Business

In a ceremony last week attended by heads of state from across East Africa, Djibouti inaugurated what it says will become the largest free-trade zone on the continent.

The project will take 10 years to complete and will occupy more than 48 square kilometers when finished. In the pilot phase, it will increase the size of Djibouti’s economy by 11 percent, Prime Minister Abdoulkader Kamil Mohamed told VOA’s French-to-Africa service.

But the $3.5 billion project will also add to what some experts consider to be an extreme reliance on Chinese financing and could raise the small desert nation’s debt to alarming levels.

Debt distress

Scott Morris is a senior fellow at the Center for Global Development and the director of the U.S. Development Policy Initiative. He co-wrote a report in March that highlights the debt implications of the Belt and Road Initiative.

Morris and his colleagues considered the debt vulnerability of 68 countries involved in the BRI, including China. They concluded that most countries have a low risk, but for eight countries, the risk is high.

Djibouti is the only high-risk African country. It stands out because its debt represents a large portion of its gross domestic product, which economists consider to be a good indicator of a country’s overall economic strength and size. By the end of 2016, Djibouti’s debt had reached more than 86 percent of its GDP, and it owed nearly all of that money to China.

Combined, these factors make Djibouti susceptible to debt distress, a condition that can hurt economic growth or even cause an economic crisis.

The new free-trade zone will add significantly to Djibouti’s Chinese debt, possibly elevating Djibouti’s risk to “an alarming state,” Morris said.

‘We are well-situated’

Djibouti is optimistic its investments will pay off.

“We don’t have natural resources, but God has placed us in a strategic zone where about 30 percent of the maritime commerce in the world passes through,” Mohamed said. “So, we are well-situated, and we plan to take advantage of this placement to have the maximum profit for our country and our people.”

Morris agrees that Djibouti’s infrastructure deals could generate significant economic activity and growth, and that helps keep the risks of debt in check.

The catch, according to Morris, is big infrastructure projects pay dividends over the long haul, but debt obligations kick in much sooner. “With deals like this continuing to stack up, it does seem to me that Djibouti is facing a real debt problem,” Morris said.

If Djibouti were to default on its loans, it might find itself handing full control of projects such as the free-trade zone or Chinese-built ports over to China. That precedent was set late last year, when Sri Lanka, burdened with $8 billion in loans to Chinese firms, transferred the Port of Hambantota to China on a 99-year lease. 

If China were to take control over a Djibouti-based infrastructure project, the geopolitical implications could extend far beyond finances. But a handover wouldn’t be necessary for China to sway politics in the region and beyond.

“There’s no doubt that the Chinese government as a creditor also makes its political will known on issues that matter to it,” Morris said.

Those stipulations aren’t unique to China, Morris added, citing the United States as one example of a country that ties economics to politics. President Donald Trump’s administration, Morris said, has made clear that countries would be eligible for financial assistance depending on their votes in the United Nations.

The additional challenge with Chinese loans, according to Morris, is a lack of transparency. “It’s really hard to judge the degree to which they are extracting political concessions.”

Risks and rewards

An opaque approach to financing makes Chinese loans more risky overall, Morris said.

“There’s not a consistent reporting principle on the part of China as a creditor,” he added. And because China hasn’t agreed to be governed by globally accepted financing rules, the risk for countries that accept Chinese loans goes up.

African countries need to vet Chinese-financed projects carefully, Morris said, being sure the terms adhere to accepted financing standards. But that doesn’t mean all BRI projects should be taken off the table.

“If there is a viable infrastructure project that an entity like the China Development Bank wants to finance, and the terms look reasonable, there’s no reason not to proceed with that,” Morris said. “But one has to evaluate each project on its own merits.”

In Djibouti, the government is confident its strategy is paying off. “Chinese interests are Djiboutian interests also,” Mohamed said. “We are happy to profit from our position so we can develop our country.”

Idrissa Fall and Anasthasie Tudieshe contributed to this report.
…

Outside Baltimore, Maryland, sheets of tinplated steel transform into colorful cans and containers for Zippo lighter fluid, Starbucks cookies, Nestle chocolates, and premium brands of peanuts and popcorn. Machines stamp, cut, print, shape and assemble multiple product lines under the watchful eyes of skilled work crews at Independent Can Company, which is fighting the Trump administration’s 25 percent tariff on imported steel.

“We are the largest manufacturer of specialty tins in the United States,” ICC president and CEO Rick Huether said. “The tinplated steel that we buy is close to 50 percent of [the cost of] what we produce. It is the driver when there’s a change in our prices to the marketplace.”

The new steel tariff has been welcomed by U.S. producers of the material, but slammed by American manufacturers like ICC that rely on a global steel supply chain to stay afloat. The company says its clients will turn to foreign can makers if its prices rise too high.

“Our primary competitor would be China,”Huether said. “If we’re more than five-10 percent higher [in price] than China, our customers will shop overseas.”

The Trump administration continues to defend tariffs as stiff but appropriate medicine to save vital American industries battered by decades of predatory foreign competition.

“Steel and aluminum imports threaten to impair our national security,” Commerce Secretary Wilbur Ross said at a recent Senate hearing. “The tariff actions taken by the president are necessary to revive America’s essential steel and aluminum industries.”

Huether said ICC has bought U.S.-made steel, but that imports bridge a gap in supply for high-grade tinplated steel needed for blemish-free lithographic printing his customers demand, adding that the mere threat of tariff-induced price hikes already cost the company a $2 million order.

“We’d like to be fighting to grow our can business, but we’re fighting our supply side to just get materials to satisfy the demands we have now. So it’s a very frustrating situation,” the CEO said.

ICC is warning of possible job cuts. The company employs more than 400 workers, paying well above minimum wage with a benefits package that includes health care.

“There are craftsmen in here that have been doing this for 20, 30, 40 years,” ICC lithographer Bryon Borrell said, adding that he is thankful to hold a middle class manufacturing job. “I have been very successful, raised a family. That is all I can ask for.”

