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US-China trade war is a ‘lose-lose’ situation for them and the world

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The trade tariff spat between China and the United States has been a “lose-lose” situation for both countries and the wider world and it is likely to deteriorate unless a deal is reached, UN economists said on Tuesday.

According to data from the first six months of the year, most of the cost of higher US tariffs on China has been passed down to US consumers and firms.

“US consumers are paying for the tariffs …in terms of higher prices,” said Alessandro Nicita, an economist at the UN trade agency, UNCTAD. “Not only final consumers like us, but importers of intermediate products – firms which import parts and components from China.”

Tariffs ‘cost China $35 billion in first half of 2019’

But the US-initiated measures – put in place in the middle of last year – have also hit the Asian giant, to the tune of $35 billion.

Its firms have seen exports of these targeted products fall by a quarter over the same period on average, with other competitors – notably Taiwan – picking up some of the slack ($4.2 billion in the first half of 2019).

Other trade winners from the measures include Mexico ($3.5 billion), the European Union ($2.7 billion) and Viet Nam ($2.6 billion) and the positive effects for them “have increased over time”, UNCTAD said.

Korea, Canada and India also benefited, with “substantial” gains ranging from $0.9 billion to $1.5 billion.

Other South East Asian countries scooped up the remainder of the tariff-induced casualties, UNCTAD said, while noting that African countries saw only “minimal” benefits.

Of the $35 billion Chinese export losses in the US market, about $21 billion (or 63 per cent) was diverted to these countries and others, while the remaining $14 billion was either lost or captured by US producers.

Chinese manufacturers bearing costs

The UN agency also noted that there is early evidence that Chinese exporters may have started to bear part of the costs of the tariffs by lowering export prices.

The hardest-hit Chinese manufacturing sector has been computers and other office machinery, and communications equipment, where exports from China have declined by $15 billion.

Other areas that have “dropped substantially” include chemicals, furniture, precision instruments and electrical machinery, the UNCTAD report shows.

It nonetheless underscored the resilience of Chinese firms, which maintained 75 per cent of their exports to the US, despite the “substantial” tariffs imposed.

Trade war is a global warning

“The results of the study serve as a global warning; a lose-lose trade war is not only harming the main contenders, it also compromises the stability of the global economy and future growth,” said UNCTAD’s director of international trade and commodities, Pamela Coke Hamilton. “We hope a potential trade agreement between the US and China can deescalate trade tensions.”

While the UNCTAD report does not consider the impact of Chinese tariffs on US imports, it suggests that the result is “most likely” to be the same: “higher prices for Chinese consumers, losses for US exporters and trade gains for other countries”.

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ILO: Developing countries should invest US$1.2 trillion to guarantee basic social protection

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To guarantee at least basic income security and access to essential health care for all in 2020 alone, developing countries should invest approximately US$1.2 trillion – on average 3.8 per cent of their GDP – says a new ILO policy brief.

Since the onset of the COVID-19 pandemic  the social protection financing gap has increased by approximately 30 per cent according to Financing gaps in social protection: Global estimate and strategies for developing countries in light of the COVID-19 crisis and beyond .

This is the result of the increased need for health-care services and income security for workers who lost their jobs during the lockdown and the reduction of GDP caused by the crisis.

The situation is particularly dire in low-income countries who would need to spend nearly 16 per cent of their GDP to close the gap – around US$80 billion

Regionally, the relative burden of closing the gap is particularly high in Central and Western Asia, Northern Africa and Sub-Saharan Africa (between 8 per cent and 9 per cent of their GDP).

Even before the COVID-19 crisis, the global community was failing to live up to the social protection legal and policy commitments it had made in the wake of the last global catastrophe – the 2008 financial crisis.

Currently, only 45 per cent of the global population is effectively covered by at least one social protection benefit. The remaining population – more than 4 billion people – is completely unprotected.

