The Federal Reserve has embarked on an aggressive campaign to raise interest rates as it tries to tame the most rapid inflation in decades, an effort the central bank sees as necessary to restore price stability in the United States.
But what the Fed does at home reverberates across the globe, and its actions are raising the risks of a global recession while causing economic and financial pain in many developing countries.
Other central banks in advanced economies, from Australia to the eurozone, are also lifting rates rapidly to fight their inflation. And as the Fed’s higher interest rates attract money to the United States — pumping up the value of the dollar — emerging-market economies are being forced to raise their own borrowing costs to try to stabilize their currencies to the extent possible.
Altogether, it is a worldwide push toward more expensive money unlike anything seen before in the 21st century, one that is likely to have serious ramifications.
warned the damage could be particularly acute in poorer nations. Developing economies had already been dealing with a cost-of-living crisis because of soaring food and fuel prices, and now their American imports are growing steadily more expensive as the dollar marches higher.
The Fed’s moves have spurred market volatility and worries about financial stability, as higher rates elevate the value of the U.S. dollar, making it harder for emerging-market borrowers to pay back their dollar-denominated debt.
It is a recipe for globe-spanning turmoil and even recession. Despite that, the Fed is poised to continue raising interest rates. That’s because the Fed, like central banks around the world, is in charge of domestic economy goals: It’s supposed to keep inflation slow and steady while fostering maximum employment. While occasionally called “central banker to the world” because of the dollar’s foremost position, the Fed goes about its day-to-day business with its eye squarely on America.
loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.
What causes inflation? It can be the result of rising consumer demand. But inflation can also rise and fall based on developments that have little to do with economic conditions, such as limited oil production and supply chain problems.
Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains can lead to higher wages and job growth.
Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.
The threat facing the global economy — including the Fed’s role in it — is expected to dominate the conversation next week as economists and government officials convene in Washington for the annual meeting of the International Monetary Fund and World Bank.
In a speech at Georgetown University on Thursday, Kristalina Georgieva, the managing director of the I.M.F., offered a grim assessment of the world economy and the tightrope that central banks are walking.
“Not tightening enough would cause inflation to become de-anchored and entrenched — which would require future interest rates to be much higher and more sustained, causing massive harm on growth and massive harm on people,” Ms. Georgieva said. “On the other hand, tightening monetary policy too much and too fast — and doing so in a synchronized manner across countries — could push many economies into prolonged recession.”
Noting that inflation remains stubbornly high and broad-based, she added: “Central banks have to continue to respond.”
The World Bank warned last month that simultaneous interest-rate increases around the world could trigger a global recession next year, causing financial crises in developing economies. It urged central banks in advanced economies to be mindful of the cross-border “spillover effects.”
“To achieve low inflation rates, currency stability and faster growth, policymakers could shift their focus from reducing consumption to boosting production,” David Malpass, the World Bank president, said.
Trade and Development Report said.
So far, major central banks have shown little appetite for stopping their inflation-busting campaigns. The Fed, which has made five rate increases this year, has signaled that it plans to raise borrowing costs even higher. Most officials expect to increase rates by at least another 1.25 percentage points this year, taking the policy rate to a range of 4.25 to 4.5 percent from the current 3 to 3.25 percent.
Even economies that are facing a pronounced slowdown have been lifting borrowing costs. The European Central Bank raised rates three-quarters of a point last month, even though the continent is approaching a dark winter of slowing growth and crushing energy costs.
according to the World Bank. Food costs in particular have driven millions further into extreme poverty, exacerbating hunger and malnutrition. As the dollar surge makes a range of imports pricier for emerging markets, that situation could worsen, even as the possibility of financial upheaval increases.
“Low-income developing countries in particular face serious risks from food insecurity and debt distress,” Ngozi Okonjo-Iweala, director-general of the World Trade Organization, said during a news conference this week.
Understand Inflation and How It Affects You
In Africa, officials have been urging the I.M.F. and Group of 20 nations to provide more emergency assistance and debt relief amid inflation and rising interest rates.
“This unprecedented shock further destabilizes the weakest economies and makes their need for liquidity even more pressing, to mitigate the effects of widespread inflation and to support the most vulnerable households and social strata, especially young people and women,” Macky Sall, chairman of the African Union, told leaders at the United Nations General Assembly in September.
To be sure, central bankers in big developed economies like the United States are aware that they are barreling over other economies with their policies. And although they are focused on domestic goals, a severe weakening abroad could pave the way for less aggressive policy because of its implications for their own economic outlooks.
Waning demand from abroad could ease pressure on supply chains and reduce prices. If central bankers decide that such a chain reaction is likely to weigh on their own business activity and inflation, it may give them more room to slow their policy changes.
“The global tightening cycle is something that the Fed has to take into account,” said Megan Greene, global chief economist for the Kroll consulting firm. “They’re interested in what is going on in the rest of the world, inasmuch as it affects their ability to achieve their targets.”
his statement.
But many global economic officials — including those at the Fed — remain focused on very high inflation. Investors expect them to make another large rate increase when they meet on Nov. 1-2.
“We’re very attentive” to international spillovers to both emerging markets and advanced economies, Lisa D. Cook, a Fed governor, said during a question-and-answer session on Thursday. “But our mandate is domestic. So we’re very focused on inflation as it evolves in this country.”