ICC has asked the Commerce Department for steel tariff exemptions. U.S. Steel Corporation filed objections, arguing it has been harmed by “unfairly traded imports” and that “the domestic industry has ample production capacity to supply ICC’s needs.”

Huether countered that he has no guarantee when domestic production will be ramped up, the price ICC will be charged for tinplated steel, or whether quality standards will be met.

“U.S. Steel says they can produce our specification in sufficient quantities. Yes they can, in a year, when they invest the money they’ve already committed to upgrading the mill,” Huether said. “We would like to buy domestic. The lead times are shorter [than buying imported steel], but right now they can’t give us the material when they promised.”

The Commerce Department has not acted on ICC’s requests, but signaled that tariff exemptions will be rare.

“Relatively few of those [exemptions] will be granted because many of them have no substance,” Secretary Ross said.

“I think we’re fighting people that are not listening to our problem, our industry’s problem,” Huether said. “This is my family’s business—my sister, my dad, my cousin, my son are in this every day, on the floor, trying to develop. We’ve brought back $4-5 million dollars worth of cans to manufacture in the United States in the last three or four years. Not many companies can say that.”

ICC just installed a state-of-the-art assembly line that will expand production, if the company has enough steel to run it, and if it is able to keep prices competitive on its containers.

Huether credited President Donald Trump for tax reform enacted last year, saying it’s a boost to companies like his, but added that tariffs are counterproductive.

“Yeah, he [Trump] is encouraging us to invest. But on the other hand he’s raising our costs to produce those goods. Who are we going to have to sell it to if we don’t hit a right price [on steel]?” he said.
…

Outside Baltimore, Maryland, sheets of tinplated steel transform into colorful cans and containers for Zippo lighter fluid, Starbucks cookies, Nestle chocolates, and premium brands of peanuts and popcorn. Machines stamp, cut, print, shape and assemble multiple product lines under the watchful eyes of skilled work crews at Independent Can Company, which is fighting the Trump administration’s 25 percent tariff on imported steel.

“We are the largest manufacturer of specialty tins in the United States,” ICC president and CEO Rick Huether said. “The tinplated steel that we buy is close to 50 percent of [the cost of] what we produce. It is the driver when there’s a change in our prices to the marketplace.”

The new steel tariff has been welcomed by U.S. producers of the material, but slammed by American manufacturers like ICC that rely on a global steel supply chain to stay afloat. The company says its clients will turn to foreign can makers if its prices rise too high.

“Our primary competitor would be China,”Huether said. “If we’re more than five-10 percent higher [in price] than China, our customers will shop overseas.”

The Trump administration continues to defend tariffs as stiff but appropriate medicine to save vital American industries battered by decades of predatory foreign competition.

“Steel and aluminum imports threaten to impair our national security,” Commerce Secretary Wilbur Ross said at a recent Senate hearing. “The tariff actions taken by the president are necessary to revive America’s essential steel and aluminum industries.”

Huether said ICC has bought U.S.-made steel, but that imports bridge a gap in supply for high-grade tinplated steel needed for blemish-free lithographic printing his customers demand, adding that the mere threat of tariff-induced price hikes already cost the company a $2 million order.

“We’d like to be fighting to grow our can business, but we’re fighting our supply side to just get materials to satisfy the demands we have now. So it’s a very frustrating situation,” the CEO said.

ICC is warning of possible job cuts. The company employs more than 400 workers, paying well above minimum wage with a benefits package that includes health care.

“There are craftsmen in here that have been doing this for 20, 30, 40 years,” ICC lithographer Bryon Borrell said, adding that he is thankful to hold a middle class manufacturing job. “I have been very successful, raised a family. That is all I can ask for.”

ICC has asked the Commerce Department for steel tariff exemptions. U.S. Steel Corporation filed objections, arguing it has been harmed by “unfairly traded imports” and that “the domestic industry has ample production capacity to supply ICC’s needs.”

Huether countered that he has no guarantee when domestic production will be ramped up, the price ICC will be charged for tinplated steel, or whether quality standards will be met.

“U.S. Steel says they can produce our specification in sufficient quantities. Yes they can, in a year, when they invest the money they’ve already committed to upgrading the mill,” Huether said. “We would like to buy domestic. The lead times are shorter [than buying imported steel], but right now they can’t give us the material when they promised.”

The Commerce Department has not acted on ICC’s requests, but signaled that tariff exemptions will be rare.

“Relatively few of those [exemptions] will be granted because many of them have no substance,” Secretary Ross said.

“I think we’re fighting people that are not listening to our problem, our industry’s problem,” Huether said. “This is my family’s business—my sister, my dad, my cousin, my son are in this every day, on the floor, trying to develop. We’ve brought back $4-5 million dollars worth of cans to manufacture in the United States in the last three or four years. Not many companies can say that.”

ICC just installed a state-of-the-art assembly line that will expand production, if the company has enough steel to run it, and if it is able to keep prices competitive on its containers.

Huether credited President Donald Trump for tax reform enacted last year, saying it’s a boost to companies like his, but added that tariffs are counterproductive.

“Yeah, he [Trump] is encouraging us to invest. But on the other hand he’s raising our costs to produce those goods. Who are we going to have to sell it to if we don’t hit a right price [on steel]?” he said.
…

The Trump administration’s 25 percent tariff on imported steel has been welcomed by U.S. producers of the material but slammed by American manufacturers that rely on a global steel supply chain to make everything from cars to razor blades. VOA’s Michael Bowman visited a can company that is being squeezed by the new tariff and has this report, which was produced by Elizabeth Cherneff.
…

As the trade war between the world’s two largest economies nears the end of its first week, its most unsettling fact may be this: No one seems to foresee any clear path to peace.

 

The United States insists that China abandon the brass-knuckles tactics it’s used to try to supplant America’s technological dominance. Yet Beijing isn’t about to drop its zeal to acquire the technology it sees as crucial to its prosperity.

 

Having run for the White House on a vow to force China to reform its trade policies, President Donald Trump won’t likely yield to vague promises by Beijing to improve its behavior — or to pledges to buy more American soybeans or liquefied natural gas.