National and international measures to reduce the economic impact of the COVID-19 crisis have provided short-term financing assistance. Some countries have sought innovative sources to increase the fiscal space for extending social protection, like taxes on the trade of large tech companies, the unitary taxation of multinational companies, taxes on financial transactions or airline tickets. With austerity measures already emerging even with the crisis ongoing, these efforts are more pressing than ever, the study says.

“Low-income countries must invest approximately US$80 billion, nearly 16 per cent of their GDP, to guarantee at least basic income security and access to essential health care to all,” said Shahrashoub Razavi, Director of the ILO’s Social Protection Department. “Domestic resources are not nearly enough. Closing the annual financing gap requires international resources based on global solidarity.”

Mobilization at the international level should complement national efforts, says the ILO. International financial institutions and development cooperation agencies have already introduced several financial packages to help governments of developing countries tackle the various effects of the crisis but more resources are needed to close the financing gap, particularly in low-income countries.

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No More Business as Usual: Green Deal Needed in Europe’s Recovery

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Chief executive officers (CEOs) and senior representatives of around 30 European companies expressed today their support for the European Green Deal as a growth strategy for Europe with a joint statement. The COVID-19 recovery is the opportunity to reset Europe’s economy with a new growth model on the path to net-zero emissions, based on circularity, renewable energy and low-carbon industries.

The CEOs said they firmly believe the way out of the current crisis cannot be more of the same. They commit to reducing their carbon footprint and to embrace new production and work models to play their part in decarbonizing Europe’s economy and achieving climate-neutrality by 2050.

“The COVID-19 pandemic requires a massive and coordinated economic stimulus to both mitigate the economic repercussions of the pandemic and, above all, to accelerate the necessary transition to a low carbon economy. We have to take more and faster action with more emphasis on sustainability and circularity. The European Green Deal presents an opportunity to do just this. It requires a strong partnership between business, politics and society. Together we can make Europe the greenest, most innovative and inclusive region in the world, where the Green Deal should provide jobs and economic prosperity at the same time. The action plan announced today by the WEF CEO Action Group for the European Green Deal is an important step with concrete actions to support this agenda.” commented the CEO Action Group Co-Chairs, Axa’s CEO Thomas Buberl and Feike Sybesma, Royal DSM’s Honorary Chairman.

“The EU is putting in place the largest and greenest stimulus plan ever. It is the right time for businesses to show how they can effectively contribute to achieving the EU’s climate targets. As a next step, this group is working on lighthouse projects, which demonstrate how to step up action in areas such as sustainable transport and mobility, food and agriculture and renewable energy markets,” Børge Brende, President of the World Economic Forum, added.

The EU Commission President Ursula von der Leyen, in her State of the European Union speech today, is expected to reassert the Green Deal as a central element of Europe’s growth strategy and the region’s recovery efforts. Frans Timmermans, the European Commission’s Executive Vice-President in charge of the European Green Deal, welcomed the CEO statement: “The Green Deal is a once-in-a-generation effort to transform our economy. It is crucial to have European businesses on board, as we’ll need every company to contribute to climate neutrality and help deliver on the Green Deal. I very much support the efforts of the CEO Action Group to implement the European climate agenda.”

CEOs and senior representatives supporting the statement are:

