Day: January 10, 2019

Rising global authoritarianism, trade protectionism and the weakening of global institutions threaten U.S. businesses, the head of the U.S. Chamber of Commerce warned Thursday.

In his annual address, Chamber of Commerce CEO Tom Donohue said for now the U.S. economy is strong and business owners are consistently optimistic, crediting “deregulation and tax reform.”

But Donohue also defended the system of alliances and multilateral institutions set up by the United States after World War II – an implicit criticism of U.S. President Donald Trump’s “America First” policies.

“The U.S. and our allies spent the last 70 years working to expand democracy and freedom,” Donohue said. “Today, we face the task of rebuilding domestic consensus for supporting democracy abroad.”

Donohue also warned against domestic political dysfunction, including the inability of U.S. lawmakers to pass immigration reform.

The comments come amid a prolonged partial government shutdown related to President Donald Trump’s demand for Congress to provide funds to build a wall on the southern U.S. border.

Building the wall would fulfill a key campaign promise for Trump, who regularly portrays immigrants as a threat. Though he didn’t criticize Trump directly, Donohue said immigrants are crucial to the U.S. economy.

“Employers don’t have the workers they need at every skill level in key industries such as health, agriculture, manufacturing, and transportation,” Donohue said. “Our nation must continue to attract and welcome industrious and innovative people from all over the world.”

U.S. lawmakers, he said, should reach a compromise that would provide legal protection for the so-called Dreamers, who came to the U.S. illegally as children. He also called for Congress to approve the “resources necessary to secure the border.”

Donohue also slammed Trump’s trade policies, saying tariffs on China and other countries are “taxes paid by American families and American businesses, not by foreigners.”

“Instead of undermining our own economy, let’s work with our allies to apply pressure on China and use the tools provided by the U.S. trade and international laws that we helped create,” he said.

WATCH: Despite Volatility in Retail Stocks, US Officials Predict Continued Growth

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China’s Commerce Ministry says that the United States and Beijing made progress in discussions about structural issues such as forced technology transfers and intellectual property rights during trade talks this week. But the lack of details from both sides following the meetings highlights the uncertainty that remains, analysts say.

The talks, which were originally scheduled to wrap up on Tuesday stretched to the evening and into Wednesday.

U.S. officials have said the talks are going well, a point Commerce Ministry spokesman Gao Feng echoed on Thursday at a regular briefing.

“The length of the meetings shows that both sides were serious and sincere about the talks,” he said. “Structural issues were an important part of this round of talks and there has been progress in these areas.”

Gao did not comment, however, on whether he was confident that the talks could be wrapped up in the 90-day period laid out by President Donald Trump and China’s Xi Jinping.

Also, he did not say when the next round of talks might be held or who might attend, only that discussions between the two sides continue.

In early December, Washington and Beijing agreed to hold off on raising tariffs and to try and reach a deal before the beginning of March. Structural issues and concerns about barriers to investment in China are seen as some of the biggest obstacles to the deal.

On Wednesday, White House spokeswoman Sarah Sanders told the U.S cable news Fox Business Network that the administration is expecting something to come out of the talks.

“We are moving towards a more balanced and reciprocal trade agreement with China,” she said, adding that no one knows yet what that agreement will look like or when it will be ready.

The U.S. Trade Representative’s office gave only a few details about the talks in Beijing, noting in a statement that the discussions “focused on China’s pledge to purchase a substantial amount of agricultural, energy, manufactured goods, and other products and services from the United States.”

At the briefing, Gao did not provide any details about what further purchases China might make.

Darson Chiu, an economist and research fellow at the Taiwan Institute of Economic Research, said the pledges China made looked similar to those it had offered earlier last year. He said it was hard to be optimistic about this first round of talks.

“It looks like short-term compromises have been made, but it remains to be seen if both superpowers are able to resolve their [structural] conflicts,” Chiu said.

He said that if more compromises are made when Chinese Vice Premier Liu He meets U.S. Trade Representative Robert Lighthizer, an official who is viewed as being more hawkish on trade with China, the crisis will only be halfway averted.

“I don’t think the U.S. will easily remove tariffs that have been imposed on Chinese goods. This is what China has wished for, but I think the U.S. will wait and see,” Chiu said.

Issues such as intellectual property enforcement are very difficult and complex, notes Xu Chenggang, a professor of economics at Cheung Kong Graduate School of Business. China can say it will do more, but it already has laws for intellectual property protection.

“Really here the key is the reality,” Xu said. “It’s the enforcement of the law and the enforcement of the law is an institutional issue,” which depends on the independence of China’s judiciary system.

Washington has given Beijing a long list of changes that it would like to see from intellectual property rights protection enforcement to industrial subsidies and other non-tariff barriers.

