Month: June 2018

 Britain, France and Germany have joined forces to urge the United States to exempt European companies from any sanctions the U.S. will slap on Iran after pulling out of an international nuclear agreement.

In a letter made public Wednesday, ministers from the three European countries told U.S. officials they “strongly regret” President Donald Trump’s decision to withdraw from the 2015 Iran deal to which their nations also were signatories.

The agreement was meant to stop Iran from developing nuclear weapons in exchange for the lifting of economic sanctions. Trump argued that it was insufficiently tough and has said sanctions will be imposed on any company doing business with Tehran.

The ministers — British Foreign Minister Boris Johnson, French Finance Minister Bruno Le Maire and German Finance Minister Olaf Scholz — said they want the U.S. to “grant exemptions” for European Union companies that have been doing business with Iran since the nuclear deal took effect in 2016.  

“As close allies, we expect that the extraterritorial effects of U.S. secondary sanctions will not be enforced on EU entities and individuals, and the United States will thus respect our political decision and the good faith of economic operators within EU legal territory,” they said in their letter to In a letter dated Monday to U.S. Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo dated Monday.

They also said that Iran should not be cut out of the SWIFT system for international money transfers.

Many companies from Europe and the U.S. have been steadily building up their investments in Iran in the wake of the nuclear deal, particularly in the fields of pharmaceuticals, banking and oil. Any sanctions could be damaging, especially if they affect business interests in the United States.

The ministers reiterated their view that the deal with Iran remains the “best means” to prevent the country from becoming a nuclear power.

They also warned that any Iranian withdrawal from the deal would “further unsettle a region where additional conflicts would be disastrous.”

The letter was published during a trip to Europe by Israeli Prime Minister Benjamin Netanyahu, who has backed Trump in declaring the nuclear deal too soft on Iran.

Earlier this week, Netanyahu met with French President Emmanuel Macron and German Chancellor Angela Merkel, who both reiterated their support for the accord.

He met British Prime Minister Theresa May on Wednesday. May said that Britain, like France and Germany, believes the nuclear deal “is the best route to preventing Iran from getting a nuclear weapon.”

“We will remain committed to it as long as Iran meets its obligations,” she said.

The publication of the letter came a day after Iran said it was preparing for the resumption of uranium enrichment within the limits set by the 2015 agreement. The modest steps appeared mainly aimed at signaling that Iran could resume its drive toward industrial-scale enrichment if the nuclear accord unravels.

French Foreign Minister Jean-Yves Le Drian sought to downplay the implications of the move and said it did not violate the terms of the deal.

“It shows a sort of irritation, and it is always dangerous to flirt with the red lines,” Le Drian said on Europe-1 radio.

“We must keep a sense of proportion and stick to the agreement,” he said. “And today, the agreement is not broken and Iran respects totally its commitments.”
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Arms control experts estimate that the dismantlement of North Korea’s nuclear program could take a decade to complete, and cost $20 billion, if a nuclear agreement is reached between U.S. President Donald Trump and North Korean leader Kim Jong Un when they meet in Singapore on June 12.

“The hard work has not yet begun, and it is gong to take sustained energy on the part of the United States, South Korea, Japan, China and North Korea. It’s going to be a multiyear long process,” said Daryl Kimball, the executive director of the Arms Control Association in Washington.

President Trump has said he expects a “very positive result” from the North Korea nuclear summit, but he also said it will likely be the beginning of a process to resolve differences over the extent of the North’s denuclearization, and the specifics regarding what sanctions relief, economic aid and security guarantees would be offered in return.

U.S. Defense Secretary Jim Mattis said on Sunday that North Korea would only receive sanctions relief after it takes “verifiable and irreversible steps to denuclearization.”

This position aligns closer to the Kim government’s stance that denuclearization measures and concessions be matched action for action. And it backs away from demands made by some in the president’s national security team that Pyongyang quickly and unilaterally dismantle all its weapons of mass destruction before any concessions would be offered.

Nuclear costs

North Korea is estimated to have 20 to 80 nuclear warheads, both known and covert nuclear research and processing sites, and thousands of ballistic missiles that can be launched from mobile vehicles, and submarine based launchers have been tested in recent years.

With such an extensive nuclear arsenal it could cost $20 billion to achieve the U.S. goal of complete, irreversible, and verifiable nuclear dismantlement (CVID), according to a recent study conducted by Kwon Hyuk-chul, a Kookmin University professor of security strategy.

