Author: Uponbiz

Huawei Founder Sees Little Effect From US Sanctions

Huawei Technologies’ founder and chief executive said Saturday that the growth of the Chinese tech giant “may slow, but only slightly,” because of recent U.S. restrictions.  

 

In remarks to the Japanese press and reported by Nikkei Asian Review, Ren Zhengfei reiterated that the Chinese telecom equipment maker had not violated any law. 

“It is expected that Huawei’s growth may slow, but only slightly,” Ren said in his first official comments after the U.S. restrictions, adding that the company’s annual revenue growth might undershoot 20%.  

 

On Thursday, Washington put Huawei, one of China’s biggest and most successful companies, on a trade blacklist that could make it extremely difficult for Huawei to do business with U.S. companies. China slammed the decision, saying it would take steps to protect its companies. 

Trade, security issues

 

The developments surrounding Huawei come at a time of trade tensions between Washington and Beijing and amid concerns from the United States that Huawei’s smartphones and network equipment could be used by China to spy on Americans, allegations the company has repeatedly denied. 

 

A similar U.S. ban on China’s ZTE Corp. had almost crippled business for the smaller Huawei rival early last year before the curb was lifted. 

 

The U.S. Commerce Department said Friday that it might soon scale back restrictions on Huawei. 

 

Ren said the company was prepared for such a step and that Huawei would be “fine” even if U.S. smartphone chipmaker Qualcomm Inc. and other American suppliers would not sell chips to the company. 

 

Huawei’s chip arm HiSilicon said Friday that it had long been prepared for the possibility of being denied U.S. chips and technology, and that it was able to ensure a steady supply of most products. 

 

The Huawei founder said that the company would not be taking instructions from the U.S. government. 

 

“We will not change our management at the request of the U.S. or accept monitoring, as ZTE has done,” he said.

In January, U.S. prosecutors unsealed an indictment accusing the Chinese company of engaging in bank fraud to obtain embargoed U.S. goods and services in Iran and to move money out of the country via the international banking system. 

 

Ren’s daughter, Huawei Chief Financial Officer Meng Wanzhou, was arrested in Canada in December in connection with the indictment. Meng, who was released on bail, remains in Vancouver and is fighting extradition. She has maintained her innocence.  

 

Ren has previously said his daughter’s arrest was politically motivated.

more

China’s Top Diplomat Calls for US Restraint on Trade, Iran 

Senior Chinese diplomat Wang Yi told U.S. Secretary of State Mike Pompeo on Saturday that recent U.S. words and actions had harmed the interests of China and its enterprises, and that Washington should show restraint, China’s Foreign Ministry said. 

 

Speaking to Pompeo by telephone, Wang said the United States should not go “too far” in the current trade dispute between the two sides, adding that China was still willing to resolve differences through negotiations but that the nations should be on an equal footing. 

 

On Iran, Wang said China hoped all parties would exercise restraint and act with caution to avoid escalating tensions. U.S. State Department spokeswoman Morgan Ortagus said in a statement that Pompeo spoke with Wang and discussed bilateral issues and U.S. concerns about Iran, but she gave no other details. 

 

Tensions between Washington and Tehran have increased in recent days, raising concerns about a potential U.S.-Iran conflict. Earlier this week the United States pulled some diplomatic staff from its Baghdad embassy following attacks on oil tankers in the Persian Gulf. 

Harder line

 

China struck a more aggressive tone in its trade war with the United States on Friday, suggesting a resumption of talks between the world’s two largest economies would be meaningless unless Washington changed course. 

 

The tough talk capped a week that saw Beijing unveil fresh retaliatory tariffs, U.S. officials accuse China of backtracking on promises made during months of talks, and the Trump administration level a potentially crippling blow against one of China’s biggest and most successful companies. The United States announced on Thursday it was putting Huawei Technologies Co. Ltd., the world’s largest telecom equipment maker, on a blacklist that could make it extremely hard to do business with U.S. companies.  

