In a surprise move, the U.S. Environmental Protection Agency reversed itself Friday and stopped the approval process for the proposed Pebble Mine copper and gold mine project in southwest Alaska’s Bristol Bay region.

“It is my judgment at this time that any mining projects in the region likely pose a risk to the abundant natural resources that exist there,” EPA Administrator Scott Pruitt said in a statement.

President Donald Trump has championed increased domestic mining, and the EPA’s decision to halt the Pebble Mine’s approval process comes as a surprise.

“Until we know the full extent of that risk, those natural resources and world-class fisheries deserve the utmost protection,” Pruitt said.

The Obama administration blocked the proposed mine in 2014 over environmental concerns. Last year, Pruitt reversed that decision, allowing the Canadian company behind the mine project to apply for a permit from the U.S. Army Corps of Engineers.

The Pebble Limited Partnership, comprising Canadian miners Northern Dynasty Minerals Ltd and First Quantum Minerals Ltd, is planning to mine 1.2 billion tons of material, including 287 million pounds of copper.

Environmentalists, commercial and sport fishermen, many Alaska Native tribal organizations and even some Republican politicians have all criticized the project, which would be built on land near Lake Clark National Park.

Alaska Governor Bill Walker, an independent, applauded the decision and thanked Pruitt “for listening to my input and that of thousands of Alaskans” who oppose the mine.

Pruitt indicated the mine could ultimately be approved.

“This decision neither deters nor derails the application process of Pebble Limited Partnership’s proposed project,” he said.

“The project proponents continue to enjoy the protection of due process and the right to proceed. However, their permit application must clear a high bar, because EPA believes the risk to Bristol Bay may be unacceptable,” he said.
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President Donald Trump’s “America First” policy on trade aims to reverse decades of lopsided exchange by withdrawing from international trade deals, renegotiating others and raising tariffs on foreign-made goods destined for the U.S. But, in a connected global economy, analysts warn the U.S. could find itself increasingly isolated as other countries rush forward to embrace new trade deals. Mil Arcega reports.
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Alaska’s all-Republican congressional delegation three weeks ago praised Interior Secretary Ryan Zinke after he announced nearly all federal waters off the state’s coast could be offered for petroleum lease sales.

But after hearing from critics who do not want drilling in their home waters, U.S. Sens. Lisa Murkowski and Dan Sullivan and Rep. Don Young are backtracking.

In a letter Friday to Zinke, the delegation requested that most Alaska waters from the state’s Panhandle to the Bering Strait be removed from the proposed five-year drilling plan.

Instead, they urged lease sales in only three areas: Cook Inlet, where petroleum platforms have extracted oil and natural gas for decades, and the Arctic waters of the Chukchi and Beaufort seas.

“We believe the strongest near-term offshore program in Alaska is one that focuses on the Chukchi, Beaufort and Cook Inlet,” they wrote. “Such a program will maximize agency resources and reflect the areas with the broadest support for development among Alaskans.”

Zinke announced the proposed lease sale plan Jan. 4. He said revisions could be made after public comment.

Immediate opposition

The proposal excluded only one area of Alaska: the North Aleutian Basin, home to Bristol Bay and the world’s largest run of sockeye salmon.

The proposal drew immediate opposition from governors in East and West Coast states. After Florida Gov. Rick Scott, a Republican, met with Zinke, the secretary announced that drilling would be “off the table” for waters in the eastern Gulf of Mexico and the Atlantic Ocean off Florida.

Subsistence resources

In Alaska, proposed lease sales in the Bering Sea drew strong condemnation from the Bering Sea Elders Group, an association of Alaska Native elders appointed from 39 tribes, and Kawerak Inc., a regional nonprofit organization, which said oil and gas activities pose a serious threat to marine life.

“These basins are where tribes from our region have harvested subsistence resources for millennia and where local people from our region fish and crab commercially,” Kawerak said in an announcement.

Drilling in the Beaufort and Chukchi seas, home to polar bears, walrus and ice seals that support the subsistence economies of coastal villages, is strongly opposed by environmental groups. They say the harsh climate makes spills inevitable and that cleanup of a major spill would be impossible in waters choked by or covered in sea ice.

Oil estimates

However, federal regulators say the Beaufort Sea, off Alaska’s north coast, holds an estimated 8.9 billion barrels of oil and the Chukchi, off Alaska’s northwest coast, holds an estimated 15.4 billion barrels.

Royal Dutch Shell spent $2.1 billion on Chukchi Sea leases in 2008, invested another $5 billion overall in U.S. Arctic waters, and pulled out after drilling a dry hole in 2015.

