Day: May 31, 2018

Reaction to U.S. President Donald Trump’s decision to slap tariffs on steel and aluminum imports from American trading partners — including the European Union — came fast and furious, with threats of retaliation and warnings they risk sparking a trans-Atlantic trade war.

European Commission President Jean-Claude Juncker said the European bloc would respond by imposing penalties of its own on American exports.

“Today is a bad day for world trade,” said Cecilia Malmström, the European trade commissioner. EU officials previously informed the World Trade Organization of the bloc’s plan to levy duties on $7.2 billion worth of U.S. exports if the Trump administration proceeded with threats to impose a 25 percent tariff on steel imports and 10 percent on aluminum.

Canadian and Mexican officials also threatened retaliatory responses but have as yet not indicated which U.S. products they will target. Both countries had hoped that the White House would continue to exempt them from the tariffs. 

National security cited

Europe, along with Canada and Mexico, had been granted a temporary reprieve from the U.S. tariffs after they were unveiled in March by Trump, who said the levies were needed to stem the flood of cheap steel and aluminum into the U.S. and that to impose them was a national security priority.

In Europe, there was disappointment, but less surprise. 

Juncker called the U.S. action “unjustified” and said Europeans had no alternative but to respond with tariffs of their own and to lodge a case against Washington with the World Trade Organization in Geneva. “We will defend the union’s interests, in full compliance with international trade law,” he said.

The EU had already publicly announced that in the event tariffs did go ahead, it would impose levies on Levi-made jeans, Harley-Davidson motorbikes and bourbon whiskey.

British officials appeared the most alarmed. The government of Theresa May had pinned post-Brexit hopes on securing a trade deal with the U.S., and the imposition of tariffs on steel is adding to fears that negotiating a quick trade liberalization agreement with Trump looks increasingly unlikely.

“We are deeply disappointed that the U.S. has decided to apply tariffs to steel and aluminum imports from the EU on national security grounds,” a government spokesman said. “The U.K. and other European Union countries are close allies of the U.S. and should be permanently and fully exempted.”

Discussion at summit

He said the British prime minister planned to raise the tariffs with the U.S. president personally in Canada at a scheduled G-7 summit of the seven largest advanced economies. That summit is likely to be a frosty affair, much like last year’s in Taormina, Sicily. 

With a week to go before the June 7-8 summit, there’s still no final agreement on the agenda, British and Italian officials said. Canadian Prime Minister Justin Trudeau had earmarked climate change, women’s rights and economic growth as key issues, but there has been pushback from Washington. Thursday’s tariff announcement by the White House will further complicate agreeing on a G-7 agenda.

German reaction to the announcement of the tariffs was among the fiercest. Chancellor Angela Merkel dubbed them “illegal.” Manfred Weber, a key ally of the German chancellor and leader of the biggest bloc in the European Parliament, accused the Trump administration of treating American allies as enemies.

“If President Trump decides to treat Europe as an enemy, we will have no choice but to defend European industry, European jobs, European interests,” he said. “Europe does not want a trade conflict. We believe in a fair trade regime from which everybody benefits.” 

Wilbur Ross, U.S. commerce secretary, who’s in Europe and has been pressing the EU to make concessions to avert the tariffs, dismissed threats of a trade war, saying retaliation would have no impact on the U.S. economy. He held out hope that the tariffs could be eliminated, saying, “There’s potential flexibility going forward. The fact that we took a tariff action does not mean there cannot be a negotiation.” 

Business leaders cautious

Some European business leaders have urged their national leaders to be restrained in response, fearing a tit-for-tat spiral could be triggered quickly. Britain’s Confederation of British Industry warned against overreaction, saying no one would win on either side of the Atlantic if a major trade war erupted.

The director of UK Steel, Gareth Stace, said he feared there was clear potential for a damaging trade war.

“Since President Trump stated his plans to impose blanket tariffs on steel imports almost three months ago, the U.K. steel sector had hoped for the best, but still feared the worst. With the expiration of the EU exemption now confirmed to take effect tomorrow [June 1], unfortunately, our pessimism was justified, and we will now see damage not only to the U.K. steel sector but also the U.S. economy.” 
…

The United States is escalating trans-Atlantic and North American trade tensions, imposing a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports from the European Union, Canada and Mexico beginning on Friday.

