Month: May 2018

The United Nations is forecasting that the global economy will expand by more than 3 percent this year and next year — but it warns that increasing risks could trigger “a shock to investment and trade” and a sharp drop to 1.8 percent growth in 2019.

The U.N.’s mid-year report on the World Economic Situation and Prospects launched Thursday says growth in the world economy is surpassing expectations, reflecting further economic expansion in developed countries and broadly favorable investment conditions.

However, the report said, “downside risks” have increased including “a rise in the probability of trade conflicts between major economies.”

Dawn Holland, chief of the U.N.’s Global Economic Monitoring Branch, cited the Trump administration’s imposition of tariffs in January and proposed new tariffs against China as well as the renegotiation of the U.S. trade agreement with Mexico and Canada, which has left “a void of uncertainty.”

There are also negotiations between the European Union and the United States partly linked to tariffs on steel, she said, and an increasing number of disputes have been raised with the World Trade Organization over the last six months.

The report said other factors also pose risks including uncertainty over monetary policy, increasing debt levels, and greater geopolitical tensions including in the Korean peninsula, Middle East, South China Sea and Ukraine.

But the U.N.’s assessment was generally upbeat citing continued economic improvements over the last several months including accelerating wage growth, improved investment prospects, and the short-term impact of the U.S. fiscal stimulus package.

“Many commodity-exporting countries will also benefit from the higher level of energy and metal prices,” the report said.

According to the U.N., world growth is now forecast to reach 3.2 percent in both 2018 and 2019, up from its forecast in December of 3 percent growth this year and 3.1 percent next year.

While many countries will experience growth, the report said output is expected to decline in central Africa and southern Africa, the report said. And the forecast for economies in transition including Russia and the world’s poorest countries have been revised “marginally downward” for 2018.

Assistant Secretary-General for Economic Development Elliott Harris cautioned, however, that “there is a strong need not to become complacent in response to upward trending headline figures.”

The report not only highlights the risks to economic growth but “the need to urgently address a number of policy challenges, including threats to the multilateral trading system, high inequality and the renewed rise in carbon emissions,” he told a press conference launching the report.

And it warned that if trade tensions and barriers were to “spiral over the course of 2018, through widespread retaliations and extensive disruption to global value chains, this could trigger a sharp drop in global investment and trade.”
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U.S. officials and politicians say they are increasingly frustrated and looking for ways to fight back against what they see as China’s use of its market power to impose “politically correct” behavior on American companies. Airlines, retailers and hoteliers all have been pressured to alter products and promotions that offended Beijing.

“These actions are outrageous and disturbing,” Deputy Assistant Secretary of State for East Asian and Pacific affairs Alex Wong told American lawmakers Tuesday.

“China is very much well aware that it’s wading through treacherous waters here. And they understand that if they continue along this path, continue to employ these tactics, that will negatively affect the U.S.-China relationship and that there will be consequences,” said Wong during a hearing at Senate Foreign Relations subcommittee on East Asia, The Pacific, and International Cybersecurity Policy.

“The consequences are under review,” Wong added.

His remarks come after American clothing retailer Gap apologized and recalled the sale in the Chinese market of its T-shirts showing a map that’s seen by Beijing as politically incorrect. The T-shirts were also destroyed. 

A Chinese student earlier this week posted pictures of the T-shirt, which did not include Taiwan, parts of Tibet and islands in the South China Sea that Beijing claims are Chinese territories. Gap quickly apologized, citing “unintentional error.” Photos circulated on Chinese social media network Weibo were said to be have been taken at an outlet store in Canada. 

A Chinese government spokesperson took note of Gap’s apology and the American company’s pledge to respect “China’s sovereignty and territorial integrity and is conducting an internal inspection.”

“We have taken note of this statement. We will continue to listen to its [Gap’s] words, and watch the actions,” said Chinese Ministry of Foreign Affairs Spokesperson Lu Kang on Tuesday.

But U.S. officials and lawmakers are hitting back.

“American companies are being bullied,” said Florida Republican Senator Marco Rubio during Tuesday’s Senate Foreign Relations Subcommittee hearing.

Rubio said U.S. airlines “are being threatened by China, that if their website doesn’t say Taiwan [is part of] China, they’re going to lose their routes and have fines and penalties.”

On April 25, the Chinese Civil Aviation Administration sent a letter to 36 foreign air carriers, including a number of American carriers, demanding the carriers remove references on their websites or in other material that suggests Taiwan, Hong Kong and Macau are independent territories from China.

