Kenya built a reputation as a pioneer of financial inclusion through its early adoption of a mobile money system that enables people to transfer cash and make payments on cellphones without a bank account.

Now, a proliferation of lenders are using the same technology to extend credit to the banked and unbanked alike, saddling borrowers with high interest rates and leaving regulators scrambling to keep up.

This week, the finance ministry published a draft bill on financial regulation that covers digital lenders for the first time. A key aim is to ensure that providers treat retail customers fairly, it said.

“We have a lot of predatory lending out here, which we want to regulate,” Geoffrey Mwau, director general of budget, fiscal and economic affairs at the treasury, told reporters Thursday.

Test case for lending

As it was for mobile cash, Kenya is something of a test case for the new lending platforms. Several of the companies involved, including U.S. fintech startups, have plans to expand in other frontier markets, meaning Kenya’s regulation will be closely watched.

From having had little or no access to credit, many Kenyans now find they can get loans in minutes.

George Ombelli, a salesman for a company importing bicycles who also owns a hair salon and cosmetics shop with his wife, has borrowed simultaneously from four providers over the past year.

He took small loans from two Silicon Valley-backed U.S. fintech firms, Branch and Tala, to see what rates he would get, as well as from a new mobile app launched by Barclays Kenya in March and a business loan from Kenya’s Equity Bank.

Citing a slowdown in his business because of elections-related political turmoil last year, Ombelli said he has fallen behind on some of his payments. He fears he will be reported to one of Kenya’s three credit bureaus, jeopardizing his chances of being able to borrow more to grow his business.

​‘Too many loans is a problem’

“I’ve realized having too many loans is a problem,” the 38-year-old father of three said in an interview in a coffee shop in Nairobi’s business district.

He is not alone. In the last three years, 2.7 million people out of a population of around 45 million have been negatively listed on Kenya’s Credit Reference Bureaux, according to a study by Microsave, which advises lenders on sustainable financial services.

For 400,000 of them, it was for an amount less than $2.

Global implications

Some of the fintech lenders are expanding into other African countries and into Latin America and Asia, saying their aim is to help some of the billions of people who lack bank accounts, assets or formal employment climb the economic ladder.

Tala says it has granted more than 6 million loans worth more than $300 million, mainly in Kenya, since it launched in Kenya in 2014. It is expanding its newer businesses in Mexico, Tanzania and the Philippines and is piloting in India.

Tala and Branch argue that their technology, which relies on an algorithm that builds a financial profile of customers, minimizes the risk of default. They say they strive to play a helpful role in planning for tighter regulation.

“We believe that credit bubbles and over-indebtedness will be a challenge over the next decade. (Credit Reference) Bureaus and regulation will be a big part of the solution,” said Erin Renzas, a Branch spokeswoman.

Branch says it expects to grant about 10 million loans worth a total of $250 million this year in Kenya and its other markets, Nigeria and Tanzania.

High interest rates

The current status of the sector, outside the direct remit of the central bank, allows providers, both banks and others, to skirt a government cap on interest of four points above the central bank’s benchmark interest rate, which now stands at 9.5 percent.

Market leader M-Shwari, Kenya’s first savings and loans product introduced by Safaricom and Commercial Bank of Africa in 2012, charges a “facilitation fee” of 7.5 percent on credit regardless of its duration.

On a loan with a month’s term, this equates to an annualized interest rate of 90 percent. The shortest loan repayment period is one week. A Safaricom spokesman referred Reuters to the CBA for comment. Calls to their switchboard and an email were not answered on Thursday.

Tala and Branch, number four and six in a ranking based on usage data by FSD Kenya, offer varying rates depending on the repayment period.

Their apps, downloaded by Reuters, each offered a month’s loan at 15 percent, equating to 180 percent over a year. Both companies say rates drop dramatically as people pay back successive loans.

Barclays Kenya launched an app in March offering 30-day loans with an interest rate of just less than 7 percent, still a hefty 84 percent annual equivalent rate. Reuters was unable to reach their spokespeople by telephone.

The new draft bill says digital lenders will be licensed by a new Financial Markets Conduct Authority and that lenders will be bound by any interest rate caps the Authority sets. But it is not clear if digital lenders are subject to such caps and the current government cap on banks’ interest rates is under review.

Introduced in 2016 to stop banks charging high interest rates, the cap has stifled traditional bank lending and the International Monetary Fund has conditioned Kenya’s continued access to balance of payments support on its removal.

But members of parliament say the public has had enough of high interest rates and the draft does not say the cap will be lifted. The finance ministry will come up with a final version of the bill in the next few weeks before sending it to parliament.
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Italy’s prime minister-designate, Giuseppe Conte, a political novice and obscure law professor accused of padding his resume, put the finishing touches to his cabinet lineup Friday. And initial reaction from financial markets was far from approving.

Italian government bond prices slumped and the country’s ailing banks saw their stock prices hit an 11-month low. Italy’s outgoing economy minister, Pier Carlo Padoan, warned the incoming coalition government of the anti-establishment Five Star Movement (M5S) and far-right League not to underestimate the power of the markets.

“The most worrying aspect of the program, which this government is working on, is its underestimation of the consequences of certain choices,” Padoan told the Il Sole 24 Ore newspaper.

M5S and the League unveiled their government agreement a week ago, after more than 70 days of tortuous talks, following the country’s inconclusive parliamentary elections in March. The polls saw establishment parties trounced.

The coalition partners’ program includes massive tax cuts favoring the rich — a League demand — additional spending on welfare for the poor, and job-seekers and a roll-back of pension reforms that helped Italy weather the multi-year-long eurozone debt crisis which bankrupted Greece.

Investors — domestic and foreign — are expressing alarm about what the next few months may hold for an Italy governed by unlikely political partners. Fears include a public sector spending spree that will put Rome not only on a collision course with the European Union over budget rules. It also will weaken the already perilous state finances of Italy, the third largest economy in Europe and the second most indebted.

Some financial analysts say investors are becoming wary about European equities in general, fearing political and economic unpredictability in Italy could trigger contagion, prompting a new eurozone crisis. European markets were on track Friday to record collectively their first weekly decline since March — and investors last week withdrew the most money in nearly two years from western European funds.

“Investors should take caution as far as European equities go,” Boris Schlossberg, managing director of FX Strategy at BK Asset Management, told CNBC’s cable TV show Trading Nation this week.

Immigration

EU officials in Brussels and Italy’s half-a-million migrants are as anxious as investors. They are bracing for confrontations with the incoming populist government, whose two halves agree about very little, except when it comes to euro-skepticism and disapproval of migrants. M5S itself is split sharply between liberals and conservatives.

Earlier this week Italian President Sergio Mattarella approved Giuseppe Conte, aged 54, as the coalition’s nominee for prime minister — despite evidence that the academic had padded his resume with stints at New York University, Girton College, Cambridge and France’s prestigious Sorbonne. None of them had any record of his official attendance, although he was granted a visitor’s library card by NYU.

Conte also claimed in his resume to have founded a prominent Italian law practice, but was only an external contributor, according to the firm.