Murkowski, Sullivan and Young contend drilling in Arctic waters can be done safely. They said they strongly support the inclusion of the Beaufort and Chukchi seas for lease sales between 2019 and 2024, while at the same time urging “meaningful consultation” with communities.
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A U.S. trade commission on Friday handed an unexpected victory to Bombardier Inc. against Boeing Co., in a ruling that allows the Canadian company to sell its newest jets to U.S. airlines without heavy duties, sending Bombardier’s shares up 15 percent.

The U.S. International Trade Commission’s unanimous decision was the latest twist in U.S.-Canadian trade relations that have been complicated by disputes over tariffs on Canadian lumber and U.S. milk and President Donald Trump’s desire to renegotiate or even abandon the North American Free Trade Agreement (NAFTA).

Trump, who did not weigh in on the dispute personally, took his “America First” message to the world’s elite on Friday, telling a summit that the United States would “no longer turn a blind eye” to what he described as unfair trade practices.

The ITC commissioners voted 4-0 that Bombardier’s prices did not harm Boeing and discarded a U.S. Commerce Department recommendation to slap a near 300 percent duty on sales of the company’s 110- to 130-seat CSeries jets for five years. It did not give a reason immediately.

U.S. Commerce Secretary Wilbur Ross said in a statement that the commission’s finding “shows how robust our system of checks

and balances is.”

Boeing’s shares closed flat.

“It’s reassuring to see that facts and evidence matter,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics in Washington. “This part of the trade policy process works unimpeded despite President Trump’s protectionist rhetoric.”

Removing ‘uncertainty’

The decision will also help Bombardier sell the CSeries in the United States by removing “a huge amount of uncertainty,” at a time when its Brazilian rival Embraer is bringing its new E190-E2 jet to market, a source familiar with the

Canadian plane and train maker’s thinking said.

The ITC had been expected to side with Chicago-based Boeing. The company alleged it was forced to discount its 737 narrow-bodies to compete with Bombardier, which it said used government subsidies to dump the CSeries during the 2016 sale of 75 jets at “absurdly low” prices to Delta Air Lines.

Bombardier called the trade case self-serving after Boeing revealed on December 21 that it was discussing a “potential combination” with Embraer. Boeing denied the trade case was motivated by those talks.

Boeing to look at options

The dispute may not be over. “This can still be appealed by Boeing,” Andrew Leslie, parliamentary secretary to Canadian Foreign Minister Chrystia

Freeland, told reporters in Montreal.

Boeing said it would not consider such options before seeing the ITC’s reasoning in February.

But Boeing said it was disappointed the commission did not recognize “the harm that Boeing has suffered from the billions of dollars in illegal government subsidies that the Department of Commerce found Bombardier received and used to dump aircraft in the U.S. small single-aisle airplane market.”

Bombardier, Delta and the U.S. consumer advocacy group Travelers United all called the ITC decision a victory for consumers and airlines.

The decision may end up helping Trump’s goal of boosting U.S. jobs as the CSeries jets for U.S. airlines will be built in the United States rather than Canada.

Through a venture with European planemaker Airbus SE, which has agreed to take a majority stake in the CSeries this year, Bombardier plans to assemble CSeries jets in Alabama to be sold to U.S. carriers starting in 2019.

Sweet surprise

Airbus Chief Executive Tom Enders promised to push ahead “full throttle” with the Alabama plans. “Nothing is sweeter than a surprise, a surprise victory,” he said.

The case had sparked trade tensions between the United States and its allies Canada and the United Kingdom. Ottawa last year scrapped plans to buy 18 Super Hornet fighter jets from Boeing.

The well-paid jobs associated with the CSeries are important both to Ottawa and the British government. Bombardier employs about 4,000 workers in Northern Ireland.

The British prime minister’s office said it welcomed the decision, “which is good news” for the British industry, while Canada’s innovation minister said the ITC came to the “right decision” on Bombardier.

Former ITC Chairman Dan Pearson praised the decision. “Not a single commissioner was willing to buy Boeing’s arguments,” he said. “I think ‘America First’ is a policy of the White House and the Commerce Department. But it’s not the policy of an independent agency [like the ITC].”
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President Donald Trump has warned that the United States will no longer tolerate unfair trade practices and will always put America first in future trade deals. Giving the closing speech at the World Economic Forum in the Swiss resort of Davos on Friday, Trump lauded the performance of the U.S. economy under his leadership. The speech, however, was overshadowed by further controversy over alleged links between the president’s campaign team and Russia. Henry Ridgwell reports.
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Coincheck, a major cryptocurrency trading exchange in Tokyo, has been hacked into and has lost about $534 million worth of virtual money, national broadcaster NHK reported on Friday.

Coincheck posted on its website on Friday afternoon that it had suspended withdrawals of almost all cryptocurrencies.

The exchange has already reported the incident to the police and to Japan’s Financial Services Agency, NHK said.

