Month: March 2018

It could soon be cheaper to operate a factory of robots in the United States than employing manual labor in Africa. That’s the stark conclusion of a report from a London-based research institute, which warns that automation could have a devastating effect on developing economies unless governments invest urgently in digitalization and skills training.

The rhythmic sounds of the factory floor. At this textile plant in Rwanda, hundreds of workers sit side-by-side at sewing machines, churning out clothes that will be sold in stores across the world.

Outsourcing production by using cheap labor in the developing world has been a hallmark of the global economy for decades. But technology could be about to turn that on its head.

Research from the Overseas Development Institute focused on the example of furniture manufacturing in Africa. Karishma Banga co-authored the report.

“In the next 15 to 20 years, robots in the U.S. are actually going to become much cheaper than Kenyan labor. Particularly in the furniture manufacturing industry. So this means that around 2033, American companies will find it much more profitable to reshore production back. Which means essentially get all the jobs and production back from the developing countries to the U.S. And that obviously can have very significantly negative effects for jobs in Africa.”

As robots are getting cheaper, she says, people are getting more expensive.

“So the cost of a robot or the cost of a 3D printer, they’re declining at similar levels, around 6 percent annually. So that’s a significant decline. Whereas wages in developing countries are rising.”

There’s no doubting the challenges posed by automation to manual labor in developing countries – but some are fighting back.

The Funkidz furniture factory in Kenya breaks with the traditional mold of production. Automated saws cut perfect templates using computer-aided designs, overseen by skilled programmers and operators.

The investment is paying off, with rapid growth and expansion into Uganda and Rwanda. But Kenyan CEO Ciiru Waweru Waithaka says she can’t find the right employees.

“We have machines that sit idle because we don’t have skilled people. There are many people who need jobs, yes, we agree, but if they have no skills… I would love to employ you, but you need a skill, otherwise you cannot operate our machines. So we are urging all institutions, government, please let us take this skills gap as a crisis.”

That call is echoed by the ODI report authors – who urge African governments to use the current window of opportunity to build industrial capabilities and digital skills – before the jobs crunch hits.
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There is no sign that the United States is distancing itself from the World Trade Organization, and negotiations are underway to avert a global trade war, WTO Director-General Roberto Azevedo said in a BBC interview broadcast Wednesday.

U.S. President Donald Trump has launched a series of tariff-raising moves, upsetting allies and rivals alike.

Trump is also vetoing the appointment of WTO judges, causing a backlog in disputes and threatening to paralyze what is effectively the supreme court of trade. Some trade experts have begun asking whether Trump wants to kill the WTO, whose 164 members force each other to play by the rules.

“I have absolutely no indication that the United Sates is walking away from the WTO. Zero indication,” Azevedo said in an interview on the BBC Hardtalk program, according to excerpts released early by the BBC.

Last month, Trump called the WTO a “catastrophe” and complained the United States had only a minority of its judges.

Correction

The next day, Azevedo gently set him straight, noting that the United States had an unusually good deal, since it had always had one of the seven judges.

Asked whether the WTO should be thinking about a Plan B without the United States, Azevedo told the BBC that he had not heard anything to suggest that such a situation was in the cards.

“Every contact that I have in the U.S. administration assures me that they are engaging,” he said.

The question of whether U.S. tariffs were legal could be settled only by a WTO dispute panel, but the damage from such unilateral actions would be felt much more quickly as other countries retaliated, leading to a global trade war, he said.

“I don’t think we are there yet, but we are seeing the first movements towards it, yes,” he said.

Nobody believed it was a minor problem, including those in the U.S. administration, and people were beginning to understand how serious the situation was and what impact it could have on the global economy, Azevedo said.

“There are still negotiations ongoing. … We want to avoid the war, so everything that we can do to avoid being in that situation, we must be doing at this point,” he said.
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U.S. President Donald Trump, who campaigned against economic agreements he considered unfair to America has his first trade deal.

The United States and South Korea have agreed to revise their sweeping six-year-old trade pact which was completed during the administration of Trump’s predecessor, Barack Obama.

The agreement “will significantly strengthen the economic and national security relationships between the United States and South Korea,” according to a senior administration official in Washington.

Trump had threatened to scrap the Korea-US Free Trade Agreement (KORUS FTA), calling it “horrible.” But officials of his administration on Tuesday confirmed key aspects of the agreement which officials in Seoul had announced the previous day.

“When this is finalized it will be the first successful renegotiation of a trade agreement in U.S. history,” according to a senior U.S. official.