A figurehead?

Few here in Rome believe Conte, who was born in the southern region of Puglia, will be anything but a figurehead. The mutually antagonistic party leaders, M5S’ Luigi Di Maio and the League’s Matteo Salvini, weren’t prepared to give way to each other and let the other have the job — hence Conte’s nomination, which still has to be approved by parliament.

The Economist magazine suggested he might end up as the fictional valet Truffaldino, a character in an 18th century Italian comedy entitled “Servant of Two Masters.” Whether he will be able to bridge disagreements between Di Maio and Salvini is unclear — and a testimony to that, say analysts, is the party leaders’ decision to set up a “conciliation committee” to adjudicate disputes.

“Nobody knows what will happen, because this is a government without precedent and the two parties are virtually incompatible,” said Sergio Fabbrini, director of the LUISS School of Government in Rome.

Economy

The parties were locked in dispute Friday with no agreement about who should occupy the key position of economy minister. The League has been pushing for 82-year-old economist Paolo Savona, a former industry minister who wants Italy to drop the euro as its currency, which he describes as “a German cage.” Savona opposed Italy signing in 1992 the Maastricht Treaty, a key document that started the process of closer EU political integration.

Even if the League fails in its bid to secure the economic portfolio for Savona, there are plenty of likely policy clashes ahead between the EU and Western Europe’s first all-populist government, despite the fact the League is no longer demanding Italy drop Europe’s single currency and M5S is no longer pushing for a referendum on Italy’s future EU membership.

Both party leaders now talk about reforming the EU from within.

Trouble ahead

Nonetheless, flashpoints are on the near horizon. Salvini, a hardline migrant opponent, is likely to become interior minister and will oversee the coalition’s agreed to anti-immigration plans, many of which are in violation of EU law. They include truncating asylum procedures, the forcible detention of irregular migrants and the repatriation of half-million migrants, most from sub-Saharan Africa, to their countries of origin.

Next month, EU leaders are due to extend the European bloc’s sanctions on Russia, but Italy’s coalition partners are opposed, viewing Moscow as a partner, rather than foe. Both M5S and the League want the sanctions lifted that were imposed on Russia for its 2014 annexation of Crimea.

Some analysts predict the new government’s slim majority — only seven in the Senate — as well as fiscal realities, will constrain the revolutionary fervor of Italy’s populists. But others envision instability and unpredictability in the weeks and months ahead.

On Friday, the European Commission’s vice-president for the euro, Valdis Dombrovskis, issued a stark warning to Italy: “Our message from the European Commission is very clear: that it is important Italy continues to stick with responsible fiscal and macro-economic policies.”
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Military veterans who were discharged for relatively minor offenses say they often can’t get jobs, and they hope a recent warning to employers by the state of Connecticut will change that.

The state’s human rights commission told employers last month they could be breaking the law if they discriminate against veterans with some types of less-than-honorable discharges. Blanket policies against hiring such veterans could be discriminatory, the commission said, because the military has issued them disproportionately to black, Latino, gay and disabled veterans.

At least one other state, Illinois, already prohibits hiring discrimination based on a veteran’s discharge status, advocates say, but Connecticut appears to be the first to base its decision on what it deems discrimination by the military. Regardless of the state’s reasons, veterans say, the attention there could at least educate employers.

“You may as well be a felon when you’re looking for a job,” said Iraq War veteran Kristofer Goldsmith. Goldsmith said the Army gave him a general discharge in 2007 because he attempted suicide.

An honorable discharge is the only type that entails full benefits. A dishonorable discharge is given after a court-martial for serious offenses, which can include felonies. Other types of discharges in between — known by veterans as “bad paper” — are issued administratively, with no court case, and can stem from behavior including talking back, tardiness, drug use or fighting.

The commission says its guidance focused on that middle class of discharges.

Sometimes such discharges are given to veterans whose violations stemmed from post-traumatic stress disorder, like Goldsmith’s, or brain injuries. Many private employers may not be aware of those extenuating circumstances or understand the differences between discharges, critics say.

And they either won’t hire bad-paper veterans or won’t give them preferences an honorably discharged veteran would get, the Veterans Legal Services Clinic at Yale Law School told the Connecticut commission.

The clinic, acting on behalf of the Connecticut chapter of the Iraq and Afghanistan Veterans of America, showed the commission job postings that require applicants who have served in the military to have been honorably discharged.

It also cited a 2017 report by the advocacy organization Protect Our Defenders that found black service members were more likely to be disciplined than white members. And the commission’s guidance to employers notes thousands of service members have been discharged for their sexual orientation.

Employers might require an honorable discharge as an easy way to narrow the pool and get strong applicants, said Amanda Ljubicic, vice president of the Chamber of Commerce of Eastern Connecticut.

“At face value it seems like a simple, logical cutoff to make as an employer,” she said. “Certainly this new policy forces employers to think about it differently and to think about the complexities.”

The Vietnam Veterans of America asked for a presidential pardon for bad-paper veterans. President Barack Obama didn’t respond as he was leaving office, nor did President Donald Trump as he was entering, said John Rowan, the organization’s president. He was unsure whether activists would ask Trump again.

PTSD

More than 13,000 service members received a type of discharge for misconduct, known as other than honorable, between 2011 and 2015, despite being diagnosed with PTSD, a traumatic brain injury or another condition associated with misconduct, the U.S. Government Accountability Office found.

The Department of Veterans Affairs, under an order from Congress, expanded emergency mental health coverage to those veterans for the first time last year.

Passing new laws to address the effects of bad paper is probably not the best solution, said U.S. Sen. Chris Murphy, a Connecticut Democrat who pushed for the changes; rather, he said, the military should stop issuing bad-paper discharges to injured veterans.

Goldsmith, 32, said he developed PTSD after his first deployment to Iraq. He was set to leave the military and go to college when the Army extended his active-duty service and ordered him back in 2007. Goldsmith said he attempted suicide shortly before he was due to deploy.

Because of his general discharge, Goldsmith lost his GI Bill benefits. He didn’t know how he’d find a job. If he didn’t mention his military service, he would have a four-year gap on his resume. But if he did, he would have to disclose medical information to explain why he left.

A friend eventually hired him to work at a photo-booth company, and Goldsmith began contacting members of Congress to press for health care for veterans with bad paper.

“Things like addressing employment discrimination on the national level are so far from possible,” he said, “I don’t think any of us in the advocacy community has put enough pressure on Congress to handle it.”
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Here are the highest-paid CEOs for 2017, as calculated by The Associated Press and Equilar, an executive data firm.

The AP’s compensation study covered 339 executives at S&P 500 companies who have served at least two full consecutive fiscal years at their respective companies, which filed proxy statements between January 1 and April 30.

Compensation often includes stock and option grants that the CEO may not receive for years unless certain performance measures are met. For some companies, big raises occur when CEOs get a stock grant in one year as part of a multi-year grant.

