Day: March 21, 2018

U.S. President Donald Trump is expected at any time to fire a salvo directly at China in what could escalate into a full-scale trade war between the world’s two largest economies.

Trade actions against China, partly in response to the theft and improper transfer of American technology to Chinese companies, are expected to be announced by Trump as soon as Thursday. His schedule includes a midday signing of a memorandum “targeting China’s economic aggression.”

On the anticipated eve of the measures, U.S. officials spoke to reporters about their monthslong investigation under Section 301 of the Trade Act of 1974 of Beijing’s trade practices.

China has long been considered by many in the international community to have contravened fundamental principles of global trade, despite joining the World Trade Organization in 2001.  

There have been a “number of specific failings by China to live up to its WTO obligations,” said an official of the U.S. Trade Representative in a Wednesday background briefing for reporters.  

The briefing and other comments not for attribution by officials are seen as clear signals the administration, in response to an Aug. 14 memo by Trump, intends to use the Section 301 trade tool.

The last time it was wielded was by the Clinton administration against Japan to pry open that country’s automotive sector.

‘Ripping off’

China has been “ripping off” the United States, Trump has emphasized numerous times in public remarks during which he has harshly criticized his predecessors for not doing anything about it.  

According to published reports, Trump is expected to impose tariffs, valued at tens of billions of dollars, on a number of Chinese products. Sources say that in addition to tariffs, restrictions on Chinese investment in the United States are likely as a response to Beijing using state funds and enterprises under the government’s control to purchase intellectual property here.

Trump in January hit the Chinese-dominated solar panel and cell industry with tariffs. Earlier this month, he launched global tariffs on steel and aluminum (from which Canada and Mexico were quickly given indefinite exemptions), a move China’s commerce ministry said it “strongly opposed.”   

U.S. Trade Representative officials on Wednesday declined to specify what new actions will be taken, but they did not disagree that an announcement is expected as soon as Thursday.

“We’re getting very close,” said a USTR official speaking to reporters on condition of not being named. “The president will have the final say.”

Bracing for an anticipated harsh reaction from China, the official noted, “We recognize the potential gravity of the situation here.”

Depending on the severity of the measures taken by Trump, stock markets in Asia and elsewhere could be roiled, according to market analysts.

Trade groups representing American retail giants, such as Walmart, and tech companies, including Apple, warn that sweeping tariffs would raise prices for consumers in the United States and might not do much to reduce the trade deficit.
…

U.S. congressional leaders have reached a deal on a $1.3 trillion spending bill as a budget deadline looms.

Lawmakers now have until midnight Friday to approve it and prevent the year’s third government shutdown. Passage of the massive bipartisan effort seems certain.

The bill, which will keep the government funded until the end of September, has President Donald Trump’s support, the White House said in a statement released Wednesday.

“The president had a discussion with (House) Speaker (Paul) Ryan and (Senate) Leader (Mitch) McConnell, where they talked about their shared priorities secured in the omnibus spending bill,” said White House Press Secretary Sarah Huckabee Sanders.

Deadline late Friday

The bill will give Trump a huge budget increase for the military, including a 2.4 percent pay raise for military personnel.

It also will include a measure strengthening the federal background check system for gun purchases.

WATCH: Federal Budget Explainer

The “Fix NICS” measure would provide funding for states to comply with the existing National Instant Criminal Background Check system and penalize federal agencies that don’t comply.

It also will include money to improve school safety, including money for training school officials and law enforcement officers on how to identify signs of potential violence and intervene early, installing metal detectors and other steps to “harden” schools to prevent violence.

GOP aides said that Trump will win $1.6 billion for a wall and physical barriers along the U.S.-Mexico border. But Trump would be denied a far larger $25 billion request for multiyear funding for the project.

To the Democrats’ disappointment, the bill makes no mention of protections for so-called Dreamers, undocumented immigrants brought to the United States as children.

No insurer subsidies

It also won’t provide subsidies to health care insurers who cut costs for low-earning customers. And it won’t have federal payments for carriers to help them afford to cover their costliest clients.

Both parties touted the $4.6 billion in total funding to fight the nation’s opioid addiction epidemic and a record $3 billion increase for medical research at the National Institutes of Health.

