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Ministers gather for high-stakes WTO meet

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Russia's war in Ukraine -- traditionally a breadbasket that feeds hundreds of millions of people -- is having a toll on food security
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The World Trade Organization gathers ministers in Geneva Sunday to tackle pressing issues including global food security threatened by Russia’s invasion of Ukraine, overfishing and equitable access to Covid vaccines.

With its first ministerial meeting in years, WTO faces pressure to finally eke out long-sought trade deals and show unity amid the still raging pandemic and an impending global hunger crisis.  

Top of the agenda as the four-day meeting kicks off is the toll Russia’s war in Ukraine — traditionally a breadbasket that feeds hundreds of millions of people — is having on food security.

EU trade commissioner Valdis Dombrovskis said the bloc had been “working hard with all the members to prepare a multilateral food security package,” slamming Russia for “using food and grain as a weapon of war”.

The WTO is hoping to isolate criticism of Russia’s war in Ukraine to the first day of talks, when many of the more than 100 ministers due to attend are expected to issue blistering statements.

But with many flatly refusing to negotiate directly with Moscow, there are fears the issue could bleed into the following days, when WTO wants to focus on nailing down long-elusive trade deals.  

“There is a real risk that things could go off the rails next week,” a Geneva-based diplomatic source said.

– Fisheries deal in sight? –

The tensions have not curbed WTO chief Ngozi Okonjo-Iweala’s zeal to press for agreements on a range of issues during the first ministerial gathering on her watch, especially as the global trade body strives to prove its worth after nearly a decade with no new large trade deals.

There is cautious optimism that countries could finally agree on banning subsidies that contribute to illegal and unregulated fishing, after more than 20 years of negotiations.

The WTO says talks have never been this close to the finish line, but diplomats remain cautious.

The negotiations “have made progress recently, but these remain difficult subjects,” a diplomatic source in Geneva told AFP.

One of the main sticking points has been so-called special and differential treatment (SDT) for developing countries, like major fishing nation India, which can request exemptions.

A draft text sent to the ministers for review proposes exemptions should not apply to member states accounting for an as yet undefined share of the global volume of fishing.

The duration of exemptions also remains undefined.

Environmental groups say anything beyond 10 years would be catastrophic. India has demanded a 25-year exemption.

– India ‘creating problems’ –

“Twenty-five years is an unreasonable length of time,” Isabel Jarrett, head of the Pew Charitable Trusts’ project to end harmful fisheries subsidies, told AFP, warning so much leeway would be “devastating for fish stocks”.

Colombian Ambassador Santiago Wills, who chairs the WTO fisheries subsidies negotiations, stressed the urgency of securing a deal.

“The longer we wait, the more the fish lose. And the more the fish lose, the more we all lose,” he said in a statement Saturday.

India however appears to be stubbornly sticking to its demands on fisheries and in other areas, jeopardising the chances of reaching deals since WTO agreements require full consensus backing.

“There is not a single issue that India is not blocking,” a Geneva-based ambassador said, singling out WTO reform and agriculture.

A source with knowledge of the negotiations towards a text on food security meanwhile said “the Indians are still creating problems”.

Elvire Fabry, a senior research fellow at the Jacques Delors Institute, said India had appeared eager to “throw more weight around” in international organisations, warning New Delhi was capable of scuppering talks.

– Patent waiver? –

The ministers are also set to seek a joint WTO response to the pandemic, although significant obstacles remain. 

Back in October 2020, India and South Africa called for intellectual property rights on Covid-19 vaccines and other pandemic responses to be suspended in a bid to ensure more equitable access in poorer nations.

After multiple rounds of talks, the European Union, the United States, India and South Africa hammered out a compromise that has become the basis for a draft text sent to ministers.

The text, which would allow most developing countries, although not China, to produce Covid vaccines without authorisation from patent holders, is still facing opposition from both sides.

Britain and Switzerland are reluctant to sign up, arguing along with the pharmaceutical industry that the waiver would undermine investment in innovation.

Public interest groups meanwhile say the text falls far short of what is needed by covering only vaccines and not Covid treatments and diagnostics.

“The negotiations are still aeons away from ensuring access to lifesaving Covid medical tools for everyone, everywhere,” Doctors Without Borders warned.

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Price spike: Higher fuel prices test US economy

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Drivers of long-haul delivery trucks, such as this one pictured January 2018, are contending with surging US gas prices
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Surging energy costs are being felt across the US economy with varying effects. Some consumers are absorbing higher costs, while others are shifting behavior or cutting back.

Here’s a sampling of how the story is playing out in different sectors.

– Trucker sees austerity –

As he contends with surging fuel prices, truck driver Lamar Buckwalter sees signs all around that consumers are cutting back. 