1. Hock Tan

Broadcom

$103.2 million

Change from last year: Up 318 percent

1. Leslie Moonves

CBS

$68.4 million

Change: flat

1. W. Nicholas Howley

TransDigm

$61 million

Change: Up 223 percent

(Howley left the CEO position last month.)

1. Jeffrey Bewkes

Time Warner

$49 million

Change: Up 50 percent

1. Stephen Kaufer

TripAdvisor

$43.2 million

 

Change: Up 3,400 percent

(Kaufer’s 2017 compensation excludes $4.8 million in incremental fair value relating to the modification of awards granted in 2013.)

1. David Zaslav

Discovery Communications

$42.2 million

Change: Up 14 percent

1. Robert Iger

Walt Disney

$36.3 million

Change: Down 11 percent

1. Stephen Wynn

Wynn Resorts

$34.5 million

Change: Up 23 percent

(Wynn left the CEO position in February.)

1. Brenton Saunders

Allergan

$32.8 million

Change: Up 693 percent

1. Brian Roberts

Comcast

$32.5 million

Change: Down 1 percent
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As tensions are easing over a potential trade war while negotiations between the U.S. and China continue, the uncertainty about tariffs and the eventual impact on the U.S. agricultural industry is taking a toll on U.S. farmers heading to the fields to plant this year’s crops. As VOA’s Kane Farabaugh reports, there is a lot at stake, not just for farmers but also the companies that supply them.
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The U.S. oil export infrastructure is straining to keep up as the country’s crude oil exports hit new highs and China snaps up more of it than ever before.

U.S. crude production has surged to a record 10.7 million barrels a day, driven largely by growth from the Permian shale patch in West Texas, which pumps more than 3 million barrels per day.

However, the infrastructure to move it abroad is lagging, even as U.S. prices are well below the Brent benchmark, a discount that sits just off three-year highs at $8.09 per barrel. 

U.S. crude exports peaked at 2.6 million bpd two weeks ago, but are expected to keep rising.

What is US export capacity?

No definitive data are available on how much crude the United States can export, though analysts estimate a nationwide capacity of 3.5 million to 4 million bpd. Most terminal operators and companies do not disclose capacity, and the U.S. Energy Department does not track it.

“So far, export capacity is keeping pace, but we are walking a tightrope,” said Bernadette Johnson, vice president at Drilling Info.

That capacity may begin to be tested next month, as Sinopec, Asia’s largest refiner, bought a record 16 million barrels, or about 533,000 bpd of U.S. crude, to load in June, two sources with knowledge of the matter said Wednesday.

For the last six months of available data, ending in February, the United States exported about 332,000 bpd to China.

Terminals designed for imports

Analysts are concerned about how quickly the crude terminals at Gulf Coast ports, many initially designed for imports, can shift to handling exports. Only the Louisiana Offshore Oil Port can handle supertanker exports, but it only started testing in February. The supertankers, known as VLCCs or very large crude carriers, can handle about 2 million barrels of oil, the amount preferred by Asian buyers with bigger ports.

“There’s only one dock on the Gulf Coast that can handle a VLCC deepwater, and that’s LOOP. And the LOOP has only started to export,” said Sandy Fielden, director of research in commodities and energy at Morningstar. 

Port of Corpus Christi in Texas is developing its Harbor Island port, which will accommodate 120 VLCCs per year, said Jarl Pedersen, chief commercial officer at the port, with a targeted completion of late 2020.

Kpler, a cargo tracking service, Thursday estimated that up to 4.8 million bpd can be moved from the top crude-exporting ports of Corpus Christi, Houston, Port Arthur and New Orleans. Their estimate in October was 3.2 million bpd.

PIRA Energy Group put the U.S. overall crude export capacity at 3.5 million bpd, while Morningstar’s estimate is 3.8 million bpd at most.

Pipelines lacking, too

In addition to port constraints, inadequate pipeline space has created a glut of supply in West Texas, pushing the principle cash grade there to a $13 discount to benchmark U.S. crude futures this month, the biggest in 3½ years.

“The constraint is really the pipeline coming down from the Permian to Corpus Christi,” Pedersen said. However, the ship channel still needs to be deepened, a $320 million project in development with the U.S. Army Corps of Engineers.

There is 3.4 million bpd of pipeline capacity, while total output from tight oil and legacy production from vertical wells in the Permian is at more than 4.2 million bpd, according to energy consultancy Wood Mackenzie.

“The combined volumes mean that the infrastructure is crammed full — there’s little or no room for incremental volumes,” R.T. Dukes, head of U.S. Lower 48 oil supply at Wood Mackenzie said in a note.

About 300,000 bpd of new pipeline capacity is to come on by the end of January, but “it’s really from next summer that we’ll see big new capacity,” Dukes said.

In the second half of 2019, another 1.25 million bpd will be added, lifting total capacity up to 5 million bpd, he said.

“That’s when the big discount of WTI at Midland will narrow,” Dukes said.
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Brazil’s government said late Thursday that a deal had been reached with truckers to suspend a 4-day-old strike that caused fuel shortages, cut into food deliveries, backed up exports and threatened airline flights.

Eliseu Padilha, chief of staff for President Michel Temer, told reporters in Brasilia that several unions that represent truckers agreed to suspend the strike for 15 days to give all parties time to negotiate a solution to rising fuel prices that drivers say have cut deeply into their earnings.

The deal came after a full day of negotiations with several of the largest transportation unions. 

 

Diumar Bueno, president of the National Confederation of Autonomous Transporters, told the newspaper Folha de S. Paulo that he hoped the agreement would lead to drivers quickly dismantling roadblocks on highways and streets.

But it wasn’t immediately clear how many of the thousands of truckers, who by the nature of their jobs operate with a good bit of independence, would heed calls to stop the strike.

Road transport

Brazil’s economy runs largely on road transport, and the strike to protest rising diesel prices was beginning to have serious consequences, with highway police reporting blocked roads in nearly all of Brazil’s states.

The airport in the capital of Brasilia allowed landings only by planes that carried enough fuel to take off again. The stop-gap measure hadn’t resulted in any flight cancelations, but it was unclear how long it could continue before companies would have to ground planes. The civil aviation authority and airport authorities said they were monitoring fuel supplies carefully.

Long lines formed at gas stations, and some ran out of some kinds of fuel. In Rio de Janeiro, only about two-thirds of the city’s buses were running Thursday, according to Rio Onibus, which represents the companies that run the various lines.

Local media reported food shortages and rationing in some supermarkets, and an association of supermarkets in Brazil’s south warned that perishable food would run out in days if the strike did not end. The association said stores on average have a 15-day supply of dry goods, but fresh food would run out or spoil before then.

The Brazilian Association of Meat Industry Exporters said dozens of meatpacking plants were idling because of the strike, and 1,200 containers carrying beef for export were not being loaded on ships each day. Brazil is one of the largest exporters of meat in the world.

Truckers complain that rising diesel prices have cut deeply into their income and are demanding relief from the government. Diesel prices are being pushed up by rising world oil prices and Brazil’s falling real currency.

Truckers reject Petrobras move

Truckers rejected the Wednesday decision by the state oil company Petrobras to reduce diesel prices at refineries by 10 percent. The company said the measure would last for 15 days and give the government time to negotiate an end to the strike.

