Day: July 25, 2018

Mexican and Canadian officials are stressing that talks on the North American Free Trade Agreement will remain a three-way negotiation, despite suggestions by U.S. President Donald Trump that he might pursue separate trade deals with both countries.

Mexican Foreign Minister Luis Videgaray says “Canada and Mexico not only share geography, history and friendship, but also principles and common goals, and we are a team and act as a team.”

Visiting Canadian Foreign Affairs Minister Chrystia Freeland also stressed that NAFTA is a three-country agreement. She said that Canada also opposes a “sunset” clause proposed by Trump that would allow countries to opt out of the pact every five years.

Freeland also met Wednesday with Mexican President-elect Andres Manuel Lopez Obrador, who will take office on December 1.
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Leaders from the five BRICS nations sounded the alarm over what South Africa’s president described as recent threats to multilateralism and sustainable global growth — a not-so-coded reference to a brewing trade war between the U.S. and BRICS’ wealthiest member, China.

Chinese President Xi Jinping raised his concerns as the three-day summit began in South Africa.

“A trade war should be rejected because there will be no winner,” he said. “Economic hegemony is even more objectionable, because it will undermine the collective interest of the international community. Those who pursue this cause will only hurt themselves.”

WATCH: Leaders of BRICS Economic Bloc Cite Concerns at Protectionist Policies

South African President Cyril Ramaphosa echoed his sentiments.

“We are meeting here, ladies and gentlemen, at a time when the multilateral trading system is facing unprecedented challenges,” Ramaphosa said. “We are concerned by the rise in unilateral measures that are incompatible with World Trade Organization rules and we are worried about the impact of these measures, especially as they impact developing countries and economies. These developments call for thorough discussion on the role of trade in growing and in promoting sustainable development, particularly inclusive growth.”

BRICS comprises Brazil, Russia, India, China and South Africa. The bloc admitted South Africa in 2010 as part of its aim of leveling the global playing field by representing nontraditional powers.

U.S. President Donald Trump has threatened to slap tariffs on all $505 billion worth of Chinese imports, a move that has caused global concern. Summit watchers say his blunt rhetoric will influence this year’s summit.

“I think that something that is pertinent that relates to the United States and President Trump’s administration is of course their protectionist measures that they have put on in terms of trade, and the trade wars that have every country in the globe speaking,” analyst Luanda Mpungose told VOA. “But something that the BRICS have actually come out and actually spoken about quite strongly, is that they want to support multilateralism and a rules-based world order.”

But, she says, BRICS may use that adversity to seek to build a new world order, even beyond the five-member bloc.

“Something that’s different about BRICS this year, specifically about South Africa as a host country, is that this initiative is not only about the BRICS member countries, the five countries, but actually, we’ve actually seen an outreach of neighborhood countries being invited,” she said. “So this is taking along the Africa developmental agenda and bringing it Into the BRICS agenda, I mean countries like Rwanda, like Senegal, like Togo have been invited to come and attend.”

The summit continues through Friday.
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This year’s summit of the BRICS nations — Brazil, Russia, India, China and South Africa — began Wednesday with an expression of concern about the trade war brewing between the United States and BRICS’ wealthiest member, China.

BRICS admitted South Africa in 2010 as part of the bloc’s aim of leveling the global playing field by representing non-traditional powers.

Leaders say that goal is now more important than ever, given the growth of protectionist trade policies and politics around the globe.

South African President Cyril Ramaphosa issued strong words of concern at the opening of the summit in Johannesburg on Wednesday.

“We are meeting here, ladies and gentlemen, at a time when the multilateral trading system is facing unprecedented challenges. We are concerned by the rise in unilateral measures that are incompatible with World Trade Organization rules and we are worried about the impact of these measures, especially as they impact developing countries and economies.”

Ramaphosa said these developments “call for thorough discussion on the role of trade in growing and in promoting sustainable development, particularly inclusive growth.”

To that end, he said, the bloc’s development bank has, since its establishment in 2014, issued $5.1 billion in loans to foster development projects.

On the eve of the summit, Ramaphosa met with Chinese President Xi Jinping. China has been attempting to shore up its international relationships amid U.S. President Donald Trump’s threat to impose tariffs on Chinese goods.

