International Trade and World Market

More stories

  • 150 Shares179 Views

    in Economy

    How AI and DNA Are Unlocking the Mysteries of Global Supply Chains

    by

    At a cotton gin in the San Joaquin Valley, in California, a boxy machine helps to spray a fine mist containing billions of molecules of DNA onto freshly cleaned Pima cotton.That DNA will act as a kind of minuscule bar code, nestling amid the puffy fibers as they are shuttled to factories in India. There, the cotton will be spun into yarn and woven into bedsheets, before landing on the shelves of Costco stores in the United States. At any time, Costco can test for the DNA’s presence to ensure that its American-grown cotton hasn’t been replaced with cheaper materials — like cotton from the Xinjiang region of China, which is banned in the United States because of its ties to forced labor.Amid growing concern about opacity and abuses in global supply chains, companies and government officials are increasingly turning to technologies like DNA tracking, artificial intelligence and blockchains to try to trace raw materials from the source to the store.Companies in the United States are now subject to new rules that require firms to prove their goods are made without forced labor, or face having them seized at the border. U.S. customs officials said in March that they had already detained nearly a billion dollars’ worth of shipments coming into the United States that were suspected of having some ties to Xinjiang. Products from the region have been banned since last June.Customers are also demanding proof that expensive, high-end products — like conflict-free diamonds, organic cotton, sushi-grade tuna or Manuka honey — are genuine, and produced in ethically and environmentally sustainable ways.That has forced a new reality on companies that have long relied on a tangle of global factories to source their goods. More than ever before, companies must be able to explain where their products really come from.A technician at Applied DNA Sciences testing samples to trace the raw materials.Johnny Milano for The New York TimesCotton samples that are being processed at the lab.Johnny Milano for The New York TimesThe task may seem straightforward, but it can be surprisingly tricky. That’s because the international supply chains that companies have built in recent decades to cut costs and diversify their product offerings have grown astonishingly complex. Since 2000, the value of intermediate goods used to make products that are traded internationally has tripled, driven partly by China’s booming factories.A large, multinational company may buy parts, materials or services from thousands of suppliers around the world. One of the largest such companies, Procter & Gamble, which owns brands like Tide, Crest and Pampers, has nearly 50,000 direct suppliers. Each of those suppliers may, in turn, rely on hundreds of other companies for the parts used to make its product — and so on, for many levels up the supply chain.To make a pair of jeans, for example, various companies must farm and clean cotton, spin it into thread, dye it, weave it into fabric, cut the fabric into patterns and stitch the jeans together. Other webs of companies mine, smelt or process the brass, nickel or aluminum that is crafted into the zipper, or make the chemicals that are used to manufacture synthetic indigo dye.“Supply chains are like a bowl of spaghetti,” said James McGregor, the chairman of the greater China region for APCO Worldwide, an advisory firm. “They get mixed all over. You don’t know where that stuff comes from.”Harvesting cotton in Xinjiang. Cotton from the region in China is banned in the United States because of its ties to forced labor.Getty ImagesGiven these challenges, some companies are turning to alternative methods, not all proven, to try to inspect their supply chains.Some companies — like the one that sprays the DNA mist onto cotton, Applied DNA Sciences — are using scientific processes to tag or test a physical attribute of the good itself, to figure out where it has traveled on its path from factories to consumer.Applied DNA has used its synthetic DNA tags, each just a billionth of the size of a grain of sugar, to track microcircuits produced for the Department of Defense, trace cannabis supply chains to ensure the product’s purity and even to mist robbers in Sweden who attempted to steal cash from A.T.M.s, leading to multiple arrests.MeiLin Wan, the vice president for textiles at Applied DNA, said the new regulations were creating a “tipping point for real transparency.”“There definitely is a lot more interest,” she added.The cotton industry was one of the earliest adopters of tracing technologies, in part because of previous transgressions. In the mid-2010s, Target, Walmart and Bed Bath & Beyond faced expensive product recalls or lawsuits after the “Egyptian cotton” sheets they sold turned out to have been made with cotton from elsewhere. A New York Times investigation last year documented that the “organic cotton” industry was also rife with fraud.In addition to the DNA mist it applies as a marker, Applied DNA can figure out where cotton comes from by sequencing the DNA of the cotton itself, or analyzing its isotopes, which are variations in the carbon, oxygen and hydrogen atoms in the cotton. Differences in rainfall, latitude, temperature and soil conditions mean these atoms vary slightly across regions of the world, allowing researchers to map where the cotton in a pair of socks or bath towel has come from.Other companies are turning to digital technology to map supply chains, by creating and analyzing complex databases of corporate ownership and trade.Farmers in India auction their cotton.Saumya Khandelwal for The New York TimesSome firms, for example, are using blockchain technology to create a digital token for every product that a factory produces. As that product — a can of caviar, say, or a batch of coffee — moves through the supply chain, its digital twin gets encoded with information about how it has been transported and processed, providing a transparent log for companies and consumers.Other companies are using databases or artificial intelligence to comb through vast supplier networks for distant links to banned entities, or to detect unusual trade patterns that indicate fraud — investigations that could take years to carry out without computing power.Sayari, a corporate risk intelligence provider that has developed a platform combining data from billions of public records issued globally, is one of those companies. The service is now used by U.S. customs agents as well as private companies. On a recent Tuesday, Jessica Abell, the vice president of solutions at Sayari, ran the supplier list of a major U.S. retailer through the platform and watched as dozens of tiny red flags appeared next to the names of distant companies.“We’re flagging not only the Chinese companies that are in Xinjiang, but then we’re also automatically exploring their commercial networks and flagging the companies that are directly connected to it,” Ms. Abell said. It is up to the companies to decide what, if anything, to do about their exposure.Studies have found that most companies have surprisingly little visibility into the upper reaches of their supply chains, because they lack either the resources or the incentives to investigate. In a 2022 survey by McKinsey & Company, 45 percent of respondents said they had no visibility at all into their supply chain beyond their immediate suppliers.But staying in the dark is no longer feasible for companies, particularly those in the United States, after the congressionally imposed ban on importing products from Xinjiang — where 100,000 ethnic minorities are presumed by the U.S. government to be working in conditions of forced labor — went into effect last year.Uyghur workers at a garment factory in the Xinjiang region of China in 2019.Gilles Sabrie for The New York TimesXinjiang’s links to certain products are already well known. Experts have estimated that roughly one in five cotton garments sold globally contains cotton or yarn from Xinjiang. The region is also responsible for more than 40 percent of the world’s polysilicon, which is used in solar panels, and a quarter of its tomato paste.But other industries, like cars, vinyl flooring and aluminum, also appear to have connections to suppliers in the region and are coming under more scrutiny from regulators.Having a full picture of their supply chains can offer companies other benefits, like helping them recall faulty products or reduce costs. The information is increasingly needed to estimate how much carbon dioxide is actually emitted in the production of a good, or to satisfy other government rules that require products to be sourced from particular places — such as the Biden administration’s new rules on electric vehicle tax credits.Executives at these technology companies say they envision a future, perhaps within the next decade, in which most supply chains are fully traceable, an outgrowth of both tougher government regulations and the wider adoption of technologies.“It’s eminently doable,” said Leonardo Bonanni, the chief executive of Sourcemap, which has helped companies like the chocolate maker Mars map out their supply chains. “If you want access to the U.S. market for your goods, it’s a small price to pay, frankly.”Others express skepticism about the limitations of these technologies, including their cost. While Applied DNA’s technology, for example, adds only 5 to 7 cents to the price of a finished piece of apparel, that may be significant for retailers competing on thin margins.And some express concerns about accuracy, including, for example, databases that may flag companies incorrectly. Investigators still need to be on the ground locally, they say, speaking with workers and remaining alert for signs of forced or child labor that may not show up in digital records.Justin Dillon, the chief executive of FRDM, a nonprofit organization dedicated to ending forced labor, said there was “a lot of angst, a lot of confusion” among companies trying to satisfy the government’s new requirements.Importers are “looking for boxes to check,” he said. “And transparency in supply chains is as much an art as it is a science. It’s kind of never done.” More