Demand for refrigerated pet food — a torrid business just three months ago — has virtually disappeared. Humans are also shifting their own diets, ordering less high-end meats like veal and crab cakes.

“People are starting to cut off the extras,” said Buckwalter, a third-generation trucker who lives in Pennsylvania. “They’re not buying filet mignon steak.”

The last time he fueled up, Buckwalter spent $5.79 a gallon for diesel, more than double the price from a year ago, a shift exacerbated by lower job rates as demand for trucking services cools.

Mitigating things a bit is Buckwalter’s membership in a national small trucker association that offers discounted fuel. He can also pass on a fraction of the fuel price spike to consumers.

But the pain from fueling up is “enough to make a preacher man curse,” said Buckwalter, who has been turning down trips that pay insufficiently.

He is also planning to tighten the belt on perks for his three employees, such as a summer family picnic. 

“We’ll still do Christmas bonuses,” he said. “Unfortunately, I have to cut back where I can.”

– Tough times for taxis –

Also taking a hit is Rutz Alliance, a New York taxi driver who feels the pinch daily.

“I used to put $25 of gas every day,” Alliance told AFP. “Now it’s up to $45.”

That computes to weekly pay of about $600 to $650, one-third less than the pre-pandemic amount.

“We’re trying to live. We have no choice. Inflation is all over. Rent, food, everything, but it’s take it or leave it.”

Dubbing the jump in prices an “emergency,” the New York Taxi Workers Alliance called in March for a 75-cent temporary fuel surcharge. But city officials have not taken action thus far.

– Airlines pass on the pain –

Airlines have been among the sectors most directly affected by spiking energy prices, with jet fuel prices jumping almost 50 percent since mid-March, according to Argus.

That would normally amount to a huge drag on the industry, given that fuel and labor are two major sources of costs.

“The rule of thumb in this industry is that you can pass through two-thirds of a fuel price increase within three to six months, the full amount within six to 12 months,” said Savanthi Syth, an industry expert at Raymond James. 

But in a twist of fortunes in a pandemic-dominated era, airlines are benefitting from “pent-up demand” of consumers desiring travel after more than two years of being hemmed in.

Airline tickets are currently up 38 percent compared with the level of the year prior, with industry executives saying they are having no trouble passing on the hit from higher fuel costs.

– A higher bar on vacations –

For Chayzz Devyant, one casualty of spiking gasoline prices has been a summer visit to Atlantic City.

Just traveling back and forth to the casino town would cost some $162 in gas, on top of lodging costs.

“Big Oil is to blame,” said Devyant, who hopes to work from home to save on fuel costs. 

But travel experts still expect a busy summer even if more consumers like Devyant cut some trips.

“We are seeing mixed messages. Oil prices obviously have an effect,” said Aaron Szyf, economist for the US Travel Association.

“But pent up demand is so high that hotels/attractions/national parks/flights are all expected to be at full capacity this summer.”

– Electric vehicles get a closer look –

Higher gasoline prices have prompted greater interest from consumers in electric vehicles (EV). Since January, website visits to EV options have soared 73 percent, according to Cox Automotive.

However, the share of visits to EVs remains a relatively small 5.7 percent of overall page views, according to Cox.

Moreover, the shortage of semiconductors and other key supplies has left car dealerships with limited inventories, crimping sales. 

In May, Toyota and Lexus sold 46,000 hybrid vehicles, down 17 percent from the year-ago period amid tight supplies.

At Tesla, the top-selling EV maker in the United States, the wait time is at least three months for delivery of a Model 3 and six for the Model Y.

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Resurging US inflation puts Fed on track for more big rate hikes

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US President Joe Biden (R, pictured May 2022) has given his full backing to Federal Reserve Chair Jerome Powell's efforts to cool inflation by raising borrowing costs
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Red-hot US inflation is showing few signs of cooling, putting the Federal Reserve on track to continue its aggressive interest rate increases to help cool high prices that are challenging Joe Biden’s presidency.

The hoped-for signs of relief for American families did not materialize in May as consumer prices hit a new four-decade high, rising 8.6 percent and topping what economists thought was the peak in March.

With Russia’s war on Ukraine continuing to pressure global fuel and food prices, and amid ongoing supply chain uncertainties due to Covid-19 lockdowns in Asia, analysts now say the expected easing of inflationary pressures will take much longer to materialize.

The US central bank already had signaled plans for more big increases in the benchmark borrowing rate this week and next month, but chances are rising that the Fed might have to be even more aggressive — which increases the risk the economy might tip into a recession.

The latest inflation report — the last major data point before the Fed’s policy meeting Tuesday and Wednesday — also douses hopes central bankers will be able to call a ceasefire in September ahead of key congressional elections, where Biden’s Democrats are widely expected to suffer damaging losses.