The U.S. also negotiated quotas or volume limits on other countries, such as South Korea, Argentina, Australia and Brazil, instead of tariffs, Commerce Secretary Wilbur Ross also told reporters by telephone. 

President Donald Trump has repeatedly said such measures are necessary to protect American jobs and industries in key manufacturing sectors. 

“The president’s actions are about protecting American steel, American aluminum,” a White House spokesman, Raj Shah, said on Fox News. “They’re critical for national security.”

But the negative reaction from some of America’s most important strategic allies has been quick and fierce.

Canadian Prime Minister Justin Trudeau called the tariffs “totally unacceptable” and vowed retaliation. 

“This decision is not only unlawful, but it is a mistake in many respects,” said French President Emmanuel Macron, warning that “economic nationalism leads to war.”

France’s finance minister, Bruno Le Maire, who met Ross earlier on Thursday, said the U.S. shouldn’t see global trade like the Wild West or Gunfight at the O.K. Corral.

‘Bad day for world trade’

European Commission President Jean-Claude Juncker said the U.S. move marked “a bad day for world trade,” announcing there is “no choice” but to proceed with a World Trade Organization dispute settlement case and additional duties on numerous U.S. imports.

The retaliatory tariffs from the Europeans are expected to target several billion dollars’ worth of American goods, including such iconic American products as Harley Davidson motorcycles and Levi’s jeans, as well as Kentucky bourbon and Tennessee whiskey.

Ross, in Paris, interviewed on CNBC after the announcement, brushed off the retaliation saying, “It’s a tiny, tiny fraction of 1 percent” of trade.

Ross, a banker known for restructuring failed companies prior to joining Trump’s Cabinet, also predicted America’s trading partners “will get over this in due course.”

“The United States is taking on the whole world in trade and it’s not going to go well,” predicted Simon Lester, trade policy analyst at the libertarian Cato Institute.

The action is also not popular with some members of Congress, including those from Trump’s own party, whose states are dependent on exports. 

“Imposing steel and aluminum tariffs on our most important trading partners is the wrong approach and represents an abuse of authority intended only for national security purposes,” said Senate Foreign Relations Committee Chairman Bob Corker, a Tennessee Republican.

“You don’t treat allies the same way you treat opponents,” Republican Senator Ben Sasse of Nebraska said on Twitter. “Blanket protectionism is a big part of why we had a Great Depression. ‘Make America Great Again’ shouldn’t mean ‘Make America 1929 Again.’ ”

Tennessee has three major auto assembly plants. Nebraska is a significant exporter of cattle, corn, soybeans and hogs. 

Mexico said, in response, it will penalize U.S. imports, including pork bellies, apples, grapes, cheeses and flat steel.

“There’s a reason why” the countries are carefully selecting which American products to target in response, said William Reinsch, senior adviser at the Center for Strategic and International Studies.  

“Most of bourbon is made in Kentucky, which is the state of the Senate majority leader. Harley Davidsons are made in Wisconsin, which is the state of the speaker of the House,” Reinsch told VOA News. “Usually when other countries retaliate, and the Chinese have done something similar, is they’re good at maximizing political pain by picking out products that are made in places where people are politically important.”

“Tariffs on steel and aluminum imports are a tax hike on Americans and will have damaging consequences for consumers, manufacturers and workers,” said Republican Orrin Hatch, who chairs the Senate’s finance committee and is a longtime advocate of breaking down trade barriers. 

One side of equation 

Expected higher prices for U.S. consumers on some products is only one side of the equation, said Ross, who noted that steel and aluminum makers in the United States are adding employment and opening facilities as a result of the U.S. government action.

“You can create a few jobs, however, you’re going to lose more in the process,” as consuming industries will be placed at a disadvantage of paying more for raw materials compared to their foreign competitors, Lester told VOA News.

Christine Lagarde, managing director of the International Monetary Fund, is warning a trade war will also damage public trust in leaders. 

“First of all, those who will suffer most are the poorest, the less privileged people, those who actually rely on imported goods to have their living,” Lagarde said at a meeting in Canada of finance ministers and central bankers of the Group of Seven nations, adding that long-standing supply chains also would be disrupted.

Trump, in March, announced the United States would impose such tariffs, but he granted exemptions that expire Friday to the European Union and other U.S. allies.