The House is expected to vote on the bill by Thursday, followed quickly by the Senate, to meet Friday’s midnight deadline.
…

The U.S. and the European Union are set to engage in a new round of talks to resolve trade disputes, including those over U.S.-proposed tariffs on steel and aluminum imports.

“We have agreed to launch immediately a process of discussion with President Trump and the Trump administration on trade issues of common concern, including steel and aluminum, with a view to identifying mutually acceptable outcomes as rapidly as possible,” a joint U.S.-E.U. statement said Wednesday.

The announcement was made after talks in Washington between Commerce Secretary Wilbur Ross and E.U. Trade Commissioner Cecilia Malmstroem.

U.S. President Donald Trump’s announced tariffs on aluminum and steel imports are scheduled to take affect later this week. 

Washington already temporarily exempted Canada and Mexico from the tariffs during talks to renegotiate the North American Free Trade Agreement.  

U.S. Trade Representative Robert Lighthizer said in congressional testimony Wednesday the administration is currently discussing tariff exemptions with Argentina, Australia and Brazil.

Lighthizer also told lawmakers he expected a decision soon from Trump on tariffs on imports from China, which Washington accuses of stealing U.S. intellectual property.

The Trump administration’s aggressive actions on trade issues have triggered alarm among legislators in the president’s own Republican Party and among industry groups who say the tariffs exposes the U.S. to higher prices and potential trade wars.

 
…

Top officials of the U.S. central bank raised the key interest rate slightly Wednesday, amid strong job gains and moderate economic growth. 

The rate is one-quarter of a percentage point higher, putting it in a range between 1.5 and 1.75 percent. 

WATCH: Fed Signals at Least Three More Rate Hikes in 2018

Federal Reserve officials said that is still “accommodative,” meaning it is still fairly low, compared to the average rate during the past few decades. Fed officials said they will probably raise interest rates a few more times this year if the economy continues along its current path.

The Federal Reserve tries to manage the economy to maximize employment and keep prices stable. 

The bank slashed interest rates nearly to zero during the financial crisis in 2008 to stimulate economic growth. However, economists say keeping rates too low for too long could push inflation up fast enough to damage the economy. 

While inflation is below the 2 percent rate the Fed thinks is best for the economy, the bank said inflation seems likely to rise a bit.  
…

When Nestle executive Stephan Canz attended the German school in Nairobi in the early 1980s, it was surrounded by lush coffee farms.

Today, the trees have long since been uprooted and replaced by a shopping mall and upmarket homes, driving a sharp drop in

production of Kenya’s premium beans.

“The coffee has disappeared,” said Canz, who co-manages Swiss-based Nestle’s partnerships with coffee farmers globally. “You have to go almost to the slopes of Mount Kenya to find coffee.”

Kenya accounts for just 1 percent of the global crop, but its high-quality arabica beans are sought-after for blending with other varieties.

Alarmed by a steep drop in the country’s production, Nestle, which buys 10 percent of the world’s coffee and has the leading packaged coffee business, is working with farmers to guarantee its supplies.

In a $1 million project, begun in 2010, it says it is boosting bean production and quality.

Mary Wanja, with 350 coffee trees on her plot in rural Kirinyaga at the foot of Mount Kenya, is one of more than 40,000 of Kenya’s 600,000 coffee farmers participating in the project.

She harvested 1,200 kg of coffee last year, double the previous year, and saw her annual earnings rise to 100 shillings ($0.99) per kg, from 70 shillings.

“We are planting more trees so we can harvest more,” she said, standing amid newly planted seedlings provided by the Nestle project, which she joined three years ago.

Multiplier effect

Since Kenya’s production peaked at 129,000 tonnes in 1988/89 it has dropped steadily due to poor management and global price swings. Farmers have switched crops or sold their land.

Nestle, which is counting on growth in its coffee business as it overhauls its business to improve performance, works with a local milling and marketing company, Coffee Management Services (CMS), to train farmers regularly on fertilizer application, pest and disease control. It provides seedlings for farmers wishing to plant more.