And in January, Beijing requested U.S. hotel giant Marriott International change the way it referred to Tibet, Taiwan, Hong Kong and Macau to be in line with Beijing’s views.

The request came after a Marriott employee “liked” a tweet by Friends of Tibet that praised Marriott for “listing #Tibet as a country along with #HongKong and #Taiwan” in an online customer questionnaire.

The employee was fired and Marriott apologized to Beijing.

Observers said market access to the growing population of affluent Chinese consumers leads to American companies’ compliance.

“It’s totally based on market strategy or, more precisely, fear of being shut out of the China market,” Brooking Institution’s Senior Fellow Richard Bush told VOA on Thursday. 

U.S. officials said they have raised this issue privately with their Chinese counterparts, while also condemning Beijing’s actions in public. U.S. officials have also talked with companies who have been involved in the incidents.

China claims democratically ruled Taiwan is part of its territory, and it has never renounced the use of military force to bring the island under Beijing’s control. The U.S. broke diplomatic ties with Taiwan in 1979 and has “acknowledged” Beijing’s position, while insisting on a “peaceful resolution of cross-Strait differences.”
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President Donald Trump stepped into a round of tough trade talks with China on Thursday after the White House confirmed a meeting between the U.S. president and Chinese Vice Premier Liu He.

The two world powers are taking part in a second series of trade negotiations that started Thursday. The initial talks were held in Beijing two weeks ago.

Speaking to reporters before his meeting with Liu, Trump repeated his strong dislike for previous deals between Washington and Beijing.

“The United States has been ripped off for many, many years by its bad trade deals. I don’t blame China; I blame the leadership of this country from the past,” Trump told reporters before a meeting with NATO Secretary-General Jens Stoltenberg.

“China has taken out hundreds of billions of dollars a year from the United States, and I explained to President Xi [Jinping] we can’t do that anymore,” Trump added.

The talks are aimed at “rebalancing the United States-China bilateral economic relationship,” according to the White House. They are also aimed at avoiding a full-blown trade war after the two countries exchanged tariff threats in March.

Despite the tough talks, Trump tweeted over the weekend that he was working with Xi to give Chinese phone company ZTE a way to get back into business.

The U.S. slapped sanctions against the Chinese telecommunications company last month for breaking U.S. trade control laws by selling components to Iran and North Korea. The move prompted ZTE to shut down its U.S. operations.

U.S. law enforcement and intelligence communities have long had national security and espionage concerns about ZTE.

“ZTE was a company I spoke to with President Xi. He asked me if I could take a look at that, because it was very harmful to them in terms of their jobs and probably other things, and I certainly said I would — he asked me to do it, and I would do that. I like him, he likes me, we have a great relationship,” Trump said in explaining his tweet to reporters. 

Trump noted it was his administration that had first put strong clamps on ZTE.

“Anything we do with ZTE is just a small component of the overall deal. I can only tell you this: We are going to come out fine with China,” Trump said. “When you’re losing $500 billion a year on trade, you can’t lose the trade war, you’ve already lost it.”

Liu, who is Xi’s top economic adviser, is taking part in two days of talks with a U.S. trade delegation led by Treasury Secretary Steve Mnuchin.

Trump’s top economic adviser, Larry Kudlow, told reporters Wednesday that the administration was conducting “very serious” talks with China, and that Trump was “very hands-on” and “involved in every decision.”

“We have requested that China change their trading practices, which are unfair and in many ways illegal,” Kudlow said.

“This is with respect to the issue of theft of technology, forced transfers of technology, high tariffs and non-tariff barriers” that are preventing the United States from making a competitive effort to export goods and services to China, he said.

The economic adviser said the administration had given China a “lengthy, detailed list” of what the U.S. wanted, including narrowing the U.S.-China trade deficit, lowering non-tariff barriers and permitting American ownership of its own companies in China. 

“Right now, the limit is 49 percent and that’s one of the causes of the theft and transfer of viable technology,” Kudlow said. “When we do these joint ventures, we should have to own 51 percent on to 100 percent. That’s a key part of these talks.”
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The European Commission will initiate plans Friday to prohibit European companies from adhering to U.S. sanctions against Iran, a move to help keep the Iran nuclear agreement intact and to defend European corporate interests.

“We have the duty to protect European companies,” Commission President Jean-Claude Juncker said following a meeting of European Union leaders Thursday in Sofia, Bulgaria, “We now need to act and this is why we are launching the process.”

Juncker said the commission will begin the process of activating a so-called blocking statute, which bans EU companies from observing the sanctions and any court rulings that enforce U.S. penalties.