  • 100 Shares99 Views

    in Economy

    Biden’s Reluctant Approach to Free Trade Draws Backlash

    by

    A law intended to bolster clean energy manufacturing has ignited debate over whether the U.S. should work to break down international trade barriers — or keep them intact to protect American workers.WASHINGTON — Since President Biden came into office two years ago, the United States has declined to pursue new comprehensive free-trade agreements with other countries, arguing that most Americans have turned against the kind of pacts that promote global commerce but that also help to send factory jobs overseas.But in recent months, with the rollout of a sweeping climate bill intended to bolster clean energy manufacturing, the lack of free-trade agreements with some of America’s closest allies has suddenly become a major headache for the administration.The dispute, which centers on which countries can receive benefits under the Inflation Reduction Act, has caused significant rifts with foreign governments and drawn blowback from Congress. And it is helping to reignite a debate over whether the United States should be working to break down trade barriers with other countries — or keep them intact in an attempt to protect American workers.The law as written offers tax credits for electric vehicles that are built in North America or that are made with battery minerals from the United States and countries with which it has a free-trade agreement.Those provisions have angered allies in Europe and elsewhere that, despite close ties with America, do not actually have free-trade agreements with the United States. They have complained that companies in their countries would be put at a disadvantage to U.S. firms that can receive the subsidies. To soothe relations, the Biden administration has developed a complicated workaround, in which it is signing limited new trade deals with Japan and the European Union.But that solution has vexed lawmakers of both parties, who say that these agreements are not valid and that the administration needs to ask Congress to approve the kind of free-trade agreement the law envisions.“It’s a fix,” said Edward Alden, a senior fellow at the Council on Foreign Relations who specializes in trade, adding that they were not free-trade agreements “by any reasonable definition of the term.”The World Trade Organization defines a free-trade agreement as covering “substantially all trade” between countries. In the United States, such broad agreements need the approval of Congress, though the executive branch has the authority to negotiate much narrower agreements.Administration officials argue that because the Inflation Reduction Act does not define the term “free-trade agreement,” these narrower pacts are allowed. But in hearings before the House and the Senate last month, lawmakers criticized the administration for bypassing Congress in making these agreements.Some lawmakers argued for more traditional free-trade deals, while others voiced support for new deals with higher labor and environmental standards, like the North American agreement Congress approved in 2020.In hearings, Katherine Tai, the U.S. trade representative, highlighted efforts to raise global labor standards and decarbonize industries, and said she and her colleagues were “writing a new story on trade.”Mariam Zuhaib/Associated PressIn her opening statement at the hearings, Katherine Tai, the United States trade representative, set out a vision for a trade policy that was different from those of previous administrations, focused more on defending American workers from unfair foreign competition than opening up global markets. Ms. Tai said she and her colleagues were “writing a new story on trade” that would put working families first and reflect the interests of a wider cross section of Americans.Speaking before the Senate on Thursday, Ms. Tai said she remained “open minded” about doing more trade agreements if they would help address the challenges the country has today.The Biden administration has long insisted that past approaches to trade policy — in which other countries gained access to the U.S. market through low or zero tariffs — ended up hurting American workers and enriching multinational companies, which simply moved U.S. jobs and factories overseas. In contrast, Biden officials have pledged to strengthen the economy and to make the country more competitive with China by expanding the country’s infrastructure and manufacturing, rather than negotiating new trade deals.The administration is currently negotiating trade frameworks for the Indo-Pacific region and the Americas, and is engaging in trade talks with Taiwan, Kenya and other governments. But, to the dissatisfaction of some lawmakers in both parties, none of these agreements are expected to involve significantly opening up foreign markets by lowering tariffs, as more traditional trade deals have done..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-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve 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;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Representative Adrian Smith, a Nebraska Republican who leads the House Ways and Means trade subcommittee, said in the hearing that he was concerned the United States had “lost momentum on trade” even as China continued to aggressively broaden its own partnerships.“I cannot express strongly enough,” he added, “that the administration cannot just come up with new definitions of what a trade agreement is for some reason, and certainly not to give handouts for electric vehicles.”“You have to appreciate that we live in a very different world,” Ms. Tai responded. She said the Biden administration sought to adapt its policies to respond “to the world we’re living in, and not the world that we want to live in.”Part of the pressure stems from the fact that other countries — including China — are continuing to pursue more traditional trade deals that lower their tariffs with trading partners, giving their companies an advantage over businesses based elsewhere. On Friday, British officials announced that they had reached an agreement to join a Pacific trade pact that, despite being devised by the Obama administration, does not include the United States.Membership in the so-called Comprehensive and Progressive Agreement for Trans-Pacific Partnership will allow Britain to export products tariff-free to 11 other countries. With the inclusion of Britain, the pact will represent 15 percent of the global economy, British officials said.Jake Colvin, the president of the National Foreign Trade Council, a U.S. group that lobbies on behalf of major multinational companies, called the news “a stark reminder that the world isn’t waiting for the United States.”“While we congratulate the U.K. government for being part of this massive agreement, it’s frustrating to see America’s allies writing global rules and creating new market opportunities without the United States,” he said.Politicians of both parties have found support for free-trade agreements to be controversial in the United States in recent years. The Trans-Pacific Partnership — the original deal negotiated by the Obama administration with 11 other nations circling the Pacific Ocean — received criticism from labor unions and other progressive Democrats who said it would ship jobs overseas. Hillary Clinton opposed it as a candidate in the 2016 presidential election.As president, Donald J. Trump also criticized the deal and officially withdrew the United States from it in 2017. He also scrapped a negotiation over a comprehensive trade deal the Obama administration had been carrying out with the European Union.The Biden administration is trying to reach trade frameworks for the Indo-Pacific region and the Americas, but none of these agreements are expected to involve significantly opening up foreign markets by lowering tariffs.Coley Brown for The New York TimesMr. Trump went on to sign a series of limited trade deals with Japan and China without congressional approval. He also oversaw an update to the North American Free Trade Agreement that was ratified by Congress, which he named the U.S.-Mexico-Canada Agreement.Democrats also came to support that deal after adding significant protections for workers and the environment.Some trade experts have speculated that the Biden administration will try to build on the success of the U.S.M.C.A. by adding more nations to the pact, or by applying its terms to negotiations elsewhere. But so far, the Biden administration has not announced any such plans.Two top Democratic lawmakers focused on trade issued a statement last week criticizing the limited agreement the Biden administration had signed with Japan and urging officials to try to replicate the success of the U.S.M.C.A. by working with Congress to draft new deals with enforceable environmental and labor protections.“U.S.M.C.A. is a prime example of what’s possible when the executive and Congress collaborate, and its enforcement mechanisms should be the floor for future agreements,” Representative Richard E. Neal of Massachusetts, the top Democrat on the Ways and Means Committee, and Senator Ron Wyden, a Democrat of Oregon who leads the Finance Committee, said in the statement.Republicans have also been split over how aggressively to pursue new free-trade agreements. More traditional free-traders — like those from agricultural states that depend on exporting goods overseas — have been at odds with a growing populist contingent that favors industrial policy and trade barriers to protect American workers.Still, Kelly Ann Shaw, a partner with Hogan Lovells in Washington and a former economic adviser to the Trump administration, said that “the amount of inaction by the administration is doing a lot to unify Republicans” around pursuing more free-trade deals.“If you would ask me two years ago, I would have thought that Republicans were more split on this issue than they really are,” she said. “But it’s pretty clear that we’re losing out on opportunities by sitting on our hands and doing nothing.” More

