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Federal Reserve’s Preferred Inflation Gauge Picked Up Last Month in Sign of Still-Elevated Prices

WASHINGTON — An inflation gauge favored by the Federal Reserve increased in January, the latest sign that the slowdown in U.S. consumer price increases is occurring unevenly from month to month.

The government reported Thursday that prices rose 0.3% from December to January, up from 0.1% in the previous month. But in a more encouraging sign, prices were up just 2.4% from a year earlier, down from a 2.6% annual pace in December and the smallest such increase in nearly three years.

The year-over-year cooldown in inflation is sure to be welcomed by the White House as President Joe Biden seeks re-election. Still, even though average paychecks have outpaced inflation over the past year, many Americans remain frustrated that overall prices are still well above where they were before inflation erupted three years ago. That sentiment, evident in many public opinion polls, could pose a threat to Biden’s re-election bid.

Inflation, as measured by the Fed’s preferred gauge, fell steadily last year after having peaked at 7.1% in the summer of 2022. Supply chain snarls have eased, reducing costs of parts and raw materials, and a steady flow of job seekers has made it easier for employers to limit wage increases, one of the drivers of inflation. Still, inflation remains above the central bank’s 2% annual target.

Excluding volatile food and energy costs, prices rose 0.4% from December to January, up from 0.1% in the previous month. And compared with a year earlier, such so-called “core” prices rose 2.8%, down from 2.9% in December. Economists consider core prices a better gauge of the likely path of future inflation.

Some of January’s inflation reflects the fact that companies often raise prices in the first two months of the year, leaving January and February price data high compared with the rest of the year. But the costs of hospital and doctors’ services are also rising to offset the sizable pay raises commanded by nurses and other in-demand health care workers.

That trend could help keep inflation elevated in the coming months. But by early spring, most analysts expect prices to settle back to the milder pace of increases that occurred in the second half of 2023, when inflation eased to a 2% annual rate.

January’s uptick in inflation helps explain the concern expressed by many Fed officials, including Chair Jerome Powell, about potentially cutting interest rates too soon this year. One influential official, Christopher Waller of the Fed’s Board of Governors, said this month that he would want to see two more months of inflation data after January’s to determine whether prices were cooling sustainably toward the Fed’s target level.

Beginning in March 2022, the Fed raised its benchmark rate 11 times to attack the worst bout of inflation in 40 years. Those rate hikes have helped cool inflation drastically. But they have also made borrowing much more expensive for consumers and businesses. In particular, high loan rates have throttled sales in the economy’s crucial homebuying sector. Conversely, rate cuts by the Fed, whenever they happen, would eventually lead to lower borrowing costs across the economy.

Thursday’s inflation data mirrors figures released earlier this month that showed that the government’s more widely followed consumer price index also rose faster in January than it had in previous months. The Fed prefers the measure reported Thursday, in part because it accounts for changes in how people shop when inflation jumps — when, for example, consumers shift away from pricey national brands in favor of cheaper store brands.

Several Fed officials have said they’re optimistic that inflation will continue to fall back toward the Fed’s target level, with some downplaying the recent pickup in prices as a one-time jump.

“The path will continue to be bumpy, and we should not overreact to individual data readings,” Susan Collins, president of the Federal Reserve Bank of Boston, said Wednesday. “I remain what I call a ‘realistic optimist’ in thinking that the economy is on a path to 2% inflation on a sustained basis while maintaining a healthy labor market.”

Some other officials sound more uncertain. Jeffrey Schmid, the new president of the Federal Reserve Bank of Kansas City, said this week that “when it comes to too-high inflation, I believe we are not out of the woods yet.”

Outside the Fed, most economists envision a steady, if fitful, slowdown of inflation in the coming months. Economists at Goldman Sachs project that core inflation, as measured by the Fed’s preferred gauge, will drop rapidly to just 2.2% by May — low enough for the Fed to initiate rate cuts in June.
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AI – Charting Rules of the Road

Artificial intelligence touches nearly every aspect of our digital lives, but there are few laws governing its use. In this episode of our web series about AI, VOA’s Tina Trinh looks at how lawmakers and tech developers are making rules for something that is changing nearly every day.
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China Users on Banned Social Platforms Need Protection, Advocates Say

washington — Rights advocates are urging international social media platforms to do more to prevent Chinese authorities from obtaining the personal information of users. The call comes after two popular Chinese social media influencers alleged on X and YouTube that police in China were investigating their followers and had called some in for questioning.

Social media platforms such as X and YouTube and thousands of websites — from The New York Times to the BBC and VOA — are blocked in China by the country’s Great Firewall. But increasingly, even as social controls tighten under the leadership of Xi Jinping, many in China are using virtual private networks to access X, YouTube and other sites for news, information and opinions not available in China.