“People didn’t know how and when to apply fertilizer properly. Nestle has taught us a lot,” said William Njeru, a farmer who harvested 7,600 kg last year, up from around 1,200 kg a year before he joined the project five years ago.

“If we can have other partners who are doing what Nestle is doing, the multiplier effect on productivity in Kenya can be very high,” said Peter Kimata, deputy head of Nestle’s partner CMS.

A half hour drive up the road from his office sits an abandoned coffee factory with rusting machinery.

Farmer Moses Wachira says it was closed in 2013 after its management embezzled farmers’ money. That forced 500 farmers to start selling their coffee to brokers who offer lower prices.

“These problems are causing production to fall because nobody watches to ensure managers do not misappropriate farmers’ money,” said the white-bearded farmer.

Kenya’s harvest fell 12 percent in the 2016/17 season to 40,700 metric tonnes, according to government data.

Government efforts to revive the sector have faltered. Last year, a judge stopped the government from acting on the recommendations of an official report on ways to boost coffee production after farmers claimed they were not consulted.

Some Kenyan farmers will miss out on expanding the crop to meet 2-3 percent annual growth in global demand for coffee, according to Nestle, as consumers discover new ways of consuming coffee, including capsules and cold brews.

Demand for coffee is also growing locally.

In Kenya, cafe chain Java, owned by Dubai-based private equity firm Abraaj, opened its first shop in 1999 and has grown to 68 retail outlets, as an emerging middle class and young professionals develop a taste for lattes and mocha.

“The coffee has to come from somewhere,” said Canz.

 
…

French commuters face major train service disruptions on Thursday due to an unexpectedly large walkout by railway workers angry at the government’s plans to shake up the state-owned and highly indebted SNCF rail company.

Labor unions said last week they would launch rolling strikes in early April, but France’s transport minister said many were planning to join a wider day of public service protests on Thursday, reducing rail services by 50 percent.

“There will ultimately be serious disruption tomorrow,” Transport Minister Elisabeth Borne said.

Unions are on a collision course with the government over its plans for the biggest shake-up of SNCF (Societe Nationale des Chemins de Fer) since the nationalization of the railways in the 1930s. Among the government’s plans are the trimming of benefits received by SNCF’s 260,000 employees and a cut in its 45 billion euro ($56 billion) debt.

The showdown was due to start with strikes two days a week over three months from April 3. It is shaping up as the biggest test of Emmanuel Macron’s presidency since the 40-year-old came to power last May on a promise of sweeping economic reforms.

Thursday’s stoppages are not part of the programmed rolling strikes. They are being organized to dovetail with a day of demonstrations by civil servants and public service employees opposed to plans to change the retirement system.

Minister Borne said the stoppages would halve regional rail services nationally and that high-speed TGV connections between major cities would be cut to 40 percent of normal levels.
…

Peter G. Peterson, a billionaire and business executive who became one of the most prominent voices to argue for entitlement reform and reducing the U.S. national debt, died of natural causes early Tuesday, his family said. He was 91.

Born in the small town of Kearney, Nebraska, to Greek immigrants, Peterson was CEO of two major U.S. companies and co-founded one of the world’s largest private-equity firms.

He was a national figure in business by the early 1960s, serving as chairman and CEO of Bell and Howell, one of the largest manufacturers of movie cameras at the time.

He left Bell and Howell to work for the Nixon administration in the early 1970s, eventually serving as secretary of commerce from 1972 to 1973.

Lehman Brothers 

He took over as chief executive of the investment bank Lehman Brothers in 1973 after leaving the Nixon administration. In 1985, he co-founded the private-equity firm Blackstone Group with Stephen Schwarzman.

“His intelligence, wit and vision made him an inspirational leader who brought people together from the White House to Wall Street,” his family said in a statement.

Blackstone went on to become one of biggest private-equity firms in the world, with $434 billion in assets under management at the end of last year. When the firm went public in 2007, Peterson’s stake in the company made him a billionaire. His wealth was estimated at $2 billion, according to Forbes Magazine.

Fiscal challenges

Peterson dedicated the rest of his life to what he called “key fiscal challenges threatening America’s future,” donating $1 billion to create the Peter G. Peterson Foundation in 2007.