  • 138 Shares99 Views

    in Economy

    Lawmakers Rebuke Biden for Bypassing Congress in Trade Deal With Japan

    by

    A statement from two Democrats called the Biden administration’s deal “unacceptable,” saying it should have been made available to Congress and the public for review.WASHINGTON — Lawmakers on Tuesday issued a sharp rebuke of a limited trade deal the Biden administration reached with Japan, saying that it should have been made available to Congress and the public for review and that it lacked important protections for the environment and workers.In a statement viewed by The New York Times, Representative Richard E. Neal of Massachusetts, the Democratic ranking member of the Ways and Means Committee, and Senator Ron Wyden, Democrat of Oregon and the chairman of the Finance Committee, called the agreement “unacceptable.”“Without enforceable environmental or labor protections, the administration abandons worker-centric trade policy and jeopardizes our climate work by opening the door for another environmental catastrophe,” wrote the lawmakers, who are the two most powerful Democrats in Congress on trade issues.“Agreements should be developed transparently and made available to the public for meaningful review well before signing,” they added, “not after the ink is already dry.”The Biden administration announced late Monday that it had reached an agreement with Japan over supplies of critical minerals like lithium, cobalt and nickel, which are used to make car batteries. The agreement provides a potential workaround for the Biden administration in its disagreement with allies over the terms of the Inflation Reduction Act, which invests $370 billion to transition the United States to cleaner cars and energy sources.That law has angered some allies who were excluded from its benefits, which include generous tax incentives for companies that make electric vehicles in North America or source material for batteries from the United States or countries with which it has a free-trade agreement. That category does not include Japan or European Union countries.But because the Inflation Reduction Act does not technically define what constitutes a free-trade agreement, U.S. officials have found what they believe to be a workaround. They are arguing that countries will be able to meet the requirement by signing a more limited trade deal instead. The Treasury Department is expected to issue a proposed rule this week clarifying the provisions of the law..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-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve 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;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.A fact sheet distributed late Monday by the Office of the United States Trade Representative said that the United States and Japan had promised to encourage higher labor and environmental standards for minerals that power electric vehicles. The parties also promised to promote more efficient use of resources and confer on how they review investments from foreign entities in the sector, among other pledges.In a call with reporters on Monday, a senior official said the Biden administration had consulted with Congress and received input from lawmakers. But the official said the administration had the authority to negotiate limited agreements without submitting them to Congress for approval.Katherine Tai, the United States trade representative, had been expected to sign the agreement on Tuesday.“It’s clear this agreement is one of convenience,” Mr. Neal and Mr. Wyden said in the statement. “As we warned Ambassador Tai last week, the administration does not have the authority to unilaterally enter into free trade agreements.”Administration officials have argued that key members of Congress always intended U.S. allies to be included in the law’s benefits. But other lawmakers have also criticized the Biden administration for sidestepping Congress’s authority over new trade deals, a tactic that the Trump administration also frequently used.In a statement on Tuesday, Representative Jason Smith, Republican of Missouri and the chairman of the Ways and Means Committee, said the agreement with Japan did not shift critical mineral supply chains from China.“Equally shameful is the fact that the Biden administration is distorting the plain text of U.S. law to write as many green corporate welfare checks as possible,” Mr. Smith said. “The administration has not been transparent with the American people and has ignored major concerns raised by Congress, including failing to provide an analysis of the effects this agreement would have on American workers.”Representative Dan Kildee, Democrat of Michigan, said on Tuesday that the administration was taking the wrong approach with the deal.“I believe the administration must come to Congress if they want to enter new free trade pacts,” he said in a statement. More