Raghuram Rajan, a former head of India’s central bank and now an economist at the University of Chicago, has in the past pushed the Fed to take foreign conditions into account as it sets policy. He still thinks that measures like bond-buying should be pursued with an eye on global spillovers.
But amid high inflation, he said, central banks are required to pay attention to their own mandates to achieve price stability — even if that makes for a stronger dollar, weaker currencies and more pain abroad.
“The basic problem is that the world of monetary policy dances to the Fed’s tune,” Mr. Rajan said, later adding: “This is a problem with no easy solutions.”
FANGLIAO, Taiwan — Lin Chun-lai bought his grouper farm in southern Taiwan about a decade ago with an eye on mainland China’s growing appetite for live fish. In just a few years, the former electrician made enough money to comfortably support his family of four and even open a small inn.
Then China abruptly banned all imports of grouper from the island, in an apparent attempt at turning the economic screws on Taiwan, a self-governed island that Beijing claims as its own territory. The move cut Mr. Lin and other farmers like him off from their main market, putting their livelihoods at risk and dealing a huge blow to a lucrative industry.
Taiwan’s unification with China is inevitable, but most of Taiwan’s 23 million people are in favor of maintaining the island’s de facto independence. As Beijing has ramped up pressure on the island, Taiwan has moved to strengthen economic and diplomatic ties with friendlier countries, including the United States, those in the European Union and Japan.
In recent years, Beijing has sent military aircraft toward the island almost daily. It has tried to isolate Taiwan, peeling off its few remaining diplomatic allies and blocking it from joining international organizations. It has also increasingly sought to restrict the island’s access to China’s vast consumer market, banning Taiwanese pineapples, then wax apples, last year after it said the fruits brought in pests.
their ties to forced labor practices could portend trouble for industries that depend on materials from China.
In recent days, Taiwanese agricultural authorities have contacted grouper farmers to discuss ways that the government can help, including by providing low-interest loans and feed subsidies and expanding access to domestic consumers and overseas markets. Another idea being floated is to include the fish in individually packaged meal boxes sold at train stations and on trains by Taiwan’s railway administration. Taiwan’s Fisheries Agency said on Tuesday that the agency would spend more than $13 million to support the grouper industry.
Taiwan’s Council of Agriculture has said it would consider filing a complaint about the grouper ban to the World Trade Organization. Lin Kuo-ping, the deputy director general of the official Fisheries Agency, said the government had reached out to their Chinese counterparts to discuss the inspection process but had not heard back. China’s General Administration of Customs did not respond to an emailed request for comment.
Some grouper farmers said that if the ban was not lifted, they would have to settle for selling the fish on the domestic market at a huge loss. Until then, the fish will remain in the ponds. Mr. Lin, the grouper farmer, said he worried the groupers could die as a result of overcrowding.
He is now pinning his hopes on another kind of fish that he has been farming, the four-finger threadfin fish, which is also popular on the mainland. But he acknowledged that even this backup strategy was vulnerable to geopolitical shifts. Last year, Taiwan’s exports of the fish were worth nearly $40 million — and more than 70 percent went to China.
“Our biggest customer,” he said, “is still China.”
GENEVA, June 17 (Reuters) – The World Trade Organization agreed on the first change to global trading rules in years on Friday as well as a deal to boost the supply of COVID-19 vaccines in a series of pledges that were heavy on compromise.
The deals were forged in the early hours of the sixth day of a conference of more than 100 trade ministers that was seen as a test of the ability of nations to strike multilateral trade deals amid geopolitical tensions heightened by the Ukraine war.
Delegates, who had expected a four-day conference, cheered after they passed seven agreements and declarations just before dawn on Friday.
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Director-General Ngozi Okonjo-Iweala told them: “The package of agreements you have reached will make a difference to the lives of people around the world. The outcomes demonstrate that the WTO is in fact capable of responding to emergencies of our time.”
Earlier she had appealed to WTO members to consider the “delicate balance” required after nearly round-the-clock talks that have at times been charged with anger and accusations.
The package, which the WTO chief called “unprecedented”, included the two highest profile deals under consideration – on fisheries and on a partial waiver of intellectual property (IP) rights for COVID-19 vaccines.
The accord to curb fishing subsidies is only the second multilateral agreement on global trading rules struck in the WTO’s 27-year history and is far more ambitious than the first, which was designed to cut red tape.
At one stage, a series of demands from India, which sees itself as the champion of poor farmers and fishermen as well as developing countries, appeared set to paralyse talks but accommodations were found, trade sources said.
The WTO’s rules dictate that all decisions are taken by consensus, with any single member able to exercise a veto.
‘LOT OF BUMPS’
“It was not an easy process. There were a lot of bumps, just like I predicted. It was like a roller coaster, but in the end we got there,” an exhausted but elated Okonjo-Iweala told a final news conference.
World Trade Organization Director-General Ngozi Okonjo-Iweala delivers her speech during the closing session of a World Trade Organization Ministerial Conference at the WTO headquarters in Geneva, Switzerland June 17, 2022. Fabrice Coffrini/Pool via REUTERS
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The deal to ban subsidies for illegal, unreported and unregulated fishing or fishing of an over-fished stock has the potential to reverse collapsing fish stocks. Though pared back significantly, it still drew approval.