 

The U.S. Commerce Department then said on Friday that it might soon scale back restrictions on Huawei. It said it was considering issuing a temporary general license to “prevent the interruption of existing network operations and equipment.” 

 

Potential beneficiaries of this license could, for example, include telecom providers in thinly populated parts of U.S. states such as Wyoming and Oregon that purchased network equipment from Huawei in recent years. 

 

On Friday, Chinese Foreign Ministry spokesman Lu Kang, asked about state media reports suggesting there would be no more trade negotiations, said China always encouraged resolving disputes with the United States through dialogue and consultations.

more

US Warns Airliners Flying in Persian Gulf Amid Iran Tensions

U.S. diplomats warned Saturday that commercial airliners flying over the wider Persian Gulf faced a risk of being “misidentified” amid heightened tensions between the U.S. and Iran.

The warning relayed by U.S. diplomatic posts from the Federal Aviation Administration underlined the risks the current tensions pose to a region crucial to global air travel. It also came as Lloyd’s of London warned of increasing risks to maritime shipping in the region.

 

Concerns about a possible conflict have flared since the White House ordered warships and bombers to the region to counter an alleged, unexplained threat from Iran that has seen America order nonessential diplomatic staff out of Iraq. President Donald Trump since has sought to soften his tone.

 

Meanwhile, authorities allege that a sabotage operation targeted four oil tankers off the coast of the United Arab Emirates, and Iran-aligned rebels in Yemen claimed responsibility for a drone attack on a crucial Saudi oil pipeline. Saudi Arabia directly blamed Iran for the drone assault, and a local newspaper linked to the al-Saud royal family called on Thursday for America to launch “surgical strikes” on Tehran.

 

This all takes root in Trump’s decision last year to withdraw the U.S. from the 2015 nuclear accord between Iran and world powers and impose wide-reaching sanctions. Iran just announced it would begin backing away from terms of the deal, setting a 60-day deadline for Europe to come up with new terms or it would begin enriching uranium closer to weapons-grade levels. Tehran long has insisted it does not seek nuclear weapons, though the West fears its program could allow it to build atomic bombs.

 

The order relayed Saturday by U.S. diplomats in Kuwait and the UAE came from an FAA Notice to Airmen published late Thursday in the U.S. It said that all commercial aircraft flying over the waters of Persian Gulf and the Gulf of Oman needed to be aware of “heightened military activities and increased political tension.”

 

This presents “an increasing inadvertent risk to U.S. civil aviation operations due to the potential for miscalculation or misidentification,” the warning said. It also said aircraft could experience interference with its navigation instruments and communications jamming “with little to no warning.”

 

The Persian Gulf has become a major gateway for East-West travel in the aviation industry. Dubai International Airport in the United Arab Emirates, home to Emirates, is the world’s busiest for international travel, while long-haul carriers Etihad and Qatar Airways also operate here.

 

In a statement, Emirates said it was aware of the notice and in touch with authorities worldwide, but “at this time there are no changes to our flight operations.”

 

Qatar Airways similarly said it was aware of the notice and its operations were unaffected.

 

Etihad, as well as Oman Air, did not respond to a request for comment Saturday about the warning.

 

The warning appeared rooted in what happened 30 years ago after Operation Praying Mantis, a daylong naval battle in the Persian Gulf between American forces and Iran during the country’s long 1980s war with Iraq. On July 3, 1988, the USS Vincennes chased Iranian speedboats that allegedly opened fire on a helicopter into Iranian territorial waters, then mistook an Iran Air heading to Dubai for an Iranian F-14. The Vincennes fired two missiles at the airplane, killing all aboard the flight.

 

Meanwhile, Lloyd’s Market Association Joint War Committee added the Persian Gulf, the Gulf of Oman and the United Arab Emirates on Friday to its list of areas posing higher risk to insurers. It also expanded its list to include the Saudi coast as a risk area.