  • 138 Shares189 Views

    in Economy

    Global Economy May Be in a ‘Lost Decade,’ World Bank Warns

    by

    Adding to crises like the pandemic, recent stress in the banking system is a new threat to world growth, experts at the organization said.WASHINGTON — The World Bank warned on Monday that the coronavirus pandemic and Russia’s war in Ukraine had contributed to a decline in the global economy’s long-term growth potential, leading to what could be a “lost decade” that would mean more poverty and fewer resources to combat the impact of climate change.The warning comes as the world deals with overlapping crises — a pandemic that crippled economies and strained public health systems and Russia’s invasion of Ukraine, which disrupted global supply chains and hurt international trade ties. The threat of a more protracted slump coincides with new signs of stress in the world’s financial system as a series of banking crises threaten to undermine economic growth.The World Bank projected in a new report that average potential global output is poised to fall to a 30-year low of 2.2 percent per year between 2023 and 2030. That would be a sharp decline from 3.5 percent per year during the first decade of this century.The falloff will be even more pronounced for developing economies, which grew at an average annual rate of 6 percent from 2000 to 2010; that rate could decline to 4 percent this decade.“A lost decade could be in the making for the global economy,” said Indermit Gill, the World Bank’s chief economist and senior vice president for development economics. “The ongoing decline in potential growth has serious implications for the world’s ability to tackle the expanding array of challenges unique to our times — stubborn poverty, diverging incomes and climate change.”Officials at the World Bank said the “golden era” of development appeared to be coming to an end. They warned that policymakers would need to get more creative as they tried to address global challenges without being able to rely on the rapid economic expansions of countries such as China, which has long been an engine of worldwide growth.They suggested that international monetary and fiscal policy frameworks should be more closely aligned, and that world leaders needed to find ways to reduce trade costs and increase their labor force participation. A return to faster growth, they said, will not be easy.Kristalina Georgieva, the managing director of the International Monetary Fund, said on Sunday that “risks to financial stability have increased.”Jing Xu/Reuters“It will take a herculean collective policy effort to restore growth in the next decade to the average of the previous one,” the World Bank said in the report.The increasing frequency of global crises continues to weigh on output even as signs of an economic rebound emerge. Efforts by central banks to tame inflation by raising interest rates have fueled turmoil in the banking sector, leading to the failures of Silicon Valley Bank and Signature Bank in the United States this month and the rescue of Credit Suisse by UBS.Top economic officials have been watching to see if the strain on the banking system will become a significant economic headwind that could tip the United States into a recession.“It definitely brings us closer right now,” Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said of a recession on the CBS program “Face the Nation” on Sunday. “What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch.”Kristalina Georgieva, the managing director of the International Monetary Fund, said on Sunday that “risks to financial stability have increased” and that given high levels of uncertainty, policymakers must remain vigilant. She noted that the recent turmoil could have implications for the I.M.F.’s global economic outlook and financial stability report, which will be released in the next few weeks.“At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates — necessary to fight inflation — inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies,” Ms. Georgieva said at the China Development Forum.The I.M.F. said in January that it believed a global recession could be avoided as growth began to rebound later this year. At the time, it projected that output would be more resilient than previously anticipated, and it upgraded its growth projections for 2023 and 2024, but it did warn that “financial stability risks remain elevated.”World Bank officials said that if the current banking turmoil spiraled into a financial crisis and recession, then global growth projections might be even weaker because of the associated losses of jobs and investment.“However you look at it, if the current situation gets worse and turns into a recession, especially a recession at the global level, that could have negative implications for long-term growth prospects,” said Ayhan Kose, director the World Bank’s Prospects Group and the lead author of the report. More