Kwon based his assessment in part on past nuclear deals with North Korea and Ukraine’s experience in dismantling its nuclear arsenal after the fall of the Soviet Union in the 1990s. 

“In the process of the nuclear dismantlement of Ukraine, all of the strategic nuclear warheads that Ukraine possessed were transferred to Russia and were dismantled there. In doing so, the United States provided large-scale containers and technical support to assist with safe dismantling,” said Kwon.

The Kookmin University study estimates it would costs $5 billion to dismantle the North’s nuclear arsenal and supporting facilities. Another $5 billion, Kwon said, would be needed to fulfill a U.S. pledge, made as part of a 1994 nuclear agreement with North Korea, to build two light water reactors to generate electrical power.

Another $10 billion in economic aid would be needed both as incentives to convince the leadership to give up its nuclear deterrent and to help transition the over 3,000 to 10,000 nuclear workers into peacetime professions.

President Trump recently said he does not expect the U.S. to provide any government aid but could offer American private investment if North Korea gives up its nuclear weapons. Instead he said the Kim government should look to South Korea and China for any direct economic assistance.

Denuclearization roadmap

A recent Stanford University report estimates it would take over 10 years to permanently dismantle the North’s nuclear program.

Stanford nuclear scientist Siegfried Hecker, who visited North Korea in the past to assess the country’s plutonium program, Robert Carlin, a former CIA Korea analyst, and researcher Elliot Serbin, conducted the detailed study of the North’s nuclear program.

The researchers listed specific categories that must be verified by outside inspectors including; nuclear fissile material of plutonium, tritium for fusion Hydrogen bombs, enriched uranium, nuclear reactors, centrifuge facilities, long and medium and short range missiles, test engines, and space launch vehicles.

The authors proposed a three-phase denuclearization process that would halt or limit further activity in the first year, roll back or dismantle over five years, and permanently eliminate North Korea’s nuclear capabilities in 10 years.

Lee Yoon-jee in Seoul contributed to this report.
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Mexico put tariffs on American products ranging from steel to pork and bourbon on Tuesday, retaliating against import duties on metals imposed by

President Donald Trump and taking aim at Republican strongholds ahead of U.S. congressional elections in November.

Mexico’s response further raises trade tensions between the two countries and adds a new complication to efforts to renegotiate the NAFTA trade deal between Canada, the United States and Mexico.

American pork producers, for whom Mexico is the largest export market, were dismayed by the move.

Trump last week rattled some of the closest U.S. allies by removing an exemption to tariffs on imported steel and aluminum that his administration had granted to Mexico, Canada and the European Union.

Meanwhile, Trump economic advisor Larry Kudlow revived the possibility on Tuesday that the president will seek to replace the trillion dollar North American Trade Agreement (NAFTA) with bilateral deals with Canada and Mexico, something both countries say they oppose.

Following news of the new Mexican tariffs, which take effect immediately, the peso tumbled to its weakest level since February 2017, making it one of the worst performers among major currencies.

Mexico’s retaliatory list, published in the government’s official gazette, included a 20 percent tariff on U.S. pork legs and shoulders, apples and potatoes and 20 to 25 percent duties on types of cheeses and bourbon.

A net importer of U.S. steel, Mexico is also putting 25 percent duties on a range of U.S. steel products.

Mexico’s trade negotiators designed the list, in part, to include products exported by top Republican leaders’ states, including Indiana where Vice President Mike Pence was formerly governor, according to a trade source familiar with the matter.

Bourbon-producing Kentucky is the home state of Senate Majority Leader Mitch McConnell, a Republican.

The new tariffs could also have political implications in some hotly contested races as the Republicans seek to maintain control of both chambers in Congress in November’s election, illustrating the potential perils of Trump’s aggressive efforts to set right what he sees as unfair trade balances with allies and rivals.

Midwestern worries

Iowa, where one incumbent Republican representative, Rod Blum, is seen as vulnerable, is an example of a place where Trump’s party could be hurt. The state is the top pork producing state in the United States and Mexico is its main export market by volume.

“We need trade and one of the things we’re concerned about is long-term implications that these trade issues will have on our partnerships with Mexico and Canada and other markets,” said Iowa Secretary of Agriculture Mike Naig, a Republican.

“Our customers around the world start going to other parts of the world for their supplies, that is a serious problem,” he said.

Chicago Mercantile Exchange hog futures at one point fell more than 2 percent following the Mexico pork tariff announcement.

“It certainly casts a negative pall over the market,” said CME livestock futures trader Dan Norcini.