“This is a turning point in addressing one of the key drivers of global over-fishing,” said Isabel Jarrett, manager of The Pew Charitable Trusts’ campaign to reduce harmful fisheries subsidies.
Okonjo-Iweala said it was the first step after 21 years of talks towards what she hoped would be a more comprehensive deal.
The deal on a partial IP waiver to allow developing countries to produce and export COVID-19 vaccines has divided the WTO for nearly two years, but finally passed. It has also drawn the fiercest criticism from campaign groups that say it barely expands on an existing exemption in WTO rules and is too narrow by not covering therapeutics and diagnostics.
“Put simply, it is a technocratic fudge aimed at saving reputations, not lives,” said Max Lawson, co-chair of the People’s Vaccine Alliance.
The pharmaceutical industry was also critical of the deal, saying that there is currently a surplus of shots which governments and other authorities haven’t figured out how to distribute and administer.
“Rather than focus on real issues affecting public health, like solving supply chain bottlenecks or reducing border tariffs on medicines, they approved an intellectual property waiver on COVID-19 vaccines that won’t help protect people against the virus,” Stephen Ubl, President of the Pharmaceutical Research and Manufacturers of America (PhRMA), said in an emailed statement.
One agreement also reached was to maintain a moratorium on e-commerce tariffs, which business says is vital to allow the free flow of data worldwide. read more
Overall, many observers said the deals should boost the credibility of the WTO, which was weakened by former U.S. President Donald Trump’s crippling of its ability to intervene in trade disputes, and set it on a course for reform.
European Trade Commissioner Valdis Dombrovskis said the WTO meeting had clinched outcomes of global significance despite unprecedented challenges.
“The profound divergences here amply confirm that a deep reform of the organisation is urgently needed, across all its core functions,” he said, adding he would work to get it agreed at the next ministerial conference due in 2023.
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Writing by Emma Farge and Philip Blenkinsop; Editing by Richard Pullin, Raju Gopalakrishnan and Toby Chopra
Our Standards: The Thomson Reuters Trust Principles.
A general view of the room during the speech of Director-General of the World Trade Organisation (WTO) Ngozi Okonjo-Iweala at the opening ceremony of the 12th Ministerial Conference (MC12), at the World Trade Organization, in Geneva, Switzerland, June 12, 2022. Martial Trezzini/Pool via REUTERS
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India, formerly seen as a spoiler, expects more deals
GENEVA, June 16 (Reuters) – Major members of the World Trade Organization reached an initial deal on Thursday, winning over India which said it was confident more global accords could be achieved as negotiations on fishing, vaccines and food security entered their final hours.
Ministers from more than 100 countries convened at the global trade watchdog’s headquarters in Geneva this week for the first time in more than four years to agree new trade rules, a feat many thought unlikely in an era of high geopolitical tensions. read more
The body’s 164 members must all agree for new rules to pass, meaning that one member alone can block deals.
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During the June 12-15 meeting, extended into the evening of a fifth day on Thursday, that member has been India.
However, a provisional agreement to extend a moratorium on applying duties to electronic transmissions until at least 2023 was reached despite earlier opposition from New Delhi. read more
Indian Commerce Minister Piyush Goyal, who had struck a defiant stance on a range of topics earlier in the week, told journalists he expected more “solid decisions” to come.
New Delhi, which has a history of blocking multilateral negotiations, has previously stuck to long-held demands to maintain subsidies for fisheries and agriculture and pushed for extra reforms, trade sources said.
India maintains it is fighting to protect livelihoods in developing nations.
Delegates were more upbeat on Thursday about a package of deals with trade-offs possible, without specifying what the compromises would be. EU trade commissioner Valdis Dombrovskis tweeted that members were “getting closer”. WTO deputy director-general Anabel Gonzalez said she was “hopeful”.
Negotiators were in intense talks in the so-called ‘Green Room’ of the WTO for most of the night. U.S. Trade Representative Katherine Tai and Chinese Commerce Minister Wang Wentao were no longer in Geneva, trade sources said.
Negotiations resumed around 0700 GMT Thursday and were expected to conclude in the evening, they added.
One of the possible outcomes of the talks is a pared-back version of a deal designed to curb fishing subsidies that cause over-fishing, a document seen by Reuters showed.
Another is a partial waiver of intellectual property rights for COVID-19 vaccines designed to allow developing countries to produce them and pledges to ease the food security crisis although tussles over the precise wording continued, sources said.
WTO officials have maintained throughout the meetings a belief that deals can be reached, saying talks often look hopeless until a final bargain is reached.
Observers expressed frustration with the process.
“The ministerial (conference) laid bare the increasing dysfunction that inhibits collective action at the WTO,” said Jake Colvin, president of the National Foreign Trade Council, adding that members should not reward “obstructionism”.
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Reporting by Emma Farge; Additional reporting by Andrea Shalal in Washington and Philip Blenkinsop in Brussels; Editing by Raju Gopalakrishnan, Alison Williams, Elaine Hardcastle
Our Standards: The Thomson Reuters Trust Principles.