 

“It certainly feels like we’re in for a protracted fight,” said Timothy Keeler of the law firm Mayer Brown and a former chief of staff at the Office of the U.S. Trade Representative. “Truthfully, I don’t know what the off-ramp is.”

 

The first shots sounded July 6: The United States slapped 25 percent taxes on $34 billion in Chinese imports. Most of them are industrial goods that the Trump administration says receive subsidies or other unfair support from Beijing. China quickly lashed back with tariffs on $34 billion in U.S. products.

The two countries have targeted an additional $16 billion worth of each other’s products for a second round of25 percent tariffs. On Tuesday, the Office of the U.S. Trade Representative proposed 10 percent tariffs on another $200 billion in Chinese imports, ranging from fish sticks to burglar alarms.

 

All told, Trump has threatened eventually to slap tariffs on up to $550 billion in Chinese imports — more than China actually exported to the United States last year — if Beijing won’t relent to U.S. pressure and continues to retaliate.

 

At the heart of the dispute: The Trump administration’s complaints that China has used predatory practices in a relentless push to grant Chinese companies an unfair advantage in the industries of the future, including robotics, electric cars and biopharmaceuticals. These tactics include the outright theft of trade secrets, government subsidies to homegrown tech firms and demands that U.S. and other foreign companies hand over technology if they want access to China’s vast market.

 

Eliminating the new tariffs will prove a lot harder than it was to raise them in the first place, said Wendy Cutler, a former U.S. trade negotiator who is a vice president at the Asia Society Policy Institute. “Both sides have too much at stake and don’t want to back down.”

 

So how does the trade war end? Analysts offer several potential scenarios:

 

China Blinks

 

The Trump administration boasts that China has more to lose in a trade war. After all, Beijing sold $524 billion worth of goods and services to the United States last year and bought far less — $188 billion. So China has far fewer goods to tax than the United States does.

 

And China’s benchmark stock index — the Shanghai Composite — has dropped 15 percent this year, at least partly on fears about damage from the trade conflict with Washington.

 

“It’s a dicey time for the Chinese economy,” said Claude Barfield, a resident scholar at the conservative American Enterprise Institute and former consultant to the U.S. Trade Representative.

Beijing is trying to contain a run-up in corporate debt and manage a difficult transition away from fast but unsustainable export-driven growth based on exports and often-wasteful investment toward steadier growth built on consumer spending. The International Monetary Fund expects Chinese economic growth to decelerate to 6.6 percent this year from 6.9 percent in 2017.

 

So it’s possible that economic pressure could persuade Beijing to cave. Yet many analysts are skeptical. Eswar Prasad, an economist at Cornell University, said the economic damage from U.S. tariffs is “likely to be muted since China has enough room to forestall a growth slowdown” by increasing government spending or adopting easy-money policies that put more cash into the economy.

 

Mary Lovely, an economist and trade expert at Syracuse University, says it’s unclear how China could appease Trump, even if it wanted to. China has pledged in the past to police cyber-theft and end coerced technology transfers. So any negotiations, Lovely said, would raise more questions: Would the Trump administration accept another promise? How would any promise be verified? How long would it take to determine whether Beijing has actually reformed its ways?

 

And China’s leaders might prove reluctant to back down and risk a backlash from the public.

 

“They have nothing to gain internally by kowtowing to President Trump, and that’s exactly what it would be,” Lovely said.

 

Trump Blinks

 

Trump faces pressures, too. The Chinese designed their tariffs to inflict political pain in the United States. They have, for example, targeted soybeans and other farm products in a shot at Trump supporters in the American heartland. And U.S. farmers are represented by trade groups and congressional delegations who aren’t shy about attacking U.S. policies that threaten farm incomes.

But the president would also find it hard to back down. He’s already considered one possible solution only to back away from it. In May, Treasury Secretary Steven Mnuchin announced after a meeting with the Chinese that the trade war was “on hold” and the tariffs suspended after Beijing agreed to reduce the U.S. trade deficit by buying more American energy and farm products.

 

Yet the cease-fire quickly collapsed once critics complained that the Trump administration was letting China buy its way out of the impasse.

 

“The president felt the sting of that and didn’t like that,” Keeler said. So the administration decided to “drive a harder bargain,” and it revived — and ramped up — its tariff threat.

 

A Win-Win Resolution

 

Taiya Smith, a former Treasury official who handled negotiations with China, says it’s possible a deal could be reached in which Beijing ends its predatory practices but can still keep itself competitive in advanced industries. The key, she says, is persuading China that its tech companies don’t need massive assistance from the state.

 

“Their companies are becoming very powerful,” Smith said. “They have to be willing to compete on a level playing field. They no longer need a leg up.”

 

But she said the U.S. would have to make concessions, too, perhaps by agreeing to let China play a bigger role in global economic policymaking.

 

“The Chinese have to have a political win somewhere in there, too,” Smith said. “You can’t design something where we get what we want and China gets nothing. They have their own politics.”

 

The War Drags On

 

Scott Paul, president of the Alliance for American Manufacturing and a sharp critic of Beijing’s trade practices, wants to see the tariffs remain until either U.S. companies leave China or Beijing opens its market wider to American goods and investment.

 

“They should stay on for long enough that they manifest some change,” he said. “I don’t see the tariffs coming off anytime soon.”

 

Paul notes that China has repeatedly made empty promises to reform its practices.

“We have waste cans full of promises by the Chinese government to reform its anti-competitive practices that are completely ignored,” he said. “The tariffs are the best and only leverage that we have with China, and we would be foolish to squander them without major gains.”
…

Tesla Inc Chief Executive Officer Elon Musk on Tuesday landed a deal with Chinese authorities to build a new auto plant in Shanghai, its first factory outside the United States, that would double the size of the electric car maker’s global manufacturing.

The deal was announced as Tesla raised prices on U.S.-made vehicles it sells in China to offset the cost of new tariffs imposed by the Chinese government in retaliation for U.S. President Donald Trump’s move to slap heavier duties on Chinese goods.