The president of the U.S. National Pork Producers Council, Jim Heimerl, said Mexico accounted for nearly 25 percent of all pork shipments last year, adding that “a 20 percent tariff eliminates our ability to compete effectively in Mexico.”

“This is devastating to my family and pork producing families across the United States,” said Heimerl, a pork producer from Johnstown, Ohio.

In Minnesota, about 14 percent of the state’s $7.1 billion of annual agricultural exports goes to Mexico, one of the state’s top export markets, said Matthew Wohlman, Minnesota Department of Agriculture deputy commissioner.

The Mexican tariffs will hit its pork, dairy and potato exports, Minnesota state officials said.

U.S. Senator Mark Warner, a Democrat from Virginia, called the new tariffs a “gut punch” to farmers in his state, who he said exported more than $68 million in pork to Mexico last year.

“The President’s trade war is going to cost Virginia ag jobs,” he wrote in a tweet.

America first

Mexico announced its response to Trump’s move last week but it did not provide details of tariff levels or a full list of products at the time.

The United States and Mexico do $600 billion in annual trade and about 16 percent of U.S. goods exports go to its southern neighbor. However, the Mexican economy relies more on trade than does the U.S. economy, with about 80 percent of its exports sold to America.

The trade fights with Mexico and Canada are part of the Trump administration’s “America First” economic agenda, which has also put Washington on a collision course with China over trade.

Washington and Beijing have threatened tit-for-tat tariffs on goods worth up to $150 billion each, as Trump has pushed Beijing to open its economy further and address the United States’ large trade deficit with China.

The United States imposed tariffs of 25 percent on imported steel and 10 percent on aluminum in March, citing national security grounds. Last week Washington said it was ending a two-month exemption it had granted to imports from Canada, Mexico and the European Union.

The dispute with Mexico over tariffs makes it more difficult to conclude talks on renegotiating NAFTA between the three countries, discussions that began last year because Trump said the deal needed to be reworked to better serve the United States. Canada has also strongly objected to the metals tariffs.

The U.S. side has linked lifting its tariffs to a successful outcome of the NAFTA negotiations.

Separately, Mexico took steps on Tuesday to make it more attractive for other countries to send it pork by opening a tariff-free quota for some pork imports. Economy Minister Ildefonso Guajardo said his country would now “surely” look to Europe for pork products, used in many traditional dishes in Mexico.
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U.S. President Donald Trump is “seriously contemplating” trying to reach separate trade deals with Canada and Mexico instead of reshaping the more than two-decade-old North American Free Trade Agreement with both neighbors, a White House economic adviser said Tuesday.

Trump economic adviser Larry Kudlow told Fox News, “He prefers bilateral negotiations, and he is looking at two much different countries.”

The U.S., Canada and Mexico have for months engaged in talks to revise NAFTA, which has been in force since 1994. But Kudlow said separate deals “might be able to happen more rapidly.”

However, Kudlow said Trump does not plan to withdraw from the three-nation agreement.

“He is seriously contemplating a shift in the NAFTA negotiations … [and] he asked me to convey this,” Kudlow said. The adviser said Trump “believed bilateral is always better. He hates large treaties.”

Trump has long assailed multinational trade deals and within days of assuming power last year, withdrew the U.S. from the Trans-Pacific Partnership with 11 other Pacific rim nations.

On Monday, he said on Twitter, “The U.S. has made such bad trade deals over so many years that we can only WIN!”

He declared, “China already charges a tax of 16% on soybeans. Canada has all sorts of trade barriers on our Agricultural products. Not acceptable!”

Trump contended, “Farmers have not been doing well for 15 years. Mexico, Canada, China and others have treated them unfairly. By the time I finish trade talks, that will change. Big trade barriers against U.S. farmers, and other businesses, will finally be broken. Massive trade deficits no longer!”

The NAFTA talks have stalled on U.S. demands to increase American components in duty-free NAFTA autos, as well as its argument that any new agreement end after five years.

Kudlow said he told top Canadian officials Monday about Trump’s hope for bilateral trade talks and is awaiting for reaction from Ottawa.

“The important thought is he may be moving quickly towards these bilateral discussions instead of as a whole,” Kudlow said.

Trump’s trade talks with China, Mexico, Canada and the European Union have proved contentious. The U.S. leader last week drew the ire of Canada, Mexico and the EU by imposing tariffs on their aluminum and steel exports.

Canadian Prime Minister Justin Trudeau called the tariffs “insulting and unacceptable.” In a weekend television interview, Kudlow called the U.S.-Canada trade dispute a “family quarrel.”

 
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