“The government thinks truckers are illiterate and can’t count,” said Vicente Reis, who has been driving for 20 years. “In 2018, there has already been about a 25 percent increase in fuel prices. And now they want a 15-day freeze with (a reduction of) 10 percent. Truckers know how to count, Mr. President.”
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U.S. President Donald Trump signed into law Thursday a measure that eases rules imposed on banks in the aftermath of the 2008 financial crisis and the Great Recession.

The law relaxes regulations and oversight on banks with assets below $250 billion, leaving a handful of the largest U.S. banks that must still comply with the stringent rules and oversight.

Trump said at the signing ceremony the rules and oversight, enacted by the 2010 Dodd-Frank financial reform law, were “crushing small banks.” Trump lauded the signing as a victory in his administration’s efforts to eliminate regulations to promote economic growth.

Although Trump signed the bill into law, much of Dodd-Frank remains intact. Trump signed the Republican-led measure that was passed by Congress after receiving the support of some Democrats.

Dodd-Frank was signed into law by President Barack Obama in response to a crisis that resulted in the loss of 8 million jobs, 2.5 million home foreclosures and the shuttering of 2.5 million businesses, according to Northwestern University’s Institute for Policy Research.

A federal report prepared by the Financial Crisis Inquiry Commission concluded economic weaknesses that created the potential for the crisis were “years in the making.” But the report said “it was the collapse of the housing bubble — fueled by low interest rates, easy and available credit, scant regulation and toxic mortgages — that was the spark that ignited a string of events, which led to the full-blown crisis in the fall of 2008.”
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Even though the United States is one of the richest and most technologically advanced countries in the world, about 45 million Americans live below the poverty line. In Buffalo, New York, a once-prosperous city that has fallen on hard-times, one-third of its residents live in poverty. As Olga Loginova reports, the city offers an example of what happens when a once-powerful industrial sector declines and well-paying jobs become scarce.
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Germany’s struggling Deutsche Bank is slashing thousands of jobs as it reshapes its stocks trading operation and refocuses its global investment banking business on its European base.

The bank said Thursday it would cut its workforce from 97,000 to “well below” 90,000 and that the reductions were underway.

It said headcount in the stocks trading business, mostly based in New York and London, would be reduced by about 25 percent. Those cuts will cost the bank about 800 million euros ($935 million) this year.

Deutsche Bank has struggled with high costs and troubles with regulators. The bank replaced its CEO in April after three years of annual losses and lagging progress in streamlining its operations.

New CEO Christian Sewing has said the bank would refocus on its European and German customer base and cut back on costlier and riskier operations where it doesn’t hold a leading position. Sewing said the bank was committed to its international investment banking operations but must “concentrate on what we truly do well.” The new strategy means stepping back from several decades of global expansion in which the bank sought to compete with Wall Street rivals such as Goldman Sachs or JPMorgan Chase.

Sewing replaced John Cryan in April with a mandate to accelerate the bank’s wrenching restructuring. It has suffered billions in losses from fines and penalties related to past misconduct. But progress in cutting costs has remained elusive. Sewing on Thursday affirmed the bank’s goal to hold costs to 23 billion euros this year and 22 billion next year.

The announcement came hours before Board Chairman Paul Achleitner had to face disgruntled investors at the bank’s annual shareholder meeting. The bank’s share price has sagged and it paid only a small dividend of 11 euro cents per share last year.

Addressing an audience of several thousands in Frankfurt, Achleitner said Cryan had “set the ball rolling for fundamental change” but later displayed “shortcomings in decision-making and implementation.”

“Dear shareholders, you are right to expect the bank and its management to hit the targets it has set itself,” he said. “If there are signs those targets are in jeopardy… then we on the supervisory board have to act swiftly and decisively.”

The bank’s troubles and the turmoil surrounding Cryan’s departure have put pressure on Achleitner as well. Cryan was forced to publicly push back against a media report that Achleitner was looking for a replacement, then left to twist in the wind for days before being shown the door. Achleitner brought Cryan to the bank in 2015 and thus in principle shares responsibility for the bank’s strategy and performance since then.
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Amazon, Starbucks, Vulcan and other companies have pledged a total of more than $350,000 toward an effort to repeal Seattle’s newly passed tax on large employers intended to combat homelessness.

Just days after the Seattle City Council approved the levy, the No Tax On Jobs campaign, a coalition of businesses, announced it would gather signatures to put a referendum on the November ballot to repeal it. 

Amazon, Starbucks, Vulcan, Kroger and Albertsons each promised $25,000 to the effort last week, according to a report filed by the campaign. The Washington Food Industry Association pledged $30,000. 

Referendum backers will have to gather 17,632 signatures of registered Seattle voters by June 14 to get the measure on the ballot.

The so-called head tax will charge businesses making at least $20 million in gross revenues about $275 per full-time worker each year. The tax would begin in 2019 and raise about $48 million a year to build affordable housing and provide emergency homeless services.

Opponents say the Seattle measure is a tax on jobs and questioned whether city officials are spending current resources effectively. 

Worker and church groups and others praised the tax as a step toward building badly needed affordable housing in an affluent city where the income gap continues to widen and lower-income workers are being priced out.

The clash over who should pay to solve the city housing crisis that’s exacerbated by Seattle’s rapid economic growth featured weeks of tense exchanges, raucous meetings and a threat by Amazon, the city’s largest employer, to stop construction planning on a 17-story building near its hometown headquarters.

Amazon has resumed planning the downtown building, but the company remains “apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here,” said Drew Herdener, Amazon’s vice president for global corporate and operations communications. 

Four council members initially pitched an annual tax of $500 per full-time employee before a compromise proposal lowered the tax rate after they could not muster six votes needed to override a potential veto by Mayor Jenny Durkan. 

The mayor signed the head tax on May 16, saying “we must make urgent progress on our affordability and homelessness crisis.”

Seattle’s action came as cities around San Francisco consider business taxes to help offset issues created by the growth of tech companies. 
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Starbucks Corp. on Wednesday revealed details of the employee anti-bias training program that will take place behind closed doors at 8,000 U.S. company-owned cafes on the afternoon of May 29.

Starbucks announced plans to shutter stores and corporate offices to train 175,000 employees after the controversial April 12 arrests of two black men, who were detained for hours after the manager of a Philadelphia Starbucks called police because they had not made purchases and refused to leave.

The arrests of Donte Robinson and Rashon Nelson, who were waiting to meet a friend, sparked protests and calls for a boycott of the coffee chain known for its diverse workforce and liberal stances on issues such as gay marriage.

Starbucks said the first training on May 29 “will serve as a step in a long-term journey to make Starbucks even more welcoming and safe for all.”

It will include videos featuring Starbucks executives such as Chief Executive Kevin Johnson, Executive Chairman and co-founder Howard Schultz, board member Mellody Hobson, hip hop artist Common, store managers and experts from the Perception Institute. Employees also will view a film called “You’re Welcome” by Stanley Nelson and participate in discussion and problem-solving sessions on identifying and avoiding bias in every day situations.