Li Ying, who is also known online as Teacher Li, is one of the social media influencers who issued the warning on Sunday. Li came to prominence as a source of news and information following a rare display of public dissent in 2022 in China, protesting the government’s draconian zero-COVID policy. His account on X has now become a hub for news and videos provided by netizens that the Chinese government considers sensitive and censors online.

In a post on Sunday, Teacher Li said, “Currently, the public security bureau is checking my 1.6 million followers and people in the comments, one by one.”

He shared screenshots of private messages he received from followers over the past few months, some of which claimed that police had interrogated individuals, even causing one person to lose their job.

VOA could not independently verify the authenticity of the claims, but court records in China and reports by rights groups have previously documented the country’s increasing use of social media platforms banned in China to detain, prosecute and sentence individuals over comments made online.

The Chinese Embassy spokesperson in Washington, Liu Pengyu, said he was not aware of the specifics regarding the social media influencers.

“As a principle, the Chinese government manages internet-related affairs according to law and regulation,” Liu said.

Influencers warn followers

News of the crackdown on followers of social influencers comes amid a flurry of reports about China’s hacking capabilities. Last week, FBI Director Christopher Wray warned that cyberattacks on U.S. infrastructure were “at a scale greater than we’d seen before.”

A recent document dump detailed how private companies are helping China to hack foreign governments across Southeast Asia and to unmask users of foreign social media accounts.

Wang Zhi’an, a former journalist at China’s state broadcaster CCTV who has a million subscribers on X and 1.2 million followers on YouTube, says his followers have reported similar problems.

In response, both Wang and Teacher Li have urged their followers to take precautions, suggesting they unfollow their accounts, change their usernames, avoid Chinese-made phones and prepare to be questioned.

As of Tuesday afternoon, Li’s followers on X had dropped to 1.4 million. VOA reached out to Li for comment but did not receive a response as of publication.

Authorities reportedly tracking followers

Maya Wang, acting China director at Human Rights Watch, said China is putting more effort into policing platforms based outside of the country as more Chinese people move to the platforms to speak out.

She said the recent reports of authorities tracking down followers is just a part of China’s long-standing effort to restrict freedom of expression.

“I think the Chinese government is also increasingly worried about the information that is being propagated, transmitted or distributed on these foreign platforms because they have been, thanks to these individuals, very influential,” Wang said.

A recent leak of documents from I-Soon, a private contractor linked to China’s top policing agency and other parts of its government, described tools used by Chinese police to curb dissent on overseas social media, including one tool specifically created to surveil users on X.

Hackers also created tools for police to hack email inboxes and unmask anonymous users of X, the documents show. The leak revealed that officers sometimes sent requests to surveil specific individuals to I-Soon.

Wang said it is incumbent on social media companies to make sure their users stay safe.

“I would want to direct these questions to Twitter [X] to ask — are they adopting heightened measures to protect PRC [People’s Republic of China]-based users?” she said. “I think Twitter [X] needs to investigate just how exactly this kind of information is being obtained and whether or not they need to plug some loopholes.”

Yaqiu Wang, research director for China, Hong Kong and Taiwan at Freedom House, said that besides better protecting their users’ privacy, the companies should also put in more effort to combat China’s clampdown on freedom of speech.

“They should have steps actually helping out activists to protect their freedom of speech,” she said. “Big social media companies should widely disseminate information to their users, like a manual or instructions of how to protect their account.

“They need to be more transparent, so users and the public know whether government-sponsored hacking activities are going on,” she added.

VOA reached out to X, formerly known as Twitter, several times for comment but did not receive any response by the time of publication.

Xiao Yu contributed to this report.
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Renewal of U.S.-China Science and Tech Pact Faces Hurdles

STATE DEPARTMENT — With a science and technology agreement between the United States and People’s Republic of China due to expire Tuesday, the State Department said it is negotiating to “amend, extend, and strengthen protections within” the agreement but declined to specify if the U.S. would extend the deal.

“We are not able to provide information at this time on specific U.S. negotiating positions or on whether the agreement will be extended past its current expiration date,” a State Department spokesperson told VOA.

The Science and Technology Cooperation Agreement is a framework for U.S. governmental collaborations with China in science and technology.  

U.S. officials have said the STA provides consistent standards for government-to-government scientific cooperation between the U.S. and China.  

While the agreement supports scientific collaboration in areas that benefit the United States, U.S. officials acknowledge the challenges posed by China’s national science and technology strategies and its domestic legal framework.

Critics, including U.S. lawmakers, point out China’s restrictions on data and a lack of transparency in sharing scientific findings. Washington is also concerned about personal safety of American scientists who travel to China, as well as Beijing’s potential military application of shared research.