He never publicly endorsed the fiscal ideals of the Tea Party. However, his ideas did give him some common ground with them.

He long argued that the United States’ entitlement programs, principally Medicaid, Medicare and Social Security, had to be restructured or benefits cut back to avoid bankrupting the government. Through his foundation, he disseminated his ideas among the public and politicians.

“The fact he was able to start a serious debate about the future of Social Security and other entitlement programs was a huge accomplishment,” said Fred Bergsten, founder of the Peterson Institute for International Economics, who worked with Peterson in various capacities going back to the 1970s.

Raising taxes

Peterson was not considered ideological when it came to dealing with Social Security and Medicare. A life-long Republican, he still believed that raising taxes should be considered as part of any major restructuring of the U.S. budget, Bergsten said.

The foundation quickly became a major voice on all budget-related matters, repeatedly quoted in national media outlets. In 2008, his organization helped bankroll the documentary “I.O.U.S.A,” with the goal of making the federal government’s ballooning national debt, then around $10 trillion, a central campaign issue.

“What is most significant is most of our challenges are not really being discussed,” Peterson told The Associated Press in 2008 when he created his foundation. “I’ve been a very lucky beneficiary of the American dream as the son of immigrants. And, the more I look at some of these problems, the more persuaded I am they will pose a serious threat to this country.”

Peterson is survived by his wife, Joan Ganz Cooney, who co-founded the Children’s Television Workshop, and children John Peterson, Jim Peterson, David Peterson, Holly Peterson and Michael Peterson, and nine grandchildren.
…

Women are often short-changed compared to men when communities are compensated or resettled during commercial land deals in Africa, and governments should take action to rectify that, researchers said Tuesday.

The World Resources Institute’s (WRI) research showed men had received up to six times as much for their land. And although women usually had smaller land parcels, they also lost access to resources such as rivers, forests and social networks.

Among other measures, the U.S.-based WRI said governments should enact laws ensuring women receive an equitable share of compensation payments made to households.

“There is usually a power asymmetry between the community and the investor. These deals are presented to the community as almost-done deals with women getting the short-end,” said WRI associate researcher Celine Salcedo-La Vina.

“Most of the time the expected benefits are not legally binding,” she told Reuters by Skype.

WRI focused on Tanzania and Mozambique, which are among the places where major commercial deals in agribusiness, tourism and mining have displaced thousands over the last decade, she said.

Land in Africa is often communally held, with fathers assumed to be the rightful owners who usually pass it on to their sons. That makes it hard for women to own land except through their husbands or by buying it, the World Bank has said.

Women are usually not compensated for lost farms because they are not deemed to own the fields they cultivate, and often grow subsistence crops. Men, on the other hand, typically plant cash crops whose value is easy to determine, WRI said.

Changing land laws

Some African governments, including Tanzania and Mozambique, have enacted new laws to address how investors engage communities during land deals to reduce inequality, WRI said.

But these changes have done little to address how women are compensated or resettled during commercial deals, because most of the laws use “gender-neutral language.”

“When applied in patriarchal contexts [these laws] result in women’s marginalization,” the report said.

Tanzania and Mozambique are working to change their land laws to bring in more rights for women during commercial land deals. However, those would first have to tackle the cultural norms of how women come to own land, Salcedo-La Vina said.

“We have seen where we have men and women working together during land deals, it usually strengthens community rights,” she said.

WRI also recommended that women’s land uses and contributions as heads of households be taken into account, that land titles be in both spouses’ names, and that intangible assets be included when determining compensation.
…

When Commerce Secretary Wilbur Ross held up a can of Campbell’s soup in a CNBC interview to make the case that the Trump administration’s steel and aluminum tariffs were “no big deal,” the canning industry begged to disagree — and they were hardly alone.

President Donald Trump’s strong-armed trade policies have set off an intense scramble among industry groups, companies and foreign countries seeking exemptions from tariffs of 25 percent on steel imports and 10 percent on imported aluminum. The push comes ahead of a round of new penalties expected to be slapped on China by week’s end.

