies could pose, has urged countries to keep trade open to combat the negative effects of climate change.In a 2018 report, the W.T.O. pointed out that the global food trade was particularly vulnerable to disruptions in transportation that might occur as a result of climate change, like rising sea levels threatening ports or extreme weather degrading roads and bridges. More than half of globally traded grains pass through at least one of 14 global “choke points,” including the Panama Canal, the Strait of Malacca or the Black Sea rail network, the report said.Ngozi Okonjo-Iweala, the W.T.O.’s director general, has described trade as “a mechanism for adaptation and resilience” that can help countries deal with crop failure and natural disasters. In a speech in January, she cited economic models estimating that climate change was on track to contribute to severe malnutrition, with as many as 55 million people at risk by 2050 because of local effects on food production. But greater trade could cut that number by 35 million people, she said.“Trade is part of the solution to the challenges we face, far more than it is part of the problem,” Ms. Okonjo-Iweala said.Solomon Hsiang, the Chancellor’s Professor of Public Policy at the University of California, Berkeley, and a co-director of the Climate Impact Lab, agreed that trade might simultaneously make the world more resilient to these disasters and more vulnerable.In some situations, trade can help soften the effects of climate change — for example, allowing communities to import food when local crops fail because of a drought, he said.“That’s on the good side of the ledger,” Mr. Hsiang said. “But the bad side is, as everyone really acutely understands, we are so interconnected from our supply chains that events on one side of the world can dramatically impact people’s well-being elsewhere.” More