WASHINGTON — When the Cold War ended, governments and companies believed that stronger global economic ties would lead to greater stability. But the Ukraine war and the pandemic are pushing the world in the opposite direction and upending those ideas.
Important parts of the integrated economy are unwinding. American and European officials are now using sanctions to sever major parts of the Russian economy — the 11th largest in the world — from global commerce, and hundreds of Western companies have halted operations in Russia on their own. Amid the pandemic, companies are reorganizing how they obtain their goods because of soaring costs and unpredictable delays in global supply chains.
Western officials and executives are also rethinking how they do business with China, the world’s second-largest economy, as geopolitical tensions and the Chinese Communist Party’s human rights abuses and use of advanced technology to reinforce autocratic control make corporate dealings more fraught.
The moves reverse core tenets of post-Cold War economic and foreign policies forged by the United States and its allies that were even adopted by rivals like Russia and China.
“What we’re headed toward is a more divided world economically that will mirror what is clearly a more divided world politically,” said Edward Alden, a senior fellow at the Council on Foreign Relations. “I don’t think economic integration survives a period of political disintegration.”
“Does globalization and economic interdependence reduce conflict?” he added. “I think the answer is yes, until it doesn’t.”
Opposition to globalization gained momentum with the Trump administration’s trade policies and “America First” drive, and as the progressive left became more powerful. But the pandemic and President Vladimir V. Putin’s invasion of Ukraine have brought into sharp relief the uncertainty of the existing economic order.
President Biden warned President Xi Jinping of China on Friday that there would be “consequences” if Beijing gave material aid to Russia for the war in Ukraine, an implicit threat of sanctions. China has criticized sanctions on Russia, and Le Yucheng, the vice foreign minister, said in a speech on Saturday that “globalization should not be weaponized.” Yet China increasingly has imposed economic punishments — Lithuania, Norway, Australia, Japan and South Korea have been among the targets.
The result of all the disruptions may well be a fracturing of the world into economic blocs, as countries and companies gravitate to ideological corners with distinct markets and pools of labor, as they did in much of the 20th century.
Mr. Biden already frames his foreign policy in ideological terms, as a mission of unifying democracies against autocracies. Mr. Biden also says he is enacting a foreign policy for middle-class Americans, and central to that is getting companies to move critical supply chains and manufacturing out of China.
The goal is given urgency by the hobbling of those global links over two years of the pandemic, which has brought about a realization among the world’s most powerful companies that they need to focus on not just efficiency and cost, but also resiliency. This month, lockdowns China imposed to contain Covid-19 outbreaks have once again threatened to stall global supply chains.
The Chinese city of Shenzhen was shut down due to Covid concerns last week, threatening the global supply chain.Credit…Kin Cheung/Associated Press
The economic impact of such a change is highly uncertain. The emergence of new economic blocs could accelerate a massive reorganization in financial flows and supply chains, potentially slowing growth, leading to some shortages and raising prices for consumers in the short term. But the longer-term effects on global growth, worker wages and supplies of goods are harder to assess.
The war has set in motion “deglobalization forces that could have profound and unpredictable effects,” said Laurence Boone, the chief economist of the Organization for Economic Cooperation and Development.
For decades, executives have pushed for globalization to expand their markets and to exploit cheap labor and lax environmental standards. China especially has benefited from this, while Russia profits from its exports of minerals and energy. They tap into enormous economies: The Group of 7 industrialized nations make up more than 50 percent of the global economy, while China and Russia together account for about 20 percent.
Trade and business ties between the United States and China are still robust, despite steadily worsening relations. But with the new Western sanctions on Russia, many nations that are not staunch partners of America are now more aware of the perils of being economically tied to the United States and its allies.
If Mr. Xi and Mr. Putin organize their own economic coalition, they could bring in other nations seeking to shield themselves from Western sanctions — a tool that all recent U.S. presidents have used.
“Your interdependence can be weaponized against you,” said Dani Rodrik, a professor of international political economy at Harvard Kennedy School. “That’s a lesson that I imagine many countries are beginning to internalize.”
The Ukraine war, he added, has “probably put a nail in the coffin of hyperglobalization.”
China and, increasingly, Russia have taken steps to wall off their societies, including erecting strict censorship mechanisms on their internet networks, which have cut off their citizens from foreign perspectives and some commerce. China is on a drive to make critical industries self-sufficient, including for technologies like semiconductors.
And China has been in talks with Saudi Arabia to pay for some oil purchases in China’s currency, the renminbi, The Wall Street Journal reported; Russia was in similar discussions with India. The efforts show a desire by those governments to move away from dollar-based transactions, a foundation of American global economic power.
For decades, prominent U.S. officials and strategists asserted that a globalized economy was a pillar of what they call the rules-based international order, and that trade and financial ties would prevent major powers from going to war. The United States helped usher China into the World Trade Organization in 2001 in a bid to bring its economic behavior — and, some officials hoped, its political system — more in line with the West. Russia joined the organization in 2012.
But Mr. Putin’s war and China’s recent aggressive actions in Asia have challenged those notions.