 

The USS Abraham Lincoln and its carrier strike group have yet to reach the Strait of Hormuz, the narrow mouth of the Persian Gulf through which a third of all oil traded at sea passes. A Revolutionary Guard deputy has warned that any armed conflict would affect the global energy market. Iran long has threatened to be able to shut off the strait.

 

Benchmark Brent crude now stands around $72 a barrel.

 

more

US Says It May Scale Back Some Huawei Trade Restrictions

The U.S. Commerce Department may soon scale back restrictions on Huawei Technologies after this week’s blacklisting made it nearly impossible for the Chinese company to purchase goods made in the United States, a 

department spokeswoman said Friday. 

The Commerce Department may issue a temporary general license to allow time for companies and people who have Huawei equipment to maintain reliability of their communications networks and equipment, the spokeswoman said. 

The possible general license would not apply to new transactions, according to the spokeswoman, and would last for 90 days. 

A spokesman for Huawei did not immediately respond to a request for comment. 

The Commerce Department on Thursday added Huawei to a list of entities that are banned from doing business with U.S. companies without licenses. 

The entities list identifies companies believed to be involved in activities contrary to the national security or foreign policy interests of the United States. 

Potential beneficiaries of the temporary license could include internet access and mobile phone service providers in thinly populated places such as Wyoming and eastern Oregon that purchased network equipment from Huawei in recent years. 

more

Trump Lifts Tariffs on Mexico, Canada, Delays Auto Tariffs 

Bogged down in a sprawling trade dispute with U.S. rival China, President Donald Trump took steps Friday to ease tensions with America’s allies: lifting import taxes on Canadian and Mexican steel and aluminum and delaying auto tariffs that would have hurt Japan and Europe. 

 

By removing the metals tariffs on Canada and Mexico, Trump cleared a key roadblock to a North American trade pact his team negotiated last year. As part of Friday’s arrangement, the Canadians and Mexicans agreed to scrap retaliatory tariffs they had imposed on U.S. goods, according to four sources in the U.S. and Canada who spoke on condition of anonymity ahead of an announcement. 

 

In a joint statement, the U.S. and Canada said they would work to prevent cheap imports of steel and aluminum from entering North America. China has long been accused of flooding world markets with subsidized metal, driving down world prices and hurting U.S. producers. 

Some in Washington were urging Trump to take advantage of the truce with U.S. allies to get even tougher with China.

China is our adversary,'' said Sen. Ben Sasse, R-Neb.Canada and Mexico are our friends. The president is right to increase pressure on China for their espionage, their theft of intellectual property and their hostility toward the rule of law. The president is also right to be deescalating tension with our North American allies.”

 

Earlier Friday, the White House said Trump was delaying for six months any decision to slap tariffs on foreign cars, a move that would have hit Japan and Europe especially hard.

Trump still is hoping to use the threat of auto tariffs to pressure Japan and the European Union into making concessions in trade talks. “If agreements are not reached within 180 days, the president will determine whether and what further action needs to be taken,” White House press secretary Sarah Sanders said in a statement. 

Trade weapon

 

In imposing the metals tariffs and threatening the ones on autos, the president was relying on a rarely used weapon in the U.S. trade war arsenal — Section 232 of the Trade Expansion Act of 1962 — which lets the president impose tariffs on imports if the Commerce Department deems them a threat to national security. 

 

But the steel and aluminum tariffs were also designed to coerce Canada and Mexico into agreeing to a rewrite of North American free trade pact. In fact, the Canadians and Mexicans did go along last year with a revamped regional trade deal that was to Trump’s liking. But the administration had refused to lift the taxes on their metals to the United States until Friday. 

 

The new trade deal — the U.S.-Mexico-Canada Agreement — needs approval of the legislatures in the U.S., Canada and Mexico. Several key U.S. lawmakers were threatening to reject the pact unless the tariffs were removed. And Canada had suggested it wouldn’t ratify any deal while the tariffs were still in place. 

Trump had faced a Saturday deadline to decide what to do about the auto tariffs. 