Musk was in Shanghai Tuesday, and the Shanghai government in a statement said it welcomed Tesla’s move to invest not only in a new factory in the city, a center of the Chinese auto industry, but in research and development, as well. China has long pushed to capture more of the talent and capital invested by global automakers in advanced electric vehicle technology.

Tesla plans to producing the first cars about two years after construction begins on its Shanghai factory, ramping up to as many as 500,000 vehicles a year about two to three years after that, the company said.

That would make Tesla’s Shanghai plant large by auto industry standards, where most factories are tooled to build 200,000 to 300,000 vehicles a year, and roughly equivalent to the planned annual production at Tesla’s plant in Fremont, California.

Tesla shares rose 1.5 percent in early U.S. trading, even as some analysts questioned where the money-losing company will get the capital required to build and staff such a large plant.

Musk has said Tesla will be cash-flow positive this year.

Analysts have predicted the company will raise capital to fund a list of new projects, including launching an electric semi truck, a pickup truck, a compact SUV and new battery and vehicle production facilities that Musk has proposed for China and Europe.

“I am sure that Tesla needs fresh money at the latest next year,” said Frank Schwope, an analyst with NORD/LB.

In its statement, the Shanghai government suggested it could help with some of the capital costs. “The Shanghai municipal government will fully support the construction of the Tesla factory,” the statement said.

Tuesday’s announcement will not impact U.S. manufacturing operations, which continue to grow, Tesla said.

Musk was talking about building a Chinese factory long before the Trump administration proposed punitive tariffs on Chinese goods. China until recently levied 25-percent tariffs on imported cars, and for decades automakers have been moving to build more vehicles in the markets where they will be sold to neutralize the risk of currency shifts and trade policy

reversals.

China is the largest market for electric vehicles, and most forecasters predict that electric vehicle sales in the country will accelerate rapidly as government regulation drives toward a goal of 100 percent electric vehicles by 2030.

China is the world’s largest auto market overall, with more than 28 million vehicles sold last year, and annual sales are forecast to top 35 million by 2025. That level would be more than double the current U.S. market, where new light vehicle sales run at about 17 million vehicles a year.

Still, the Chinese authorities’ decision to grant Tesla permission to move forward lands as President Trump is fighting to stop U.S. manufacturers from responding to his trade policy by shifting production overseas, as U.S. motorcycle maker Harley-Davidson said it would do last month.

Tesla did not immediately respond to requests for comment.

The signing was held at Shanghai’s Fairmont Peace Hotel but media attendance was limited, a Shanghai government official who declined to give his name told Reuters. Tesla’s Chief Executive Elon Musk attended the signing, according to a Reuters witness.

Bloomberg reported on Monday that Musk will visit Beijing on Wednesday and Thursday.

Tesla has been in protracted negotiations to open its own factory in China to help bolster its position in the country’s fast-growing market for electric cars and to avoid high import tariffs.

Tesla hiked prices in China over the weekend to a level more than 70 percent higher than in the United States amid mounting trade frictions between Washington and Beijing that have seen several U.S. imports, including cars, become subjected to retaliatory tariffs of 25 percent.

Musk had previously criticized China’s tough auto rules for foreign businesses, which would have required it to cede a 50-percent share in the factory. The company was keen to maintain control of its plant and protect its technology.

It registered a new electric car firm in Shanghai in May after China announced that it planned to scrap rules on capping foreign ownership of new-energy vehicle (NEV) ventures by 2022.
…

Tesla Inc Chief Executive Officer Elon Musk on Tuesday landed a deal with Chinese authorities to build a new auto plant in Shanghai, its first factory outside the United States, that would double the size of the electric car maker’s global manufacturing.

The deal was announced as Tesla raised prices on U.S.-made vehicles it sells in China to offset the cost of new tariffs imposed by the Chinese government in retaliation for U.S. President Donald Trump’s move to slap heavier duties on Chinese goods.

Musk was in Shanghai Tuesday, and the Shanghai government in a statement said it welcomed Tesla’s move to invest not only in a new factory in the city, a center of the Chinese auto industry, but in research and development, as well. China has long pushed to capture more of the talent and capital invested by global automakers in advanced electric vehicle technology.

Tesla plans to producing the first cars about two years after construction begins on its Shanghai factory, ramping up to as many as 500,000 vehicles a year about two to three years after that, the company said.

That would make Tesla’s Shanghai plant large by auto industry standards, where most factories are tooled to build 200,000 to 300,000 vehicles a year, and roughly equivalent to the planned annual production at Tesla’s plant in Fremont, California.

Tesla shares rose 1.5 percent in early U.S. trading, even as some analysts questioned where the money-losing company will get the capital required to build and staff such a large plant.

Musk has said Tesla will be cash-flow positive this year.

Analysts have predicted the company will raise capital to fund a list of new projects, including launching an electric semi truck, a pickup truck, a compact SUV and new battery and vehicle production facilities that Musk has proposed for China and Europe.

“I am sure that Tesla needs fresh money at the latest next year,” said Frank Schwope, an analyst with NORD/LB.

In its statement, the Shanghai government suggested it could help with some of the capital costs. “The Shanghai municipal government will fully support the construction of the Tesla factory,” the statement said.

Tuesday’s announcement will not impact U.S. manufacturing operations, which continue to grow, Tesla said.

Musk was talking about building a Chinese factory long before the Trump administration proposed punitive tariffs on Chinese goods. China until recently levied 25-percent tariffs on imported cars, and for decades automakers have been moving to build more vehicles in the markets where they will be sold to neutralize the risk of currency shifts and trade policy

reversals.

China is the largest market for electric vehicles, and most forecasters predict that electric vehicle sales in the country will accelerate rapidly as government regulation drives toward a goal of 100 percent electric vehicles by 2030.

China is the world’s largest auto market overall, with more than 28 million vehicles sold last year, and annual sales are forecast to top 35 million by 2025. That level would be more than double the current U.S. market, where new light vehicle sales run at about 17 million vehicles a year.

