Month: June 2018

China calls President Donald Trump’s threat to slap more tariffs on Chinese exports to the U.S. “extreme pressure and blackmail” and threatens to retaliate.

Beijing reacted Tuesday to Trump’s plan to impose tariffs on another $200 billion of Chinese goods “if China refuses to change its practices.”

“China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology,” a presidential statement said late Monday. “Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong.”

The president has ordered Trade Representative Robert Lighthizer to identify a list of $200 billion in additional Chinese goods subject to a 10 percent tariff — a move that would bring on another round of Chinese penalties on American products.

Trump has already ordered 25 percent tariffs on $50 billion in Chinese products. Those penalties are scheduled to take effect next month and will likely be followed by Chinese countermeasures.

The U.S. has long accused China of stealing U.S. technology secrets, requiring U.S. firms to share intellectual property as a condition for doing business in joint ventures in China. China denies such theft and accuses Washington of “deviating from the consensus reached by both parties.”

The Director of White House National Trade Council, Peter Navarro, told reporters Tuesday the White House has given China every opportunity to change its “aggressive behavior.”

Trump and Chinese President Xi Jinping held a summit last year at Trump’s Mar-a-Lago resort. But that meeting and several rounds of trade talks between high-level officials in the past year have not yielded any progress.

“It is important to note here that the actions President Trump has taken are purely defensive in nature. They are designed to defend the crown jewels of American technology from China’s aggressive behavior,” Navarro contended. 

U.S. stock market tumbled on Tuesday following the latest salvos between Washington and Beijing. The Dow Jones Industrial Average lost more than 1.1 percent at the close of trading and other major indexes posted losses as well. 

But Navarro dismissed concerns about how the administration’s trade policy would affect the financial markets and global economy, saying it will have only a “relatively small effect.” He argued the U.S. steps will ultimately benefit the country and global trading system. 

Navarro did not reveal plans for further trade talks between Washington and Beijing, but added, “our phone lines are open, they have always been open.”

Trump has said he has an excellent relationship with Chinese President Xi Jinping, but has also said “the United States will no longer be taken advantage of on trade by China and other countries in the world.”

He has imposed tariffs on aluminum and steel imports from Canada, Mexico, and the European Union and is feuding over trade with some of the United States’ closest allies.
…

Is this what a trade war looks like?

The Trump administration and China’s leadership have threatened to impose tariffs on $50 billion of each other’s goods. Trump has proposed imposing duties on $400 billion more if China doesn’t further open its markets to U.S. companies and reduce its trade surplus with the United States. China, in turn, says it will retaliate.

In recent years, tariffs had been losing favor as a tool of national trade policy. They were largely a relic of 19th and early 20th centuries that most experts viewed as mutually harmful to all nations involved. But President Donald Trump has restored tariffs to a prominent place in his self-described America First approach.

Trump enraged U.S. allies Canada, Mexico and the European Union earlier this month by slapping tariffs on their steel and aluminum shipments to the United States. The tariffs have been in place on most other countries since March.

Trump has also asked the U.S. Commerce Department to look into imposing tariffs on imported cars, trucks and auto parts, arguing that they pose a threat to U.S. national security.

Here is a look at what tariffs are, how they work, how they’ve been used in the past and what to expect now.

Are we in a trade war?

Economists have no set definition of a trade war. But with the world’s two largest economies aggressively threatening each other with punishing tariffs, such a war appears perilously close. All told, the White House has threatened to hit $450 billion of China’s exports to the U.S. with punitive tariffs. That’s equivalent to 90 percent of the goods that China shipped to the United States last year.

It’s not uncommon for countries — even close allies — to fight over trade in specific products. The United States and Canada, for example, have squabbled for decades over softwood lumber.

But the U.S. and China are fighting over much broader issues, such as China’s requirements that American companies share advanced technology to access China’s market, and the overall trade deficit the U.S. has with China. So far, neither side has shown any sign of bending.

What are tariffs?