 

Taxing auto tariffs would mark a major escalation in Trump’s aggressive trade policies and likely would meet resistance in Congress. The United States last year imported $192 billion worth of passenger vehicles and $159 billion in auto parts. 

Legitimate use?

 

“I have serious questions about the legitimacy of using national security as a basis to impose tariffs on cars and car parts,” Iowa Republican Sen. Chuck Grassley, chair of the Senate Finance Committee, said in a statement Friday. He’s working on legislation to scale back the president’s authority to impose national security tariffs under Section 232.

In a statement, the White House said that Commerce Secretary Wilbur Ross has determined that imported vehicles and parts are a threat to national security. Trump deferred action on tariffs for 180 days to give negotiators time to work out deals but threatened them if talks break down. 

 

In justifying tariffs for national security reasons, Commerce found that the U.S. industrial base depends on technology developed by American-owned auto companies to maintain U.S. military superiority. Because of rising imports of autos and parts over the past 30 years, the market share of U.S.-owned automakers has fallen. That has caused a lag in research and development spending that is “weakening innovation and, accordingly, threatening to impair our national security,” the statement said. 

 

The market share of vehicles produced and sold in the U.S. by American-owned automakers, the statement said, has declined from 67% in 1985 to 22% in 2017.

But the statistics don’t match market share figures from the industry. A message was left Friday seeking an explanation of how Commerce calculated the 22%.  

In 2017, General Motors, Ford, Fiat Chrysler and Tesla combined had a 44.5% share of U.S. auto sales, according to Autodata Corp. Those figures include vehicles produced in other countries. 

 

It’s possible that the Commerce Department didn’t include Fiat Chrysler, which is now legally headquartered in the Netherlands but has a huge research and development operation near Detroit. It had 12% of U.S. auto sales in 2017. 

 

The Commerce figures also do not account for research by foreign automakers. Toyota, Hyundai-Kia, Subaru, Honda and others have significant research centers in the U.S. 

more

After Huawei Blow, China Says US Must Show Sincerity for Talks

The United States must show sincerity if it is to hold meaningful trade talks, China said on Friday, after U.S. President Donald Trump dramatically raised

the stakes with a potentially devastating blow to Chinese tech giant Huawei.

China has yet to say whether or how it will retaliate against the latest escalation in trade tension, although state media has taken an increasingly strident tone, with the ruling Communist Party’s People’s Daily publishing a front-page commentary that evoked the patriotic spirit of past wars.

China’s currency slid to its weakest in almost five months, although losses were capped after sources told Reuters that the central bank would ensure the yuan did not weaken past the key 7-per-dollar level in the immediate term.

The world’s two largest economies are locked in an increasingly acrimonious trade dispute that has seen them level escalating tariffs on each other’s imports in the midst of negotiations, adding to fears about risks to global growth and knocking financial markets.

Foreign ministry spokesman Lu Kang, asked about state media reports suggesting there would be no more U.S.-China trade talks, said China always encouraged resolving disputes between the two countries with dialog and consultations.

“But because of certain things the U.S. side has done during the previous China-U.S. trade consultations, we believe if there is meaning for these talks, there must be a show of sincerity,” he told a daily news briefing.

The United States should observe the principles of mutual respect, equality and mutual benefit, and they must also keep their word, Lu said, without elaborating.

On Thursday, Washington put telecoms equipment maker Huawei Technologies Co Ltd, one of China’s biggest and most successful companies, on a blacklist that could make it extremely difficult for the telecom giant to do business with U.S. companies.

That followed Trump’s decision on May 5 to increase tariffs on $200 billion worth of Chinese imports, a major escalation after the two sides appeared to have been close to reaching a deal in negotiations to end their trade battle.

‘Wheel of destiny’

China can be expected to make preparations for a longer-term trade war with the United States, said a Chinese government official with knowledge of the situation.

“Indeed, this is an important moment, but not an existential, live-or-die moment,” the official said.