  • Michael Altendorf, Co-Founder and Chief Executive Officer, Adtelligence GmbH, Germany
  • Marco Alverà, Chief Executive Officer, Snam S.p.A., Italy
  • Claudia Azevedo, Chief Executive Officer, SONAE SGPS SA, Portugal
  • Kai Beckmann, Chief Executive Officer, Performance Materials, Member of the Executive Board, Merck, Germany
  • Dick Benschop, President and Chief Executive Officer, Royal Schiphol Group, Netherlands
  • Jesper Brodin, Chief Executive Officer, Ingka Group (IKEA), Netherlands
  • Thomas Buberl, Chief Executive Officer, AXA SA, France*
  • Levent Cakiroglu, Chief Executive Officer, Koç Holding AS, Turkey
  • Bertrand Camus, Chief Executive Officer, SUEZ, France
  • Liam Condon, President, Bayer Crop Science, Bayer AG, Germany
  • Claudio Descalzi, Chief Executive Officer, Eni SpA, Italy
  • Hanneke Faber, President, Foods and Refreshment Division, Unilever, Netherlands
  • Camilla Hagen Sørli, Member of the Board, Canica AS, Norway
  • André Hoffmann, Vice-Chairman, F. Hoffmann-La Roche Ltd, Switzerland
  • John Holland-Kaye, Chief Executive Officer, Heathrow Airport Holdings Limited, United Kingdom
  • Svein Tore Holsether, President and Chief Executive Officer, Yara International ASA, Norway
  • Paul Hudson, Chief Executive Officer, Sanofi, France
  • Nuno Matos, Chief Executive Europe, HSBC Holdings Plc, United Kingdom
  • Gerald Podobnik, CFO Corporate Bank, Deutsche Bank AG, Germany
  • Jonas Prising, Chairman and Chief Executive Officer, ManpowerGroup, USA
  • Nicolas Namias, Chief Executive Officer, Natixis, France
  • Yves Robert-Charrue, Member of the Executive Board and Head of Switzerland, Europe, Middle East & Africa, Bank Julius Baer & Co. Ltd, Switzerland
  • Michael Schernthaner, Chief Executive Officer, Schur Flexibles Group, Austria
  • Veronica Scotti, Chairperson, Public Sector Solutions, Swiss Re Management Ltd, Switzerland
  • Marco Settembri, Executive Vice-President and Chief Executive Officer, Europe, Middle East and North Africa, Nestlé, Switzerland
  • Feike Sybesma, Honorary Chairman, Royal DSM NV, Netherlands*
  • Jean-Pascal Tricoire, Chairman and Chief Executive Officer, Schneider Electric, France
  • Loic Tassel, President, Europe, Procter & Gamble, Switzerland
  • Bernhardt von Spreckelsen, Fashion Photographer & Developing Hyper Luxury, Brand Owner, Bernhardt von Spreckelsen, United Kingdom

The CEO Action Group for the European Green Deal, launched in autumn 2019 in cooperation with the World Economic Forum and the European Commission, seeks to mobilize business to step up commitments towards achieving the Green Deal and the EU greenhouse gas reduction targets for 2030 in order to drive a clean and inclusive economic recovery.

*Co-chairs of the CEO Action Group for the European Green Deal

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Indigenous People in World Affairs

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In late May, the world’s biggest iron ore miner Rio Tinto legally destroyed two historically significant sacred caves in a Western Australian state, against the wishes of the traditional Aboriginal owners, which sat atop a high-grade ore body it planned to mine.

The destruction distressed the local Puutu Kunti Kurrama and Pinikura people (PKKP) and fuelled a wider public outcry that led to an inquiry into how the blast was legally sanctioned.

The destruction of the sites, which showed evidence of 46,000 years of continual habitation, occurred just as the Black Lives Matter protests trained a global spotlight on racial injustice.

The inquiry is looking at how a culturally significant site came to be destroyed, the processes that failed to protect it, the impacts on traditional owners, and the legislative changes required to prevent such incidents from recurring.

Rio is conducting its own independent board review into the incident, due to be completed in October, and has pledged to make the findings public.

Aboriginal cultural heritage is a fundamental part of Aboriginal community life and cultural identity. It has global significance and forms an important component of the heritage of all Australians.

But the destruction of this culturally significant Aboriginal site is not an isolated incident. Rio Tinto was acting within the law.

In 2013, Rio Tinto was given ministerial consent to damage the Juukan Gorge caves. One year later, an archaeological dig unearthed incredible artefacts, such as a 4,000-year-old plait of human hair, and evidence that the site was much older than originally thought.