Still, the Chinese authorities’ decision to grant Tesla permission to move forward lands as President Trump is fighting to stop U.S. manufacturers from responding to his trade policy by shifting production overseas, as U.S. motorcycle maker Harley-Davidson said it would do last month.

Tesla did not immediately respond to requests for comment.

The signing was held at Shanghai’s Fairmont Peace Hotel but media attendance was limited, a Shanghai government official who declined to give his name told Reuters. Tesla’s Chief Executive Elon Musk attended the signing, according to a Reuters witness.

Bloomberg reported on Monday that Musk will visit Beijing on Wednesday and Thursday.

Tesla has been in protracted negotiations to open its own factory in China to help bolster its position in the country’s fast-growing market for electric cars and to avoid high import tariffs.

Tesla hiked prices in China over the weekend to a level more than 70 percent higher than in the United States amid mounting trade frictions between Washington and Beijing that have seen several U.S. imports, including cars, become subjected to retaliatory tariffs of 25 percent.

Musk had previously criticized China’s tough auto rules for foreign businesses, which would have required it to cede a 50-percent share in the factory. The company was keen to maintain control of its plant and protect its technology.

It registered a new electric car firm in Shanghai in May after China announced that it planned to scrap rules on capping foreign ownership of new-energy vehicle (NEV) ventures by 2022.
…

The Cuban government will allow new restaurants, bed-and-breakfasts and transportation businesses by the end of the year, reopening the most vibrant sectors of the private economy after freezing growth for more than a year.

The government is unveiling a set of new regulations Tuesday meant to control the growth of tourism-related private businesses and collect more tax revenue from them. Private restaurants and bed-and-breakfasts boomed after U.S.-Cuba normalization in 2014 prompted rapid growth in tourism to Cuba.

 

Tax evasion and purchase of stolen state materials also boomed in the mostly cash-based private hospitality sector. Among other measures, the new regulations announced Tuesday require private businesses to move all their revenue through state-run bank accounts. Cuba froze new licenses for restaurants, bed-and-breakfasts and other key business in August 2017.
…

The Cuban government will allow new restaurants, bed-and-breakfasts and transportation businesses by the end of the year, reopening the most vibrant sectors of the private economy after freezing growth for more than a year.

The government is unveiling a set of new regulations Tuesday meant to control the growth of tourism-related private businesses and collect more tax revenue from them. Private restaurants and bed-and-breakfasts boomed after U.S.-Cuba normalization in 2014 prompted rapid growth in tourism to Cuba.

 

Tax evasion and purchase of stolen state materials also boomed in the mostly cash-based private hospitality sector. Among other measures, the new regulations announced Tuesday require private businesses to move all their revenue through state-run bank accounts. Cuba froze new licenses for restaurants, bed-and-breakfasts and other key business in August 2017.
…

BMW Group and the biggest Chinese SUV brand, Great Wall Motor, announced a partnership Tuesday to produce electric MINI vehicles in China as global automakers ramp up development under pressure from Beijing.

The companies said they signed an agreement Monday during an event in Berlin attended by Chinese Premier Li Keqiang and German Chancellor Angela Merkel.

BMW and Great Wall said their venture, Spotlight Automotive Ltd., also will make electrics for the Chinese partner’s brand. Great Wall put total investment in the venture at 5.1 billion yuan ($770 million) and said it is aiming for annual production of 160,000 vehicles.

Automakers are pouring billions of dollars into creating electric models for China, the biggest market for the technology.

Beijing is using access to its market as leverage to induce global automakers to help Chinese brands develop battery and other technology.

Auto brands in China are required to make electric vehicles at least 10 percent of their sales starting next year or buy credits from competitors that exceed their quotas. Later, they face pressure to raise those sales in order to satisfy fuel efficiency requirements that increase annually.

Sales of pure-electric passenger vehicles in China rose 82 percent last year to 468,000, according to an industry group, the China Association of Automobile Manufacturers. That was more than double the U.S. level of just under 200,000.

Other automakers including General Motors Co., Volkswagen AG and Nissan Motor Co. have announced similar plans with Chinese partners to produce dozens of electric models.

Great Wall, headquartered in Baoding, southwest of Beijing, sells more than 1 million SUVs a year.

“With our joint approach, we can quickly scale up production and increase efficiency,” said Klaus Frolich, a BMW board member, in a statement.

MINI’s first battery electric model is due to be produced at its main British factory in Oxford in 2019, according to BMW.

China is BMW’s biggest market. The Munich-based automaker said about 560,000 BMW brand vehicles were delivered to Chinese customers in 2017, more than its next two markets – the United States and Germany – combined.

China was MINI’s fourth-largest market in 2017, with 35,000 vehicles delivered, the company said.

The electrics venture with BMW is an important boost for Great Wall, which industry analysts warned would struggle to satisfy Beijing’s sales quotas due to its fuel-guzzling vehicle lineup and had yet to announce any significant electric plans.
…

BMW Group and the biggest Chinese SUV brand, Great Wall Motor, announced a partnership Tuesday to produce electric MINI vehicles in China as global automakers ramp up development under pressure from Beijing.

The companies said they signed an agreement Monday during an event in Berlin attended by Chinese Premier Li Keqiang and German Chancellor Angela Merkel.

BMW and Great Wall said their venture, Spotlight Automotive Ltd., also will make electrics for the Chinese partner’s brand. Great Wall put total investment in the venture at 5.1 billion yuan ($770 million) and said it is aiming for annual production of 160,000 vehicles.

Automakers are pouring billions of dollars into creating electric models for China, the biggest market for the technology.

Beijing is using access to its market as leverage to induce global automakers to help Chinese brands develop battery and other technology.

Auto brands in China are required to make electric vehicles at least 10 percent of their sales starting next year or buy credits from competitors that exceed their quotas. Later, they face pressure to raise those sales in order to satisfy fuel efficiency requirements that increase annually.