  • 113 Shares99 Views

    in Economy

    Support Grows to Have Russia Pay for Ukraine’s Rebuilding

    by

    Although U.S. officials have cautioned against seizing Russia’s reserves in foreign banks, others say it’s “crazy” not to after Moscow’s war of aggression.When the World Bank released its latest damage assessment of war-torn Ukraine this week, it announced that the price of recovery and rebuilding had grown to $411 billion. What it didn’t say, though, was who would pay for it.To Ukraine, the answer seems obvious: Confiscate the roughly $300 billion in Russian Central Bank assets that Western banks have frozen since the invasion last year. As the war grinds on, the idea has gained supporters.The European Union has already declared its desire to use the Kremlin’s bankroll to pay for reconstruction in Ukraine. At the urging of a handful of Eastern European and Baltic nations, the bloc convened a working group last month to assess the possibility of grabbing that money as well as frozen assets owned by private individuals who have run afoul of European sanctions.“In principle, it is clear-cut: Russia must pay for the reconstruction of Ukraine,” said Sweden’s prime minister, Ulf Kristersson, who holds the presidency of the Council of the European Union.At the same time, he noted, turning that principle into practice is fraught. “This must be done in accordance with E.U. and international law, and there is currently no direct model for this,” Mr. Kristersson said.The working group, which has a two-year mandate, is scheduled to meet in Brussels next week.Other top officials, in the United States and elsewhere, have sounded more skeptical. After visiting Kyiv last month, Treasury Secretary Janet L. Yellen reiterated her warnings of formidable legal obstacles. The Swiss government declared that confiscating private Russian assets from banks would violate Switzerland’s Constitution as well as international agreements.The legal debate is just one skein in the tangle of moral, political and economic concerns that the potential seizure of Russia’s reserves poses.Departing a Mass in Lviv, Ukraine. Some U.S. officials worry about side effects from seizing assets in order to rebuild the country. Maciek Nabrdalik for The New York TimesMs. Yellen and others have argued that seizing Russia’s accounts could undermine faith in the dollar, the most widely used currency for the world’s trade and transactions. Foreign nations might be more reluctant to keep money in U.S. banks or make investments, fearing that it could be seized. At the same time, experts worry that such a move could put American and European assets held in other countries at higher risk of expropriation in the future if there is an international dispute.There are also concerns that seizure would erode faith in the system of international laws and agreements that Western governments have championed most vocally.But Russia’s pummeling of Ukraine’s infrastructure, charges of war crimes against President Vladimir V. Putin, and the difficulty of squeezing Russia economically when demand for its energy and other exports remains high have helped the idea gain ground.Also, there is the uncomfortable realization that the cost of rebuilding Ukraine once the war is over will far outstrip the amount that even wealthy allies like the United States and Europe may be willing to give.The United States, the European Union, Britain and other allies have funneled billions of dollars into Ukraine’s war effort, as well as tanks, missiles, ammunition, drones and other military equipment. And this week the International Monetary Fund approved its biggest loan yet — $15.6 billion — just to keep Ukraine’s battered economy afloat.But public support for continued funding is not inexhaustible.“If it’s difficult to get funding now for maintaining the infrastructure or housing, why is it going to be easier to get funding later?” asked Tymofiy Mylovanov, the president of the Kyiv School of Economics and a former government minister.It’s hard enough for Ukraine to get money and equipment “while we are being killed,” Mr. Mylovanov said. “Once we’re not being killed, we’ll have difficulty getting anything.”Laurence Tribe, a university professor of constitutional law at Harvard, has argued that a 1977 law, the International Emergency Economic Powers Act, gives the U.S. president the authority to confiscate sovereign Russian assets and repurpose them for Ukraine.The U.S. authorities previously seized Iraqi and Iranian assets and redirected them to compensate victims of violence, settle lawsuits or provide financial assistance.Mr. Tribe concedes that calculations about the ripple effect on the dollar or invested assets will ultimately matter more to policymakers than legal ones. But he finds those broader political concerns unpersuasive.“It’s crazy to argue that it’s more destabilizing to have assets seized than to have wars of aggression,” Mr. Tribe said in an interview on Friday. “The survival of the global economy is far more threatened by the way Russia behaved” than by any financial retaliation.And, he added, taking billions of dollars is much more meaningful either as a deterrent or punishment than bringing war crime charges.A destroyed garage in Hostomel, a Kyiv suburb. Prominent Americans like Laurence Tribe and Lawrence Summers argue that seizing Russian assets would be the right thing to do.Emile Ducke for The New York TimesOther prominent voices in the United States have endorsed the notion. Lawrence H. Summers, a former Treasury secretary; Robert B. Zoellick, a former president of the World Bank and U.S. trade representative; and Philip D. Zelikow, a historian at University of Virginia and a former State Department counselor, made their case this week in an opinion piece in The Washington Post.“Transferring frozen Russian reserves would be morally right, strategically wise and politically expedient,” they wrote.A few countries in addition to Ukraine have taken steps to pry loose foreign assets owned by Russian individuals and entities and use the money for reconstruction. In December, the Canadian government began the process of seizing $26 million owned by the Russian oligarch Roman Abramovich after passing a law easing the forfeiture of private Russian assets from individuals who are under sanctions.A federal judge in Manhattan gave the go-ahead last month to confiscate $5.4 million from another Russian businessman facing sanctions, Konstantin Malofeev. And Estonia is also seeking to pass legislation that would give the government there similar powers.But Mr. Tribe, Mr. Summers and others argue that the main focus should be not on seizing private assets, which would be legally much more complicated and time-consuming, but on the hundreds of billions owned by Russia’s central bank.Wherever the money comes from, the bill keeps growing. Over the past year, Ukraine’s economy has shrunk by a third. The war has pushed more than seven million people into poverty, the World Bank reported, and reversed 15 years of development progress. More