The tentative agreement between the United States and its sixth largest trading partner and a critical security ally in Asia comes at a time of fast-moving developments on the Korean peninsula.

In exchange for terms more favorable to American automakers, South Korea — the third largest steel exporter to the United States — is being exempted for recently announced heavy tariffs on steel rolled out by Trump. South Korea will also limit to about 2.7 tons per year shipments of steel to the United States.

“This is a huge win,” a senior U.S. official, speaking on condition of anonymity, told reporters on a conference call Tuesday evening.

Trump last week also temporarily excluded other trade partners, including Canada, the European Union and Mexico from the announced import duties of 25 percent on steel and 10 percent on aluminum, which came into effect on Friday.

Under the revisions to be made the KORUS FTA, South Korea is to allow American carmakers to double to 50,000 the number of vehicles that meet U.S. safety standards to Korea annually even though they do not comply with various local standards.

“The revisions to the KORUS FTA benefit both countries as they addressed the United States’ primary concern in autos trade, opening the South Korean market to additional exports of U.S. autos,” Troy Stangarone, the senior director of congressional affairs and trade at the Korea Economic Institute in Washington, tells VOA. “For South Korea, they addresses concerns in the dispute settlement process, while the overall revisions remained relatively narrow in scope. The agreement also takes a potentially contentious issue off of the table as the United States and South Korea prepare for critical talks with North Korea.”

Vehicle emissions standards will also be eased for U.S. vehicles imported from 2021 to 2025.

The Korea Automobile Manufacturers Association immediately called on Seoul to also ease environmental and safety standards for domestic vehicle manufacturers “to offer a level playing field.”

The balance is heavily in favor of South Korea. According to U.S. government statistics, Americans bought $16 billion  worth of passenger cars while such purchases made by South Koreans totaled just $1.5 billion.

The United States, under the revised deal, will also maintain tariffs on exports of South Korean pick-up trucks until 2041, an extension from the previously agreed 2021. However, no South Korean manufacturer is currently exporting such vehicles to the U.S. market.

U.S. officials also say that South Korea has agreed to recognize U.S. standards for auto parts.

“They will reduce some of the burdensome labeling requirements when it comes to auto parts,” a senior U.S. official told reporters.

The apparent settlement of the trade dispute comes before a planned meeting between the leaders of rival South and North Korea. Trump has also accepted an invitation relayed by the South from the North’s leader, Kim Jong Un, to meet with the U.S. president. The White House on Tuesday said planning for such a summit is still proceeding but no location or date has been decided. State Department official say they are unsure it will happen by May as previously announced.

The rival Koreas have no diplomatic relations and technically remain at war since a 1953 armistice signed by armies of China and North Korea with the United Nations Command, led by the United States.
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For this ancient town on the southern edge of the Sahara, the flow of desperate migrants trying to reach Europe used to be a boon, not a burden.

Abdoul Ahmed, a 31-year-old mechanic in Agadez, measured the good years in customers. When arrivals in Europe peaked in 2015, dozens of cars came to his workshop each day to get their tires changed before setting off across the desert.

But since the European Union cracked down on migration a year later, his daily clientele has dropped to one or two. That earns him about $4, to be shared with five skinny teenage apprentices.

“Times are bad. There’s no activity,” he said, sitting along one of the few paved roads in Agadez, a mud-brick town where beat-up motorcycles outnumber cars.

For years, the old trading post in Niger has been a key stop for West Africans traveling north — mostly young men fleeing poverty in search of better opportunities abroad.

It is the place where migrants find smugglers to arrange their trip across the desert. Those ferrying the travelers earn hundreds of dollars for each person they cram into the back of a Toyota Hilux.

But smugglers have not been the only ones to benefit from the migrant boom, said Sadou Soloke, the governor of Agadez.

Cash from feeding, housing and transporting migrants fed thousands of people in the area and helped develop the impoverished region, he told Reuters.

That activity began to slow when Niger, under EU pressure, started arresting smugglers and posted soldiers across the desert in 2016. By late last year, the life had been sucked out of the once-bustling town, several residents said.

Now corners once crowded with merchants are quiet, and wide streets are empty even at midday. Men on motorcycles gather in patches of shade, waiting hours for someone to request a ride.

“We worry for the people who used to provide services to the migrants,” Soloke told humanitarian workers last month. “Now they’ve been put in a risky situation too.”

As more people move around the world — spurred by climate extremes, conflict and poverty — migration has developed an economy of its own, one many people rely on for an income.

That reality can make efforts to brake or shift migration harder — and riskier — to achieve, as they affect everything from powerful criminal networks to vulnerable people just trying to get by.