But as South African Trade and Industry Minister Rob Davies pointed out in a business-oriented pre-summit meeting, even within BRICS, trade is not balanced. South Africa is the newest and smallest member of BRICS, he said, but invests more than it gets back.

“If we look at the investment relationship, I think we can see that there has been less progress,” he said. “The figure that we have recorded, nearly $18 billion US dollars — 17.8 billion — that was the inflow of BRICS investment into the South African economy between 2003 and 2017, but actually South Africa, between 2001 and 2016, invested $68 billion, a larger sum, in other BRICS countries.”

With outside threats looming large, analyst Luanda Mpungose says things are changing. This year, she said, it’s notable that BRICS has extended a hand beyond just South Africa.

“Something that’s different about BRICS this year, specifically about South Africa as a host country, is that this initiative is not only about the BRICS member countries, the five countries,” he sai. “But actually we’ve actually seen an outreach of neighborhood countries being invited. So this is taking along the Africa developmental agenda and bringing it Into the BRICS agenda, I mean countries like Rwanda,like Senegal, like Togo have been invited to come and attend.”

The summit continues through Friday.
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U.S. President Donald Trump attacked China on Wednesday for targeting American farm products with new tariffs in what he said would be a failed effort to gain a trade advantage over the United States.

“China is targeting our farmers, who they know I love & respect, as a way of getting me to continue allowing them to take advantage of the U.S.,” Trump said on Twitter. “They are being vicious in what will be their failed attempt. We were being nice – until now!”

Beijng recently imposed new tariffs on an array of American farm produce, including soy beans, corn, wheat, cotton, rice, sorghum, beef, pork, poultry, fish, dairy products, nuts and vegetables.

It is part of a tit-for-tat tariff battle that Trump is waging with China in an effort to get Beijing to further open up its markets and end what the U.S. views as onerous requirements that American companies hand over proprietary technology information in order to do business in China.

The U.S. has chronically run a trade deficit with China, although Trump overstated the 2017 figure as $517 billion. The U.S. government says the deficit actually was $375.6 billion.

With the new tariffs in China, some U.S. farmers, many of them among Trump’s biggest political supporters in the 2016 election, have voiced their dismay at declining sales.

With the agricultural financial fallout occurring less than four months before nationwide congressional elections in November, the Trump administration said Tuesday it would provide up to $12 billion in aid to farmers who have been hurt by the president’s tariff policies. He has said the tariffs he has imposed are needed to force foreign governments to improve their trade deals with the U.S.

U.S. Agriculture Secretary Sonny Perdue said the compensation to U.S. farmers was “a firm statement that other nations cannot bully our agricultural producers to force the United States to cave in. This administration will not stand by while our hardworking agricultural producers bear the brunt of unfriendly and illegal tariffs.”

White House officials contend the tariffs inflict some necessary minor, domestic short-term pain in order to achieve long-term large gains for the U.S. economy.

However, several lawmakers, including farm-state Republicans, attacked Trump’s compensation plan for U.S. farmers.

“Our farmers want trade, not aid,” declared Congressman Kevin Cramer, a Republican from North Dakota, a Midwestern state where agriculture alone accounts for one-fourth of the revenue base.

“This trade war is cutting the legs out from under farmers, and the White House’s ‘plan’ is to spend $12 billion on gold crutches,” said Sen. Ben Sasse of Nebraska, where beef and corn are the top agricultural products. “This administration’s tariffs and bailouts aren’t going to make America great again. They’re just going to make it 1929 again.”

Sen. Bob Corker, a Republican from Tennessee, where soybeans are the top row crop, said, “You have a terrible policy that sends farmers to the poorhouse. And then you put them on welfare. And we borrow the money from other countries. It’s hard to believe there isn’t an outright revolt right now in Congress.”

A Democratic House member, Jackie Speier, whose prosperous California district is known for its Brussels sprouts and grape production, wrote on Twitter: “OK @POTUS — you created this mess with your trade war and now you are going to spend $12 billion to placate the farmers that voted for you.”