  • 138 Shares189 Views

    in Economy

    U.S. and Europe Angle for New Deal to Resolve Climate Spat

    by

    American and European officials are trying to reach agreement on the outlines of a limited trade deal that could help resolve a major rift over America’s new climate legislation.WASHINGTON — American and European officials meeting in Washington this week are trying to agree on the outlines of a limited trade deal that would allow European companies to qualify for some of the benefits of the Biden administration’s new climate legislation, in a bid to assuage a major source of tension between the allies.The governments hope to announce their intention to begin negotiations over such an agreement as soon as Friday, when President Biden is set to meet with Ursula von der Leyen, the president of the European Commission, at the White House.American officials have also been carrying out similar conversations with the governments of Japan and the United Kingdom to see if some type of limited new agreement could be struck that would also offer Japanese and British companies certain benefits under the law.At the center of the debate is the Inflation Reduction Act, a $370 billion bill that President Biden signed last year to try to mitigate climate change by transforming U.S. power generation and the car industry. The bill offers generous tax credits to American consumers to purchase new and used electric vehicles, but it imposes tough restrictions on the types of vehicles that can benefit from these rules, in ways that disadvantage foreign carmakers.The law specifies that, to receive a tax credit, cars must be assembled in North America and source the material for their batteries from North America, or from countries with which the United States has a free-trade agreement. Despite close ties, the United States does not have a free-trade agreement with the European Union, Japan or the United Kingdom.The passage of the law has prompted harsh criticism from allies, who say companies in their countries will be penalized. European officials have been particularly outspoken, arguing that the bill comes at a delicate time for a European economy that is already contending with disruptions from the war in Ukraine and skyrocketing energy prices.The dispute has raised the prospect of a subsidy war between the United States and the European Union, and threatened to strain relations at a time when both sides are trying to maintain a united front against Russia.“I don’t think U.S. government officials anticipated this level of pushback and this level of disdain against this massive climate bill,” said Olga Khakova, the deputy director for European energy security at the Atlantic Council’s Global Energy Center. But she said emotions had now subsided a bit. “We are in this mode right now where we want to find a solution.”An electric Volkswagen at a factory in Germany. Despite close ties, the United States and the European Union do not have a free-trade agreement.Jens Schlueter/Agence France-Presse — Getty ImagesThe rift has set off a scramble within the U.S. government to try to scrape together some type of new trade deal that could be signed with allied governments to allow their companies to benefit from some of the law’s tax credits. With such an agreement, for example, a company based in the European Union could help to supply lithium, nickel or other battery materials for electric vehicles made in North America.A Treasury official said that any new trade agreements would be evaluated during a rule-making process to ensure that they comply with the critical mineral requirements in the legislation. The official pointed to Chinese control over critical mineral extraction as a reason for the need to make the supply chains of the United States and like-minded partners strong.A U.S. official said that the administration had been engaged in ongoing consultations with Congress, and that those briefings, and conversations with unions and private industry, would continue in the coming weeks.The Treasury Department, in a white paper published in December, said that the Inflation Reduction Act did not define the term “free trade agreement,” and that the Treasury secretary could identify additional free-trade agreements for the purposes of the critical-minerals requirement going forward.Treasury Secretary Janet L. Yellen said last month that the Biden administration was considering limited trade deals focused on critical minerals as a solution, and she suggested that these could be done without the approval of Congress. She emphasized that the intent of the law was not for the United States to steal jobs from Europe and that the law was meant to be aligned with the administration’s “friend-shoring” agenda..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-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve 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;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.“I think the word ‘free trade’ was meant to mean reliable friends and partners with whom we can feel we have secure supply chains,” Ms. Yellen said on the sidelines of the Group of 20 finance ministers meetings in India last month. “We’ve been very clear with Europe that this is not a subsidy war.”With input from the Office of the United States Trade Representative, officials from the Treasury Department have prepared a document spelling out what kind of deal would constitute a “free-trade agreement” for the purposes of the legislation, according to people familiar with the plans.It is not clear how quickly the solution could be completed, however, as the white paper said the Treasury Department and the Internal Revenue Service would seek public comment on “what criteria should be used to identify free-trade agreements for the purposes of the critical-minerals requirement.”In a briefing on Friday, a European official said Europe and the United States could announce by the end of this week a commitment to forge a new limited trade deal, most likely focused on supply chains for critical minerals. Unlike a traditional free-trade agreement, which entails reducing barriers to trade between partners, this agreement would not involve lowering tariffs on either side, and the parties would aim to flesh out the agreement in days or weeks, rather than months, the European official said.“I think the word ‘free trade’ was meant to mean reliable friends and partners with whom we can feel we have secure supply chains,” Treasury Secretary Janet L. Yellen said at the Group of 20 meeting last month.Aijaz Rahi/Associated PressThe official added that the agreement would need to be legally binding, and would still involve seeking some type of approval from European Union member states. In the United States, the agreement could come in the form of an executive order from the Biden administration, and without requiring the approval of Congress, the official suggested.One irony is that neither the European Union nor the United States is a major source of the critical minerals needed for electric vehicle batteries. But some officials have suggested that the partnership would form a foundation for a group that could be expanded over time to include countries with larger supplies of lithium, cobalt, nickel and other minerals.While analysts said a new deal with Europe could in practice satisfy the requirements of the law, it would not really resemble a free-trade agreement, as such agreements have come to be understood.Free-trade deals are legal agreements that the World Trade Organization defines as covering “substantially all trade” between countries, including a broad range of goods and, typically, services. They usually take years to negotiate and, in the United States, require the approval of Congress.Scott Lincicome, the director of general economics at the Cato Institute, said that the Biden administration’s authority to strike such trade pacts was questionable but that it was unlikely that anyone would try to mount a legal challenge to them.“Everyone in the room knows that this is not kosher, but there’s not really anything anybody can do about it,” Mr. Lincicome said.Political appetite for striking new free-trade deals has diminished in the United States in recent years, in part because of a perception that such pacts have helped multinational corporations move factories and jobs offshore.Efforts to strike expansive trade deals with Europe and a group of Asian countries during the Obama administration fizzled, in part because of that political opposition. During the Trump administration, the United States signed a series of limited trade deals with South Korea, Japan and China that were carried out through executive orders, not by congressional approval.Edward Alden, a senior fellow at the Council on Foreign Relations, said that the limited deal would mollify the Europeans, and that U.S.-E.U. economic relations were too important “to not allow the Europeans under the tent in some way or another.” But it could escalate complaints from other trading partners, like South Korea, that don’t feel as though their concerns have been taken care of, he said.South Korea already has a comprehensive free-trade agreement with the United States, but it has other criticisms of the climate law, centering on how the current terms exclude electric vehicles made by Hyundai from receiving tax credits. “Once you make accommodations for one, the pressure grows to make accommodations for others,” he said.It remains unclear how Congress will respond. Lawmakers have expressed concerns that the administration is not adhering to the law’s original intent of promoting U.S. manufacturing. Many also disapprove of efforts by the executive branch to bypass congressional authority in approving trade deals.But Democrats may also be sympathetic to the effort to smooth over relations with Europeans, and reluctant to reopen debate over their signature climate legislation. And at least one key lawmaker, Senator Joe Manchin III, Democrat of West Virginia, has said he didn’t realize that the European Union lacked a free-trade agreement with the United States in the first place.Still, the dispute has elicited some criticism that American officials are going to great lengths to mollify Europeans, especially given that the European Union imposes some trade barriers on the United States, like a relatively high tariff on imported U.S. cars.John G. Murphy, the senior vice president for international policy at the U.S. Chamber of Commerce, said it was his group’s view that the Biden administration should fight against various E.U. policies that discriminate against American companies “with the same doggedness European officials have brought to their complaints about the I.R.A.” More