Tariffs are a tax on imports. They’re typically charged as a percentage of the transaction price that a buyer pays a foreign seller. Say an American retailer buys 100 garden umbrellas from China for $5 apiece, or $500. The U.S. tariff rate for the umbrellas is 6.5 percent. The retailer would have to pay a $32.50 tariff on the shipment, raising the total price from $500 to $532.50.

In the United States, tariffs — also called duties or levies — are collected by Customs and Border Protection agents at 328 ports of entry across the country. Proceeds go to the Treasury. The tariff rates are published by the U.S. International Trade Commission in the Harmonized Tariff Schedule, which lists U.S. tariffs on everything from dried plantains (1.4 percent) to parachutes (3 percent).

Sometimes, the U.S. will impose additional duties on foreign imports that it determines are being sold at unfairly low prices or are being supported by foreign government subsidies.

Do other countries have higher tariffs than the United States?

Most key U.S. trading partners do not have significantly higher average tariffs. According to an analysis by Greg Daco at Oxford Economics, U.S. tariffs, adjusted for trade volumes, on goods from around the world average 2.4 percent, above Japan’s 2 percent and just below the 3 percent for the European Union and 3.1 percent for Canada.

The comparable figures for Mexico and China are higher: Both have higher duties that top 4 percent.

Trump has complained about the 270 percent duty that Canada imposes on dairy products. But the United States has its own ultra-high tariffs — 168 percent on peanuts and 350 percent on tobacco.

What are tariffs supposed to accomplish?

Two things: Raise government revenue and protect domestic industries from foreign competition. Before the establishment of the federal income tax in 1913, tariffs were a big money raiser for the U.S. government. From 1790 to 1860, for example, they produced 90 percent of federal revenue, according to Clashing Over Commerce: A History of US Trade Policy by Douglas Irwin, an economist at Dartmouth College. By contrast, last year tariffs accounted for only about 1 percent of federal revenue.

In the fiscal year that ended Sept. 30, the U.S. government collected $34.6 billion in customs duties and fees. The White House Office of Management and Budget expects tariffs to fetch $40.4 billion this year.

Those tariffs are meant to increase the price of imports or to punish foreign countries for committing unfair trade practices, like subsidizing their exporters and dumping their products at unfairly low prices. Tariffs discourage imports by making them more expensive. They also reduce competitive pressure on domestic competitors and can allow them to raise prices.

Tariffs fell out of favor as global trade expanded after World War II.

The formation of the World Trade Organization and the advent of trade deals like the North American Free Trade Agreement among the U.S., Mexico and Canada reduced tariffs or eliminated them altogether.

Why are tariffs making a comeback?

After years of trade agreements that bound the countries of the world more closely and erased restrictions on trade, a populist backlash has grown against globalization. This was evident in Trump’s 2016 election and the British vote that year to leave the European Union — both surprise setbacks for the free-trade establishment.

Critics note that big corporations in rich countries exploited looser rules to move factories to China and other low-wage countries, then shipped goods back to their wealthy home countries while paying low tariffs or none at all. Since China joined the WTO in 2001, the United States has shed 3.1 million factory jobs, though many economists attribute much of that loss not to trade but to robots and other technologies that replace human workers.

Trump campaigned on a pledge to rewrite trade agreements and crack down on China, Mexico and other countries. He blames what he calls their abusive trade policies for America’s persistent trade deficits — $566 billion last year. Most economists, by contrast, say the deficit simply reflects the reality that the United States spends more than it saves. By imposing tariffs, he is beginning to turn his hard-line campaign rhetoric into action.

Are tariffs a wise policy?

Most economists — Trump’s trade adviser Peter Navarro is a notable exception — say no. The tariffs drive up the cost of imports. And by reducing competitive pressure, they give U.S. producers leeway to raise their prices, too. That’s good for those producers — but bad for almost everyone else.

Rising costs especially hurt consumers and companies that rely on imported components. Some U.S. companies that buy steel are complaining that Trump’s tariffs put them at a competitive disadvantage. Their foreign rivals can buy steel more cheaply and offer their products at lower prices.