Sales of pure-electric passenger vehicles in China rose 82 percent last year to 468,000, according to an industry group, the China Association of Automobile Manufacturers. That was more than double the U.S. level of just under 200,000.

Other automakers including General Motors Co., Volkswagen AG and Nissan Motor Co. have announced similar plans with Chinese partners to produce dozens of electric models.

Great Wall, headquartered in Baoding, southwest of Beijing, sells more than 1 million SUVs a year.

“With our joint approach, we can quickly scale up production and increase efficiency,” said Klaus Frolich, a BMW board member, in a statement.

MINI’s first battery electric model is due to be produced at its main British factory in Oxford in 2019, according to BMW.

China is BMW’s biggest market. The Munich-based automaker said about 560,000 BMW brand vehicles were delivered to Chinese customers in 2017, more than its next two markets – the United States and Germany – combined.

China was MINI’s fourth-largest market in 2017, with 35,000 vehicles delivered, the company said.

The electrics venture with BMW is an important boost for Great Wall, which industry analysts warned would struggle to satisfy Beijing’s sales quotas due to its fuel-guzzling vehicle lineup and had yet to announce any significant electric plans.
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Behind a row of sealed red incubator doors in a new facility in northern China, about 400,000 chicks are hatched every day, part of the rapidly modernizing supply chain in China’s $37 billion egg industry, the world’s biggest.

As China overhauls production of everything from pork to milk and vegetables, farmers raising hens for eggs are also shifting from backyards to factory farms, where modern standardized processes are expected to raise quality and safety.

That’s an important step in a country where melamine-tainted eggs and eggs with high antibiotic residues have featured in a series of food safety scandals in recent years. It is also spurring demand for higher priced branded eggs over those sold loose in fresh produce markets.

“These days if you’re a small farmer, your eggs won’t get into the supermarkets,” said Yuan Song, analyst with China-America Commodity Data Analytics.

Tough new regulations on treating manure and reducing the environmental impact from farms have also pushed many small farmers out.

Most egg producers now have between 20,000 and 50,000 hens, said Yuan, a significant change even from two years ago. The remainder with less than 10,000 birds are likely to be shut down soon as local governments favor larger producers that can be more easily scrutinized.

High-tech hatchery

Those rapid changes are driving investments like the 150 million yuan ($22.60 million) hatchery in Handan, about 400km (250 miles) southwest of Beijing.

The highly automated plant, owned by a joint venture between China’s Huayu Agricultural Science and Technology Co. Ltd. and EW Group’s genetics business Hy-Line International, is the world’s biggest hatchery of layer chicks, or birds raised to produce eggs rather than meat.

By producing 200,000 females a day, or around 60 million layers a year (one day a week is for cleaning), it can meet demand from larger farms who want to buy day-old-chicks in one batch, said Jonathan Cade, president of Hy-Line International, based in West Des Moines, Iowa.

“That’s the best way to start off with good biosecurity,” he said. When the birds on one farm are the same age, they are less likely to spread disease.

Imported, latest-generation equipment helps speed up the throughput of the hatchery. An automatic grading machine, which can handle 60,000 eggs an hour, sorts eggs into two acceptable sizes before they enter incubators — uniform eggs produce similar sized chicks that will have the same feeding ability.

Once hatched, female chicks go to automated beak-clipping machines that process around 3,500 an hour.

Only 20 staff will be needed in the new plant, compared with around 100 in Huayu’s older hatchery, said Huayu chairman Wang Lianzeng.

Fierce competition, disease

Efficiency is important in an industry which is not expected to see much volume growth. The Chinese already eat more eggs per capita than almost everyone else, about 280 a year or almost one billion a day across the country, so consumption is unlikely to rise much.

Breeders like Huayu are trying to grow by taking market share from others. In addition to the new Handan hatchery, it is building another in Chongqing, which will bring annual production to 180 million chicks.

Layer inventory last year was around 1.2 billion, according to the China Animal Agriculture Association.

Huayu is also looking into breeding layers and building hatcheries in South-East Asia and Africa, said Wang, the chairman.

Key to industrial-scale facilities will be managing the risks of disease. Prices and demand for eggs and poultry plunged last year, after hundreds of people died from contracting bird flu, even though the disease left flocks largely unscathed.

Although that has created new opportunities for large players to expand after others were forced to exit, the impact of a disease outbreak on intensive operations is significantly higher.

Huayu itself has recently suffered from outbreaks, with high rates of poultry disease Mycoplasma synoviae (MS) in China’s breeding flocks last year, said Wang. The disease can reduce egg production in layers.

Wang said biosecurity is the major advantage in the new hatchery, which uses advanced ventilation and environmental controls to keep new chicks healthy.

“When you enter the hatchery, you wouldn’t know you’re in a hatchery,” he said, referring to the smell typical in older facilities.

Disinfection is used at every step along the chain and workers follow strict procedures on hygiene, he added.

A safe environment with very high standards of biosecurity is important in raising chicks, said Wang.

With such pressures on production, improving animal welfare is unsurprisingly not a priority, said Jeff Zhou, China representative for Compassion in World Farming (CIWF), a nonprofit.

China has no animal welfare regulations, although some companies have begun voluntarily to phase out the painful beak-trimming practice, including Huayu rival Ningxia Xiaoming Farming and Animal Husbandry Co. Ltd.

Xiaoming is also supplying male chicks from its hatcheries to local farmers to rear for meat in free-range environments, according to CIWF. Huayu sells its male chicks as food for snakes, which are farmed in China for traditional medicine.
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The possibility of more Western sanctions against Moscow is the key risk for the Russian economy, as much as 21 percent of which has already felt the impact of existing sanctions, Russia’s Analytical Credit Ratings Agency said in a report Tuesday.

Western sanctions are expected to weigh on Russia’s oil-dependent economy in the longer run, having dented incomes of Russian households, the Kremlin-backed ACRA said.

The West first imposed economic and financial sanctions against Moscow in 2014 for its annexation of Crimea and its role in the Ukrainian conflict.