The American Soybean Association said in a statement, “While soybean growers appreciate the administration’s recognition that tariffs have caused reduced exports and lower prices, the announced plan provides only short-term assistance.” It called “for a longer-term strategy to alleviate mounting soybean surpluses and continued low prices, including a plan to remove the harmful tariffs.”

Mark Santucci, a farmer of tart cherries in the state of Michigan, told VOA that while the relief programs will not directly benefit him, “I am glad the president has decided to implement it. I think we are in for a long battle with the Chinese government, so this program will go a long way in helping our farmers who are on the front line.”

 
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Sergio Marchionne, a charismatic and demanding CEO who engineered two long-shot corporate turnarounds to save carmakers Fiat and Chrysler from near-certain failure, died Wednesday. He was 66.

The holding company of Fiat’s founders, the Agnelli family, announced Marchionne had died after unexpected complications from surgery in Zurich. That came days after a deterioration in his health led the company to hastily appoint a successor.

At Fiat Chrysler Automobiles headquarters in the Italian city of Turin, corporate flags flew at half-staff while inside the building, Marchionne’s successor led a minute of silence ahead of an earnings presentation. Workers at a plant near Naples that Marchionne had brought back to life halted production for 10 minutes in tribute.  

“Unfortunately what we feared has come to pass,” said John Elkann, Fiat heir and head of the Exor holding company. “Sergio Marchionne, man and friend, is gone.”

The news agency ANSA reported the cause of death as cardiac arrest. He suffered one while recovering from shoulder surgery late last month, landing him in intensive care, followed by a second, fatal event. Fiat Chrysler declined to comment, citing privacy issues.

The Italian-Canadian had planned to step down after first-quarter earnings next year, but the transition was accelerated after the company announced that the complications, which it did not detail, would prevent his return. He also was replaced as CEO of sportscar maker Ferrari and heavy truck and equipment maker CNH Industrial.

Marchionne turned around the dysfunctional Fiat and Chrysler, merging them into the world’s seventh-largest carmaker, Fiat Chrysler Automobiles, almost by personal force of will, living on a corporate jet crossing the Atlantic to push employees to accomplish what most people thought was impossible amid a devastating global recession.

Marchionne, who was born in Italy and emigrated to Canada at age 14, had revived Fiat by 2009 when he was picked by the U.S. government to save U.S.-based Chrysler from its trip through bankruptcy protection after being owned by a private equity company.

 “It’s highly unlikely that Chrysler would exist today had he not taken that gamble,” said Autotrader.com analyst Michelle Krebs. “The company was in such bad shape, being stripped of any kind of resources by the previous owners.”

Marchionne met most of his goals, even though at times he was doubted by nearly everyone in the automobile business. But he didn’t live long enough to complete his last two: personally hand over the reins of Fiat Chrysler to a hand-picked protege and lay out plans for transforming supercar maker Ferrari.

The manager, known for his folksy, colorful turns of phrase and for his dark cashmere sweaters no matter the occasion, was the darling of the automotive analyst community. Even when expressing doubts at his audacious targets, they showed admiration for his adept deal-making. That included getting General Motors to pay $2 billion to sever ties with Fiat, key to relaunching the long-struggling Italian brand, and the deal with the U.S. government to take Chrysler without a penny down in exchange for Fiat’s small-car technology.

Marchionne joined Fiat after being tapped by the Agnelli family to save the company. Fiat had for generations been a family-run enterprise and having someone at the helm from outside Italy’s clubby management circles — even a dynamo like Marchionne — was an enormous change.

Other key corporate moves included the spinoff of the heavy industrial vehicle and truck maker CNH and of the Ferrari supercar maker. Both deals unlocked considerable shareholder value for Agnelli family heirs led by Elkann. Elkann, 42, came into his own under Marchionne’s stewardship, taking over as chairman in 2010 having been tapped more than a decade earlier by his grandfather, the late Gianni Agnelli, to run the family business.

As Marchionne’s health failed following surgery, a clearly emotional Elkann delivered what amounted to an impromptu eulogy and message of gratitude to a man he called his mentor.

“He taught us to think differently and to have the courage to change, often in unconventional ways, always acting with a sense of responsibility for the companies and their people,” Elkann said over the weekend. “He taught us that the only question that’s worth asking oneself at the end of every day is whether we have been able to change something for the better, whether we have been able to make a difference.”