A report by Congressional Research Service said China’s cooperation under the agreement has not been consistent. For example, “China reportedly withheld avian influenza strains required for U.S. vaccines and in 2019, cut off U.S. access to coronavirus research, including U.S.-funded work at the Wuhan Institute of Virology,” said the CRS.

Advocates for renewing the agreement want to maintain some level of official and unofficial contacts amid strained relationship between the two countries.  

During a recent discussion hosted by the Washington-based Institute for China-America Studies (ICAS), panelists said the STA is “important symbolically” and gives confidence to researchers on both sides to deepen their engagement with counterparts.

“In the event of the agreement’s non-renewal, the mutual confidence that sustains and underpins collaboration is bound to suffer,” said ICAS in its post-event summary.

Dean Cheng, a senior advisor to the China program at the U.S. Institute of Peace, said the American system is far more open, so China will typically be able to gather information regardless of whether there is an agreement.

“The STA is no guarantee that American scientists will, in fact, be able to access Chinese research, information, or scholars, whereas the Chinese side will use the STA as a means of establishing an even greater presence in the U.S.,” Cheng told VOA, adding the “strategic advantage” under the deal will likely be with the PRC.

The STA was originally signed in 1979 by then-U.S. President Jimmy Carter and then-PRC leader Deng Xiaoping. Under the agreement, the two countries cooperate in fields including agriculture, energy, space, health, environment, earth sciences and engineering, as well as educational and scholarly exchanges.

U.S.-China science and technology activity increased in November 2009 with new agreements on joint projects in electric vehicles, or EVs, renewable energy, and the creation of the U.S.-China Clean Energy Research Center, or CERC, a 10-year research effort between the U.S. Department of Energy and China’s Ministry of Science and Technology.

The agreement has been renewed approximately every five years since its inception, with the most recent five-year extension occurring in 2018. Last August, it received a six-month extension as officials from the two countries undertook negotiations to amend and strengthen the terms.
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2 Exiled Chinese Bloggers Warn of Police Interrogating Their Followers

SHANGHAI — Two prominent Chinese bloggers in exile said that police were investigating their millions of followers on international social media platforms, in an escalation of Beijing’s attempts to clamp down on critical speech even outside of the country’s borders.

Former state broadcaster CCTV journalist Wang Zhi’an and artist-turned-dissident Li Ying, both Chinese citizens known for posting uncensored Chinese news, said in separate posts Sunday that police were interrogating people who followed them on social media, and urged followers to take precautions such as unfollowing their accounts, changing their usernames, avoiding Chinese-made phones and preparing to be questioned.

Li Ying, known as Teacher Li, came to prominence as a source of news about the White Paper protests, a rare moment of anti-government protests in mainland China in 2022. Teacher Li’s account on X, formerly known as Twitter, @whyyoutouzhele now posts news and videos submitted by users, which cover everything from local protests to viral videos of real-life incidents that are censored on the Chinese internet.

In a post Sunday evening, Teacher Li suggested people unfollow his account. “Currently, the public security bureau is checking my 1.6 million followers and people in the comments, one by one.”

Li shared screenshots of private messages he received from followers over the past few months, which claimed that police had interrogated individuals, and that one person had even lost their job.

As of Monday afternoon, Li had dropped down to 1.4 million followers on X.

International social media platforms like X and YouTube are blocked in China but can still be accessed with software that circumvents the country’s censorship systems.

Wang, who has a million subscribers on X and 1.2 million followers on YouTube, also told his fans to unsubscribe.

Li, Wang and the Chinese foreign ministry did not immediately respond to requests for comment.

Over the past decade, Beijing has cracked down on dissent on Chinese social media, with thousands of censors employed both at private companies and with the Chinese state.

Chinese users expressing critical opinions online have reported being called, harassed or interrogated by police, with some called in for questioning and ordered to take down certain posts or delete their accounts. In some cases, users have been detained, with some spending up to two weeks in jail and a small number sentenced to years in prison.

More recently, Beijing has extended its reach to tracking non-Chinese platforms such as Facebook, Telegram and X. A recent leak of documents from I-Soon, a private contractor linked to China’s top policing agency and other parts of its government, described tools used by Chinese police to curb dissent on overseas social media, including one tool specifically created to surveil users on X.

Hackers also created tools for police to hack email inboxes and unmask anonymous users of X, the documents show. Sometimes, officers sent requests to surveil specific individuals to I-Soon, the leak revealed.

Li said he would not stop posting even if people unfollowed, but he urged his followers to take basic digital safety precautions.

“I don’t want your life to be impacted just because you wanted to understand the real news in China,” Li said, in an additional post. “You only want to understand what’s happening, but the price is quite high

 
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Private US Lunar Lander Will Stop Working Tuesday 

CAPE CANAVERAL, Fla. — A private U.S. lunar lander is expected to stop working Tuesday, its mission cut short after landing sideways near the south pole of the moon.