  • 113 Shares189 Views

    in Economy

    U.S. to Challenge Mexican Ban on Genetically Modified Corn

    by

    The Biden administration said it would request talks with Mexico over a brewing trade fight.WASHINGTON — The Biden administration said on Monday that it would take initial steps toward challenging a ban that Mexico has placed on shipments of genetically modified corn from the United States, restrictions that have rankled farmers and threatened a profitable export.Mexico has planned to phase out the use of genetically modified corn, as well as an herbicide called glyphosate, by 2024. About 90 percent of corn grown in the United States is genetically modified.Senior administration officials have expressed concerns to the Mexican government about the measures for more than a year in virtual and in-person meetings, saying they could disrupt millions of dollars of agricultural trade and cause serious harm to U.S. producers. Mexico is the second-largest market for U.S. corn, after China.On Monday, U.S. officials said that they were requesting consultations over the issue with their Mexican counterparts under the terms of the United States-Mexico-Canada Agreement, which governs the terms of trade in North America. Biden officials said that parties to that agreement, which was signed in 2020, had committed to basing their regulation on scientific research, and that Mexico’s ban on genetically modified corn did not conform to those promises.The consultations are the first step in a process that could lead to the United States bringing a formal dispute against Mexico. The parties must meet to discuss the issue within 30 days, and, if the talks are not successful, the United States could turn to a separate dispute settlement procedure under the trade agreement. That process could result in the United States placing tariffs on Mexican products, if no other resolution can be reached.Senior officials with the Office of the United States Trade Representative said they were focused on finding a resolution through the talks at hand. But in a statement, the office said that it would “consider all options, including taking formal steps to enforce U.S. rights under the U.S.M.C.A.” if the issue was not resolved.Mexico bought more than 20 million metric tons of corn from the United States in the 2021-22 marketing year, which runs from September to August, according to the U.S. Department of Agriculture.The National Corn Growers Association has said that the impending ban would be “catastrophic” for American corn producers and Mexican consumers alike and undermine the principles of the trade agreement. The industry has maintained that bioengineered corn is safe for human consumption, contrary to health concerns cited by Mexican officials.Scientists, too, widely believe that genetically modified foods are safe, but consumers and Mexican officials remain wary of genetically modified crops.In a statement on Monday, the Mexican Ministry of Economy said its decree was aimed at ensuring that tortillas are made with native Mexican corn varieties, in an effort to ensure the biodiversity of the corn that is grown in the country. It said it would draw on data and evidence to demonstrate that the ban had not had an impact on commerce, and was consistent with the trade agreement.In the United States, the vast majority of corn planted has been bioengineered to be resistant to herbicides and insects. Bt corn, for example, contains a gene from a soil bacterium that kills the European corn borer, an insect that feeds on maize and other grasses.Corn can also be modified to be resistant to glyphosate, the most widely used herbicide in agriculture and lawn maintenance in the United States. Glyphosate-based products like Roundup are sprayed on fields, killing weeds and leaving the resistant crops intact.While the Environmental Protection Agency has said the herbicides pose no risk to human health, overuse can wreak ecological havoc in areas where natural plant species are not resistant to the chemical compound. Environmental groups have warned that glyphosate can be particularly deadly for pollinators like bees and butterflies.It is illegal to grow genetically modified corn in Mexico, where maize was first domesticated 8,700 years ago and where white corn is a staple crop. Supporters of Mexico’s ban worry that any imports of bioengineered corn would threaten native species, as the varieties can cross-pollinate.The Mexican government in February moved to soften its restrictions, saying it would allow genetically modified corn to be brought into the country for animal feed and industrial use, though not for human consumption. Tom Vilsack, the U.S. agriculture secretary, said he was “disappointed” in the decision.It also remains to be seen whether domestic corn production in Mexico is sufficient to replace imports, the eventual goal of the Mexican government. Last year, farmers in Mexico grew 27.3 million metric tons, about 38 percent below domestic demand. One analysis projected that, should the ban remain in place, corn costs could rise by 20 percent in Mexico and increase rates of food insecurity. More