More broadly, economists say trade restrictions make the economy less efficient. Facing less competition from abroad, domestic companies lose the incentive to increase efficiency or to focus on what they do best.
…

Russia has announced retaliatory measures in response to the U.S. move to impose tariffs on foreign steel and aluminum.

Economic Development Minister Maxim Oreshkin said a statement on Tuesday Moscow has decided to apply retaliatory measures in line with the World Trade Organization’s rules to compensate for damage incurred by the U.S. tariffs.

Oreshkin said that additional tariffs will be applied to a range of U.S. imports, but he declined to immediately name them. He added that the tariffs will be applied to the U.S. goods that have domestic equivalents to avoid hurting the national economy.

The European Union, India, China and Russia all have applied to the WTO to challenge the tariffs that took effect March 23. Washington argued they were for national security reasons.
…

The oil ministers of the OPEC cartel were gathering Tuesday to discuss this week whether to increase production of crude and help limit a rise in global energy prices.

The officials were arriving in Vienna ahead of the official meeting Friday, when they will also confer with Russia, a non-OPEC country that since late 2016 has cooperated with the cartel to limit production.

Analysts expect the group to discuss an increase in production of about 1 million barrels a day, ending the output cut agreed on in 2016.

The cut has since then pushed up the price of crude oil by about 50 percent. The U.S. benchmark in May hit its highest level in three and half years, at $72.35 a barrel.

Upon arriving, the energy minister of the United Arab Emirates, Suhail al-Mazrouei, said: “It’s going to be hopefully a good meeting. We look forward to having this gathering with OPEC and non-OPEC.”

The 14 countries in the Organization of the Petroleum Exporting Countries make more money with higher prices, but are mindful of the fact that more expensive crude can encourage a shift to renewable resources and hurt demand.

“Consumers as well as businesses will be hoping that this week’s OPEC meeting succeeds in keeping a lid on prices, and in so doing calling a halt to a period which has seen a steady rise in fuel costs,” said Michael Hewson, chief market analyst at CMC Markets U.K.

The rise in the cost of oil has been a key factor in driving up consumer price inflation in major economies like the U.S. and Europe in recent months.

Already U.S. President Donald Trump has called on OPEC to cut production, tweeting in April and again this month that “OPEC is at it again” by allowing oil prices to rise.

Within OPEC, an increase in output will not affect all countries equally. While Saudi Arabia, the cartel’s biggest producer, is seen to be open to a rise in production, other countries cannot afford to do so. Those include Iran and Venezuela, whose industries are stymied either by international sanctions or domestic turmoil. Iran is a fierce regional rival to Saudi Arabia, meaning the OPEC deal could also influence the geopolitics in the Middle East.

 
…

The World Cup in Russia is the most expensive ever – with the official price tag around $15 billion. The result: several huge new stadiums, railroads and upgraded airports, plus the chance to reboot Russia’s global image. So, will the tournament represent a good value for Russians? As Henry Ridgwell reports from Moscow, the government appears to have used the World Cup to bury some bad economic news.
…

Norway tested a two-seater electric plane on Monday and predicted a start to passenger flights by 2025 if new aviation technologies match a green shift that has made Norwegians the world’s top buyers of electric cars.

Transport Minister Ketil Solvik-Olsen and Dag Falk-Petersen, head of state-run Avinor which runs most of Norway’s airports, took a few minutes’ flight around Oslo airport in an Alpha Electro G2 plane, built by Pipistrel in Slovenia.

“This is … a first example that we are moving fast forward” towards greener aviation, Solvik-Olsen told Reuters. “We do have to make sure it is safe – people won’t fly if they don’t trust it.”

He said plane makers such as Boeing and Airbus were developing electric aircraft and that battery prices were tumbling, making it feasible to reach a government goal of making all domestic flights in Norway electric by 2040.