Intuitive Machines, the Houston company that built and flew the spacecraft, said Monday it will continue to collect data until sunlight no longer shines on the solar panels. Based on the position of Earth and the moon, officials expect that to happen Tuesday morning. That’s two to three days short of the week or so that NASA and other customers had been counting on.

The lander, named Odysseus, is the first U.S. spacecraft to land on the moon in more than 50 years, carrying experiments for NASA, the main sponsor. But it came in too fast last Thursday and the foot of one of its six legs caught on the surface, causing it to tumble over, according to company officials.

Based on photos from NASA’s Lunar Reconnaissance Orbiter flying overhead, Odysseus landed within 1.5 kilometers of its intended target near the Malapert A crater, just 300 kilometers from the moon’s south pole.

The LRO photos from 90 kilometers up are the only ones showing the lander on the surface, but as little more than a spot in the grainy images. A camera-ejecting experiment by Embry-Riddle Aeronautical University, to capture images of the lander as they both descended, was called off shortly before touchdown because of a last-minute navigation issue.

According to NASA, the lander ended up in a small, degraded crater with a 12-degree slope. That’s the closest a spacecraft has ever come to the south pole, an area of interest because of suspected frozen water in the permanently shadowed craters there.

NASA, which plans to land astronauts in this region in the next few years, paid Intuitive Machines $118 million to deliver six experiments to the surface. Other customers also had items on board.

Instead of landing upright, the 4.3-meter Odysseus came down on its side, hampering communication with Earth. Some antennas were covered up by the toppled lander, and the ones still exposed ended up near the ground, resulting in spotty communications. The solar panels also ended up much closer to the surface than anticipated, less than ideal in the hilly terrain. Even under the best of circumstances, Odysseus only had a week to operate on the surface before the long lunar night set in.

Since the 1960s, only the U.S., Russia, China, India and Japan have successfully pulled off moon landings, and only the U.S. with crews. Japan’s lander ended up on the wrong side, too, just last month.

Despite its slanted landing, Intuitive Machines became the first private business to join the elite group. Another U.S. company, Astrobotic Technology, gave it a try last month, but didn’t make it to the moon because of a fuel leak.

Intuitive Machines almost failed, too. Ground teams did not turn on the switch for the lander’s navigating lasers before the Feb. 15 liftoff from Florida. The oversight was not discovered until Odysseus was circling the moon, forcing flight controllers to rely on a NASA laser-navigating device that was on board merely as an experiment.

As it turned out, NASA’s test lasers guided Odysseus to a close to bull’s-eye landing, resulting in the first moon landing by a U.S. spacecraft since the Apollo program.

Twelve Apollo astronauts walked on the moon from 1969 through 1972. While NASA went on to put an occasional satellite around the moon, the U.S. did not launch another moon-landing mission until last month. Astrobotic’s failed flight was the first under NASA’s program to promote commercial deliveries to the moon.

Both Intuitive Machines and Astrobotic hold NASA contracts for more moon landings.
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Japan Moon Lander Revives After Lunar Night

Tokyo — Japan’s moon lander has produced another surprise by waking up after the two-week lunar night, the country’s space agency said Monday.

The unmanned Smart Lander for Investigating Moon (SLIM) touched down last month at a wonky angle that left its solar panels facing the wrong way.

As the sun’s angle shifted, it came back to life for two days and carried out scientific observations of a crater with a high-spec camera, the Japan Aerospace Exploration Agency (JAXA) said.

It went to sleep again as darkness returned and, since it was “not designed for the harsh lunar nights,” JAXA had been uncertain whether it would reawaken.

“Yesterday we sent a command, to which SLIM responded,” JAXA said on X, formerly Twitter, on Monday.

“SLIM succeeded in surviving a night on the Moon’s surface while maintaining its communication function!”

It said that communications were “terminated after a short time, as it was still lunar midday and the temperature of the communication equipment was very high.”

But it added: “Preparations are being made to resume operations when instrument temperatures have sufficiently cooled.”

SLIM, dubbed the “Moon Sniper” for its precision landing technology, touched down within its target landing zone on Jan. 20.

The feat was a win for Japan’s space program after a string of recent failures, making the nation only the fifth to achieve a “soft landing” on the moon, after the United States, the Soviet Union, China and India.

But during its descent, the craft suffered engine problems and ended up on its side, meaning the solar panels were facing west instead of up.

The latest news comes after JAXA toasted a successful blast-off for its new flagship H3 rocket on Feb. 17, making it third time lucky after years of delays and two previous failed attempts.

Countries including Russia, South Korea and the United Arab Emirates are also trying to reach the moon.

The first American spaceship to the moon since the Apollo era, the uncrewed Odysseus lander built by a private company and funded by NASA, landed near the lunar south pole on Thursday.