Russia has responded with counter-sanctions, banning imports of a wide range of food from countries that had targeted Moscow.

Later, sanctions against Russia were expanded, putting extra pressure on Russia’s economy and the ruble.

“The risk of widening of anti-Russian sanctions remains one of the key risks that the Russian economy could face this year,” ACRA said.

New sanctions listed by ACRA might target more companies, Russian state debt or even disconnect Russia from the international SWIFT payment system.

For now, Russia’s international reserves, which stood at nearly $456 billion as of late June, “fully cover external debt, which is vulnerable to wider sanctions,” ACRA said.

“Sanctions should not be named the key factor that limits economic growth in Russia in the mid-term … The impact of sanctions on growth rate could turn out to be more pronounced in the long term for both companies and the economy in general,” ACRA said.

Western sanctions have hit Russian companies that account for 95 percent of the country’s oil and gas industry revenues.

Restrictions imposed on Russian oil and gas companies in 2014 will affect their oil output in 2020s, ACRA said.

Sanctions have also hit Russia’s major state-owned banks, which account for 54 percent of banking assets. But the sanctions’ impact on the financial health of companies and banks has been less pronounced than that of the country’s economic policies, ACRA said.

Moscow’s response to the sanctions, which limited imports, has inflated prices for a number of goods.

“Counter-sanctions have resulted in price growth and a decline in households’ incomes by 2-3 percentage points in 2014-2018,” ACRA said.
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World fish production is expected to grow over the next 10 years despite a slowdown in both farmed and wild caught fish, the U.N.’s food agency said.

In a new report on global fisheries, the Food and Agricultural Agency predicts world fish production will grow to 201 million metric tons by 2030 — an 18 percent rise over current levels.

This is despite the amount of wild caught fish leveling off and the number of farmed fish slowing down after decades of rapid growth.

“The fisheries sector is crucial in meeting FAO’s goal of a world without hunger and malnutrition, and its contribution to economic growth and the fight against poverty is growing,” FAO Director-General Jose Graziano da Silva said.

But the report said future growth depends on sustainable and stronger fishing management, and successfully fighting such problems as pollution, global warming and illegal fishing.

The report said nearly 60 million people are employed in the world’s fishing industry, with China being the biggest producer and exporter of fish.

The European Union, United States and Japan are the world’s top three consumers of fish and users of fish products.
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What started as a simple desire to be able to provide for her children has turned into a multimillion-dollar business for Tammie Umbel of Dulles, Virginia. She not only runs a cosmetics company but home-schools her 14 children — and says she still finds time for herself. Leysa Bakalets has her story.
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Mexican President-elect Andres Manuel Lopez Obrador will seek to end the country’s massive fuel imports, nearly all from the United States, during

the first three years of his term while also boosting refining at home.

The landslide winner of last Sunday’s election told reporters Saturday morning before attending private meetings with members of his future cabinet that he would also prioritize increasing domestic production of crude oil, which has fallen sharply for years.

“The objective is that we stop buying foreign gasoline by the halfway point of my six-year term,” said Lopez Obrador, repeating a position he and his senior energy adviser staked out during the campaign.

“We are going to immediately revive our oil activity, exploration and the drilling of wells so we have crude oil,” he said.

On the campaign trail, the leftist former mayor of Mexico City pitched his plan to wean the country off foreign gasoline as a means to increasing domestic production of crude and value-added fuels, not as a trade issue with the United States.

Lopez Obrador also reiterated on Saturday his goal to build either one large or two medium-sized oil refineries during his term, which begins December 1.

While he said the facilities would be built in the Gulf coast states of Tabasco and possibly Campeche, he has been less clear about how the multibillion-dollar refineries would be paid for.

So far this year, Mexico has imported an average of about 590,000 barrels per day (bpd) of gasoline and another 232,000 bpd of diesel.

Foreign gasoline imports have grown by nearly two-thirds, while diesel imports have more than doubled since 2013, the first year of outgoing President Enrique Pena Nieto’s term, according to data from national oil company Pemex.

Far below capacity

Meanwhile, the six oil refineries in Mexico owned and operated by Pemex are producing at far below their capacity, or an average of 220,000 bpd of gasoline so far this year.

Gasoline production at the facilities is down 50 percent compared with 2013, and domestic gasoline output accounts for only slightly more than a quarter of national demand from the country’s motorists.

During the campaign, the two-time presidential runner-up also promised to strengthen Pemex. He also was sharply critical of a 2013 constitutional energy overhaul that ended the company’s monopoly and allowed international oil majors to operate fields on their own for the first time in decades.

The overhaul was designed to reverse a 14-year-long oil output slide and has already resulted in competitive auctions that have awarded more than 100 exploration and production contracts to the likes of Royal Dutch Shell and ExxonMobil.

“What’s most important is to resolve the problem of falling crude oil production. We’re extracting very little oil,” said Lopez Obrador.

During the first five months of this year, Mexican crude oil production averaged about 1.9 million bpd, a dramatic drop compared with peak output of nearly 3.4 million bpd in 2004, or 2.5 million bpd in 2013.
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One of the world’s biggest cargo shippers announced Saturday that it was

pulling out of Iran for fear of becoming entangled in U.S. sanctions, and President Hassan Rouhani demanded that European countries to do more to offset the U.S. measures.

The announcement by France’s CMA CGM that it was quitting Iran dealt a blow to Tehran’s efforts to persuade European countries to keep their companies operating in Iran despite the threat of new American sanctions.

Iran says it needs more help from Europe to keep alive an agreement with world powers to curb its nuclear program. U.S. President Donald Trump abandoned the agreement in May and has announced new sanctions on Tehran. Washington has ordered all countries to stop buying Iranian oil by November and foreign firms to stop doing business there or face U.S. blacklists.

European powers that still support the nuclear deal, officially called the Joint Comprehensive Plan of Action, say they will do more to encourage their businesses to remain engaged with Iran. But the prospect of being banned in the United States appears to be enough to persuade European companies to keep out.