Asked when passenger flights in electric planes could start, Falk-Petersen, the pilot, said: “My best guess is before 2025 … It should all be electrified by 2040.”

The two said the plane, with a takeoff weight of 570 kg (1255 lb), was cramped and buffeted by winds but far quieter than a conventional plane run on fossil fuels.

Norway tops the world league for per capita sales of electric cars such as Teslas, Nissan Leafs or Volkswagen Golfs, backed by incentives such as big tax breaks, free parking and exemptions from road tolls.

In May 2018, 56 percent of all cars sold in Norway were either pure electric or hybrids against 46 percent in the same month of 2017, according to official statistics.

Norway, a mountainous country of five million people where fjords and remote islands mean many short-hop routes of less than 200 kms, would be ideal for electric planes, Solvik-Olsen said. Also, 98 percent of electricity in Norway is generated from clean hydro power.

Some opposition politicians said the government needed to do far more to meet green commitments in the 200-nation Paris climate agreement.

“This is a start … but we have to make jet fuel a lot more expensive,” said Arild Hermstad, a leader of the Green Party.

The first electric planes flew across the English Channel in July 2015, including an Airbus E-Fan. French aviator Louis Bleriot who was first to fly across the Channel, in 1909, in a fossil-fuel powered plane.

Electric planes so far have big problems of weight, with bulky batteries and limited ranges. Both Falk-Petersen and Solvik-Olsen said they had been on strict diets before the flight.

“My wife is happy about it,” Solvik-Olsen said.
…

When Jamil Bey wanted to move back to the Pittsburgh neighborhood where he had grown up, he found the perfect house to buy. There was just one problem — a fall in property values on that street had left the owners trapped in negative equity.

Unable to agree on a price that would allow the sellers to pay off their mortgage, Bey realized he would not be able to buy a house in his old neighborhood — and that the owners would be stuck with a property they did not want.

Across the United States, former manufacturing centers like Pittsburgh have experienced overwhelming population declines in recent decades, pushing down property prices and leaving homes empty and neglected.

“For folks who have a connection to those neighborhoods because they grew up there, there’s not a whole lot of quality properties to chose from,” Bey told the Thomson Reuters Foundation. “Even if you’re looking for property to invest in, you can’t fund new construction because the property values in those neighborhoods are too low.”

It took a trip to New York state for Bey to find a potential solution to the problem blighting his city — land banks, which have the power to search out vacant properties and work to return them to the market.

“I was in Syracuse and realizing that the vacant lots looked well taken care of — planted, with cut grass and nicely maintained,” he said. “And I was told, ‘We have a land bank’.”

Many former industrial cities, particularly in the northeastern United States, have lost a quarter of their population or more since the 1950s, according to census data.

Pittsburgh, once one of the largest and most prosperous cities in the country, has been among the hardest hit.

Some neighborhoods there have suffered population declines of 80 percent and more, said Bey, setting up a cycle of decline that has blighted entire communities.

Recycling Land

Bey is now vice chairman of the Pittsburgh Land Bank, which is set to start operating this summer, aiming to take on the growing numbers of abandoned properties in the city.

He describes its remit as “recycling land” — working through entanglements of ownership, addressing tax issues and fixing up or tearing down structures with a view to getting vacant property back on the market or giving it over as a public space.

Houses that have sat for long enough to become blighted are often saddled with significant tax arrears, reducing their appeal to investors.

Many land banks are able to short-circuit this process, clearing arrears before addressing regulatory violations to make the property appealing to new buyers.

Land banks have existed in the United States since the 1980s, but interest has spiked since the economic downturn of 2008-09, according to law professor Frank S. Alexander.

That created a wave of foreclosures in which “abandonment was occurring, particularly at the low end of the property spectrum,” said Alexander, a leading authority on land banking who said the sector had seen “tremendous growth” as a result.

Around 170 land banks were operating across the country as of January, according to the Center for Community Progress, which Alexander co-founded.