But its maker said the US spacecraft is probably lying sideways following its dramatic landing, even as ground controllers work to download data and surface photos from it.

Private Japanese firm ispace also attempted to land on the moon last year but the probe suffered a “hard landing” and contact was lost.
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Facing Chinese EV Rivals, Europe’s Automakers Squeeze Suppliers on Costs

London — Europe’s automakers and their already-stretched suppliers face a tough year as they race to cut costs for electric models to counter leaner Chinese rivals which are bringing cheaper vehicles to challenge them on their home turf.

A big question is how much more Europe’s automakers can squeeze out of suppliers that have already started laying off workers, with many smaller companies hard hit by supply chain issues during the pandemic.

The difference between Europe’s legacy automakers and more EV-focused Chinese manufacturers will be on stark display this week at the Geneva car show, which is returning after a four-year hiatus due to the pandemic.

The only major companies holding media events are France’s Renault and China’s SAIC Motors and the BYD Company — two of several of the country’s automakers that have set their sights on Europe.

Renault is launching its electric R5 and SAIC’s MG brand will unveil its M3 hybrid. Meanwhile, BYD’s Seal sedan is shortlisted for the Car of the Year award. If it wins, it would be the first Chinese model to get the prestigious award.

“They really are like chalk and cheese,” Nick Parker, a partner and managing director at consulting firm AlixPartners, said of the legacy European automakers and their Chinese rivals.

Unlike European automakers that are reliant on external suppliers with separate supply chains for fossil-fuel and electric, their Chinese rivals are highly vertically integrated, producing almost everything in-house and keeping costs down.

That helps them undercut their European rivals. In Britain, BYD’s electric Dolphin hatchback starts at 25,490 pounds ($32,300), about 27% less than Volkswagen’s equivalent ID.3 model. Tesla works in the same way.

Chasing those rivals means European automakers’ profit margins could be “heavily challenged” moving forward because there is only so much they can squeeze out of external suppliers, AlixPartners’ Parker said.

The challenge has been made more difficult by a slower-than-expected shift to EVs, leaving legacy automakers stuck with their dual supply chains. Data this week showed EU fully-electric car sales in January fell 42.3% from December.

Both Renault and Stellantis have stressed their EV cost-cutting efforts this month while Mercedes toned down expectations for EV demand and said it will update its traditional lineup well into the next decade.

Stellantis CEO Carlos Tavares has gone further, telling suppliers that with 85% of EV costs related to purchased materials, they need to bear a proportionate burden in reducing costs.

“I am translating that reality to my partners: If you don’t do your part of the job, then you exclude yourself,” he said.

Nickel and aluminum prices have also risen this week as Western countries expanded sanctions lists against Moscow, highlighting the lingering risks to raw materials prices even though there was no mention of the two metals.

Job cuts

Many legacy suppliers are already feeling the strain of cost cuts with FORVIA, Continental and Bosch all recently announcing or warning of layoffs, with more expected.

To preserve their profits, automakers focused production on higher-margin models during the recent semi-conductor shortage, but that meant less revenue and less upside for their suppliers.

Now industry experts say well-capitalized larger suppliers can adapt to the new reality but warn that plenty of smaller ones are teetering on the edge, like Germany’s Allgaier which filed for insolvency in July.

That means Europe’s automakers face a delicate balancing act between cutting costs to fend off Chinese rivals and avoiding pushing their suppliers too far. Philip Nothard, insight director at dealer services firm Cox Automotive, says automakers may even have to step in to bailout struggling suppliers.

“The risk is if (European automakers) try and screw those suppliers down too much, they’ll either push them into administration or they’ll push them into seeking different markets,” he said.
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Tax-Free Status of Movie, Music and Games Traded Online Is on Table as WTO Nations Meet in Abu Dhabi

Geneva — Since late last century and the early days of the web, providers of digital media like Netflix and Spotify have had a free pass when it comes to international taxes on films, video games and music that are shipped across borders through the internet.

But now, a global consensus on the issue may be starting to crack.

As the World Trade Organization opens its latest biannual meeting of government ministers Monday, its longtime moratorium on duties on e-commerce products — which has been renewed almost automatically since 1998 — is coming under pressure as never before.

This week in Abu Dhabi, the WTO’s 164 member countries will take up a number of key issues: Subsidies that encourage overfishing. Reforms to make agricultural markets fairer and more eco-friendly. And efforts to revive the Geneva-based trade body’s system of resolving disputes among countries.

All of those are tall orders, but the moratorium on e-commerce duties is perhaps the matter most in play. It centers on “electronic transmissions” — music, movies, video games and the like — more than on physical goods. But the rulebook isn’t clear on the entire array of products affected.