In 2014, Tokyo-based Mt. Gox, which once handled 80 percent of the world’s bitcoin trades, filed for bankruptcy after losing some 850,000 bitcoins — then worth around half a billion U.S. dollars — and $28 million in cash from its bank accounts.
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The Chinese government recently claimed that 98 major state-run industries have turned in the best industrial and financial performance in 2017 compared to the past five years. These companies, which have assets totaling $9 trillion, produced a remarkable profit of $218 billion, an increase of 15.2 percent in profit in 2017, more than double the rate of national economic growth.

Industry experts are closely examining the report card because China’s state sector represents nearly 60 percent of the country’s industrial economy. It controls areas like natural resources, steel, energy, heavy machinery, telecommunication, defense and infrastructure sectors, where the private sector has little or no role.

The government’s claim has caused some surprise because state-owned-enterprises (SOEs) have been widely blamed for corruption and sloth, with many economists saying they are a drag on the national economy.

The New York-based Center on Foreign Relations reported this month that profits of Chinese SOEs plunged 33 percent between 2011 and 2016, while that of the country’s private-sector enterprises rose 18 percent in the same period. However, the government and state-owned banks continued funding the state sector, which drew 80 percent of industrial financing, it said.

Lagging behind private sector

Analysts said the SOEs managed to come up with a better balance sheet in 2017, with tremendous assistance from the government. But there was no real improvement in their management capabilities and market competitiveness.

“The improvement in profitability does not mean they are more efficient or more productive and they still aren’t as profitable as private companies,” said Scott Kennedy, deputy director at the Freeman Chair in China Studies at the Center for Strategic & International Studies.

One reason for the improved profits report may be the closure of dozens of coal mines and steel mills and hundreds of factories as part of an effort to overcome problems of overcapacity and chronically loss-making units. This came at a social cost as reduction in coal capacity by 27 million tons and in steel capacity by 5.95 million tons resulted in layoffs of millions of workers in mines and factories.

Another part of the improvement was achieved by sales and swaps of piled up debt at 20-30 percent of their original value, leading to massive losses for banks and financial agencies that gave the loans. Nearly $158 billion was infused into these companies, banks, stock and property markets and other sources in 2017.

Mergers also eliminated competition as two or more rival companies came together to form a stronger monopoly.

 

Monopoly creation

“Those survivors, they can enjoy the monopoly, that is why they can enjoy higher profit margins because of the monopolies,” CEIBS professor of finance and accounting Oliver Rui said, adding, “Usually they were competitors, now they have become one company.”

 

The State-owned Assets Supervision and Administration Commission, which manages the 98 enterprises owned by the central government, claimed a major success in reducing their debt burden. Its chief accountant, Shen Ying, told a recent news conference that central SOEs are confident and able to repay their debt and prevent systemic risks in 2018.

“There was no issue of bond default by central SOEs in 2017,” she said. “We will continue to push SOE reforms, in particular in their operational mechanism, methods of building a modern enterprise system, regulatory measures of State-owned assets and the cultivation of entrepreneurship in 2018.”

State owned banks were ordered to swap their unpaid loans into equity making them part owners of their customers, the SOEs. A part of the debt was converted into equity.

Jason Lee, an expert with the China Market Research Group said he expected the government to continue with the drive to reduce SOE debt by getting banks, stock and property markets to inject funds in 2018. “My estimation is that it won’t be double (compared to 2017) but probably around like 700 billion or 800 billion (Yuan), he said. An important issue is whether the government is merely rewriting the account books or state run companies are going through a major improvement in their functioning.

 

“Yes, that’s artificially solving the problem,” Rui said. “So, in the long run you need improve your performance through either by reducing the cost, or through enhanced efficiency or by increasing your pricing powers, you could sell your products at a higher price.”

 

New normal

Improvement in market prices of goods produced by the SOEs also played a key role in their improved balance sheets.

 

“Producer prices in China are growing and those products come mainly from SOEs and that’s the primary source for the turnaround in SOE performance, balance sheet performance,” Kennedy said.

Kennedy said the ruling Communist Party is not interested in allowing the bureaucracy-run SOEs to perform freely in terms of market dynamics.

The Communist “Party is increasing its supervision and management of SOEs. So I think, what you are seeing is a cyclical change in their financial position because of the price environment but not changes in the structural, systemic issues that make state owned enterprises less competitive and profitable than  the private sector,” Kennedy said.

The government has been publicly saying that it is focusing on the quality of life in terms of better performance in welfare areas like education, health and poverty alleviation and GDP numbers are not as important any more. But privately, it is pushing the industry to achieve higher growth because it cannot afford a major economic slowdown, analysts said. In this respect, the government is forced to rely on the state sector a lot more than the private sector.

“The private sector stopped investing because there are so many critical uncertainties. So, the SOE is the major driving force behind the GDP growth,” Rui said.
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