Juncker also said the commission would continue to cooperate with Iran and the European Investment Bank would be allowed to facilitate European corporate investment in the Persian Gulf country.

The commission’s move is in retaliation to U.S. President Donald Trump’s decision to withdraw from the Iranian nuclear deal and a subsequent move to revive stringent sanctions against Tehran.

The U.S. actions sparked concern among European countries over how to incentivize Iran to maintain compliance with the accord signed by world powers in July 2015, and the blocking statute is the most powerful tool at its immediate disposal.

European leaders are also confronted with the threat of U.S. tariffs on European steel and aluminum exports. The Trump administration’s temporary exemptions from the tariffs expire June 1.

 
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Sparks fly and machines whir as workers busily prepare thousands of steel pipes that will become part of a vast undersea pipeline bringing gas from Russia to Germany’s northeastern Baltic coast.

The Nord Stream 2 project will double the amount of natural gas Russia can funnel directly to the heart of Europe from newly tapped reserves in Siberia, intentionally skirting Eastern European nations like Poland and Ukraine. It also promises much-needed jobs in this poor German backwater, some three hours’ drive north of Berlin.

The United States and some other German allies have bristled at the project, warning that it could give Moscow greater leverage over Western Europe.

Energy-poor Germany already relies heavily on Russian gas and so far Chancellor Angela Merkel has deftly kept the new $11 billion pipeline off the table while imposing sanctions against Russia for its actions in Ukraine.

But as plans become closer to reality, the pressure has increased on her, and last month after meetings with Ukrainian President Petro Poroshenko she acknowledged that Nord Stream 2 was more than just a business project, saying that “political factors have to be taken into account.”

With Merkel heading to Sochi on Friday for talks with Russian President Vladimir Putin, a senior U.S. diplomat warned that proceeding with the project could result in sanctions for those involved.

“We would be delighted if the project did not take place,” U.S. Deputy Assistant Secretary Sandra Oudkirk, an energy policy expert in the State Department, told reporters in Berlin on Thursday.

She said Washington is concerned Nord Stream 2 could increase Russia’s “malign influence” in Europe.

Oudkirk said the new pipeline would divert gas flows away from Ukraine, which depends heavily on transit fees, and could become a pathway for Russia to install surveillance equipment in the Baltic Sea, a sensitive military region.

She said the U.S. is “exerting as much persuasive power” as it can to stop the project, and noted that Congress has given the U.S. administration explicit authority to impose sanctions in connection with Russian pipeline projects if necessary.

“Any pipeline project — and there are many multiple pipeline projects in the world that are potentially covered by this sanctions authority — is in an elevated position of sanctions risk,” she said.

Jens Mueller, a spokesman for Nord Stream 2, dismissed concerns from the U.S. and several European countries, saying the new pipeline would merely be one of many sources of natural gas for Europe.

“This pipeline can’t be used to blackmail or negatively affect any country,” he told The Associated Press in an interview.

Merkel’s trip to the Black Sea resort of Sochi, her first visit to Russia in a year, will be a diplomatic balancing act.

While the German leader has taken a hard line on Russian actions in recent years — from the conflicts in Ukraine and Syria to the chemical attack on a former Russian spy in Britain — Germany badly needs to secure its gas supply and Berlin has calculated that Nord Stream 2 offers the best deal.

Europe’s biggest economy is also the world’s biggest importer of natural gas. According to Kirsten Westphal, an energy policy expert at the German Institute for International and Security Affairs, said its import needs are likely to grow.

Germany’s chemical industry alone uses more gas than the country of Denmark. Chemical giant BASF is a major investor in Nord Stream 2.

Under Merkel, Germany has also set itself an ambitious goal of switching off all nuclear plants by 2022. While renewable power is on the rise, coal forms the bedrock of Germany’s energy mix, a fact that’s not compatible with the country’s pledge to sharply reduce carbon emissions.

“If you want to take climate goals seriously then gas is simply an important source of energy,” said Westphal.

From the end of 2019 when it’s to go online, the twin pipes of Nord Stream 2 will pump up to 55 billion cubic meters of gas to Western Europe each year, the same as its predecessor Nord Stream 1, which runs from the Russian city of Vyborg under the Baltic to the German city of Greifswald. The additional gas is needed to fill a projected decline in supply from Norway and the Netherlands, as their reserves wane.

The aging Ukrainian Gas Transmission System, meanwhile, is a Soviet-era relic in bad need of upgrading and unlikely to be competitive in the foreseeable future. Its loss would be a severe blow to Kiev, which earns up to 2 billion euros ($2.35 billion) a year from transit fees — some 2 percent of the country’s gross domestic product.