But state laws let Rio Tinto charge ahead nevertheless. This failure to put timely and adequate regulatory safeguards in place reveals a disregard and disrespect for sacred Aboriginal sites.

Another example is the world’s leading steel and mining company ArcelorMittal.

ArcelorMittal needs to move beyond good intentions on environmental and social improvements and turn words into deeds. Despite its rhetoric on social responsibility, the company continues to destroy the environment, risk people’s lives and displace local communities, according to a new report launched in 2019 by the Global Action on ArcelorMittal coalition to coincide with the company’s annual shareholder meeting in Luxembourg.

Comprising case studies from seven countries ranging from the Czech Republic to India and South Africa, the report also reveals new problems emerging around ArcelorMittal’s iron ore-mining operations in Nimba County, Liberia, including unclear resettlement plans for local people, a lack of permanent employment from the mine, threats to the Mount Nimba Nature Reserve, and a questionable donation of 100 pickup trucks.

The action of another manufacturer also raises controversy. Anglo American is a global mining company with a portfolio that spans diamonds, platinum, copper, iron ore and more. The emissions from a new Anglo American underground mine project in Chile could be catastrophic for the nation, ecologists reveal. The multinational company has so far avoided scrutiny of the project by hollowing out regional environmental organisations and sharing erroneous information with the scientific community. Anglo American, a London Stock Exchange listed company, has tunnelled under a Chilean glacier, with a plan to excavate copper and approximately 166 million tonnes of raw material from beneath the Yerba Loca nature sanctuary. This is equivalent to the volume of 127 Costanera Centre towers—South America’s tallest building, which sits at 300 metres and is located in Santiago. It then plans to backfill the entire mine with approximately 114.9 million tonnes of concrete.

The carbon footprint of the 3.4 million tonnes of cement required will be equivalent to 3.2 percent of the South American nation’s 2016 carbon dioxide equivalent emissions, or the collective carbon dioxide emissions of 20 of the world’s least-polluting countries. The number rises to 9.7 percent if Anglo American’s plan to extend the life of the mine from 2036 to 2065 is agreed.

We have more good examples.

The third largest steelmaker in the world is Nippon Steel. Each year beginning from 2015, the company has conducted a forest environment preservation activity—Greenship Action. In order to protect the valuable nature in the Tokyo metro area, with the cooperation of NPOs and members of the local forestry industry, Nippon Steel have been performing thinning work and creating access roads in the mountain forests of Ome City in Tokyo. Although cutting down trees may seem like environmental destruction, if the forest is left on its own, the trees will grow increasingly dense, resulting in a dark and unhealthy forest due to the lack of sunlight penetration. By identifying necessary and unnecessary trees, and removing the unnecessary ones, a suitable amount of sunlight can enter, restoring an environment that allows a diverse range of woodland life to coexist. This activity is a valuable opportunity for the participants to personally experience and understand the importance of contributing to society.

The Russian company Nornickel is a global leader in the production of the mineral nickel. Murmansk Oblast and the Taymyr Peninsula have been the homeland for indigenous peoples of the Arctic for generations and are the principal sites for the company’s activities. The Sámi, Nentsy, Nganasan, Entsy, Dolgan, and Evenki communities have preserved the traditional life, culture, and economy of Northern peoples, including reindeer herding, hunting, fishing, and gathering. Healthy and productive ecosystems, both on land and water, are the basis of indigenous people’s culture and identity, supported by the company.

In particular, the company allocates funds for the construction and repair of housing for indigenous peoples, the improvement of small and remote settlements in Taimyr, and the provision of food for the children of reindeer herders. Norilsk Nickel also renders assistance to the indigenous population with air transportation of goods to remote villages, supplies of building materials and fuel.

This article takes a critical look at how large-scale mining works in the emerging global economy. The strategies adopted by governments around the world in recent years to encourage foreign investment in exploration and production of minerals raise questions about how multinational mining companies are approaching environmental and related challenges. And the role of ecology in the policy of companies should only grow.

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