The United States has said that any deal with China must be followed up with ongoing verification and enforcement.

If the two sides are unable to reach a deal by March, President Trump has threatened to raise tariffs on $200 billion in Chinese goods to 25 percent and to possibly levy additional tariffs that would extend to all imports from China.

Joyce Huang contributed to this report.
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The United States says talks in Beijing on ending a bruising trade war focused on Chinese promises to buy more American goods. But it gave no indication of progress on resolving disputes over Beijing’s technology ambitions and other thorny issues.

China’s Ministry of Commerce said Thursday the two sides would “maintain close contact.” But neither side gave any indication of the next step during their 90-day cease-fire in a tariff fight that threatens to chill global economic growth.

That uncertainty left Asian stock markets mixed Thursday. Share prices had risen Wednesday after President Donald Trump fueled optimism on Twitter about possible progress.

The U.S. Trade Representative, which leads the American side of the talks, said negotiators focused on China’s pledge to buy a “substantial amount” of agricultural, energy, manufactured goods and other products and services.

No signs of progress

However, the USTR statement emphasized American insistence on “structural changes” in Chinese technology policy, market access, protection of foreign patents and copyrights and cybertheft of trade secrets. It gave no sign of progress in those areas. 

Trump hiked tariffs on $250 billion of Chinese goods over complaints Beijing steals or pressures companies to hand over technology. 

Washington also wants changes in an array of areas including the ruling Communist Party’s initiatives for government-led creation of global competitors in robotics, artificial intelligence and other industries.

American leaders worry those plans might erode U.S. industrial leadership, but Chinese leaders see them as a path to prosperity and global influence and are reluctant to abandon them.

The two sides might be moving toward a “narrow agreement,” but “U.S. trade hawks” want to “limit the scope of that agreement and keep the pressure up on Beijing,” said Eurasia Group analysts of Michael Hirson, Jeffrey Wright and Paul Triolo in a report.

“The risk of talks breaking down remains significant,” they wrote.

​White House optimism

On Wednesday, White House press secretary Sarah Sanders expressed optimism to Fox Business Network. She said the timing was unclear but the two sides “are moving towards a more balanced and reciprocal trade agreement with China.”

The U.S. statement said negotiations dealt with the need for “ongoing verification and effective enforcement.” That reflects American frustration that the Chinese have failed to live up to past commitments.

Beijing has tried to defuse pressure from Washington and other trading partners over industrial policy promising to buy more imports and open its industries wider to foreign competitors.

Trump has complained repeatedly about the U.S. trade deficit with China, which last year likely exceeded the 2017 gap of $336 billion.

​Enthusiasm wears thin

U.S. stocks surged Wednesday on optimism higher-level U.S. and Chinese officials might meet.

That enthusiasm was wearing thin Thursday. Hong Kong’s Hang Seng index fell 0.5 percent while Tokyo’s Nikkei 225 dropped 1.4 percent.

Economists say the 90-day window is too short to resolve all the conflicts between the biggest and second-biggest global economies.

“We can confidently say that enough progress was made that the discussions will continue at a higher level,” said Craig Allen, president of the U.S.-China Business Council. “That is very positive.”

Chinese exports to the U.S. have held up despite tariff increases, partly because of exporters rushing to fill orders before more increases hit. Forecasters expect American orders to slump this year.

China has imposed penalties on $110 billion of American goods, slowing customs clearance for U.S. companies and suspending issuing licenses in finance and other businesses.

U.S. companies also want action on Chinese policies they complain improperly favor local companies. Those include subsidies and other favors for high-tech and state-owned industry, rules on technology licensing and preferential treatment of domestic suppliers in government procurement.

For its part, Beijing is unhappy with U.S. export and investment curbs, such as controls on “dual use” technology with possible military applications. They say China’s companies are treated unfairly in national security reviews of proposed corporate acquisitions, though almost all deals are approved unchanged.

This week’s talks went ahead despite tension over the arrest of a Chinese tech executive in Canada on U.S. charges related to possible violations of trade sanctions against Iran. 
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Deep in a provincial region of northwestern Turkey, it looks like a mirage — hundreds of luxury houses built in neat rows, their pointed towers somewhere between French chateau and Disney castle.

Meant to provide luxurious accommodations for foreign buyers, the houses are however standing empty in what is anything but a fairy tale for their investors.

The ambitious development has been hit by regional turmoil as well as the slump in the Turkish construction industry — a key sector — as the country’s economy heads towards what could be a hard landing in an intensifying downturn.

After a long period of solid growth, Turkey’s economy contracted 1.1 percent in the third quarter, and many economists expect it will enter into recession this year.

The country has been hit by high inflation and a currency crisis in August. The lira lost 28 percent of its value against the dollar in 2018 and markets are still unconvinced by the readiness of the government under President Recep Tayyip Erdogan to tackle underlying economic issues.