  • 150 Shares99 Views

    in Economy

    How One Ukrainian Company Survived, and Thrived, Through a Year of War

    by

    It was exactly a year ago, and the Ukrainian pet food maker Kormotech had concluded its annual meeting. The mood was buoyant. Business was booming, the factory was running 24/7, and sales were projected to grow by double digits. “We had a beautiful budget,” Rostyslav Vovk, the company’s chief executive and founder, recalled almost dreamily.The next morning, air sirens sounded.Russia had invaded. Mr. Vovk called his top managers to meet at a nearby hotel, avoiding the company’s windowed seventh-floor headquarters in Lviv. They had a plan for what had been considered a very unlikely risk — Russian aggression — but it soon proved wholly inadequate.“We were not ready,” Mr. Vovk said. He closed the plant. Raw materials couldn’t get into the country, and deliveries headed abroad couldn’t get out. Staff from the besieged eastern part of the country needed to be evacuated. Employees were joining the military. And the company’s biggest export market, Belarus, was a close ally of Vladimir V. Putin, the Russian president.“We would make decisions,” Mr. Vovk said of that first week after the invasion, “and then the next morning, we would change all the information.”Like leaders at tens of thousands of companies throughout Ukraine, Mr. Vovk and his team were suddenly confronted with a new and bewildering responsibility: keeping a business going through the chaos and danger of war.For many, the task has proved impossible. Before the war, Ukraine’s private sector, including its huge steel and agricultural industries, accounted for 70 percent of the country’s gross domestic product, said Elena Voloshina, head of the International Finance Corporation in Ukraine. Eighty-three percent of businesses experienced losses related to the war, she said. Forty percent suffered direct damage, like a factory or store decimated by a missile, while 25 percent were in what is now occupied territory.Kormotech employs 1,300 people, some of whom had to be evacuated from the eastern part of Ukraine.Maciek Nabrdalik for The New York TimesLast year, Ukraine’s overall output plunged by nearly a third, wrecking the country’s economy and hampering its ability to battle Russian forces.Kormotech, a family-owned business with 1,300 employees worldwide, does not produce weapons or drones. It isn’t involved in supplying critically needed electricity, transport or fresh water to ravaged cities. But it employs people, produces income, earns foreign currency from exports, and contributes tax revenue that the government in Kyiv desperately needs to pay soldiers, repair power lines and buy medical equipment.A year later, Mr. Vovk and his management team have found reason to again celebrate. Mr. Vovk was back in his offices getting ready for the latest annual meeting with his staff — and some of their dogs, which are fixtures around the office and often serve as product taste testers. Despite the odds, business grew more than expected.The State of the WarBiden’s Kyiv Visit: President Biden traveled covertly to the besieged Ukrainian capital, hoping to demonstrate American resolve and boost shellshocked Ukrainians. But the trip was also the first of several direct challenges to President Vladimir V. Putin of Russia.Contrasting Narratives: In sharply opposed speeches, Mr. Biden said Mr. Putin bore sole responsibility for the war, while Mr. Putin said Russia had invaded in self-defense. But they agreed the war would not end soon.Nuclear Treaty: Mr. Putin announced that Russia would suspend its participation in the New START nuclear arms control treaty — the last major such agreement remaining with the United States.In the North: A different sort of war game is playing out in northern Ukraine, where Russian shelling is tying up thousands of Ukrainian troops that might otherwise defend against attacks farther south.Kormotech had a few things going for it. The company’s plant was outside Lviv in the westernmost part of the country, near the Polish border, one of the safest parts of Ukraine. The two factories in Prylbychi were able to reopen less than two weeks after the war began.An earlier decision to start an additional factory in Lithuania, which opened in 2020 and was operating around the clock, turned out to be a boon. It could continue smoothly producing and delivering tons of Kormotech’s Club 4 Paws, Optimeal, Miau and Gav brands.After a helter-skelter start, Mr. Vovk and his top managers reorganized. The company, which sells its products in 35 countries including the United States and Europe, had a little wiggle room because they had avoided just-in-time practices that eliminated backup inventory — a cost-cutting approach that had stymied so many companies worldwide during the pandemic. Kormotech routinely kept stock in its warehouses — at least a month and a half’s worth in Ukraine, two months in other countries in Europe and two and a half in the United States.Kormotech was able to recover from supply chain turmoil in part because it had routinely stocked its warehouses with up to two months of ingredients for its pet food.Maciek Nabrdalik for The New York TimesStill, Kormotech’s supply chain was disrupted. Before the war, roughly half its raw materials, like meat and chicken meal, came from abroad. Now border crossing delays and rising import prices had prompted a search for domestic producers. It found two that had never produced pet meal before and taught them what to do.Kateryna Kovaliuk, Kormotech’s chief reputation officer, emphasized that pet food standards could often be more exacting than food produced for people. During a recent tour of the Lviv plant, she picked up a few kibble-size bits chopped up from long ropelike strands of cat food fresh off the production line.“Try it,” she urged, before popping a couple of pieces in her mouth and smiling. “It’s good. It tastes like meat without salt.”As it turned out, the local producers, less than 40 miles from the plant, were not only cheaper but also didn’t have to be paid in precious foreign currency. Instead of buying 500 tons of meal from abroad, the company now buys 100 tons.Kormotech stepped up its purchase of Ukrainian grains and corn as well. The war and Russian blockade caused a drastic drop in grain exports, spiraling food prices and a global hunger crisis. But it also meant that domestic businesses like Kormotech could buy at a discount.Manufacturing the product was one hurdle; getting it delivered abroad was another. At a time when Ukraine has barred men under 60 from leaving the country, the trade ministry provided exemptions for delivery drivers.“We would make decisions, and then the next morning, we would change all the information,” Rostyslav Vovk, the chief executive of Kormotech, said of the first week after the invasion.Maciek Nabrdalik for The New York TimesBut the wait at the borders could extend from a few days to a few weeks. And with seaports mostly blocked, exporting remained an expensive and tricky problem.“No one knew where to go or how,” Mr. Vovk said. The first truck sent to Azerbaijan, he said, cost more than $8,000 — before the war, it was roughly $2,000.Domestic demand for its products stayed steady, but finding new export markets was another challenge. Belarus, which has allowed Russia to stage attacks from inside its border, represented 25 percent of Kormotech’s export market. The management team decided to pull out but needed to replace those customers.Supermarket chains, particularly in the Baltic countries and Poland, were eager to step in and replace Russian-made goods with Ukrainian ones.“For the first time in my life, ‘Made in Ukraine’ was a premium,” Mr. Vovk said. Previously, when the company appeared at international pet supply exhibitions, he said with a laugh, people were so unfamiliar with the country’s products, they would ask if the letters “u” and “k” referred to “the U.K.,” for the United Kingdom.Even so, good will extended only so far. Buyers wanted assurances that Kormotech’s products would keep flowing. So the company provided guarantees, setting up a warehouse in Poland with backup stocks of its 650 different products, outsourcing some production to facilities in Germany and Poland, and drawing up last-resort plans to move production out of Ukraine.The enormous growth in both the European and American markets means that the company’s sales are expected to increase to $155 million this year from $124 million. The main obstacle to expanding even more is capacity.Its growth in Europe and the United States is expected to propel Kormotech to a big revenue increase in 2023, an unlikely development after a year of war.Maciek Nabrdalik for The New York TimesKormotech scrapped plans for a new 92 million-euro factory because of uncertainty and the difficulty in getting financing. But it invested €5 million ($5.34 million) in the Prylbychi plant and €7 million ($7.5 million) in Lithuania.Of course, many businesses have not been as successful as Kormotech, either because their facilities were damaged or demand for their products was eviscerated when people fled the country, as well as by ravenous inflation and shrunken incomes. Mr. Vovk said the exodus of millions of mothers and children had left a friend’s diaper manufacturing business in tatters.A new report from the American Chamber of Commerce in Ukraine and McKinsey & Company found that only 15 percent of companies grew last year, while nearly half saw a decline in sales.Others have adapted by relocating to places like Lviv, or changing their output to fill new wartime demands, like the lingerie seamstresses who have switched to sewing cloth vests to fit body armor plates. Ukraine’s large and mobile information technology sector has also remained strong.Businesses are still struggling to adapt. Russian attacks on Ukraine’s power grids compelled Kormotech to buy two generators at €150,000 apiece, supersize versions of the small colorful units that noisily hum outside nearly every shop and cafe on Lviv’s streets.Now, the Russians are stepping up missile strikes. On a recent weekday, air raid alerts caused 200 plant workers to spend more than half of their 12-hour shift in a tunnel-like storage area about three paces wide that doubles as a bomb shelter.Vira Protsyk, who normally would be packing boxes, sat on one of the wooden benches that lined the 100-foot-long wall. “It’s a bit boring,” she said of the forced breaks. This was the second alert of the day. “I didn’t want to go to the shelter. I’d rather work.”Russia has stepped up its missile strikes, and on a recent weekday, plant workers had to seek safety in a storage area.Maciek Nabrdalik for The New York TimesYurii Shyvala contributed reporting. More