It was Marchionne’s success in turning around a pair of Swiss businesses that drew the attention of the Agnelli family. He joined Fiat’s board in May 2003, four months after the death of Fiat scion Gianni Agnelli. He became CEO in June 2004, after the death of Gianni Agnelli’s brother, Umberto, Fiat’s chairman, left a family void in the company.

As an outsider, Marchionne was unfettered by local loyalties and he set about cutting jobs and expenses, slimming management ranks and increasing shareholder value along the way. He brought in other outsiders to key positions and relaunched the iconic 500, which became one of the new Fiat’s calling cards and a sign of rebirth as it expanded abroad.

While he started small with limited industrial alliances, his ambitions soon grew. The bankruptcy of Chrysler gave him the opportunity to create a global car company with brands including Jeep, Ram, Alfa Romeo, Ferrari and Maserati that he envisioned would grow to 6 million cars a year. A global economic crisis that bottomed out car sales in key U.S. and European markets prevented him from reaching that goal, but his industrial vision never faltered as he spun off CNH and Ferrari into stand-alone entities.

His most quoted presentation to analysts, titled “Confessions of a Capital Junkie,” argued that consolidation was inevitable in the investment-heavy car industry. But though he tried for another merger with General Motors, talks never led to a deal. Still, newspaper photographs of a chain-smoking Marchionne awaiting talks with German Chancellor Angela Merkel outside the Chancellery in Berlin on the role of GM’s then-subsidiary, Opel, made clear just how personally he took the negotiations.

Marchionne had always insisted that his successor would come from inside — so it was no surprise when British manager Mike Manley, who helped boost Jeep to global success and get Fiat a foothold in Asia, was named CEO.

“Clearly, this is a very sad and difficult time, and our thoughts and prayers go to Sergio’s family, friends and colleagues,” Manley told an analyst conference call presenting second quarter result. “Personally, having spent the last nine years of my life seeing or talking to Sergio almost on a daily basis this morning’s news is heartbreaking.”

“There is no doubt Sergio was a very special, unique man and there is no doubt that he’s going to be sorely missed.”

Marchionne had never indicated plans to leave either Ferrari or CNH, leaving many to speculate that the tireless manager known for his short sleep cycles and globe-trotting style would use those positions to keep a foothold in the automotive world.

In June, he laid out Fiat Chrysler’s five-year plan, which included launching electrified powertrains across Fiat brands — a tacit acknowledgement that the company had lagged in introducing hybrid, hybrid-electric and full-electric engines. They also were to put Ferrari engines in Maserati cars as Marchionne sought to take on electric-car pioneer Tesla.

Marchionne’s penchant for numbers was always clear in his attentive quarterly presentations. He let his real satisfaction show during the June 2018 presentation when he announced the company had reached zero debt, by briefly donning a necktie for the first time in a decade.

Other automotive leaders paid tribute to Marchionne’s skill, creativity and determination.

General Motors CEO Mary Barra praised his “remarkable legacy in the automotive industry.” Ford Executive Chairman Bill Ford called Marchionne “one of the most respected leaders in the industry whose creativity and bold determination helped to restore Chrysler to financial health and grow Fiat Chrysler into a profitable global automaker.”

At his last public appearance as CEO, Marchionne in June attended a ceremony in Rome where a Jeep was presented to the paramilitary Carabinieri police. Marchionne began his brief remarks noting that his father had been a Carabinieri officer.

He said he recognized in the Carabinieri “the same values at the basis of my own education: seriousness, honesty, sense of duty, discipline and spirit of service.”

Marchionne was divorced. He is survived by his companion, Manuela Battezzato, and two grown sons, Alessio and Tyler.
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A showdown on trade at the White House on Wednesday is expected to result in a standoff — at least for now.

A meeting between U.S. officials, led by President Donald Trump, and a European Union delegation, headed by European Commission President Jean-Claude Juncker, is looking to avert the widening trans-Atlantic gap that could turn into a full-scale trade war affecting half of global commerce.