In Agadez, about 6,000 people who were directly employed in the migrant economy are now jobless, the governor said, while countless others — shopkeepers, phone sellers, mechanics — have also seen their earnings fall.

While aid agencies have swooped in to help migrants still stranded in the town, local people feel increasingly marginalized, said Ottilia Maunganidze, a migration analyst at the Africa-based Institute for Security Studies.

“The primary question they ask is … why is the aid going to people who just got here, when in fact we are suffering just as much but we’ve chosen to remain at home?” she told Reuters.

Smugglers’ earnings

Niger is one of the poorest countries in the world, ranking second to last in the latest U.N. Human Development Index.

Agadez used to survive on tourism, with Europeans flocking to see its 16th-century clay mosque and sultan’s palace, until fears of terrorism scared them away, locals said.

Then the Libyan revolution that removed Moammar Gadhafi from power created a security vacuum between Niger and the Mediterranean, and migration surged.

Three years ago, 100 to 200 overloaded pickup trucks would leave Agadez in a convoy every Monday at sundown, kicking up dust as they sped down routes once traveled by salt traders in camel caravans.

Each trip to Libya could earn a smuggler about $5,000, said Giuseppe Loprete, country head of the International Organization for Migration (IOM).

Now smugglers charge even more, but overall earnings have plummeted since only a few vehicles make it past the checkpoints, he said.

“Communities are losing their main income,” said Loprete, explaining that migration revenues sustained not only Agadez but other desert villages along the route as well.

His organization is running cash-for-work programs in the region, paying locals to help dig wells or install electricity.

Loprete said such efforts will “buy some time” until people are able to come up with more lasting solutions.

But nothing will replace the level of income they had, he said.

Eager to occupy people with something other than migrant smuggling, the EU is also funding alternative employment programs, offering to buy ex-smugglers equipment to start farms or carpentry shops, for example.

Niger is one of several West African countries where the EU has struck or is seeking deals to cut migration, offering development aid in exchange for tighter borders, and threatening trade consequences if there is a failure to cooperate.

Local government officials said they are counting on the jobs program, which has only just got under way.

Privately, aid workers laughed when asked if they thought it would work. Used to making thousands, smugglers are unlikely to settle for meager profits from a farm stand, several said.

“I think the EU is trying,” said security analyst Maunganidze. “But the obvious challenge is that solutions have to be longer term.”

Many former smugglers will likely take up other criminal activity, such as drug trafficking, to maintain their income, she said. Some may also be drawn to join violent extremist groups in the region, she added.

Niger is warding off violence on several fronts, with Boko Haram insurgents encroaching from the south, al-Qaida-linked groups operating to the west, and various militia fighting in Libya to the north.

Risk of unrest

Conflict has yet to break out between Agadez residents and migrants stuck there, but officials, aid workers and analysts say the risk of tensions is high.

The regional health department complained last month that three dozen local and international aid groups were providing health care to migrants, while none were supporting local people, according to one source who took part in the discussion.

Aid agencies said it was easier to access international funding by working with migrants.

“[NGOs] come with good intentions, but they shouldn’t forget that locals are also in need,” said Ali Bandiare, president of Niger’s Red Cross.

Ignoring them “could create a situation that is unmanageable in terms of security,” he warned.

Off one small street in Agadez, a family sat on a dirt floor in what appeared to serve as a jewelry workshop, convenience store and living room, all at once.

On the wall were faded pictures of the patriarch posing in his turban with smiling tourists, and a certificate received by a son last year for completing a course in traditional jewelry-making organized by the IOM, the U.N. migration agency.

Abdoul Afori, 20, found the course interesting, but said there was no one to buy his goods.

“No one has helped us,” said his father, Mohamed.

Around the corner, car mechanic Ahmed scanned the dusty street as his apprentices slouched in boredom.

“With time, it will change again, God willing,” he said.
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Europe’s bailout fund on Tuesday approved a 6.7 billion-euro ($8.32 billion) loan installment to Greece as part of its third international rescue program, with payment of the first 5.7 billion euros expected this week.

The European Stability Mechanism said the approval came after the Greek government completed a series of required reforms. The funds will be used to service public debt and clear domestic arrears.

“Today’s decision … acknowledges the hard work by the Greek government and Greek people in completing an extensive set of reforms,” said ESM head Klaus Regling. The reforms were in tax policy, privatizations and the resolution of nonperforming loans, among others.