Prices continued to rise last month for a range of goods, including housing, groceries, airline fares and used and new vehicles, setting new records in multiple categories, according to the Labor Department data.

Energy has soared 34.6 percent over the past year, the fastest since September 2005, while food jumped 10.1 percent, and the cost of fuel oil more than doubled, jumping 106.7 percent, the largest increase in the history of CPI, which dates to 1935.

The CPI surge “raises the probability of even more aggressive Fed rate hikes to tamp down on inflationary expectations,” said Mickey Levy of Berenberg Capital Markets

If the policy-setting Federal Open Market Committee decides on a giant step — three quarters of a point rather than the expected half-point increase — it would be the first 75 basis point rate hike since November 1994.

Diane Swonk of Grant Thornton indicated such a move is possible. 

“They are behind the curve and eager to catch up,” she said on Twitter. “Fed has to reduce demand to meet a supply-constrained world. Ugly in many ways.”

Economists at Barclays are now calling for a 0.75-point increase, though Ryan Sweet at Moody’s says chances are low, and Karl Haeling at LBBW expects three more half-point hikes.

– Political considerations? –

Biden is facing growing political backlash as high prices increase the pain for American families, who are seeing daily records at the gas pump and higher grocery bills due to the fallout from Russian leader Vladimir Putin’s invasion of Ukraine.

Unlike his predecessor Donald Trump, who relentlessly attacked the Fed and its chair Jerome Powell, Biden has publicly endorsed the central bank’s efforts.

Biden, who blames “Putin’s Price Hike” for the acceleration in inflation, said Washington “must do more — and quickly — to get prices down here in the United States.” 

Hoping to avoid a devastating setback in November elections that could return control of the legislature to opposition Republicans, Biden has urged Congress to approve legislation to bring down costs of key products such as medicines and services such as shipping to soften the blow for US consumers.

Some analysts had speculated that Powell might call for a timeout in the interest rate moves at the FOMC’s September meeting, but economist Levy echoed the prevailing view that a pause in rate hikes is now “looking increasingly unlikely.”

Powell has always insisted that central bankers eschew political considerations and focus on what’s best for the economy.

The Fed, which has already acknowledged that slowing demand will entail some pain, is hoping to cool price pressures without choking off economic growth — but that is looking increasingly difficult.

Gita Gopinath, the number two at the International Monetary Fund, last week said US central bankers are treading an “incredibly narrow path” to achieve a soft landing and avoid a sharp increase in unemployment.

“It will be a real challenge to bring down inflation… without turbulence,” she said at a Financial Times conference, adding that it could “require much steeper increases in rates.”

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US gas price hits a record $5 a gallon: auto group

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US President Joe Biden speaks about the economy and inflation from the deck of the USS Iowa at the Port of Los Angeles on June 10, 2022; record gas prices pose a major challenge with midterm elections only months away
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The average price of premium gasoline at the pump has surpassed $5 a gallon for the first time in the United States, the American Automobile Association (AAA) reported Saturday. 

That record level, coming on top of months of soaring inflation, represents the latest bad news for President Joe Biden just five months before crucial midterm elections.

A year ago, the average price of gas in the US was just $3.07; since then it has shot up by 62 percent. 

While Europeans have long been accustomed to paying much more at the pump, US gas taxes are lower — leaving car-loving Americans in shock over surging prices.  

The increase in gas prices follows a steady rise in oil prices — which had plummeted in the early days of the Covid-19 pandemic as demand sagged, but have risen again as world economic activity resumes.

Oil prices soared further after Moscow invaded Ukraine in late February, and as international sanctions against Russia — a major petroleum producer — began to bite. 

A barrel of crude currently sells for more than $120 in both London and New York.

Overall US energy prices in May were nearly 35 percent higher compared to the same month in 2021, according to government data.

This has contributed to the overall rise in US consumer prices, which were up 8.6 percent in May from a year earlier — a 40-year record.

As the summer vacation season nears, Americans — with their longtime love affair for big gas-guzzling vehicles — can expect to see energy prices rise still further. 

That will pile even more pressure on consumers already struggling with higher prices for food (up 10.1 percent in May), housing, automobiles and health care.

All this complicates Biden’s position. For months he has sought to reassure Americans that his administration is doing everything in its power to bring down prices without derailing the economic recovery.

But in November, Americans vote to elect all members of the House of Representatives and one-third of senators — and polls show voters listing the economy, inflation and high gas prices as their top issues.

On Friday, the president again lashed out at the American oil industry, cautioning it in a statement “not (to) use the challenge created by the war in Ukraine as a reason to make things worse for families with excessive profit taking or price hikes.”

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