The villas close to the town center of Mudurnu in the Bolu region are intended to resemble European architecture and are part of the Sarot Group’s Burj Al Babas project.

But the development of 732 villas and a shopping center — which began in 2014 — is now in limbo as Sarot Group has sought bankruptcy protection.

It is one of hundreds of Turkish companies that have done so as they seek cover from creditors and to restructure their debts.

Driving force 

Sarot Group filed for bankruptcy protection after some of their Gulf customers could not pay for the villas they had bought as part of the $200 million (175 million euros) project, Sarot’s deputy chairman, Mezher Yerdelen, said.

So far, $100 million has been spent on the project.

“Some of the sales had to be cancelled,” Yerdelen told AFP, after the company sold 351 villas to Arab investors.

The villas are worth between $400,000 and $500,000 each. They were designed with the Gulf buyers in mind, architect Yalcin Kocacalikoglu said.

While the drop in oil prices hurt its Gulf customers, Sarot Group was also hit by “the negative impact of the economic fluctuations on construction costs” in Turkey, Yerdelen said.

Despite a legal battle over its bankruptcy status, Yerdelen said the company can continue making sales and that he hopes the project will be inaugurated in October 2019.

Yet the Al Babas project is hardly alone. Unfinished and empty housing projects are strewn across the country, testimony to the trouble the construction sector, and the wider economy, now finds itself in. 

The construction sector has been a driving force of the Turkish economy under Erdogan, who has overseen growth consistently above the global average since he came to power in 2003.

But the sector contracted 5.3 percent on-year in the third quarter of 2018.

“Three out of four companies seeking bankruptcy protection or bankruptcy are construction companies,” said Alper Duman, associate professor at Izmir University of Economics.

Turkey’s ‘locomotive’

“Whether we call it a construction bubble or a housing bubble, there is a bubble in Turkey,” he said.

He pointed to unsold housing stock as the main indicator of this, with data showing in that over the past 16 years 10.5 million apartments have been built but only eight million have been approved for use. 

“There is a high risk this bubble will burst,” he said.

Trade Minister Ruhsar Pekcan said in mid-December that 846 companies had applied for bankruptcy protection since March 2018 but opposition daily Sozcu claimed in October the figure was more than 3,000.

Turkish Chamber of Civil Engineers head Cemal Gokce expressed pessimism, predicting “more bankruptcy protection applications, bankruptcies” among construction companies.

He said too many homes have been built in Turkey.

And most are not luxury villas like Burj Al Babas with its style reminiscent of the Sleeping Beauty Castle at Disney theme parks, but simple apartments and homes for ordinary Turks.

The construction confidence index of the Turkish Statistical Institute (TurkStat) fell 2.1 percent in December to 55.4, after 56.6 in the previous month. Anything below 100 indicates a pessimistic outlook.

However, Kerim Alain Bertrand, who previously headed up a firm that provided and analyzed data on Turkey’s real estate market, said recently he was more optimistic, partly due to the country’s growing population.

“The construction sector is this country’s locomotive sector,” he said. 

While there will be a consolidation in the sector, it will “continue to be kept alive” by the young population, he added.

The median age of the population in Turkey was 31.7 in 2017, according to TurkStat, compared to 42.8 in the European Union.
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Cuban President Miguel Diaz-Canel replaced his transport and finance ministers this week in his first Cabinet reshuffle since forming his own government in July and amid a cash crunch and growing discontent with the island’s transport sector.

Cuban state media said Wednesday that Transport Minister Adel Yzquierdo, 73, and Finance Minister Lina Pedraza, 63, had been “freed from their roles” without explaining why, adding they would be given “other responsibilities.”

Both had been originally been named by former President Raul Castro during his 10-year mandate and reconfirmed in their roles by Diaz-Canel, who took office from the 87-year-old in April.

They will be replaced by the respective vice ministers in each ministry, Eduardo Rodriguez, 52, and Meisi Bolanos, 48.

​Public transport mess

Some Cubans questioned the logic of promoting those who had also overseen strategies they deemed had failed.

Transport is one of the top complaints of Cubans living in the capital, with new regulations vastly reducing the number of private collective taxis on the road that had supplemented the creaking public transport system.

Many Cubans say they are struggling to get around and it is taking them far longer and costing more to do so.

“Transport is awful,” said Maritza Carrion, waiting for a bus in the business district of Vedado.

In one of his last public appearances, Yzquierdo announced on state television in December that Cuba was importing hundreds of microbuses and buses to alleviate the transport shortage.

The government has periodically done so in the past, only partly resolving the chronic transport shortage for a short while.

​National airline

Meanwhile Cuba’s national airline Cubana has had to slash flights over the last year because of a lack of planes that it blamed partly on the decades-old U.S. trade embargo.