Starbucks said the long-term program is being designed and developed with input from researchers, social scientists, employees and other advisers.

Those partners include consultancy SY Partners — which worked with Starbucks to reinvent itself after a business crisis spawned by the “Great Recession”; the Perception Institute; Sherrilyn Ifill, president of the NAACP Legal Defense Fund; Bryan Stevenson, executive director of the Equal Justice Initiative; and Heather McGhee, president of public policy group Demos.

Since the Philadelphia incident, Starbucks has said it will allow people to sit in its cafes and use its restrooms without making a purchase. It also said it has outlined procedures for dealing with customers who are disruptive, using tobacco, drugs or alcohol or sleeping in its cafes. 
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U.S. President Donald Trump said on Wednesday “a different structure” is needed in trade negotiations with China, but he did not provide further details on the kind of change he seeks.

“Our trade deal with China is moving along nicely,” Trump said in his Twitter post Wednesday morning, “but in the end we will probably have to use a different structure in that this will be too hard to get done and to verify results after completion.”

The stock market reacted negatively after Trump cast doubt on trade negotiations with China but ultimately trimmed its losses, ending the day in the positive territory and gained 52.40 points, or 0.21 percent.  

Trump said on Tuesday he was neither pleased nor satisfied with how the recent trade talks with China went, but added, “They’re a start.” 

After two days of trade talks between the two countries in Washington last week, China agreed to “substantially reduce” the $375 billion annual trade surplus it has over the U.S. by buying more American goods, but there was no mention of any specific import and export targets in the statement agreed to by the two countries.

On Capitol Hill, concerns appear to be mounting on Trump’s approach to trade talks with China. 

Republican Senator John Cornyn of Texas cautioned Wednesday that the United States needs to remain “steely-eyed” and make sure “China isn’t playing us for fools.” 

Democratic Senator Debbie Stabenow of Michigan warned, “It’s important we not only talk tough about China, but actually be tough with China.”

“I am really concerned about the president’s hemming and hawing over the last few days when it comes to China. I’m worried that President Xi [Jinping] is crafting a much better deal than President Trump,” Senate Minority Leader Chuck Schumer of New York said Tuesday.  

On trade with China, Schumer added that he is “closer to the president’s view” than he was to the views of former Presidents Barack Obama or George W. Bush.  

Republican Senator Marco Rubio of Florida, chairman of the Congressional-Executive Commission on China and a longtime critic of China, said Wednesday that the U.S. needs a “structural rebalance” of trade with China, not a “dollar rebalance.” 

In a Twitter post, Rubio said he has urged Trump to “follow his initial instincts on China,” and he also asked Trump to “listen to those who understand that a short-term trade deal that sounds good but poses long-term danger is a bad deal.”  

According to U.S. media reports, infighting between free-trade advocates and protectionists within Trump’s trade team has led to contradicting policy pronouncements and public statements on trade negotiations with China.

For example, U.S. Treasury Secretary Steven Mnuchin said the United States would hold off on imposing tariffs on China. But U.S. Trade Representative Robert Lighthizer said hours later the tariffs were still on the table. Earlier this month, White House trade adviser Peter Navarro, known for his protectionist views, reportedly feuded with Mnuchin on his approach to trade talks during their trip to Beijing.

The recent rounds of trade talks are aimed at avoiding a full-blown trade war between the United States and China.

In April, Trump imposed tariffs on $50 billion worth of Chinese goods, and the Chinese retaliated with tariffs of their own. Trump announced he had instructed the U.S. trade representative to consider whether tariffs on another $100 billion worth of Chinese goods would be appropriate following China’s announcement.

Michael Bowman contributed to this report.
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This week marks six months since Zimbabwe President Emmerson Mnangagwa took office, after Robert Mugabe gave in to military pressure and resigned.

During the weekend, the 75-year-old Mnangagwa told supporters that since he took over, a lot had improved.

He says Zimbabwe’s annual foreign direct investment had been around $400 or 500 million, but for the past five months it has gone to more than $15 billion committed to investment in the country, with international companies and countries such as Canada, South Africa, China, Britain and the United States coming to invest in power generation and water.

Last Tuesday, the British gave $100 million to aid toward trying to eliminate Zimbabwe’s cash crisis, Mnangagwa said.

The country’s methane gas reserves have improved as well, he added.

“After about three and half years, we should be able to produce eight million liters of fuel per day,” Mnangagwa said. “The country only consumes five million [liters] per day — three million surplus per day.  Zimbabwe will prosper, it is going to develop. Zimbabwe will shine not only in SADC [Southern African Development Community], but also in Africa because Zimbabwe is in good hands. Our political party ZANU-PF is a revolutionary party, it caters for the interests of the people.”

Chido Masasai, an unemployed former media student, says Zimbabwe’s people have yet to see the money the president is talking about. She says there is still a shortage of cash, and the black market continues to operate.

What she does see is a greater expression of political views — a significant change from the Mugabe era when authorities regularly harassed the president’s critics and opponents.

“But in terms of freedom of expression, a lot more people are liberal with their views and opinions. You find that there are a lot of political parties that have come into the fore,” Masasai said.

Harare-based economist John Robertson says it is too early for Zimbabwe’s economy to fully recover from Mugabe’s populist policies, which drove away most foreign investment.

“The economy is still in great difficulty, but remember that the difficulties we face were built slowly into the system by 38 years of very badly chosen economic policies, and I think that the media is largely responsible in increasing the expectations of the population beyond what was reasonably possible within a short period of time,” he said.

Robertson added that Mnangagwa might make major policy changes, such as compensating white farmers for land that was confiscated during the Mugabe years, and ensuring that black farmers can get bank loans instead of depending on government handouts.

“I think this is why the president is waiting for the elections,” he said. “Behind him he would have increased amounts of courage to make changes that will prove unpopular to the people who thought they achieved what they were expecting.”

The president is expected to announce a date for the elections soon, which could place in July or August.  
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Ethiopia’s state-run telecoms monopoly has agreed to allow some local firms to provide internet services through its infrastructure, a move seen as spurring competition and expanding the data market, officials said.

Ethio Telecom has more than 16 million subscribers of internet services in the country of over 100 million people.

It generated over 27.7 billion birr ($1 billion) in revenues in the first nine months of 2017/18, 70 percent of which was earned from mobile services and 18 percent from internet.

“Our objective of signing VISP [virtual internet service provider] agreements is to increase subscriptions,” said Abdurahim Ahmed, the company’s head of communications.

“There may be price reductions. There will be competition among themselves — that is the core idea,” he told Reuters.

Abdurahim said eight firms have signed up to provide the services, which include different internet packages. Foreign companies were not allowed to provide services, he said.

Ethiopia is one of few African countries to still have a state monopoly in telecoms. The companies that signed agreements with Ethio Telecom have either just been established to sign up for this new business or they were previously doing other business.

Addis Ababa has ruled out liberalizing the telecoms sector, saying the revenue it generates was being spent on infrastructure projects such as railways.