The angst about global trade tensions helped send stock prices lower in the United States on Thursday. The Dow Jones industrial average fell 1 percent, while the broader S&P 500 was off nearly 0.7 percent.

Carol Castiel contributed to this report.
…

When Oregon lawmakers created the state’s legal marijuana program, they had one goal in mind above all else: to persuade illicit pot growers to leave the black market.

That meant low barriers to entry that also targeted long-standing medical marijuana growers, whose product is not taxed. As a result, weed production boomed — with a bitter consequence.

Now, marijuana prices here are in free fall, and the craft cannabis farmers who put Oregon on the map decades before broad legalization say they are in peril of losing their now-legal businesses as the market adjusts.

Oregon regulators on Wednesday announced they will stop processing new applications for marijuana licenses in two weeks to address a severe backlog and ask state lawmakers to take up the issue next year.

​California takes heed

Experts say the dizzying evolution of Oregon’s marijuana industry may well be a cautionary tale for California, where a similar regulatory structure could mean an oversupply on a much larger scale.

“For the way the program is set up, the state just wants to get as many people in as possible, and they make no bones about it,” Hilary Bricken, a Los Angeles-based attorney specializing in marijuana business law, said of California. “Most of these companies will fail as a result of oversaturation.”

A staggering inventory

Oregon has nearly 1 million pounds (453,600 kilograms) of marijuana flower, commonly called bud, in its inventory, a staggering amount for a state with about 4 million people. Producers told The Associated Press wholesale prices fell more than 50 percent in the past year; a study by the state’s Office of Economic Analysis found the retail cost of a gram of marijuana fell from $14 in 2015 to $7 in 2017.

The oversupply can be traced largely to state lawmakers’ and regulators’ earliest decisions to shape the industry.

They were acutely aware of Oregon’s entrenched history of providing top-drawer pot to the black market nationwide, as well as a concentration of small farmers who had years of cultivation experience in the legal, but largely unregulated, medical pot program.

Getting those growers into the system was critical if a legitimate industry was to flourish, said Sen. Ginny Burdick, a Portland Democrat who co-chaired a committee created to implement the voter-approved legalization measure.

Lawmakers decided not to cap licenses; to allow businesses to apply for multiple licenses; and to implement relatively inexpensive licensing fees.

The Oregon Liquor Control Commission, which issues licenses, announced Wednesday it will put aside applications for new licenses received after June 15 until a backlog of pending applications is cleared out. The decision comes after U.S. Attorney Billy Williams challenged state officials to address Oregon’s oversupply problem.

“In my view, and frankly in the view of those in the industry that I’ve heard from, it’s a failing of the state for not stepping back and taking a look at where this industry is at following legalization,” Williams told the AP in a phone interview.

But those in the industry supported the initial decisions that led to the oversupply, Burdick said.

“We really tried to focus on policies that would rein in the medical industry and snuff out the black market as much as possible,” Burdick said.

​Consolidation

Lawmakers also quickly backtracked on a rule requiring marijuana businesses have a majority ownership by someone with Oregon residency after entrepreneurs complained it was hard to secure startup money. That change opened the door to out-of-state companies with deep pockets that could begin consolidating the industry.

The state has granted 1,001 producer licenses and has another 950 in process as of last week. State officials worry if they cut off licensing entirely or turn away those already in the application process, they’ll get sued or encourage illegal trade.

Some of the same parameters are taking shape in California, equally known for black-market pot from its Emerald Triangle region.

The rules now in effect there place caps only on certain, medium-sized growing licenses. In some cases, companies have acquired dozens of growing licenses, which can be operated on the same or adjoining parcels. The growers association is suing to block those rules, fearing they will open the way for vast farms that will drive out smaller cultivators.

Beau Whitney, senior economist at national cannabis analytics firm New Frontier Data, said he’s seeing California prices fall.

In contrast, Washington knew oversupply could draw federal attention and was more conservative about licensing. As the market matured, its regulators eased growing limits, but the state never experienced an oversupply crisis.

Colorado has no caps on licenses, but strict rules designed to limit oversupply allow the state to curtail a growers’ farm size based on past crop yields, existing inventory, sales deals and other factors.

Chain stores

In Oregon, cannabis retail chains are emerging to take advantage of the shake-up.