“In the short term, the trade situation between China and the United States will be severe, and there will be challenges. Neither will it be smooth in the long run. This will spur China to make adequate preparations in the long term.”

The impact of trade friction on China’s economy is “controllable,” the state planner said on Friday, pledging to take countermeasures as needed, Meng Wei, a spokeswoman for the National Development and Reform Committee (NDRC), told a media briefing.

The South China Morning Post, citing an unidentified source, reported that a senior member of China’s ruling Communist Party said the trade war with the United States could reduce China’s 2019 growth by 1 percentage point in the worst-case scenario.

Wang Yang, the fourth-most senior member of the Communist Party’s seven-member Standing Committee, the top decision-making body, told a delegation of Taiwan businessmen on Thursday that the trade war would have an impact but would not lead to any structural changes, the paper said, citing an unidentified source who was at the meeting.

One company that says it has been making preparations is Huawei’s Hisilicon unit, which purchases U.S. semiconductors for its parent.

Its president told staff in a letter on Friday that the company had been secretly developing back-up products for years in case Huawei was one day unable to obtain the advanced chips and technology it buys from the United States.

“Today, the wheel of destiny has turned and we have arrived at this extreme and dark moment, as a super-nation ruthlessly disrupts the world’s technology and industry system,” the company president said in the letter.

The letter was widely shared on Chinese social media, gaining 180 million impressions in the few hours after it was published on the Weibo microblogging site.

“Go Huawei! Our country’s people will always support you,” wrote one Weibo user after reading the letter.

more

Trade Tensions Seen Tightening Job Market for Chinese Graduates

A record number of 8.34 million university graduates are set to enter the Chinese job market this summer amid escalating trade tensions between Washington and Beijing.

Observers say that as China’s export-dependent economy braces for more hits from tariff hikes, which U.S. President Donald Trump recently imposed, the country’s job markets will be tighter for everyone including fresh graduates.

And the impact of a job mismatch among college graduates has long weighed on their actual employment rate at only 52% this year, according to a recent survey.

That means more than 4 million graduates will soon join the ranks of those unemployed, although many of them may opt to pursue higher education, the survey found.

Tightening job market

“Graduate employment has always been problematic in China. Given the current situation with the trade war, I think we should expect it to be even more so this year,” said Geoffrey Crothall, spokesperson at China Labor Bulletin.

“And there’s always been a mismatch between the expectations of graduates, the reality of the job markets and particularly the expectations of employers,” he added.

Graduates will either take longer to find a job or settle with one that has lower pay or poor career prospects, Crothall said.

Making matters worse, the number of job opportunities in China is on the wane as China tries to move away from labor-intensive industries, said Wang Zhangcheng, head of the Labor Economics Institute at the Zhongnan University of Economics and Law.

“The transformation of industrial structure and the U.S.-China trade war [is making the situation worse]. Also, China’s economy no longer grows at a fast pace. Instead, it has matured with mid- to low-paced growths. Under such circumstances, the demand for labor has declined,” Wang said.

“Plus, many jobs have been replaced by robots as a result of the development of artificial intelligence in the past two years. That surely adds pressure on job seekers,” he added.

Fewer jobs, more seekers

A recent report by Renmin University of China (RUC) and career platform Zhaopin.com found that the number of job seekers in China grew 31% year-on-year in the first quarter – the highest growth in workers since 2011 — while the number of job vacancies shrank by 11% at the same time.

China’s job market prosperity index has dropped to a record low since 2014, it concluded.

However, the latest available state statistics paint a slightly different picture.

Official data showed that China’s surveyed unemployment rate in urban areas stood at 5.2% in March, down 0.1 percentage points from February.

Analysts described the country’s job markets as “stable overall” although the surveyed unemployment rate in 31 major cities went up 0.1 percentage points month-on-month, to 5.1% in March – the highest since late 2016.

Still, China’s State Council has made “saving jobs” one of its top policy priorities since late last year, offering incentives for firms with no or few layoffs and subsidies for internships or on-the-job training.