The Can Manufacturers Institute, which represents 22,000 workers at manufacturers across the nation, estimates the steel and aluminum tariffs will harm their industry and consumers alike. The institute says there are 119 billion cans made in the U.S., meaning a 1 cent tariff would lead to a $1.1 billion tax on consumers and businesses.

“Secretary Ross has made cans a poster child to dispel concerns about the costs of tariffs,” said Robert Budway, the institute’s president. He said his organization was concerned Ross “is already predisposed to deny our petitions.”

Trump’s one-two punch on trade has set in motion a deluge of requests to the Commerce Department for exclusions for certain steel and aluminum products. Foreign countries, meanwhile, complain the U.S. trade representative’s office has not provided specific guidance on gaining exemptions before the steel and aluminum tariffs are implemented on Friday.

Countries in the dark

“Typically, the countries are determined before tariffs are announced,” said Josh Zive, senior principal at the law firm Bracewell LLP. This time, countries don’t know whether they will end up being targeted or exempted — “that’s weird and no one knows what to make of it.”

The Trump administration, which has said steel and aluminum imports threaten U.S. national security, has already given Mexico and Canada a reprieve — provided they agree to a revamp of the North American Free Trade Agreement. The European Union, South Korea, Australia and Brazil are among the groups and countries seeking the exemptions.

Senator Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee, said tariffs are “sometimes necessary tools” to protect national security or fight unfair trade practices. But he said the administration’s approach is producing “chaos, uncertainty and an alienation of our closest allies.”

Emily Davis, a spokeswoman for U.S. Trade Representative Robert Lighthizer, said the U.S “is engaged in discussions with several countries to determine if means other than tariffs can be arranged to address our national security concerns.”

Companies that buy imported steel and aluminum can request tariff relief from the Commerce Department, especially if they rely on types of imported steel and aluminum that aren’t available from domestic U.S. producers.

Expect a deluge: Steel and aluminum producers have 30 days to make their exemption requests. Commerce expects 4,500 requests for relief and 1,500 objections — and it is supposed to reach decisions in 90 days.

Commerce has said it intends to reach decisions on a company-by-company basis, not by making across-the-board exemptions for individual steel and aluminum products. That decision has created anxieties that certain companies could get tariff relief while others would be forced to pay tariffs on the same product — perhaps because in the time between the two requests domestic U.S. production has ramped up to fill shortages.

“The big thing is, it’s arbitrary,” said Mary Lovely of the Peterson Institute for International Economics. “The government is becoming the matchmaker between the purchaser and the supplier.”

“It’s a real question to me whether they understand the magnitude of the requests they are going to get,” Zive said of Commerce. “How they’re going to get through them in 90 days is difficult to understand.”

Industry officials said other aspects of the exemption process will burden companies. Manufacturers are unclear whether companies will qualify for refunds if they end up getting exemptions after they’ve begun paying the tariffs. And since Trump set no timeline for ending the tariffs, the companies will need to reapply for the exemptions annually.

Stocking up

Companies, meanwhile, have been trying to beat the tariffs by stocking up on imports. Steel imports rose 15 percent last year and another 17 percent in January.

The steel and aluminum tariffs may only be the opening salvo.

Administration officials said Trump is expected to announce $60 billion in tariffs on Chinese imports by Friday on a wide array of consumer goods, from apparel to electronics, and even on imported parts for products made in the U.S.

Ross, appearing before a House budget panel on Tuesday, faced questions about the trade moves, with lawmakers warning the tariffs could lead to retaliation from foreign countries and wreak economic havoc for consumers.

“I worry that now we’re engaged in a trade war which is further going to alienate us from our adversaries,” said Representative Rodney Frelinghuysen, a New Jersey Republican who chairs the powerful House Appropriations Committee.

Representative Derek Kilmer, a Washington state Democrat, noted that the decision to exclude aluminum and steel producers on a company-by-company basis — rather than by individual products — could create the possibility that some companies will gain a huge advantage over their competitors if they win exemptions.

Ross vowed that “the process will be open and transparent” and that Commerce was working to “minimize the amount of inconvenience that any of the affected parties will suffer as a result of the process. We’re gearing up to be fast, to be fair and to be practical.”
…