“The whole idea of the liberal international order was that economic interdependence would prevent conflict of this kind,” said Alina Polyakova, president of the Center for European Policy Analysis, a research group in Washington. “If you tie yourselves to each other, which was the European model after the Second World War, the disincentives would be so painful if you went to war that no one in their right mind would do it. Well, we’ve seen now that has proven to be false.”
“Putin’s actions have shown us that might have been the world we’ve been living in, but that’s not the world he or China have been living in,” she said.
The United States and its partners have blocked Russia from much of the international financial system by banning transactions with the Russian central bank. They have also cut Russia off from the global bank messaging system called SWIFT, frozen the assets of Russian leaders and oligarchs, and banned the export from the United States and other nations of advanced technology to Russia. Russia has answered with its own export bans on food, cars and timber.
The penalties can lead to odd decouplings: British and European sanctions on Roman Abramovich, the Russian oligarch who owns the Chelsea soccer team in Britain, prevent the club from selling tickets or merchandise.
Ticket sales for Chelsea Football Club games were stopped after Britain and the European Union imposed sanctions on the club’s owner, Roman Abramovich, a Putin ally. Credit…Andy Rain/EPA, via Shutterstock
About 400 companies have chosen to suspend or withdraw operations from Russia, including iconic brands of global consumerism such as Apple, Ikea and Rolex.
While many countries remain dependent on Russian energy exports, governments are strategizing how to wean themselves. Washington and London have announced plans to end imports of Russian oil.
The outstanding question is whether any of the U.S.-led penalties would one day be extended to China, which is a far bigger and more integral part of the global economy than Russia.
Even outside the Ukraine war, Mr. Biden has continued many Trump administration policies aimed at delinking parts of the American economy from that of China and punishing Beijing for its commercial practices.
Officials have kept the tariffs imposed by Mr. Trump, which covered about two-thirds of Chinese imports. The Treasury Department has continued to impose investment bans on Chinese companies with ties to the country’s military. And in June, a law will go into effect in the United States barring many goods made in whole or in part in the region of Xinjiang.
Despite all that, demand for Chinese-made goods has surged through the pandemic, as Americans splurge on online purchases. The overall U.S. trade deficit soared to record levels last year, pushed up by a widening deficit with China, and foreign investments into China actually accelerated last year.
Some economists have called for more global integration, not less. Speaking at a virtual conference on Monday, Ngozi Okonjo-Iweala, director general of the World Trade Organization, urged a move toward “re-globalization,” saying, “Deeper, more diversified international markets remain our best bet for supply resilience.
But those economic ties will be further strained if U.S.-China relations worsen, and especially if China gives substantial aid to Russia.
Besides recent warnings to China from Mr. Biden and Secretary of State Antony J. Blinken, Commerce Secretary Gina Raimondo has said her agency would ban the sale of critical American technology to Chinese companies if China tried to supply forbidden technology to Russia.
In the meantime, the uncertainty has left the U.S.-China relationship in flux. While many major Chinese banks and private companies have suspended their interactions with Russia to comply with sanctions, foreign asset managers appear to have also begun moving their money out of China in recent weeks, possibly in anticipation of sanctions.
Mary Lovely, a senior fellow at the Peterson Institute for International Economics, said she did not expect China to “throw all in” with Russia, but that the war could still strain economic ties by worsening U.S.-China relations.
“Right now, there is great uncertainty as to how the U.S. and China will respond to the challenges posed by Russia’s increasingly urgent need for assistance,” she said. “That policy uncertainty is another push to multinationals who were already rethinking supply chains.”
FRANKFURT — The name MG used to be synonymous with spirited but finicky sports cars from Britain. Nowadays the iconic octagonal badge serves a different kind of motoring ambition: China’s push to become a big player in the global auto market.
SAIC Motor, one of China’s Big Four automakers, bought the MG brand in 2007 and is stamping it on a line of electric sport utility vehicles on sale in Germany and other European markets. MG is an example of how Chinese carmakers are exploiting the shift to electric cars to challenge the American, European and Japanese carmakers that have long dominated the industry.
The Chinese automakers are arriving as electric cars surge in popularity, accounting for almost 10 percent of new car sales in Western Europe, and consumers are in a mood to buy, with savings built up during the pandemic. At the same time, car manufacturers are cutting back production because of shortages of microprocessors.
MG already has 350 dealers in 16 European countries and is still expanding. Two other Chinese automakers, Nio and BYD, are moving into Europe by way of Norway, the world’s most electrified large car market.
Nio, based in Shanghai, opened a dealership in Oslo at the end of September, the company’s first outlet outside China. BYD, based in Shenzhen, delivered an electric S.U.V. called the Tang, to the first Norwegian customer in August.
Polestar, which is based in Sweden but belongs to Geely Holding of China, has been selling a Chinese-made battery-powered model in Europe and the United States since 2020. And many of the Teslas on European roads were imported from the company’s factory in Shanghai. (That will change once the company finishes building a factory near Berlin.)
Foreign automakers like Volkswagen, Mercedes-Benz or General Motors sell millions of cars in China, so they can hardly complain when Chinese automakers encroach on their turf. Even though China is the world’s largest car market, its brands have only a sliver of the international market. Even buyers in China prefer foreign brands, although local carmakers are growing quickly and have captured more than 40 percent of the domestic market.
global semiconductor shortage. The wait time for an MG hybrid is only four weeks, and three months for an all-electric model, “which is pretty much OK compared to other brands right now,” Mr. Stark said.