Foreign ministers from the five remaining signatory countries to the nuclear deal — Britain, France, Germany, China and Russia — offered a package of economic measures to Iran on Friday, but Tehran said they did not go far enough.

“European countries have the political will to maintain economic ties with Iran based on the JCPOA, but they need to take practical measures within the time limit,” Rouhani said Saturday on his official website.

‘We apply the rules’

CMA CGM, which according to the United Nations operates the world’s third-largest container shipping fleet with more than 11 percent of global capacity, said it would halt service for Iran because it did not want to fall afoul of the rules, given its large presence in the United States.

“Due to the Trump administration, we have decided to end our service for Iran,” CMA CGM chief Rodolphe Saade said during an economic conference in the southern French city of Aix-en-Provence. “Our Chinese competitors are hesitating a little, so maybe they have a different relationship with Trump, but we apply the rules.”

The shipping market leader, A.P. Moller-Maersk of Denmark, already announced in May it was pulling out of Iran.

In June, French carmaker PSA Group suspended its joint ventures in Iran, and French oil major Total said it held little hope of receiving a U.S. waiver to

continue with a multibillion-dollar gas project in the country.

Total’s CEO Patrick Pouyanne said Saturday that the company had been left with little choice. “If we continued to work in Iran, Total would not be able to

access the U.S. financial world,” he told RTL radio. “Our duty

is to protect the company. So we have to leave Iran.”

Iranian Oil Minister Bijan Zanganeh called the tension between Tehran and Washington a “trade war.” He said it had not led to changes in Iranian oil production and exports.

He also echoed Rouhani’s remarks that the European package did not meet all economic demands of Iran.

“I have not seen the package personally, but our colleagues in the Foreign Ministry who have seen it were not happy with its details,” Zanganeh was quoted as saying by the Tasnim news agency.

Some Iranian officials have threatened to block oil exports from the Gulf in retaliation for U.S. efforts to reduce Iranian oil sales to zero. Rouhani himself made a veiled threat along those lines in recent days, saying there could be no oil exports from the region if Iran’s were shut.
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The opening shots have been fired in what some fear may be the start of a major trade war. China retaliating at midnight Friday with equivalent tariffs on U.S. goods after the U.S. followed through on its threat to raise tariffs on $34 billion worth of Chinese imports. All this as the U.S. job market posted solid gains last month. Mil Arcega has more.
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Amid the very real hardships Syrian refugees face, little has been said about another major health and humanitarian issue: What to do with the massive accumulations of trash and waste. But one refugee camp in Jordan is doing something about it. With the help of an international nonprofit group, the residents of the Zaatari Refugee Camp launched a recycling program to eliminate the trash left by the tens of thousands of refugees who live there … and provide jobs. Arash Arabasadi reports.
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The political squabbling between China and the United States over trade and other issues affect the world’s two largest economies through a variety of mechanisms with unpredictable results. 

For example, prices of stock in both nations have been hurt as some shareholders sold their shares and other investors were reluctant to buy shares of companies that might be hurt by rising tariffs. These actions cut demand for certain stocks, making prices fall. Shareholders are part-owners of companies who hope to profit when the company prospers and grows. Rising tariff costs make growth less likely, and that hurts investor confidence.

World Trade Organization spokesman Dan Pruzin told Reuters that worries about trade are already being felt.

“Companies are hesitating to invest, markets are getting jittery, and some prices are rising,” he said, adding that further escalation could hurt “jobs and growth,” sending “economic shock waves” around the world. 

Confidence

Trade squabbles can hurt business confidence, because managers are less willing to take the risk of buying new machines, building new factories or hiring new workers. Less expansion means less demand for equipment, and a smaller workforce means fewer people have the money to rent apartments, buy food or finance a new car. Less demand for goods and services ripples through the economy and sparks less economic activity and less growth.

​Agriculture

U.S. farmers are another group feeling the effects of this trade dispute, as Beijing raises tariffs on U.S. soybeans. Higher tariffs raise food costs for Chinese consumers, so demand falls for U.S. farm products, a key American export. Anticipating slackening demand for U.S. soybeans, market prices dropped even before the tariffs were imposed. That means U.S. farmers can no longer afford to buy as many tractors and hire as many workers. Fewer workers mean fewer people with the money to buy products, which slows economic growth in farm states. 

Consumers

Meantime, new U.S. tariffs hit Chinese-made vehicles, aircraft, boats, engines, heavy equipment and many other industrial products. China’s Xinhua news agency said new U.S. tariffs are an effort to “bully” Beijing. The agency says the new tariffs violate international trade rules, and will hurt many companies and “ordinary consumers.” 

Experts say Washington tried to avoid tariffs on China that would directly raise costs to U.S. consumers. Economists say increasing taxes on products that help create consumer goods will still raise costs to consumers, fuel inflation and hurt demand. 

​Currency

PNC Bank Senior Economist Bill Adams, an expert on China’s economy, says one step China could take, but has not, would be to let its currency value drop. A weaker currency would mean Chinese-made products are cheaper and more competitive on international markets. Adams says China has taken steps recently to prop up the value of its currency. While a weaker currency helps exports, it can fuel inflation by raising the costs of imported products like oil or other raw materials needed by Chinese companies.

In the meantime, uncertainty fueled by trade disputes puts upward pressure on the value of the U.S. dollar, because investors see the United States as a safe haven in times of economic strife. But a stronger, more expensive dollar means U.S. products are more expensive for foreign customers, which hurts American exports and economic growth. 

All of this means it is hard to predict how this trade dispute will play out. Experts say it will depend in large measure on how many times the two sides raise tariffs in response to each other, how high the tariffs go, and how long the bickering lasts.

William Zarit, the chairman of the American Chamber of Commerce in China, writes that this is the biggest trade dispute between China and the United States in 40 years.

The two sides must work something out, Zarit says, because a “strong bilateral trade and investment relationship is too important to both countries for it to be mired in verbal and trade remedy attacks and counterattacks.”

He says a new agreement would “significantly benefit both economies.”
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