A company called Nectar has 13 stores around the state, with three more on tap, and says on its website it is buying up for-sale dispensaries too. Canada-based Golden Leaf Holdings bought the successful Oregon startup Chalice and has six stores around Portland, with another slated to open.

William Simpson, Chalice’s founder and Golden Leaf Holdings CEO, is expanding into Northern California, Nevada and Canada. Simpson welcomes criticism that he’s dumbing down cannabis the same way Starbucks brought coffee to a mass market.

“If you take Chalice like Starbucks, it’s a known quantity, it’s a brand that people know and trust,” he said.

Amy Margolis, executive director of the Oregon Cannabis Association, says that capping licenses would only spur even more consolidation in the long-term. The state is currently working on a study that should provide data and more insight into what lies ahead.

“I don’t think that everything in this state is motivated by struggle and failure,” she said. “I’m very interested to see … how this market settles itself and (in) being able to do that from a little less of a reactionary place.”

​Craft growers

For now, Oregon’s smaller marijuana businesses are trying to stay afloat.

A newly formed group will launch an ad campaign this fall to tell Oregonians why they should pay more for mom-and-pop cannabis. Adam Smith, who founded the Oregon Craft Cannabis Alliance, believes 70 percent of Oregon’s small growers and retailers will go out of business if consumers don’t respond.

“We could turn around in three to four years and realize that 10 to 12 major companies own a majority of the Oregon industry and that none of it is really based here anymore,” he said. “The Oregon brand is really all about authenticity. It’s about people with their hands in the dirt, making something they love as well as they can. How do we save that?”
…

President Donald Trump’s administration is planning to impose tariffs on European steel and aluminum imports after failing to win concessions from the European Union, a move that could provoke retaliatory tariffs and inflame trans-Atlantic trade tensions.

The tariffs are likely to go into effect on the EU with an announcement by Friday’s deadline, according to two people familiar with the discussions. The administration’s plans could change if the two sides are able to reach a last-minute agreement, said the people, who spoke on condition of anonymity to discuss internal deliberations.

Trump announced in March the United States would slap a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum, citing national security interests. But he granted an exemption to the EU and other U.S. allies; that reprieve expires Friday.

​Europe bracing

Europe has been bracing for the U.S. to place the restrictions even as top European officials have held last-ditch talks in Paris with American trade officials to try to avert the tariffs.

“Realistically, I do not think we can hope” to avoid either U.S. tariffs or quotas on steel and aluminum, said Cecilia Malmstrom, the European Union’s trade commissioner. Even if the U.S. were to agree to waive the tariffs on imported steel and aluminum, Malmstrom said, “I expect them nonetheless to want to impose some sort of cap on EU exports.”

European officials said they expected the U.S. to announce its final decision Thursday. The people familiar with the talks said Trump could make an announcement as early as Thursday.

U.S. Commerce Secretary Wilbur Ross attended meetings at the Organization for Economic Cooperation and Development in Paris on Wednesday, and U.S. Trade Representative Robert Lighthizer joins discussions in Paris on Thursday.

The U.S. plan has raised the threat of retaliation from Europe and fears of a global trade war — a prospect that is weighing on investor confidence and could hinder the global economic upturn.

​

If the U.S. moves forward with its tariffs, the EU has threatened to impose retaliatory tariffs on U.S. orange juice, peanut butter and other goods in return. French Finance Minister Bruno Le Maire pledged that the European response would be “united and firm.”

Limits on cars

Besides the U.S. steel and aluminum tariffs, the Trump administration is also investigating possible limits on foreign cars in the name of national security.

“Unilateral responses and threats over trade war will solve nothing of the serious imbalances in the world trade. Nothing,” French President Emmanuel Macron said in an impassioned speech at the Organization for Economic Cooperation and Development in Paris.

In a clear reference to Trump, Macron added: “These solutions might bring symbolic satisfaction in the short term. … One can think about making voters happy by saying, ‘I have a victory, I’ll change the rules, you’ll see.’”

But Macron said those “who waged bilateral trade wars … saw an increase in prices and an increase in unemployment.”

Tariffs on steel imports to the U.S. can help local producers of the metal by making foreign products more expensive. But they can also increase costs more broadly for U.S. manufacturers who cannot source all their steel locally and need to import the raw material. That hurts the companies and can lead to more expensive consumer prices, economists say.

Ross criticized the EU for its tough negotiating position.