The ESM said the initial 5.7 billion euros were to be disbursed Wednesday. The remaining 1 billion euros, to be used for clearing arrears, may be disbursed after May 1 if the country “makes progress in reducing its stock of arrears.”

Greece has depended on billions of euros from international rescue loans since 2010, and its third bailout is due to end this summer. In exchange for the money, successive governments have had to implement often painful economic and structural reforms, including tax increases and severe cuts to pensions and public spending.

Regling said he was “confident that Greece is on track to successfully exit the ESM program in August 2018, provided that the remaining reforms are implemented by the Greek government.”

Greece’s financial crisis has wiped out a quarter of the economy and led to persistently high unemployment, which continues to hover above 20 percent. The frequently unpopular reforms have also led to street protests.
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U.S. stocks sank in late trading on Tuesday, with faltering technology shares reversing a global stock rally that had swept through Asia and Europe.

Trading sessions in Asia and Europe had ended on a high note as trade fears ebbed, while U.S. equities sold off sharply in the afternoon just a day after turning in their best performance since August 2015. Tech shares tumbled partly on concerns about regulation of social media.

MSCI’s gauge of stocks across the globe shed 0.55 percent after solid gains for much of the day.

“In the absence of earnings data between last quarter and this, the market has allowed its imagination to get the best of it,” said Steve Chiavarone, portfolio manager at Federated Investors Inc.

“What we’ve done is we’ve restored the skepticism that has been the keystone of the wall of worry that the market’s been climbing.”

The S&P 500 is down 2.3 percent this year, in price terms, with investors burdened by the prospect of trade conflict undermining growth but also by fear that strong economic growth could spark inflation and harsh action by the Federal Reserve.

The S&P 500 spent most of the day above Monday’s closing prices, sometimes barely, but then deteriorated sharply in the afternoon. Once high-flying, technology stocks were the worst-performing sector, leaving a market led by defensive utilities shares.

Facebook led technology stocks lower, down 4.9 percent as the scandal over the use of data by political consultants widened after a whistleblower said Canadian company AggregateIQ had developed a program to target Republican voters in the 2016 U.S. election.

Other developments weighed on Alphabet, Nvidia, Tesla and Twitter, and the U.S. Conference Board’s consumer confidence data released on Tuesday was also weaker than expected.

The Dow Jones Industrial Average fell 344.89 points, or 1.43 percent, to 23,857.71, the S&P 500 lost 45.93 points, or 1.73 percent, to 2,612.62 and the Nasdaq Composite dropped 211.74 points, or 2.93 percent, to 7,008.81.

The day had started on better footing.

Reports of behind-the-scenes talks between Washington and Beijing spurred optimism that U.S. President Donald Trump’s protectionist shift is more about gaining leverage in trade talks than isolating the world’s biggest economy with tariff barriers that would stifle global growth.

White House officials are asking China to cut tariffs on imported cars, allow foreign majority ownership of financial services firms and buy more U.S.-made semiconductors, Reuters reported, citing a person familiar with the discussions.

The Asian trading session left Japan’s Nikkei share index with a 2.7 percent gain for its best day in almost three months. A stronger Chinese currency against the U.S. dollar showed signs of optimism on trade. Emerging market stocks rose 0.3 percent, and copper gained 0.8 percent.

During European trading, currencies pivoted, with the yuan snapping back lower.

Data showed lending to eurozone companies slowed last month, and European Central Bank Governing Council member Erkki Liikanen said underlying eurozone inflation may remain lower than expected even if growth is robust. Those factors helped the euro lower but pushed exporters’ stocks in the region higher.

The pan-European FTSEurofirst 300 index rose 1.2 percent.

The dollar index rose 0.4 percent, with the euro moving lower on a relative basis. The yuan fell 0.2 percent against the greenback while the Japanese yen was flat.

Even with U.S. government bond investors facing a record $294 billion of new supply this week, strong buying lifted safe-haven Treasuries, with the 10-year yield hitting its lowest levels in over six weeks as stocks turned negative.

The yield on 10-year Treasury notes was down to 2.775 percent, from 2.841 percent late on Monday.

Spot gold dropped 0.6 percent to $1,344.82 an ounce, while benchmark Brent oil was last at $69.49 per barrel, down 0.9 percent.
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A growing American economy and passage of a Republican tax overhaul appear to be helping President Donald Trump lift his approval ratings from historic lows, according to a new poll by The Associated Press-NORC Center for Public Affairs Research.

Trump remains unpopular with the majority of Americans, 58 percent. But 42 percent say they now approve of the job he’s doing as president, up seven points from a month ago. That’s a welcome change in trajectory for a White House that has been battered by chaos, controversies and internal upheaval.