And college graduates remain a focal point of the council’s employment stabilization plan, along with migrants and laid-off workers.

Distorted graduate employment

China used to boast a graduate employment rate of more than 90% as universities rushed graduates to sign so-called “tripartite employment agreements” with potential employers.

Any refusal may risk their chances of thesis defense or diplomas.

Such agreements are nonbinding on the employers to offer jobs, but distort the overall graduate employment rate, which has allowed universities to attract new students – a fraud that the Ministry of Education now forbids.

In a recent notice, the ministry has disallowed universities from withholding graduates’ degree certificates if they refuse to sign such agreements.

In spite of the ban, graduates still complain about “being forcefully employed.”

On Weibo, China’s Twitter-like microblogging platform, one user wrote, “Our school still forces you to sign the agreements. The career adviser calls every day, pulling a long face.”

Another student from Rizhao Polytechnic in Shandong province noted, “Those who have signed the agreements have completed their thesis defense while many of us who haven’t signed the agreements can do nothing but wait.”

One user urged that unless the government writes the ban into law and imposes penalties, no universities would comply.

Job mismatch

Another cause of concern for graduate employment is the long-standing mismatch between the knowledge and skills students have acquired from years of studies in universities, and the private sector’s actual job requirements, professor Wang said.

Given the shifts of production paradigms and “widening structural gaps in labor forces allocations, many of our universities have set up professional courses which may not keep up with the changing [requirements] of the labor markets. That leads to the scenario that many graduates may not find the right career fit for their skills,” the professor said.

As a solution, the education ministry has encouraged universities to focus on fundamentals by providing multifaceted cultivation of talents, so graduates leaving school will meet what different jobs require.

more

South Korea Waits Out US-China Trade War

Juhyun Lee contributed to this report.

SEOUL — As U.S. President Donald Trump intensifies his trade battle with China, one of the hardest-hit countries could be South Korea.

Asia’s fourth-largest economy, South Korea is especially vulnerable to the tariff war because of its reliance on foreign trade — in particular, exports to its two biggest trading partners: China and the United States.

After U.S.-China trade talks broke down, Trump last week raised tariffs on $200 billion worth of Chinese imports, and threatened to do so with $300 billion more. China retaliated with tariffs on $60 billion of U.S. goods.

The trade war escalation, which rattled markets and threatened to hold back global growth, comes at an especially bad time for South Korea, whose economy unexpectedly contracted in the first quarter.

“South Korea is particularly vulnerable,” says Xu Xiao Chun, an economist who monitors South Korea for Moody’s Analytics. “It’s not inconceivable that you could see a second consecutive quarter of contraction of GDP, which would make it a technical recession.”

Trade war exacerbates tech woes

As the world’s leading producer of memory chips that go into consumer electronics, such as cellphones and computers, South Korea benefited from years of rapid and consistent growth in the global smartphone market.

But global demand for smartphones has plateaued. That, combined with a slowdown in China and sluggish global growth, has hurt South Korea’s export-driven economy.

In April, South Korea’s exports declined for the fifth consecutive month, falling 2% compared to the same period a year earlier.

“South Korea’s economy was already going down the wrong path… but the latest escalation in the trade war really puts a spanner (obstacle) in the works,” Xu said.

South Korea was always likely to be hurt by the U.S.-China trade war just by virtue of its proximity to China, its biggest trading partner and top export destination.

South Korea’s exports to China could be cut by about $1.3 billion a year, said An Sung-bae with the state-run Korea Institute for International Economic Policy.

But the U.S.-China tariffs also pose a more specific threat to South Korea’s crucial semiconductor industry.

Here’s how it works:

South Korea sends semiconductors to China, where they are placed into smartphones and other electronics. China then ships many of those assembled products to the United States.

Trump’s tariffs could drastically raise the price of those electronics. For example, the cost of an iPhone XS could go up by around $160 if Trump follows through on all his tariff threats, one analyst at Morgan Stanley estimated.