Waits for many European brands can be much longer, especially for lower-priced models. Carmakers like Renault are allocating scarce chips to higher-end vehicles, which generate more profit.
While the market may be ripe for Chinese electric cars, the political timing may not be so ideal. Many European leaders share their American counterparts’ concern about Chinese trade practices, accusing Beijing of subsidizing companies to give them an unfair advantage in international competition.
are negotiating to form a government that is likely to include the Green Party, which favors a harder line against China than Angela Merkel, the departing chancellor. MG may be particularly vulnerable to concerns about the mingling of government and corporate interests because its parent company, SAIC, is majority owned by the state.
international car show in Munich in September. “Car brands, wherever they are located, have export business.”
In delivering vaccines, pharmaceutical companies aided by monumental government investments have given humanity a miraculous shot at liberation from the worst pandemic in a century.
But wealthy countries have captured an overwhelming share of the benefit. Only 0.3 percent of the vaccine doses administered globally have been given in the 29 poorest countries, home to about 9 percent of the world’s population.
Vaccine manufacturers assert that a fix is already at hand as they aggressively expand production lines and contract with counterparts around the world to yield billions of additional doses. Each month, 400 million to 500 million doses of the vaccines from Moderna, Pfizer and Johnson & Johnson are now being produced, according to an American official with knowledge of global supply.
But the world is nowhere close to having enough. About 11 billion shots are needed to vaccinate 70 percent of the world’s population, the rough threshold needed for herd immunity, researchers at Duke University estimate. Yet, so far, only a small fraction of that has been produced. While global production is difficult to measure, the analytics firm Airfinity estimates the total so far at 1.7 billion doses.
dangerous new variants emerge, requiring booster shots and reformulated vaccines, demand could dramatically increase, intensifying the imperative for every country to lock up supply for its own people.
The only way around the zero-sum competition for doses is to greatly expand the global supply of vaccines. On that point, nearly everyone agrees.
But what is the fastest way to make that happen? On that question, divisions remain stark, undermining collective efforts to end the pandemic.
Some health experts argue that the only way to avert catastrophe is to force drug giants to relax their grip on their secrets and enlist many more manufacturers in making vaccines. In place of the existing arrangement — in which drug companies set up partnerships on their terms, while setting the prices of their vaccines — world leaders could compel or persuade the industry to cooperate with more companies to yield additional doses at rates affordable to poor countries.
Those advocating such intervention have focused on two primary approaches: waiving patents to allow many more manufacturers to copy existing vaccines, and requiring the pharmaceutical companies to transfer their technology — that is, help other manufacturers learn to replicate their products.
more than 100 countries in asking the W.T.O. to partially set aside vaccine patents.
But the European Union has signaled its intent to oppose waivers and support only voluntary tech transfers, essentially taking the same position as the pharmaceutical industry, whose aggressive lobbying has heavily shaped the rules in its favor.
Some experts warn that revoking intellectual property rules could disrupt the industry, slowing its efforts to deliver vaccines — like reorganizing the fire department amid an inferno.
“We need them to scale up and deliver,” said Simon J. Evenett, an expert on trade and economic development at the University of St. Gallen in Switzerland. “We have this huge production ramp up. Nothing should get in the way to threaten it.”
Others counter that trusting the pharmaceutical industry to provide the world with vaccines helped create the current chasm between vaccine haves and have-nots.
The world should not put poorer countries “in this position of essentially having to go begging, or waiting for donations of small amounts of vaccine,” said Dr. Chris Beyrer, senior scientific liaison to the Covid-19 Prevention Network. “The model of charity is, I think, an unacceptable model.”
halting vaccine exports a month ago. Now, as a wave of death ravages the largely unvaccinated Indian population, the government is drawing fire at home for having let go of doses.
poses universal risks by allowing variants to take hold, forcing the world into an endless cycle of pharmaceutical catch-up.
“It needs to be global leaders functioning as a unit, to say that vaccine is a form of global security,” said Dr. Rebecca Weintraub, a global health expert at Harvard Medical School. She suggested that the G7, the group of leading economies, could lead such a campaign and finance it when the members convene in England next month.
Pfizer expects to sell $26 billion worth of Covid vaccines this year; Moderna forecasts that its sales of Covid vaccines will exceed $19 billion for 2021.
History also challenges industry claims that blanket global patent rights are a requirement for the creation of new medicines. Until the mid-1990s, drug makers could patent their products only in the wealthiest markets, while negotiating licenses that allowed companies in other parts of the world to make generic versions.
Even in that era, drug companies continued to innovate. And they continued to prosper even with the later waivers on H.I.V. drugs.
“At the time, it rattled a lot of people, like ‘How could you do that? It’s going to destroy the pharmaceutical industry,’” recalled Dr. Anthony S. Fauci, President Biden’s chief medical adviser for the pandemic. “It didn’t destroy them at all. They continue to make billions of dollars.”
Leaders in the wealthiest Western nations have endorsed more equitable distribution of vaccines for this latest scourge. But the imperative to ensure ample supplies for their own nations has won out as the virus killed hundreds of thousands of their own people, devastated economies, and sowed despair.