Land banking initially concentrated on post-industrial inner cities, but since the recession demand has expanded to other areas, said Alexander.

“I don’t go in and evangelize, but rather work with state and local officials on why vacant and abandoned properties are killing their neighborhoods and cities,” he said. And the first thing they need to do is acknowledge the cost of doing nothing.”

‘Missing Tooth’

In some places, authorities at the highest levels have taken this lesson to heart.

In 2013, New York’s attorney general announced the creation of a seed fund for land banks across the state, drawing on legal settlements from big financial institutions involved in the housing crisis that preceded the recession.

Today, there are 25 land banks operating across the state, which turned around more than $28 million worth of property through 2016 according to a report last year from the Center for Community Progress.

Jocelyn Gordon oversees a land bank in Buffalo, a city in western New York that has some of the oldest housing stock in the country but has lost half of its population.

The city has seen over 6,000 demolitions in the past decade and has thousands of vacant lots. Many of the houses that remain are enormous and so energy-inefficient that residents’ fuel bills can exceed their rents, Gordon said.

The situation, she says, is “desperate … it’s a huge problem.”

Her Buffalo Erie Niagara Land Improvement Corporation (BENLIC) is taking over vacant parcels of land and building or retrofitting to make smaller and more energy-efficient homes.

BENLIC takes on about 70 properties annually, a figure it hopes to increase to 120. It aims to take on the parcels of land it feels will have the biggest impact in a neighbourhood — what Gordon calls filling in a block’s “missing tooth.”

“If there’s a demolition on a lot in a marketable neighborhood, and we can strengthen that block,” she said, “that’s the most fulfilling part.”
…

Intel topped a list issued on Monday ranking how well technology companies combat the risk of forced labor in their supply chains, overtaking HP and Apple.

Most of the top 40 global technology companies assessed in the study by KnowTheChain, an online resource for business, had made progress since the last report was published in 2016. But the study found there was still room for improvement.

“The sector needs to advance their efforts further down the supply chain in order to truly protect vulnerable workers,” said Kilian Moote, project director of KnowTheChain, in a statement.

Intel, HP and Apple scored the highest on the list, which looked at factors including purchasing practices, monitoring and auditing processes. China-based BOE Technology Group and Taiwan’s Largan Precision came bottom.

Workers who make the components used by technology companies are often migrants vulnerable to exploitative working conditions, the report said. 

About 25 million people globally were estimated to be trapped in forced labor in 2016, according to the International Labor Organization and rights group Walk Free Foundation.

Laborers in technology companies’ supply chains are sometimes charged high recruitment fees to get jobs, trapped in debt servitude, or deprived of their passports or other documents, the report said.

It highlighted a failure to give workers a voice through grievance mechanisms and tackle exploitative recruiting practices as the main areas of concern across the sector.

In recent years modern slavery has increasingly come under the global spotlight, putting ever greater regulatory and consumer pressure on firms to ensure their supply chains are free of forced labor, child labor and other forms of slavery.

From cosmetics and clothes to shrimp and smartphones, supply chains are often complex with multiple layers across various countries — whether in sourcing the raw materials or creating the final product — making it hard to identify exploitation.

Overall, large technology companies fared better than smaller ones, suggesting a strong link between size and capacity to take action, the report said. Amazon, which ranked 20th, was a notable exception, it said.

“Top-ranking brands … are listening to workers in their supply chains and weeding out unscrupulous recruitment processes,” Phil Bloomer, head of the Business & Human Rights Resource Center, told the Thomson Reuters Foundation.

A spokesman for Amazon said the report drew from old and incomplete information and failed to take into account recently launched anti-slavery commitments and initiatives.

HP said it regularly assessed its supply chain to identify and address any concerns and risks of exploitation.

“We strive to ensure that workers in our supply chain have fair treatment, safe working conditions, and freely chosen employment,” said Annukka Dickens, HP’s director for human rights and supply chain responsibility.

Intel, Apple, BOE Technology and Largan Precision did not immediately respond to requests for comment.
…