A deal that keeps Kiev in the mix could help normalize relations between Ukraine and Russia, Moscow and Berlin.

“A compromise could be that on the one hand the pipeline project isn’t blocked any further,” said Claudia Kemfert, a senior energy expert at the German Institute for Economic Research. “On the other hand Russia would commit itself to keep using the gas route through Ukraine, so that all sides have a face-saving result.”

Merkel’s spokesman Steffen Seibert indicated that some of the gas that passed through Ukraine’s pipes last year — over 90 billion cubic meters — will keep flowing in future.

“In the end, but we’re not there yet, it will also be about the volume of gas transiting [through Ukraine],” he said.

“Of course it makes a difference how many billion cubic meters it is. But I can’t give you a target number. We believe it needs to be resolved in talks and we hope that, piece by piece, things will move forward.”
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Iranian state TV is reporting that the country has signed an agreement with a British consortium to develop an oil field, just as another major company, France’s Total, says it will withdraw from Iran because of the renewed U.S. sanctions.

The new agreement is the first between Iran and a company from a key Western ally of the United States since Washington last week announced it will pull out of the landmark 2015 nuclear deal between Iran and Western powers. The U.S. said it was reinstalling sanctions against Iran.

Managing Director of Pergas International Consortium Colin Rowley, and Bijan Alipour, managing director of National Iranian South Oil Co., signed a preliminary deed on the partnership in the presence of British Ambassador Rob Macaire in Tehran on Wednesday night.

The project, if the agreement turns into a contract, will require more than $1 billion to produce 200,000 barrels of crude oil per day during the next decade in the 55-year old Karanj oil field. The oil field is located in the country’s oil-rich province and currently produces 120,000 barrels of crude per day.

The U.S. sanctions aim to limit companies from any country from dealing with Iran by prohibiting them from using American banks in their operations. Pergas seems to do little business in the U.S., potentially giving it more freedom to operate in Iran.

Its move contrasts with the decision by French oil and gas producer Total to not continue a multi-billion dollar project in Iran unless it is granted a waiver by U.S. authorities.

The group said in a statement Wednesday that it “cannot afford to be exposed to any secondary sanction” including the loss of financing by American banks.

Total wants U.S. and French authorities to examine the possibility of a specific project waiver.

The 2017 contract for new development at the vast South Pars gas field was the first major gas deal signed with Iran following the 2015 nuclear deal.

Major European powers and Tehran committed this week to keep working together to save the Iran nuclear deal.
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The European Union has called on U.S. President Donald Trump’s administration to stop threatening it with tariffs on steel and aluminum, saying Thursday it is prepared to discuss trade — but not at gun-point.

In March, Trump slapped tariffs of 25 percent on steel imports and 10 percent on imported aluminum, but granted the 28 EU countries a temporary exemption until June 1. He also temporarily exempted big steel producers Canada and Mexico, provided they agree to renegotiate a North American trade deal to his satisfaction.

“It’s Europe’s economic sovereignty, and what we are demanding is that we are exempted without conditions or time limits,” French President Emmanuel Macron said in Bulgaria, where EU leaders have gathered for a summit with Balkans countries.

Convinced that the U.S. move breaks global trade rules, the EU has drawn up a list of “rebalancing” duties worth some 2.8 billion euros ($3.4 billion) to impose on U.S. products if it is not permanently exempt. It has vowed not to negotiate under threat.

“I don’t think we have to consider this or that, when it contravenes the laws of international trade,” Macron said.

But he added: “We can improve things, in a peaceful setting.”

German Chancellor Angela Merkel echoed his remarks.

“We have a common position: we want an unlimited exemption, but are then prepared to talk about how we can reciprocally reduce barriers for trade,” she told reporters in the Bulgarian capital Sofia.

Should the exemptions be dropped, the EU stands ready to deepen trans-Atlantic energy cooperation, notably on liquefied natural gas, improve reciprocal market access for industrial products and work together to reform the rules of the World Trade Organization.

The EU rejects Trump’s assertion that the tariffs are needed for U.S. national security and sees them as protectionist measures meant to boost local businesses. Most EU countries are U.S. allies in the world’s biggest security organization, NATO.

 
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Olivia Rubio does the hard, tedious work of extracting crab meat on Hooper’s Island on Maryland’s Eastern Shore.