The drug companies have also promised more support for poorer nations. AstraZeneca’s vaccine has been the primary supply for Covax, and the company says it has sold its doses at a nonprofit price.
stumbled, falling short of production targets. And producing the new class of mRNA vaccines, like those from Pfizer-BioNTech and Moderna, is complicated.
Where pharmaceutical companies have struck deals with partners, the pace of production has frequently disappointed.
“Even with voluntary licensing and technology transfer, it’s not easy to make complex vaccines,” said Dr. Krishna Udayakumar, director of the Duke Global Health Innovation Center.
Much of the global capacity for vaccine manufacturing is already being used to produce other lifesaving inoculations, he added.
But other health experts accuse major pharmaceutical companies of exaggerating the manufacturing challenges to protect their monopoly power, and implying that developing countries lack the acumen to master sophisticated techniques is “an offensive and a racist notion,” said Matthew Kavanagh, director of the Global Health Policy and Politics Initiative at Georgetown University.
With no clear path forward, Ms. Okonjo-Iweala, the W.T.O. director-general, expressed hope that the Indian and South African patent-waiver proposal can be a starting point for dialogue.
“I believe we can come to a pragmatic outcome,” she said. “The disparity is just too much.”
Peter S. Goodman reported from London, Apoorva Mandavilli from New York, Rebecca Robbins from Bellingham, Wash., and Matina Stevis-Gridneff from Brussels. Noah Weiland contributed reporting from New York.
In delivering vaccines, pharmaceutical companies aided by monumental government investments have given humanity a miraculous shot at liberation from the worst pandemic in a century.
But wealthy countries have captured an overwhelming share of the benefit. Only 0.3 percent of the vaccine doses administered globally have been given in the 29 poorest countries, home to about 9 percent of the world’s population.
Vaccine manufacturers assert that a fix is already at hand as they aggressively expand production lines and contract with counterparts around the world to yield billions of additional doses. Each month, 400 million to 500 million doses of the vaccines from Moderna, Pfizer and Johnson & Johnson are now being produced, according to an American official with knowledge of global supply.
But the world is nowhere close to having enough. About 11 billion shots are needed to vaccinate 70 percent of the world’s population, the rough threshold needed for herd immunity, researchers at Duke University estimate. Yet, so far, only a small fraction of that has been produced. While global production is difficult to measure, the analytics firm Airfinity estimates the total so far at 1.7 billion doses.
more than 100 countries in asking the W.T.O. to partially set aside vaccine patents.
But the European Union has signaled its intent to oppose waivers and support only voluntary tech transfers, essentially taking the same position as the pharmaceutical industry, whose aggressive lobbying has heavily shaped the rules in its favor.
Some experts warn that revoking intellectual property rules could disrupt the industry, slowing its efforts to deliver vaccines — like reorganizing the fire department amid an inferno.
“We need them to scale up and deliver,” said Simon J. Evenett, an expert on trade and economic development at the University of St. Gallen in Switzerland. “We have this huge production ramp up. Nothing should get in the way to threaten it.”
Others counter that trusting the pharmaceutical industry to provide the world with vaccines helped create the current chasm between vaccine haves and have-nots.
The world should not put poorer countries “in this position of essentially having to go begging, or waiting for donations of small amounts of vaccine,” said Dr. Chris Beyrer, senior scientific liaison to the Covid-19 Prevention Network. “The model of charity is, I think, an unacceptable model.”
Pfizer expects to sell $26 billion worth of Covid vaccines this year; Moderna forecasts that its sales of Covid vaccines will exceed $19 billion for 2021.
History also challenges industry claims that blanket global patent rights are a requirement for the creation of new medicines. Until the mid-1990s, drug makers could patent their products only in the wealthiest markets, while negotiating licenses that allowed companies in other parts of the world to make generic versions.
Even in that era, drug companies continued to innovate. And they continued to prosper even with the later waivers on H.I.V. drugs.
“At the time, it rattled a lot of people, like ‘How could you do that? It’s going to destroy the pharmaceutical industry,’” recalled Dr. Anthony S. Fauci, President Biden’s chief medical adviser for the pandemic. “It didn’t destroy them at all. They continue to make billions of dollars.”
Leaders in the wealthiest Western nations have endorsed more equitable distribution of vaccines for this latest scourge. But the imperative to ensure ample supplies for their own nations has won out as the virus killed hundreds of thousands of their own people, devastated economies, and sowed despair.
The drug companies have also promised more support for poorer nations. AstraZeneca’s vaccine has been the primary supply for Covax, and the company says it has sold its doses at a nonprofit price.
stumbled, falling short of production targets. And producing the new class of mRNA vaccines, like those from Pfizer-BioNTech and Moderna, is complicated.
Where pharmaceutical companies have struck deals with partners, the pace of production has frequently disappointed.
“Even with voluntary licensing and technology transfer, it’s not easy to make complex vaccines,” said Dr. Krishna Udayakumar, director of the Duke Global Health Innovation Center.
Much of the global capacity for vaccine manufacturing is already being used to produce other lifesaving inoculations, he added.