“This is so important to millions of businesses, especially small- and medium-sized businesses,” WTO Director-General Ngozi Okonjo-Iweala said. “Some members believe that this should be extended and made permanent. Others believe … there are reasons why it should not.” 

“That’s why there’s been a debate and hopefully — because it touches on lives of many people — we hope that ministers would be able to make the appropriate decision,” she told reporters recently.

Under WTO’s rules, major decisions require consensus. The e-commerce moratorium can’t just sail through automatically. Countries must actively vote in favor for the extension to take effect.

Four proposals are on the table: Two would extend the suspension of duties. Two — separately presented by South Africa and India, two countries that have been pushing their interests hard at the WTO — would not.

Proponents say the moratorium benefits consumers by helping keep costs down and promotes the wider rollout of digital services in countries both rich and poor.

Critics say it deprives debt-burdened governments in developing countries of tax revenue, though there’s debate over just how much state coffers would stand to gain.

The WTO itself says that on average, the potential loss would be less than one-third of 1% of total government revenue.

The stakes are high. A WTO report published in December said the value of “digitally delivered services” exports grew by more than 8% from 2005 to 2022 — higher than goods exports (5.6%) and other-services exports (4.2%).

Growth has been uneven, though. Most developing countries don’t have digital networks as extensive as those in the rich world. Those countries see less need to extend the moratorium — and might reap needed tax revenue if it ends.

South Africa’s proposal, which seeks to end the moratorium, calls for the creation of a fund to receive voluntary contributions to bridge the “digital divide.” It also wants to require “leading platforms” to boost the promotion of “historically disadvantaged” small- and medium-sized enterprises.

Industry, at least in the United States, is pushing hard to extend the moratorium. In a Feb. 13 letter to Biden administration officials, nearly two dozen industry groups, including the Motion Picture Association, the U.S. Chamber of Commerce and the Entertainment Software Association — a video-game industry group — urged the United States to give its “full support” to a renewal.

“Accepting anything short of a multilateral extension of the moratorium that applies to all WTO members would open the door to the introduction of new customs duties and related cross-border restrictions that would hurt U.S. workers in industries across the entire economy,” the letter said.

A collapse would deal a “major blow to the credibility and durability” of the WTO and would mark the first time that its members “changed the rules to make it substantially harder to conduct trade,” wrote the groups, which said their members include companies that combined employ over 100 million workers. 
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Productivity Surge Helps Explain US Economy’s Surprising Resilience 

Washington — Trying to keep up with customer demand, Batesville Tool & Die began seeking 70 people to hire last year. It wasn’t easy. Attracting factory workers to a community of 7,300 in the Indiana countryside was a tough sell, especially having to compete with big-name manufacturers nearby like Honda and Cummins Engine. 

Job seekers were scarce. 

“You could count on one hand how many people in the town were unemployed,” said Jody Fledderman, the CEO. “It was just crazy.” 

Batesville Tool & Die managed to fill just 40 of its vacancies. 

Enter the robots. The company invested in machines that could mimic human workers and in vision systems, which helped its robots “see” what they were doing. 

The Batesville experience has been replicated countlessly across the United States the past couple of years. Worker shortages have led many companies to invest in machines. They’ve also been training the workers they do have to use advanced technology so they can produce more with less. 

The result has been an unexpected productivity boom, which helps explain a great economic mystery: How has the world’s largest economy stayed so healthy, with brisk growth and low unemployment, despite brutally high interest rates that are intended to tame inflation but that typically cause a recession? 

To economists, strong productivity growth provides an almost magical elixir. When companies roll out more efficient technology, their workers can become more productive: They increase their output per hour. A result is that companies can often boost profits and raise pay without having to jack up prices. Inflation can remain in check. 

The Fed’s aggressive streak of rate hikes — 11 of them starting in March 2022 — managed to bring inflation from a four-decade high of 9.1% to 3.1%. But, to the surprise to the economists who’d forecast a recession, the higher borrowing costs have caused little economic hardship. 

Perhaps the likeliest explanation is the greater efficiencies that companies like Batesville Tool & Die have managed to achieve. Before productivity began its resurgent growth last year, a rule of thumb was that average hourly pay could rise no more than 3.5% annually for inflation to stay within the Fed’s 2% target. That would mean that today’s roughly 4% average annual pay growth would have to shrink. Higher productivity means there’s now more leeway for wage growth to stay elevated without igniting inflation. 

The productivity boom marks a shift from the pre-pandemic years, when annual productivity growth averaged a tepid 1.5%. Everything changed as the economy rocketed out of the 2020 pandemic recession with unexpected vigor, and businesses struggled to re-hire the many workers they had shed. 

The resulting worker shortage sent wages surging. Inflation jumped, too, as factories and ports buckled under the strain of rising consumer orders. 