“There can be negotiations with or without tariffs in place. There are plenty of tariffs the EU has on us. It’s not that we can’t talk just because there’s tariffs,” he said. He noted that “China has not used that as an excuse not to negotiate.”

But German Economy Minister Peter Altmaier insisted the Europeans were being “constructive” and were ready to negotiate special trade arrangements, notably for liquefied natural gas and industrial goods, including cars.

WTO reforms

Macron also proposed to start negotiations between the U.S., the EU, China and Japan to reshape the World Trade Organization to better regulate trade. Discussions could then be expanded to include other countries to agree on changes by the end of the year.

Ross expressed concern that the Geneva-based World Trade Organization and other organizations are too rigid and slow to adapt to changes in global business.

“We would operate within (multilateral) frameworks if we were convinced that people would move quickly,” he said.

Ross and Lighthizer seemed like the odd men out at this week’s gathering at the OECD, an international economic agency that includes the U.S. as a prominent member.

The agency issued a report Wednesday saying “the threat of trade restrictions has begun to adversely affect confidence” and tariffs “would negatively influence investment and jobs.”
…

The two largest resort operators in Las Vegas would lose more than $10 million a day combined if housekeepers, cooks and others go on strike, a possibility starting Friday, the union representing thousands of casino workers said Wednesday.

The Culinary Union detailed how it thinks a one-month strike would impact MGM Resorts International and Caesars Entertainment, which operate more than half the properties that would be affected if 50,000 workers walk off the job. Workers last week voted to authorize a strike as disputes over workplace training, wages and other issues have kept the union and casino operators from agreeing on new contracts.

The union conceded that it is difficult to estimate how the strike at more than 30 casino-hotels would affect Las Vegas overall because the last citywide strike took place in 1984, when the city had 90,000 fewer hotel rooms and only about 12.8 million annual visitors. Last year, more than 42.2 million people visited.

Contract expires midnight Thursday

But it says MGM and Caesars would see a 10 percent reduction in revenue because of the loss of group and independent travelers. A strike also could happen as fans head to Las Vegas for the Stanley Cup Final.

“Furthermore, one might assume a 10 percent worsening of operating margins due to the use of less experienced and less skilled replacements … to keep the doors open, rooms cleaned, food cooked, and cocktails served, not to mention other factors such as the disruptions to management staff’s regular work,” the union wrote.

Using the companies’ earnings reports for the first three months of the year, the union’s estimates show a one-month strike could reduce MGM’s earnings before interest, taxes and other items by more than $206 million and Caesars’ by over $113 million.

Contracts expire at midnight Thursday for bartenders, housekeepers, cocktail and food servers, porters, bellmen, cooks and other kitchen workers at properties on the Las Vegas Strip and downtown Las Vegas, including Caesars Palace, Bellagio, Stratosphere, Treasure Island, The D and El Cortez.

Dealers are not part of the Culinary Union. Casino-resorts that would not be affected by the strike include Wynn Las Vegas, Encore, The Venetian and Palazzo.

More talks scheduled

MGM, which employees 24,000 of the workers, said it met with union negotiators Monday and has more talks scheduled this week. The company says it remains confident that it “can resolve the outstanding contract issues and come to an agreement that works for all sides.”

Caesars said it “expects to agree to a new 5-year contract with the Culinary Union on or about June 1 when the current contract expires.” About 12,000 of its workers are part of the negotiations for new five-year contracts.

The union said it is asking for training on new skills and job opportunities as the companies adopt technology that can displace workers. It also wants an independent study to analyze the workload of housekeepers and contract language that would protect workers if properties are sold.

“What is going to happen to my position?” said Fernando Fernandez, a guest runner at Caesars Palace. “I think they are going to be disappearing it, because robots are going to be available to deliver everything.”

He said he wants training to fix or program the robots that he believes could eventually replace him.

The union says it has asked MGM for average annual wage increases of 4 percent for each of the five years. A document says the company has countered with an approximate 2.7 percent increase.

Caesars workers are asking for an increase of 4.2 percent effective Friday, and annual increases of about 4 percent thereafter. Another document shows the company has offered an approximate 2.8 percent increase for each of the five years.

The average hourly wage of union workers is $23, including benefits such as premium-free health care, a pension and a 401(k) retirement savings plan and $25,000 down-payment assistance for first-time homebuyers.
…