“We just want it to be a level playing field for our farmers, for our manufacturers, for everybody,” Trump said, sitting alongside Juncker in the Oval Office. “If we could have no tariffs, no barriers, no subsidies, the United States would be very pleased.”

Juncker is putting forth two proposals, according to European officials. One would involve a tariff-free deal not only including the U.S. and EU automakers but those from Japan and South Korea, as well. The other suggestion: a limited U.S.-EU free-trade agreement focused on industrial tariffs.

“We are close partners — allies, not enemies — we have to work together,” declared Juncker, who is also hoping to persuade the U.S. president not to impose huge new tariffs on imported cars following Trump’s imposition of such import taxes on steel and aluminum.

There are “many countries where they have massive barriers and they have massive tariffs and we have to follow,” Trump said while reporters were in the Oval Office for a brief portion of the meeting. “You could call it retaliation, but I’d rather just say that we want reciprocal. So, whether it’s with European Union or others, it has to be reciprocal in nature at a minimum.” 

The U.S. president added, “We expect something very positive to take place.”

The EU has already retaliated against the Trump administration’s actions with $3 billion of tariffs on a range of American products from motorcycles to whiskey.

The European Commission is also preparing a list of $20 billion of U.S. goods to be hit with retaliatory tariffs, according to its trade commissioner, Cecilia Malmstrom.

Germany’s foreign minister, Heiko Maas, is warning that Europe won’t cave in to Trump’s threats.

“No one has an interest in having punitive tariffs, because everyone loses in the end,” Maas wrote on Twitter. “Europe will not be threatened by President Trump. If we cede once, we will often have to deal with such behavior in the future.”

Prior to his discussions with the Europeans, Trump met with Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan.

The previous day, Ryan told reporters he does not think “the tariff route is the smart way to go.”

Ryan said he understands Trump is seeking “a better deal for Americans,” but added the U.S. should instead “work together to reduce trade barriers and trade restrictions between our countries.”

Trump appeared to take offense to Ryan’s comments, questioning on Twitter on Wednesday morning why a “weak politician” would call for a reduction of trade restraints.

Trump also erroneously claimed the U.S. lost $817 billion on trade last year, a higher number than the $568.4 billion reported by the U.S. Bureau of Economic Analysis.
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Qian Zhiya may be Starbucks’ worst nightmare.

The 42-year-old Chinese entrepreneur says she is betting that her fledgling Luckin Coffee brand will eventually have more cafes in China than Starbucks, and she has Singapore’s sovereign wealth fund and other investors bankrolling her plan.

Luckin, which only officially launched in January, has opened more than 660 outlets in 13 Chinese cities thanks to a supercharged growth plan based on cheap delivery, online ordering, big discounts and premium pay for its staff.

Its assault comes at a crucial time for Starbucks, which has 3,400 stores in China — its second biggest market after the U.S. — and plans to almost double that number by 2022.

And the speed of the attack is a warning to other established consumer brands in China that they too could be vulnerable to a start-up’s attempt to reinvent a market, brand consultants say.

Starbucks’ shares were pummeled in June after it warned same store sales growth in China had plunged to zero or worse last quarter, against 7 percent growth a year earlier.

Its fiscal third-quarter results are due out on Thursday.

Starbucks said some new café openings were cannibalizing customer visits at nearby stores and it also blamed a drop-off in orders through delivery firms.

While it did not mention increased competition, investors and analysts said it is clear that Luckin does represent a threat.

However, they also point out that Starbucks’ brand has been very resilient to challenges from rivals around the world over the years, largely because of the ambience of its stores, its service and the consistent quality of the coffee served.

There is also no sign that Chinese consumers have turned against such a very American brand as a protest over U.S. President Donald Trump’s imposition of punitive tariffs on Chinese exports.

Big Promotions

Reuters spoke to 30 consumers in Beijing Yintai Center, a shopping mall that has a Starbucks, Costa Coffee and Luckin outlet, among others. Half of those polled said they had tried Luckin; most said they liked it, though more than two-thirds said their top choice remained Starbucks.

The majority drank coffee in-store or bought to take away, with only a small number saying they had coffee delivered, a potential challenge for Luckin’s delivery-focused strategy.

Taste, convenience and environment were their top three priorities, more than price.