Desperate, many companies turned to automation. The efficiency payoff began to arrive almost a year ago. Labor productivity rose at a 3.6% annual pace from last April through June, 4.9% from July through September and 3.2% from October through December. 

At Reata Engineering & Machine Works, “efficiency was kind of forced on us,” CEO Grady Cope said. With the job market roaring, the company, based in Englewood, Colorado, couldn’t hire fast enough. Meantime, its customers were starting to balk at paying higher prices. 

So Reata installed robots and other technology. Software allowed it to automate the delivery of price quotes to customers. That process used to require two weeks. Now, it can be done in 24 hours. 

Many economists and business people say they’re hopeful that the productivity boom can continue. Artificial intelligence, they note, is only beginning to penetrate factory floors, warehouses, stores and offices and could accelerate efficiency gains. 

Automation raises fears that machines will replace human workers, killing jobs. Some workers supplanted by robots do often struggle to find new work and end up settling for lower pay. 

Yet history suggests that in the long run, technological improvements actually create more jobs than they destroy. People are needed to build, upgrade, repair and operate sophisticated machines. Some displaced workers are trained to shift into such jobs. And that transition is likely to be eased this time by the retirement of the vast baby boom generation, which is causing labor shortages. 

Some of today’s productivity gains may be coming not just from advanced technology but also from more satisfied workers. The tight labor markets of the past three years allowed Americans to change jobs and find others that pay better and make them happier and more productive. 

Justin Thompson, of Kalamazoo, Michigan, felt burned out by his job as a police officer, with its 16-hour workdays .”I was literally running myself into the ground,” he said. 

Thompson’s wife saw a job posting for operations manager at a charter airline. Even without airline experience, his wife felt he could use skills he gains as a Marine Corps infantryman — handling logistics for missions — during tours in Iraq and Afghanistan. 

She was right. Omni Air International hired him in 2019. 

Thompson, 43, loves the new job, which allows him to work from home when he’s not traveling. And his Marine experience — which included developing ways to improve efficiency — has proved invaluable. 

Other workers have switched from low-skill jobs to those that allow them to be more productive. 

At Reata Engineering, staffers were trained to use new sophisticated equipment. 

“The whole point is not to lay people off,” said Cope, the CEO of Reata Engineering. “The point is to make people do jobs that are more interesting” — and pay better, too. 
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Chip Giant TSMC Shifts From Hotspot Taiwan With Japan Plant

TOKYO — Chip giant Taiwan Semiconductor Manufacturing Co. opened its first semiconductor plant in Japan Saturday as part of its ongoing global expansion.

“We are deeply grateful for the seamless support provided by you at every step,” TSMC Chairman Mark Liu said after thanking the Japanese government, local community and business partners, including electronic giant Sony and auto-parts maker Denso. The company’s founder, Morris Chang, was also present at the ceremony in Kikuyo.

This comes as Japan is trying to regain its presence in the chip production industry.

Japan Advanced Semiconductor Manufacturing, or JASM, is set to be up and running later this year. TSMC also announced plans for a second plant in Japan earlier this month, with production expected to start in about three years. Private sector investment totals $20 billion for both plants. Both plants are in the Kumamoto region, southwestern Japan.

Prime Minister Fumio Kishida sent a congratulatory video message, calling the plant’s opening “a giant first step.” He stressed Japan’s friendly relations with Taiwan and the importance of cutting-edge semiconductor technology.

Japan had previously promised TSMC 476 billion yen ($3 billion) in government funding to encourage the semiconductor giant to invest. Kishida confirmed a second package, raising Japan’s support to more than 1 trillion yen ($7 billion).

Although TSMC is building its second plant in the U.S. and has announced a plan for its first in Europe, Japan could prove an attractive option.

Closer to Taiwan geographically, Japan is an important U.S. ally. Neighboring China claims the self-governing island as its own territory and says it must come under Beijing’s control. The long-running divide is a flashpoint in U.S.-China relations.

The move is also important for Japan, which has recently earmarked about 5 trillion yen ($33 billion) to revive its chips industry.

Four decades ago, Japan dominated in chips, headlined by Toshiba Corp. and NEC controlling half the world’s production. That’s declined lately to under 10%, due to competition from South Korean, U.S. and European manufacturers, as well as from TSMC.

The coronavirus pandemic negatively affected the supply of electronic chips, stalling plants, including automakers, with Japan almost entirely dependent on chip imports. This pushed Japan to seek chip production in pursuit of self-sufficiency.

Sony Semiconductor Solutions Corporation, Denso Corporation and top automaker Toyota Motor Corporation are investing in TSMC’s Japan plant, with the Taiwanese giant retaining an 86.5% ownership of JASM.

Once the two plants are up and running, they’re expected to create 3,400 high-tech jobs directly, according to TSMC.