Abdurahim said the decision to allow private companies to sell services was not a precursor to fully liberalizing the sector.

“This has nothing to do with that. They will be providing downstream services,” he said, referring to data sent from an existing network service provider.

While Ethio Telecom has consistently increased annual revenue, vast parts of the country — including the capital — still suffer from occasionally patchy mobile reception and internet service.

The low internet penetration and poor quality of service in Ethiopia is often a drag on businesses and is especially seen as an obstacle to technology startups such as those that have thrived in neighboring Kenya.

Ethiopia maintains a tight grip on several other industries, with foreign firms also barred from the banking and retail sectors.
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Turkey’s currency has fallen to a record low against the dollar amid concerns about an outflow of investor capital and the country’s ability to manage the situation.

The lira weakened to over 4.80 per dollar on Wednesday, down some 5 percent since the previous day.

 

The drop puts pressure on the Turkish Central Bank to sharply increase rates before a scheduled monetary policy meeting on June 7. But it is seen to be reluctant as President Recep Tayyip Erdogan wants rates low.

 

Higher rates can support a currency and ease inflation, but also hinder economic growth by making borrowing more expensive.

 

The lira has lost more than 20 percent of its value against the dollar since the start of the year. The risk is that will increase the price of imports, making Turkish people effectively poorer. It could also encourage more investors to pull their money out if they expect that the value of their investments to drop as the currency declines.

 

Turkey’s market jitters in part reflect a global trend in which the currencies of emerging economies have come under pressure. Economists say that is partly because the U.S. Federal Reserve is raising interest rates, encouraging investors to place their money in the U.S. instead of other economies.

 

Because Turkey is particularly dependent on foreign capital, its markets are one of those to have suffered most. Other countries that have seen sharp drops in their currencies include Brazil and Argentina.

 

But Turkey’s currency has been hit particularly hard because of the complicated political backdrop. While a central bank is in theory independent from the government, Erdogan has put pressure on it to not raise rates as he prepares for early presidential and parliamentary elections next month.

 

Jason Tuvey, an economist with Capital Economics in London, says that if the central bank “continues to bow to pressure from Erdogan and refrains from raising interest rates, that would lead to an even sharper fall in the currency.”

 

Deputy Prime Minister Bekir Bozdag on Wednesday cast the lira’s drop as a foreign plot to harm Erdogan and affect the results of the polls.

 

“Those who believe that by manipulating the dollar they will lead to results that will harm the nation and their pockets and change the election result, are mistaken,” the state-run Anadolu Agency quoted Bozdag as saying.

 

Muharrem Ince, the main opposition party’s candidate who is challenging Erdogan at the June 24 presidential race, called on the Turkish leader to urgently halt interfering in the central bank’s monetary policy and to ease concerns over fiscal discipline, warning that the “economy is about to hit the wall.”

 

 

 
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Households are feeling more stable, small businesses are making money and many expect to expand and hire in the coming year, signs of continued optimism in two key parts of the economy, the Federal Reserve reported Tuesday in a pair of annual surveys.

Among more than 8,000 small businesses and more than 12,000 households covered in separate surveys late last year by the Fed and its 12 regional banks, the message was similar: economic conditions have been getting better and the expectation is for the good times to continue.

“We see a decided uptick” in the economic and credit conditions faced by small businesses, said one Fed official involved in the small business survey. “We are seeing improved business confidence and improved business performance,” with profitability and access to finance increasing in 2017, more than 70 percent of firms expecting revenue growth next year, and 48 percent expecting to add employees.

Among households, 74 percent of U.S. adults said they were financially comfortable or at least okay in 2017, four percentage points higher than in 2016 and 10 percentage points higher than the first survey year of 2013. Improvement was strongest in lower income households. The percentage of households that reported they were struggling financially fell to 7 percent from 9 percent last year.

The results from the surveys show that improvements in household and business conditions that took root under President Obama continued through the first year of the Trump administration.

Both findings are potentially significant for the economy’s future performance. Businesses with fewer than 500 employees generate perhaps 60 percent of new jobs, the New York Fed estimated in material released with the small business survey, and many report plans to expand in 2018.

Consumer spending, meanwhile, accounts for the bulk of U.S. gross domestic product, and strong household income growth in recent years has buoyed the economy overall.

“The mass of the consumer sector is in pretty good shape and that should continue,” Nathan Sheets, chief economist at PGIM Fixed Income said in an interview.

However, based on answers to a series of questions, about 2-in-5 adults faced what the Fed judged to be a “high likelihood of material hardship,” such as an inability to afford sufficient food, medical treatment, housing or utilities. About 4 in 10 said they could not meet an unexpected expense of $400 without carrying a credit card balance or borrowing from a friend.

Among the smallest firms, those with less than $100,000 in revenue, about 74 percent had trouble paying their bills, and a majority of those were either averse to borrowing or worried they would be turned down and so did not apply for credit.

But in overall the results for positive, said Fed officials.

Among firms that did apply for loans, for example, 46 percent received all they requested, compared to 40 percent last year. Nearly 60 percent wanted to use the money to expand. 
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The Trump administration is preparing to publish on Thursday long-delayed proposed rule changes for the export of U.S. firearms, a State Department official said on Tuesday.

The rule changes would move the oversight of commercial firearm exports from the U.S. Department of State to the Department of Commerce.

The action is part of a broader Trump administration overhaul of weapons export policy that was announced in April.

Domestic gun sales drop

Timing for the formal publication of the rule change and the opening of the public comment period was unveiled by Mike Miller the acting secretary for the Directorate of Defense Trade Controls, the State Department’s body that currently oversees the bulk of commercial firearms transfers and other foreign military sales.

He was speaking at the Forum on the Arms Trade’s annual conference at the Stimson Center, a Washington think tank.

Reuters first reported on the proposed rule changes in September as the Trump administration was preparing to make it easier for American gun makers to sell small arms, including assault rifles and ammunition, to foreign buyers.

Domestic gun sales have fallen significantly after soaring under President Barack Obama, when gun enthusiasts stockpiled weapons and ammunition out of fear that the government would tighten gun laws.

A move by the Trump administration to make it simpler to sell small arms abroad may generate business for gun makers American Outdoor Brands and Sturm, Ruger & Company in an industry experiencing a deep sales slump since the election of President Donald Trump.

Remington recovers from bankruptcy

Remington, America’s oldest gun maker, filed for bankruptcy protection in March, weeks after a shooting at a high school in Parkland, Florida, killed 17 people and triggered intensified campaigns for gun control by activists. Remington emerged from bankruptcy last week.

The expected relaxing of rules could increase foreign gun sales by as much as 20 percent, the National Sports Shooting Foundation has estimated. As well as the industry’s big players, it may also help small gunsmiths and specialists who are currently required to pay an annual federal fee to export relatively minor amounts of products.
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U.S. President Donald Trump said Tuesday “there is no deal” yet to lift the seven-year ban on the sale of American-made components to the giant Chinese telecommunications company ZTE, but that there might be a settlement as part of ongoing trade talks between the world’s two biggest economies.