It also faced a plane crash that killed 112, its deadliest in nearly 30 years, just weeks after Diaz-Canel took office.

“What we need are real solutions because it’s been nearly 60 years that we’ve been behind on transport,” said Yadier Osorio, 41. “The government still hasn’t found a solution.”

Under the article on state-run website Cuba debate about the Cabinet changes, many readers called for greater transparency over such decisions. Growing internet access is fostering greater public debate online and accountability from officials.
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Young people from around the world who provided low-cost child care for American families will share in a proposed $65.5 million settlement of a lawsuit brought by a dozen former au pairs against the companies that bring the workers to the United States. 

Nearly 100,000 au pairs, mostly women, who worked in American homes over the past decade will be entitled to payment under the proposed settlement filed in Denver federal court Wednesday, a month before the case brought by a dozen former au pairs from Colombia, Australia, Germany, South Africa and Mexico was set to go to trial.  

They claimed 15 companies authorized to bring au pairs to the United States colluded to keep their wages low, ignoring overtime and state minimum wage laws and treating the federal minimum wage for au pairs as a maximum amount they can earn. In some cases, the lawsuit said, families pushed the limits of their duties, requiring au pairs to do things like feed backyard chickens, help families move and do gardening, and not allowing them to eat with the family. 

“This settlement, the hard-fought victory of our clients who fought for years on behalf of about 100,000 fellow au pairs, will be perhaps the largest settlement ever on behalf of minimum wage workers and will finally give au pairs the opportunity to seek higher wages and better working conditions,” said David Seligman, director of Denver-based Towards Justice, which filed the lawsuit in 2014. It was later litigated by New York-based firm Boies Schiller Flexner. 

Companies deny wrongdoing 

Under the settlement, which still must be approved by a judge, the companies agreed to make sure au pairs are informed about their legal rights in the future, but they denied any wrongdoing. 

Lawyers now need to track down au pairs who came to the U.S. on J-1 visas between Jan. 1, 2009, and Oct. 28, 2018, and have set up a website to help spread the word about the deal. 

While sometimes confused with nannies, au pairs have much less experience and earn a lot less.   

The program, overseen by the U.S. State Department, was launched as a cultural exchange program in 1986 as demand for child care grew. At first there were only 3,000 participants as part of a pilot, but last year there were over 20,000. The program occupies a gray area between work and an international relations effort, and critics say that makes it ripe for abuse.  

The sponsors said they were just following regulations from the State Department — which last adjusted au pair pay to $195.75 for a 45-hour work week in 2009 after the federal minimum wage rose to $7.25. Their hourly wage has actually been $4.25 though: Families were told to deduct 40 percent of their pay to cover the room and board they’re required to provide the au pairs, a practice challenged by the lawsuit. 

Too costly

In court filings, the sponsors argued requiring families to pay more in states with higher minimum wages would destroy the program by making au pairs unaffordable, hurting foreign policy goals. 

According to a 2016 report on U.S. child care by the Washington-based think tank New America, the average cost of full-time care in a child care center for children up to 4 years old is $9,589 a year for each child, more than the average cost of in-state college tuition. The average cost of full-time care at home with a nanny was $28,353 — 53 percent of the median U.S. household income and nearly three times the annual pay for an au pair.   

The practice of having au pairs — French for “on par with” — developed in postwar Europe, where young people lived with families in other countries to learn a language in exchange for helping with child care and some housework. In Europe, au pairs generally are limited to working 30 hours a week. 

Sarah Azuela said the ad she saw her final year of college in Mexico promised coming to the United States to work as an au pair would be the best year of her life, full of travel, meeting new people and becoming part of an American family. But she says what grew into a two-year stay turned out to be the worst time of her life, with her feeling more like a slave subject to the whims of her host families than a member of the household.  

At her last placement — working for a single mother in Virginia — Azuela said that in addition to helping care for three children, she cooked all the meals, cleaned, planted flowers and packed the family’s belongings and helped move them twice, first to an interim apartment and then to a permanent home. 

Positives

Nevertheless, Azuela was grateful her host mother gave her time to study for a business certificate at a university, which led her to extend her stay, and for not yelling or threatening to hit her as a previous host had done. 

“I don’t wish anyone to experience anything like this,” Azuela, who is from Hermosillo, Mexico, but now lives in Wisconsin, said about why she joined in the lawsuit.

Meanwhile, a related case challenging whether Massachusetts had the right to protect au pairs in its domestic workers’ bill of rights, since they are regulated by the federal government, is pending in federal appeals court. The State Department said in a court filing in September that federal law requires only that au pairs are paid the federal minimum wage, arguing federal law specifically states when other international guest workers, like camp counselors and teachers, are entitled to make more.  
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