Hooper’s Island is part of chain of three sparsely populated islands in the Chesapeake Bay. After crossing a single bridge, the main road winds through picturesque watermen’s villages and unpopulated areas. Hooper’s is a center for seafood catching and processing.

Rubio has been coming for 15 years from Mexico to work in one of the island’s crab houses on an H2-B visa — a guest worker program that has been a continual issue in the crab industry for business owners in the Maryland Eastern Shore.

“We have the opportunity to come here to work and support our family, help our children move forward, and support our parents. It’s good. We have work. So, we’re grateful,” Rubio said.

As a temporary guest worker, Rubio can live and work in the U.S. during the warmer months and then return to her home country in the winter.

Though glad to receive the visa, Rubio wonders about next year; the Trump administration, citing higher demand this year, awarded the visas by lottery, instead of first-come, first-served.

“I hope there are visas to be able to come back and do the work again,” she said.

Rubio’s employer, GW Hall & Son Seafood, needed 40 visas but only got enough for 30 guest workers.

“I don’t know what we would do or the whole area would do without them. I mean from the stores to… I don’t even know how to describe it because of the impact that they have. They keep it all moving,” Robin Hall, co-owner, GW Hall & Son Seafood, told VOA.

Visa shortage

Since the 1980s, crab houses on Maryland’s Eastern Shore have had to hire temporary foreign workers, mostly from Mexico, to extract meat from the crabs’ hard shells. Maryland has 20 licensed crab businesses, employing 500 foreign workers.

In fiscal year 2018, 66,000 H-2B visas were available nationwide for nonagricultural industries. In its budget bill passed in March, Congress said the cap could be raised.

Amid the crisis, U.S. Rep. Andy Harris, who represents Hooper’s Island in Congress, has asked the Departments of Homeland Security and Labor for extra guest worker visas.

Harris said the fiscal year 2018 cap of H-2B visas was filled on January 1, 2018, which left many businesses unable to obtain the temporary seasonal labor they need.

“The H-2B visa program is a crucial resource for many seasonal businesses … and supports thousands of related jobs held by American citizens. … These temporary workers must pay American taxes, have a clean criminal record, receive no government benefits, and return to their home countries when their visas expire,” Harris said.

But on background, a DHS official offered “no new guidance to share.”

Continuing to pick crab meat, Rubio told VOA that a lot of her friends – who come annually – haven’t got visas.

“So they can’t come here to work, and they need it,” she said.

No workers

At nearby Russell Hall Seafood, the baskets and crates are empty. The kitchen is unused. There are no workers in sight.

Harry Phillips’ company, Russell Hall Seafood, needed 50 visas but got none.

“It never was this way before. We’ve done this for 25 years and no doubt some years it’s been slow getting workers, but we’ve always got them,” he said.

Phillips still has ads in local newspapers and is trying to hire local people.

“We have to actually advertise in newspapers before we’re allowed to even apply for the H-2B program workers, and we do that with a couple of different newspapers and I actually have ads in the paper now for workers, but nobody’s applied,” Phillips said.

Phillips does not like the lottery system when it comes to H-2B visas.

“That’s a big gamble. I mean, we can’t run our business at a gamble whether we’re going to get our workers or not.

Phillips’ work phone telephone rang. On the other end, a worker asked when visas would become available.

“You see? It’s them asking about the visas,” Phillips explained.

AE Phillips and Son, part of the Phillips Seafood restaurant chain, is also shut down unless workers become available. The company got its start in 1916.

But the plant’s general manager, Morgan Tolley, said he is “really worried” about 2019.

“We had some problems going on with immigration. A lot of issues are up in the air. A lot of things that people don’t understand or they think they understand. Speaking for the H2B program, which is a non-immigrant work visa, to me personally, that has nothing to do with immigration. It’s a non-immigrant work visa. These people take tremendous pride in the fact that they can come here to United States and work and go home and they’re proud of that right that they have earned,” Tolley said.

No locals anymore

“It tears me up.” Hall, who was operating with 75 percent of his workforce including Rubio, did not feel particularly happy or fortunate.

“I’m tickled to death to have [my workers]… But I want us all to get them. I’d really actually almost rather see everybody get them or nobody get them, so we could all be together as a group,” he said.

And he has no hope that American workers will fill the gap. “You rode down here, did you see any American people running around because there’s nobody around here?” he asked VOA.

“The few people we have here are retired from somewhere else. They moved down here and have a home here on the water and this was a great vacation spot.

Standing on the platform where crabs would be unloaded when they came in, Hall continued, “There’s no local people here anymore. Population’s got so low that you can’t get anybody from it.”
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