Trump told reporters at the White House that he could envision a $1.3 billion fine against ZTE for violating the U.S. ban on trading with Iran and North Korea, the replacement of ZTE’s management and board of directors and imposition of “very, very strict security” to prevent the theft of U.S. intellectual and national security secrets.

“We caught them doing bad things,” he said.

Trump said Chinese President Xi Jinping asked him to look into the fate of ZTE after the firm said it had to shut its production because the U.S. banned sale of American-made components ZTE uses to manufacture an array of technology products until 2025. Trump said he also heard protests from the U.S. companies selling goods to ZTE.

Trump declared he was “not satisfied” with the state of U.S.-China trade talks after last week’s negotiations in Washington. China agreed to “substantially reduce” the $375 billion annual trade surplus it has over the U.S. by buying more American goods, but there was no mention of any specific import and export targets in the statement agreed to by the two countries.

U.S. Commerce Secretary Wilbur Ross is headed to China next week for further trade talks.

Trump commented on the ZTE case as U.S. news accounts quoted officials as saying a deal was near.

His suggestion of a $1.3 billion fine was slightly more than the $1.2 billion penalty the U.S. imposed last year on ZTE after uncovering its trade ban violations.

On Sunday, White House economic adviser Larry Kudlow said, “Do not expect ZTE to get off scot-free. Ain’t going to happen.”

Congressional opposition

But some U.S. lawmakers voiced opposition to settling the case.

U.S. Sen. Marco Rubio, who lost the 2016 Republican presidential nomination to Trump, contended that Washington had “surrendered” to Beijing. The Florida lawmaker said he would try to block it.

“Making changes to their board and a fine won’t stop them from spying and stealing from us. But this is too important to be over. We will begin working on veto-proof congressional action,” Rubio said on Twitter.

Senate Democratic Leader Charles Schumer said, “The proposed solution is like a wet noodle,” contending ZTE’s technology devices threaten to steal U.S. national security secrets.

Rescuing ZTE

Trump last week called for rescuing ZTE “to get back into business, fast.” He said “too many jobs in China” were being lost after the U.S. banned the sales of American-made components to ZTE. The U.S. leader said, “Commerce Department has been instructed to get it done!”

While some U.S. officials said the penalties against ZTE — the fine and the ban on sale of U.S. components until 2025 — were a law enforcement action, Trump linked the issue to ongoing trade and tariff disputes with China. The two countries over the weekend called off the threat of imposing higher tariffs on billions of dollars of each other’s exports while their negotiations continue.

Meanwhile, China announced Tuesday that on July 1 it will cut tariffs on most imported cars from 25 percent to 15 percent, still well above the 2.5 percent levy the U.S. imposes on cars imported from overseas.

The announcement by China’s finance ministry follows a pledge by Xi last month to lower the import duties and to ease foreign ownership restrictions for the Chinese auto industry.

Trump repeatedly has mentioned the 25 percent automobile tariff as a key trade barrier between the two countries.

On Monday, Trump said new trade between China and the U.S. will especially benefit U.S. farmers.

“Under our potential deal with China, they will purchase from our Great American Farmers practically as much as our Farmers can produce,” he said on Twitter.
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Glancing constantly at his rear view mirror, truck driver “El Flaco” journeys the highways of Mexico haunted by the memory of when he was kidnapped with his security detail by bandits disguised as police officers two years ago.

Back then, El Flaco, who spoke on condition of anonymity for fear of reprisals, was beaten, blindfolded and taken to a house near Mexico City where his captors threatened to kill him. Three days later he managed to escape and flee.

Today he travels with a machete and a satellite tracking device in his cab that can pinpoint him in emergencies.

Truckers covering Mexico’s vast territory often move in convoys to reduce the risk of robberies, which in 2017 almost doubled to nearly 3,000. Some drive with armed escorts traveling alongside them. Others remove the logos from their trucks.

Companies like brewer Grupo Modelo, a unit of AB InBev, and the Mexican subsidiary of South Korea’s LG Electronics have stepped up efforts to protect their drivers, deploying sophisticated geo-location technology and increasing communication with authorities.

The problem is part of a wider Latin American scourge of highway robbery that acts as a further drag on a region long held back by sub-par infrastructure.

“Roads are getting more and more dangerous, you try not to stop,” the 50-year-old El Flaco said, as he drove in the central state of Puebla, the epicenter of highway freight theft.

“Since I was kidnapped, I’ve gotten into the habit of looking in the mirror, checking car number plates, looking at who’s gone past me,” he added. “I look at everything.”

On the most dangerous roads, like those connecting Mexico City with major ports on the Gulf of Mexico and the Pacific, it is almost certain that one in every two truckers will be held up, a study by U.S.-based security firm Sensitech showed.

While no official data on losses exist, insurers paid out almost $100 million in 2016 to crime-hit cargo operators, up 4.5 percent on 2015, Mexican insurance association AMIS says.

The true sum is likely far higher: only one in three loads is insured due to the cost, according to industry estimates.

More than 80 percent of goods are transported by road and rail in Mexico, and the thefts are hurting competitiveness at a time the country is seeking to diversify trade and tap new sources of business.

Fuels, food and beverages, building materials, chemicals, electronic goods, auto parts and clothing are all top targets, Sensitech said.

Competition squeeze

Upon taking office in December 2012, President Enrique Pena Nieto promised to get a grip on gang violence and lawlessness.

But after some initial progress, the situation deteriorated and murders hit their highest level on record last year.

Highway robberies of trucks fell through 2014. But they almost doubled in 2015 to 985, hit 1,587 in 2016 and reached 2,944 last year.

The government has responded by stepping up police patrols in affected areas and lengthening prison sentences for freight robbery to 15 years. But robberies are still rising and most are not even reported due to the arduous bureaucratic process involved, Sensitech says.

“It’s hurting productivity and competitiveness,” said Leonardo Gomez, who heads a transportation national industry body.

Some drivers are armoring cabs in trucks made by companies like U.S. firm Kenworth, an expensive move that still only covers a tiny fraction of the almost 11 million trucks crisscrossing Latin America’s second-largest economy.

Last year, 53 trucks were armored against high-caliber weapons, up 40 percent from 2016, according to the Mexican Association of Automotive Armorers.

Attacks are not confined to roads. Some 1,752 robberies were recorded on railways last year, official data show. Criminals have also become more sophisticated.

They are turning to high-caliber weapons and employ devices to block Global Positioning Systems (GPS) to prevent trucks communicating their whereabouts, experts say.

Previously, companies that suffered robberies were generally able to recover their vehicles. Not any more.

“It’s not just the goods they want, it’s the trucks too,” said Carlos Jimenez of Mexican insurance association AMIS.
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U.S. President Donald Trump says American farmers will be big beneficiaries of more trade with China.

“Under our potential deal with China, they will purchase from our Great American Farmers practically as much as our Farmers can produce,” Trump said Monday on Twitter.

In another comment, he said China “has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products – would be one of the best things to happen to our farmers in many years!”