Those higher prices would result in fewer shipments of electronics from China to the United States. Which means South Korea would be selling a lot fewer semiconductors to China.

That could put a major dent in South Korea’s economy, since semiconductors make up nearly half of its total shipments to China.

“Companies that mainly target the Chinese market will suffer… and the South Korean export business relies heavily on the Chinese market,” said Mun Byung-Ki, a senior researcher at the Korea International Trade Association.

A bright spot?

But some analysts say the situation may not be that dire. One reason: even if South Korean exports to China decline, it may make up the gap by shipping more products to the United States — a situation that could potentially provide a major boom for South Korea’s tech industry.

Alex Holmes, a Singapore-based analyst at Capital Economics, says that already may be happening. Though South Korea’s overall export numbers are suffering, its shipments to the United States are growing, he says.

That’s particularly the case for Korean electronics that fall under U.S. tariffs. Those tariffed goods have well out-performed non-tariffed items, Holmes says, “which suggests that U.S. companies have already switched suppliers as a result of tariffs.”

The increased shipments to the United States almost cover the equivalent hit South Korea has taken as a result of the tariffs, Holmes adds.

Manufacturing shift?

The tariffs could also have a long-term impact on manufacturing in Asia, as companies shift their production bases away from China as a way to shield themselves from the trade war.

A growing number of Asian companies, including some South Korean memory chipmakers, have already begun shifting their manufacturing centers to fast-growing and cheaper countries in Southeast Asia.

“If South Korea wants to find cheaper factories in say Vietnam or one of the ASEAN countries, it could make its money back or potentially even grow more than it would have if it relied on Chinese manufacturing,” Xu said. “But those sort of actions take a lot of time, a lot of capital, and there is a lot of risk involved.”

With no end in sight to the U.S.-China trade tensions, it’s a pattern that could be repeated, threatening China’s reputation as a low-cost production base.

“The knock-on effect of this trade war will be to locate a lot more production capabilities in other countries in Asia,” Xu said.

more

Consumers Start to Feel Pinch From US, China Trade Standoff

As the U.S. and China escalate their trade standoff, consumers in both countries are starting to see the impact. VOA’s Mykhailo Komadovsky reports from Washington.

more

Acting FAA Chief Defends Agency’s Safety Certification Process     

The acting head of the Federal Aviation Administration defended the way his agency certifies airline safety after two deadly crashes of the now-grounded Boeing 737 Max jet.

Daniel Elwell called the system in which FAA-approved employees at plane manufacturers inspect the aircraft they built themselves “a good system.”

But skeptical Democrats on the House Transportation Committee questioned the agency’s credibility.

They told Elwell that the closeness between Boeing and the FAA may be one of the reasons it took the agency a relatively long time to ground the Boeing jets.

“The public perception is you were in bed with those you were supposed to be regulating,” Nevada’s Dina Titus said, while committee chairman Peter DeFazio wanted to know “How can we have a single point of failure on a modern aircraft?”

A Boeing 737 Max crashed off the coast of Indonesia in October and another 737 Max crashed in Ethiopia in March, killing a total of 346 people.

Both planes were equipped with a system designed to push the nose downward to prevent a midair stall.

Faulty sensor readings kept pushing the planes down while the pilots struggled to regain control.

The pilots did not know the planes were equipped with the anti-stall system and their manuals had no explicit information.

Elwell defended the FAA’s approval of the system on the Boeing jets, but admitted the system should have been better explained in the pilots’ operational and flight manuals.

He also faulted Boeing for failing to inform airlines and the FAA that a light that is supposed to flash when there is a faulty reading from the sensors did not work.

But Elwell said pilot error may have also contributed to the Indonesian and Ethiopian disasters.

The Justice Department has opened a criminal investigation of Boeing, and Congress is looking into the relationship between Boeing and federal regulators.

Boeing plans to submit changes to the 737 Max software to the FAA, which will study the new software and carry out tests flights. Boeing will train pilots before allowing the planes to fly again.

 

more