But other health experts accuse major pharmaceutical companies of exaggerating the manufacturing challenges to protect their monopoly power, and implying that developing countries lack the acumen to master sophisticated techniques is “an offensive and a racist notion,” said Matthew Kavanagh, director of the Global Health Policy and Politics Initiative at Georgetown University.
With no clear path forward, Ms. Okonjo-Iweala, the W.T.O. director-general, expressed hope that the Indian and South African patent-waiver proposal can be a starting point for dialogue.
“I believe we can come to a pragmatic outcome,” she said. “The disparity is just too much.”
Peter S. Goodman reported from London, Apoorva Mandavilli from New York, Rebecca Robbins from Bellingham, Wash., and Matina Stevis-Gridneff from Brussels. Noah Weiland contributed reporting from New York.
Vaccinations are picking up pace in the European Union, a stunning turnaround after the bloc’s immunization drive stalled for months.
On average over the last week, nearly three million doses of the Covid-19 vaccine were being administered each day in the European Union, a group of 27 nations, according to Our World in Data, a University of Oxford database. Adjusted for population, the rate is roughly equivalent to the number of shots given each day in the United States, where demand has been falling.
The E.U. vaccination campaign, marred by disruptions in supplies of the AstraZeneca and Johnson & Johnson Covid-19 vaccines, pivoted last month to rely heavily on the Pfizer-BioNTech vaccine.
Last month, Ursula von der Leyen, the European Commission president, said that Pfizer had agreed to an early shipment of doses that she said should likely allow the bloc to reach its goal of inoculating 70 percent of adults by the end of the summer. The European Union is also on the verge of announcing a deal with Pfizer and its German partner BioNTech for 2022 and 2023 that will lock in 1.8 billion doses for boosters, variants and children’s vaccines.
customer than an investor.
“I think it is overdue that the E.U. has stepped up their vaccination campaign,” said Beate Kampmann, director of the Vaccine Center at the London School of Hygiene and Tropical Medicine.
“I think in the context of the rate of deaths we’ve seen and new cases we’ve seen in the E.U., it is absolutely vital that we get the vaccine to people there very, very quickly,” she added.
The E.U.’s increase underscores the global disparities in vaccination efforts.
About 83 percent of Covid shots have been given in high- and upper-middle-income countries, while only 0.3 percent of doses have been given in low-income countries. In North America, more than 30 percent of people have received at least one dose, according to Our World in Data. In Europe, the figure is nearly 24 percent. In Africa, it’s slightly more than one percent.
waiving intellectual property protections for Covid vaccines, which would need approval from the World Trade Organization. And even then, experts warn that pharmaceutical companies around the world would need technological help to make the vaccines and time to ramp up production.
European leaders like Ms. von der Leyen andPresident Emmanuel Macron have made it clear they think President Biden should take a different approach, and instead lift export restrictions on vaccines, which the United States has employed to keep most doses for use domestically. “We call upon all vaccine-producing countries to allow export and to avoid measures that disrupt the supply chains,” Ms. von der Leyen said in a speech last week.
But the matter is not so absolute, said Dr. Thomas Tsai, a professor who researches health policy at Harvard University. “What’s really needed is an all-of-the-above approach,” he said. Waiving patents is a big long-term step, he said, but lifting export bans would provide help sooner.
“There is a need to move toward a more comprehensive strategy” in vaccinating the world, Dr. Tsai said. “We need that same sort of Warp Speed type of commitment. It’s an investment.”
A global debate is heating up over how to get Covid-19 vaccines to the nations most in need.
The United States supports an effort to suspend intellectual property protections on Covid-19 vaccines, and European countries say that richer nations should begin exporting more of their vaccine supply to poorer ones.
The European Union — whose approval is needed for any waiver of vaccine patents — said on Thursday that it would consider the Biden administration’s proposal. But Germany, the bloc’s largest economy, said that pushing pharmaceutical companies to share vaccine patents could have “significant implications” for the production of vaccines. The European Commission signaled it wouldn’t support the U.S. proposal.
“The limiting factor in vaccine manufacturing is production capacity and high-quality standards, not patents,” a spokeswoman for Chancellor Angela Merkel of Germany said in a statement.
Europe’s position emphasized the challenges of winning support for the waivers at the World Trade Organization, where the bloc wields significant influence, and where unanimous approval would be needed for any measure to suspend patents.
inoculations have lagged behind those of richer countries.
Until the Biden administration’s announcement this week, the United States had been a major holdout at the W.T.O. over a proposal by India and South Africa to suspend some intellectual property protections. The move could give drugmakers access to the trade secrets of how the vaccines are made.
The pharmaceutical industry has argued that suspending patent protections would undermine risk-taking and innovation.
The debate arises amid a growing divide between wealthy nations that are slowly regaining normal life, and poorer countries that are confronting new and devastating outbreaks.
In India, which is suffering the world’s worst outbreak since the start of the pandemic, only 2.2 percent of the population is fully vaccinated, according to a New York Times database. South Africa has fully vaccinated less than 1 percent of its people. By contrast, vaccinations are slowing down in the United States — where one-third of people are fully inoculated — as they begin to pick up in Europe.
Even if a waiver receives support from the trade body, it alone would not increase the world’s vaccine supply. Large drug manufacturers in India and elsewhere would need extensive technological and other support to produce doses, experts say.
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