Ensuring access to an ample supply of the most advanced chips is vital with the growing popularity of electric vehicles and artificial intelligence. Some analysts note Japan still leads in crucial aspects of the industry, as seen in Tokyo Electron, which manufactures the machinery used to produce chips.

Still, it’s clear the Japanese government is intent on playing catchup. Tokyo is supporting various semiconductor projects nationwide, such as those involving Western Digital and Micron of the U.S., and Japanese companies such as Renesas Electronics, Canon and Sumitomo.
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US Should Block Chinese Auto Imports From Mexico, US Makers Say

WASHINGTON — The U.S. government should block the import of low-cost Chinese autos and parts from Mexico, a U.S. manufacturing advocacy group said Friday, warning they could threaten the viability of American car companies. 

“The introduction of cheap Chinese autos — which are so inexpensive because they are backed with the power and funding of the Chinese government — to the American market could end up being an extinction-level event for the U.S. auto sector,” the Alliance for American Manufacturing said in a report. 

The group argues the United States should work to prevent automobiles and parts manufactured in Mexico by companies headquartered in China from benefiting from a North American free trade agreement. “The commercial backdoor left open to Chinese auto imports should be shut before it causes mass plant closures and job losses in the United States,” the report said. 

Vehicles and parts produced in Mexico can qualify for preferential treatment under the U.S.-Mexico-Canada trade agreement as well as qualifying for a $7,500 electric vehicle, or EV, tax credit, the report noted. 

The Chinese embassy in Washington said in response that China’s automobile exports “reflect the high-quality development and strong innovation of China’s manufacturing industry. … The leapfrog development of China’s auto industry has provided cost-effective products with high quality to the world.” 

The issue has received new interest after news reports that China’s BYD Company plans to set up an EV factory in Mexico. BYD, known for its cheaper models and a more varied lineup, recently overtook its biggest rival, Tesla, to become the world’s top EV maker by sales. 

Tesla announced plans almost a year ago to build a factory in the northern Mexican state of Nuevo Leon. In October, Mexico said a Chinese Tesla supplier and a Chinese technology company would invest nearly a billion dollars in the state. 

A bipartisan group of U.S. lawmakers has urged the Biden administration to hike tariffs on Chinese-made vehicles and investigate ways to prevent Chinese companies from exporting to the United States from Mexico. 

A group of lawmakers urged U.S. Trade Representative Katherine Tai to boost the 27.5% tariff on Chinese vehicles and said her office “must also be prepared to address the coming wave of [Chinese] vehicles that will be exported from our other trading partners, such as Mexico, as [Chinese] automakers look to strategically establish operations outside of [China].” 

Alliance for Automotive Innovation CEO John Bozzella has said that proposed U.S. environmental regulations could let China gain “a stronger foothold in America’s electric vehicle battery supply chain and eventually our automotive market.” 

The U.S. Treasury issued guidelines in December on the $7,500 EV tax credit aimed at weaning the U.S. EV supply chain away from China. 
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Dior Postpones Hong Kong Fashion Show ‘Indefinitely’

HONG KONG — Dior has postponed a fashion show set to be held in Hong Kong next month, a city official confirmed Saturday, dealing a blow to the financial hub’s ambitions to boost its economy through major events.

Hong Kong is courting top international celebrities and brands in the hope of rebooting its reputation, which has been battered by years of social unrest and strict pandemic curbs. 

The Dior fashion show — meant to feature artistic director Kim Jones and the men’s autumn collection — was to be one of several “mega events” touted last month by Hong Kong’s culture, sports and tourism chief, Kevin Yeung, as part of the city’s drive to become an event capital. 

But Yeung’s office confirmed to AFP on Saturday that it had “just been notified” by organizers that the fashion show would not go ahead as scheduled on March 23. 

“Large-scale events are postponed from time to time, and we continue to welcome large-scale events to take place in Hong Kong,” a spokesperson for Yeung’s office said. 

Dior said the show had been “postponed indefinitely” without giving specifics, according to a company statement quoted by the South China Morning Post. 

According to the South China Morning Post, the event was expected to cost about $100 million ($12.8 million U.S.) and draw nearly 1,000 attendees.  

Louis Vuitton in November held its men’s pre-fall 2024 show in Hong Kong, led by creative director Pharrell Williams and drawing celebrity guests from China and South Korea. 

The much-hyped runway show was seen as a boon to Hong Kong’s international image and a sign of the luxury giant’s commitment to Asian markets. 
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Ukraine’s War-Battered Economy Shows Signs of Recovery

Ukraine’s economy shrank 29% in 2022, the year Russia launched its full-scale invasion. In addition, Ukrainian businesses were destroyed, exports were halted and millions of people were displaced. But in 2023, Ukranian officials’ say, the economy actually grew 5%. Eastern Europe Bureau Chief Myroslava Gongadze reports from Kyiv.
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