Luckin’s customers can order coffee via an app, watch a livestream of their coffee being made, and have it delivered to their door in an average of 18 minutes, the company says.  A regular latte, roughly the size of a Starbucks grande, costs 24 yuan plus 6 yuan for delivery (free delivery for orders of more than 35 yuan), but can be half price after promotions. A grande latte at Starbucks costs 31 yuan.

More than half of Luckin’s stores are larger “relax” outlets or pick-up stores with some seating. The rest are delivery kitchens.

The speed of Luckin’s growth is extraordinary — it took Starbucks about 12 years to open as many stores. In many ways it echoes the way in which some major Chinese technology firms, such as ride hailing platform Didi Chuxing, have burned through cash to grab market share and been valued highly as a result.

Qian, who was previously chief operating officer at Chinese ride hailing firm Ucar, says Luckin’s focus now is all about increasing customers.

“I don’t have a timeline for profit,” Qian told Reuters at the firm’s Beijing headquarters as she sipped her third Luckin coffee of the day. “For us, what we care about now is the number of users and if they are coming back to us, whether they recognize us, whether we can take market share.”

The firm raised $200 million this month to help fund its expansion, including an undisclosed sum from Singapore government fund GIC, a funding round which Luckin said valued the firm at $1 billion.

“In the future we will have more cafes than Starbucks,” she declared.

One of the investors in the latest fundraising said it is the logical time for there to be a shake-up of the coffee world in China.

“This model will appeal to young customers amid the country’s consumption upgrade,” said David Li, former head of Warburg Pincus Asia Pacific. He led the financing round for Luckin via his new investment firm Centurium Capital.

The use of online ordering and delivery should be  enough to unnerve many established brands, said Bruno Lannes, Shanghai-based partner with consultancy Bain & Co.

“It’s a big threat, that’s why western brands need to pay attention,” he said.

“Flash Mob”

Still, not everyone agrees the internet model translates easily to the coffee business, given the need for costly stores and quality control.

“It remains to be seen if they can really hook consumers in and create a monopoly in the market, like those we see in sectors like cab-hailing,” said Liu Xingliang, president of tech consultancy China Internet Data Center.

And some of the consumers Reuters spoke to in the Beijing mall saw hurdles ahead for Luckin.

Liu Xu, 23, an advertising professional, who compares Luckin to a “flash mob” that came out of nowhere, said he tried the firm’s coffee out of curiosity but prefers hand-drip single-origin coffee.

And Lian Yiheng, 22, a student, said she was attracted by Luckin’s promotions and the convenience of delivery, but felt it needed to improve its selection of coffees and store decoration to lure people in the longer run.

Qian said the plan was to have more sit-in stores and reduce the proportion of delivery-only outlets, which would require higher spending on setting up in better locations and on décor.

On the question of quality, she says that it uses select arabica beans from Ethiopia.

Luckin’s expansion comes as Starbucks’ global rivals, like Canadian chain Tim Hortons, are also pushing hard in China. Tim Hortons plans to open 1,500 outlets in China over the next 10 years, while smaller local chains are also popping up fast.

As China’s middle class continues to increase in size and the coffee chains move into many smaller towns and cities, the market is growing at 5-7 percent a year, according to research firm Mintel.

Li Yibei, owner of Double Win Café, which has a chain of eight coffee shops in Shanghai, said Luckin would have an impact on the market, but there was plenty of space left.

“Maybe they will hit Starbucks to some extent, but remember Starbucks has many die-hard fans. Maybe they can grab some followers from them, but I don’t think that many,” she said.

Starbucks may also soon be moving more formally into online delivery in China.

Howard Schultz, Starbucks’ departing executive chairman, said in Shanghai this month that he was close friends with Jack Ma, the head of Alibaba Group Holding Ltd., which controls food delivery platform Ele.me., and suggested the two could work together on Starbuck’s online delivery in China.

Schultz also said he isn’t wasn’t worried about the China slowdown.

“The more good coffee and competition that comes into the market, the more the Chinese people will be exposed to good coffee,” he said. “Emerging new players that are coming into the market will actually benefit Starbucks.”

($1 = 6.8142 Chinese yuan renminbi)
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