The U.S. leader said one result of talks with China last week in Washington is barriers to U.S.-Chinese trade and tariffs on each country’s exports will “come down for (the) first time.”

President Trump’s tweets come a day after U.S. Treasury Secretary Steven Mnuchin announced the two nations have agreed to back away from imposing tough new tariffs on each other’s exports, after reaching a deal Saturday for Beijing to buy more American goods to “substantially reduce” the huge trade deficit with the United States.

Mnuchin told Fox News the world’s two biggest economic powers “made very meaningful progress and we agreed on a framework” to resolve trade issues. “So right now we have agreed to put the tariffs on hold while we try to execute the framework,” he said.

China’s state-run news agency Xinhua quoted Vice Premier Liu He, who led Chinese negotiators in trade talks in Washington this past week, as saying, “The two sides reached a consensus, will not fight a trade war, and will stop increasing tariffs on each other.”

China’s state-run news agency Xinhua quoted Vice Premier Liu He, who led Chinese negotiators in trade talks in Washington, as saying, “The two sides reached a consensus, will not fight a trade war, and will stop increasing tariffs on each other.”

Explainer: What is a Trade War?

Negotiations to continue

Liu said the agreement was a “necessity;” but, he added, “At the same time, it must be realized that unfreezing the ice cannot be done in a day; solving the structural problems of the economic and trade relations between the two countries will take time.”

Trump had threatened to impose new tariffs on $150 billion worth of Chinese imports and Beijing had responded that it would do the same on American goods.

Mnuchin and White House economic adviser Larry Kudlow said U.S. Commerce Secretary Wilbur Ross would soon go to Beijing to negotiate on how China might buy more American goods to reduce the huge U.S. trade deficit with Beijing, which last year totaled $375 billion. The United States has signaled it wants to trim the deficit by $200 billion annually, but no figure was mentioned in the agreement reached over the weekend.

Philip Levy, senior fellow on the global economy at the Chicago Council on Global Affairs, tells VOA that while the U.S. and China have for now avoided a tariff war, the outcome of the trade talks remains unclear.

“I think the Trump administration will crow about the fact that they arranged for some additional sales. That really wasn’t the issue. It may have been in their minds, but in terms of what is in the national interest, it wasn’t,” he said.

Levy says the result is a managed trade solution that still does not answer the fundamental question of how a state-dominated economy the size of giant China fits into the global system. 

But Kudlow said there has been a lot of progress.

“You can see where we’re going next. As tariffs come down, the barriers come down, there will be more American exports,” he told ABC television, saying any agreement reached will be “good for American exports and good for Chinese growth.”

ZTE

One contentious point of conflict between the U.S. and China is the fate of ZTE, the giant technology Chinese company that has bought American-made components to build its consumer electronic devices.

The U.S. fined ZTE $1.2 billion last year for violating American bans on trade with Iran and North Korea. ZTE, however, said recently it was shutting down its manufacturing operations because it could no longer buy the American parts after the U.S. imposed a seven-year ban on the sale of the components.

Trump, at the behest of Chinese President Xi Jinping, a week ago “instructed” Commerce Secretary Ross to intervene to save the company and prevent the loss of Chinese jobs.

Even so, Kudlow said, “Do not expect ZTE to get off scot free. Ain’t going to happen.”

Ira Mellman and Kenneth Schwartz contributed to this article.
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China’s state media are playing up what it says is a trade war truce and de-escalation in tensions after negotiators from Washington and Beijing agreed to hold off on tariffs and “substantially reduce” the U.S. trade deficit. However, economists and business leaders argue that there is more to managing the relationship than balancing imports and exports.

State media in China are focusing heavily on the argument that Beijing did not give any ground and adopting their own take on the deficit question — focusing instead the country’s pledge to boost imports from the United States.

An editorial in the China Daily entitled “Sino-US agreement benefits both countries and the world” said that: “For China, ‘significantly increasing’ imports of U.S. goods and services, such as agricultural and energy products, will help meet its development needs and the desires of Chinese consumers.”

The editorial added that, “despite all the pressure, China didn’t “fold” as U.S. President Donald Trump observed. Instead, it stood firm and expressed its willingness to talk.”

An editorial in the party-backed Global Times said that while many may have noted what the joint statement said about reducing the U.S. deficit, that does not mean that the U.S. has won the trade talks. Instead, the piece said it was more a matter of learning to right an imbalance in the two countries’ trade systems.

The editorial called the now averted trade war a “historic period of difficult adjustment,” adding that “as one of the largest trade surplus countries in the world, China has learned from this dispute with the US.”

On news commentary boards, online response to agreement was mixed. Some argued the agreement was a sign that China had won. One commentator said: “America is just a paper tiger, there’s no need to be afraid.” Another: “Washington is weak in the knees.”

Many were pleased to see the two countries cooperating, agreeing that the decision was a “win-win.”

Others were not as certain. “Be careful, Trump will go back on his word,” wrote one person.

Despite state media’s rosy outlook about the agreement and confidence China had won online, huge differences between the two economies remain.

Lu Suiqi, an associate professor in economics at Peking University noted the agreement is just an incremental one and follow through will be key.

He said the focus on talks instead of brinkmanship was a positive development but not a guarantee of smooth sailing ahead.

 

“If any party fails to make good on its implementation, there may be renewed differences. And if these differences are hard to resolve, there’s still the possibility of putting the trade war back on,” Liu said.

Explainer: What is a Trade War?

 

Philip Levy, senior fellow on the global economy at the Chicago Council on Global Affairs told VOA the deal is not the worst outcome we could have had, it’s sort of the mediocre outcome many feared.

“This looks like they’re opting for some sort of managed trade solution that I don’t thing is good for either country, but it is better than a tariff war,” Levy said.

Much of what the statement said about longstanding trade differences was vague at best, some analysts note.

The joint statement said both sides agreed to encourage two-way investment and committed to creating a business environment for fair competition.

Since China joined the World Trade Organization in 2001, it has been promising and pledging to open up and many are growing tired of the talk. Over the past few years, a shift backwards toward a more central state-led economy has become more prominent.

And even as Chinese President Xi Jinping pledges to open up China’s economy further, he is asserting the party and state’s control and dominance over everything — including business.

Foreign companies’ frustration with rules in China that force the handover of sensitive technology and concerns about intellectual property persist. There is also concern about government subsidies in cutting edge industries and support for state-owned enterprises.

“There are fundamental questions about how a state dominated economy of that size fits into the global trading system. And I don’t think we’ve answered those questions,” said Levy.

Speaking at a gathering of former officials and business leaders in Beijing last week, Jeremie Waterman, the president of the China Center at the U.S. Chamber of Commerce, said that for businesses, market access is a bigger concern than trade imbalances.

“The focus of U.S Chamber of Commerce and our members really is on resolving the systemic issues, not on near term efforts to address the trade deficit,” Waterman said.

He added that focusing on opening markets and not closing them is best because it would address longstanding concerns about access in China. It could also help with the deficit.

Joyce Huang and Ira Mellman contributed to this report.
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