Israel plans for ‘indefinite’ grip over Gaza

This is an audio transcript of the FT News Briefing podcast episode: ‘Israel plans for ‘indefinite’ grip over Gaza’

Sonja Hutson
Good morning from the Financial Times. Today is Wednesday, November 8th, and this is your FT News Briefing.

Rising wages in eastern Europe could come back to bite. And Israel has changed its position on who should control Gaza. Plus, the icy relationship between Australia and China is starting to thaw. I’m Sonja Hutson, in for Marc Filippino. And here’s the news you need to start your day.

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The International Monetary Fund is warning that soaring wages in eastern Europe could actually hurt the region. Incomes have risen at double digit rates in many countries, but the IMF says that despite that, productivity has pretty much stalled. And the fund is now warning that that could make the region less attractive to the western European companies that have been expanding there. It’s also unlikely to help these countries tackle inflation, which has been running higher than the EU’s average. But the IMF’s comments will probably fall on deaf ears in many eastern European capitals. The incoming government in Poland, for example, is expected to raise wages even more in response to pressure from labour unions.

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Israel is planning to keep control of Gaza indefinitely. That’s what Prime Minister Benjamin Netanyahu told ABC News on Monday.

Benjamin Netanyahu voice clip
I think Israel will, for an indefinite period, will have the overall security responsibility because we’ve seen what happens when we don’t have it. When we don’t have that security responsibility, what we have is the eruption of Hamas terror on a scale that we couldn’t imagine.

Sonja Hutson
It’s a reversal from what Israeli officials said earlier in the country’s war with Hamas. Netanyahu said this week that the Gaza Strip should be governed by, quote, those who don’t want to continue the way of Hamas. It wasn’t clear whether he was referring to the Palestinian Authority or another government. All this has people asking what comes next for Gaza.

Emile Hokayem voice clip
The problem is, first, does this focus distract us from the here and now? Because there may be no Gaza essentially functioning place to rule over.

Sonja Hutson
That’s Emile Hokayem, a senior fellow at the International Institute for Strategic Studies in London. He spoke to the FT’s Gideon Rachman for this week’s Rachman Review podcast about what it would mean for Israel to root out Hamas in Gaza.

Emile Hokayem voice clip
But how do you, you know . . . What kind of infrastructure do you rely on to make, you know, what is a harrowing situation for these people a bit better? Because infrastructure today is essentially a Hamas-led one. Is every civil servant in Gaza a Hamas official that needs to be rooted out? Is every judge, every municipality worker, every garbage collector? That’s gonna be a massive conundrum.

Sonja Hutson
And Emile says it’s not clear who would be willing to rule Gaza after the war.

Emile Hokayem voice clip
A number of Arab states which have been quietly approached say, OK, would you want to contribute to that, are saying, well, you know, no, we don’t want to do Israel’s job. We don’t want to be in a situation where we’re fighting a Hamas insurgency. Hamas has already said that any external force would be seen as an enemy force that would need to be fought. And importantly, you won’t have a transitional authority that is viable and legitimate if you don’t have a clear political horizon. No one wants to be in Gaza forever. You have to be in Gaza so that you get to a point where there is a Palestinian state that is then responsible for the wellbeing of its own people, but also for peaceful relations with Israel next door. And we’re nowhere close to having that discussion.

Sonja Hutson
That was Middle East politics and security expert Emile Hokayem talking to the FT’s Gideon Rachman. You can hear their full conversation on the Rachman Review podcast on Thursday.

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Australia’s prime minister went to China this week. The move marked a dramatic turnaround in relations between the two countries.

Anthony Albanese voice clip
Both of us certainly agree that we shouldn’t be defined by our differences. Recognise that they are there, but also recognise the mutual benefit that we have.

Sonja Hutson
Anthony Albanese spoke with Xi Jinping on Monday over an issue that’s been a pretty big thorn in the side of Australia.

Anthony Albanese voice clip
We spoke about trade and welcomed the fact that we’re returning to the exchange of trade that’s been so important between our two countries.

Sonja Hutson
For years now, the relationship between the two countries has been pretty icy. China has sanctioned trade and increased tariffs on Australian goods — something Australia has denounced. Alan Beattie is the FT’s senior trade writer and he’s been following the recent patching up of relations. Thanks for joining us, Alan.

Alan Beattie
Oh, nice to be here.

Sonja Hutson
So what’s the main reason why trade relations between China and Australia fell apart in the first place?

Alan Beattie
So it was over something which you may not think of were (laughter) destroying trade relations over. Australia called for an inquiry into the origins of Covid. This was extremely sensitive in China because of course the debate about whether it came from wet markets from animals or whether it was a lab leak. And so China, in retaliation, put a whole variety of trade restrictions on to Australia. Australia exports a lot of commodities to China, it exports iron ore, it exports barley, it exports food as well exports a lot of wine. And for a while it was really quite a tough confrontation.

Sonja Hutson
And how did Australia respond?

Alan Beattie
Really what Australia did, which was very smart, rather than start a trade war itself and retaliate, its exporters who are very good and very competent found new markets. So the Australian wine industry looked to crack open the US market, which they’d not really done before. Australia managed to sell its barley elsewhere and in some cases, such as with iron ore, Australia found that it actually could continue to export iron ore to China just because China couldn’t find an alternative source. So actually Australia managed to roll with the punch and not get damaged that much.

Sonja Hutson
Has China used similar trade tactics elsewhere?

Alan Beattie
Yes. So Lithuania recognised a Taiwanese mission in Lithuania and called it something slightly different from the standard EU thing. China, of course, is extremely sensitive about Taiwan and said, oh, you know, this is outrageous. You’re treating Taiwan as though it’s an independent country. And without really announcing it started trade sanctions so that Lithuania suddenly discovered they couldn’t get the paperwork to export to China. What actually happened is pretty similar. I mean, Lithuania is a very small economy anyway. It’s just a small country and they quite easily found alternative export markets. And also Taiwan, which was very grateful for this support, came in and offered them, I think, credit lines and help with possibly developing a semiconductor industry and so forth. So similarly, Lithuania found that the Chinese blockade didn’t actually make that much of a difference.

Sonja Hutson
OK. So given that these trade tactics didn’t really work on either a larger country like Australia or a smaller one like Lithuania, has China changed course?

Alan Beattie
It’s hard to say whether it changed at all because China’s state is so large and has so many ways of intervening. It’s quite easy for China to to use one of lots and lots of ways to punish countries for something. Whether or not it’s now stopped doing that is not clear. Personally, I would doubt it.

Sonja Hutson
Alan Beattie is the FT’s senior trade writer. Thanks, Alan.

Alan Beattie
Thanks so much.

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Sonja Hutson
Before we go, China is having a pork problem. Demand for the commodity has plummeted recently, and with that, so have its prices. Now, economists are worried this might tip the country back into deflation, where consumer prices across the board actually decline. That would complicate Beijing’s efforts to boost consumer confidence. It hasn’t exactly been a great year for the world’s second-largest economy. China last fell into deflation back in August and has struggled to recover from pandemic-era lockdowns. Meanwhile, the all-important property sector has just been a mess. China’s consumer price index data from October is set to be released on Thursday.

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You can read more on all these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.