The poll suggests that at least some of the president’s improving standing is tied to the economy, which has steadily grown and added jobs, continuing a trajectory that began under President Barack Obama. Nearly half of Americans surveyed — 47 percent — say they approve of how Trump is handling the economy, his highest rating on any issue. When it comes to tax policy, 46 percent of Americans back Trump’s moves.

For Republicans, that offers a glimmer of hope as they stare down a difficult midterm election landscape and a surge of Democratic enthusiasm. With few other legislative victories from Trump’s first 14 months in office, GOP lawmakers have largely pinned their hopes for keeping control of Congress on middle-class voters feeling the impact of the tax law.

‘Fortunes will rise and fall’

“Our fortunes will rise and fall with the economy and specifically with the middle-class tax cut this fall,” said Corry Bliss, executive director of the Congressional Leadership Fund, a super PAC aligned with House Speaker Paul Ryan. Bliss urged Republican candidates to view the law as “an offensive, not defensive weapon.”

One of the GOP’s challenges, however, will be keeping the economy and tax overhaul in the spotlight through the fall given the crush of other matters roiling the White House and competing for Americans’ attention. At the White House Monday, the daily press briefing was dominated by questions about the president’s alleged affair with adult film star Stormy Daniels, a relationship he denies. Each week has seemed to bring a new departure among the president’s closest advisers. And many days, Trump is more inclined to use his Twitter megaphone to try to discredit the investigation into possible campaign contacts with Russia than promote the tax overhaul. 

Republican operatives acknowledge that even if they can break through the clutter, they still have a ways to go when it comes to explaining the $1.5 trillion tax plan to Americans. Democrats have aggressively cast the measure, which permanently slashes the tax rate for corporations and reduces taxes for the wealthiest Americans, as a boon for the rich that offers comparatively little for the middle class.

The Democratic message does appear to be breaking through with voters. Among those Americans who are familiar with the new law, 77 percent believe it helps large corporations and 73 percent say it benefits the wealthy, while 53 percent say it helps small businesses. Americans are evenly divided on whether the measure helps the middle class.

Republicans argue Democrats risk overreaching by downplaying the impact that even a small windfall from the tax bill can have for a family and individual. According to the AP-NORC poll, nearly half of those who receive a paycheck — 46 percent — say they’ve seen an increase in their take-home pay as a result of the tax law.

Heather Dilios, a 46-year-old social worker from Topsham, Maine, is among them. Dilios, a Republican, estimates she’s now taking home between $100 to $200 more per paycheck as a result of the new tax law, more than she expected when Trump signed the legislation.

Dilios said it’s more than the dollar amount that’s driving her support for the law.

“It’s more about being able to keep what is rightfully mine rather than giving it to the government,” she said.

Overall, taxes and the economy are the brightest spots for Trump, who gets lower numbers from voters on a range of other issues, including his handling of North Korea (42 percent), trade (41 percent), gun control (39 percent) and the budget deficit (35 percent).

Trump has benefited from an increasingly healthy economy that has boosted consumer and business sentiment. The 4.1 percent unemployment rate is the lowest since 2000 without the same kinds of excesses that fueled that era’s tech bubble.

Continuation of momentum

While Trump attributes the gains to his tax cuts and deregulation efforts, many economists say conditions so far are largely a continuation of the momentum from the gradual expansion that began during the Obama administration.

Trump’s most recent policy moves have also rattled financial markets and raised questions about the prospect of an economic slowdown. He slapped hefty tariffs on steel and aluminum imports, though his administration has issued waivers to several countries. And last week, he moved to slap $60 billion in tariffs on Chinese goods, prompting Beijing to promise swift retaliation.

The full scope and impact of Trump’s proposed tariffs won’t be known for some time, but the initial reaction from Americans is decidedly mixed. The AP-NORC poll finds that 38 percent support the steel and aluminum tariffs and 29 percent are opposed.

The poll also finds that just 32 percent of Americans think the tariffs will lead to an increase in jobs, compared with 36 percent who think it will lead to a decrease. Forty percent think it will lead to an increase in consumer prices, while 39 percent think it will lead to a decrease.

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The AP-NORC poll of 1,122 adults was conducted March 14-19 using a sample drawn from NORC’s probability-based AmeriSpeak Panel, which is designed to be representative of the U.S. population. The margin of sampling error for all respondents is plus or minus 4.2 percentage points.

Respondents were first selected randomly using address-based sampling methods, and later interviewed online or by phone.
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