YCLOAK

Chinese police have investigated 380 online lenders and frozen $1.5 billion in assets following an avalanche of scandals in the huge but lightly regulated industry, the government announced Monday.

Beijing allowed a private finance industry to flourish in order to supply credit to entrepreneurs and households that aren’t served by the state-run banking system. But that threatens to become a liability for the ruling Communist Party after bankruptcies and fraud cases prompted protests and complaints of official indifference to small investors.

The police ministry said it launched the investigation because person-to-person, or P2P, lending was increasingly risky and rife with complaints about fraud, mismanagement and waste.

The ministry gave no details of arrests but said more than 100 executives were being sought by investigators and some had fled abroad. It said authorities seized or froze 10 billion yuan ($1.5 billion) but gave no indication how much might be returned to depositors.

Police say some lenders and investment vehicles were brazenly fraudulent, while others collapsed after inexperienced founders failed to manage risk.

Monday’s statement said P2P lenders were investigated for complaints including wasting money, reporting phony investment plans and using illegal tactics to raise money.

Lending through online platforms grew by triple digits annually until 2017 when regulators tightened controls.

Depositors lent 1.9 trillion yuan ($280 billion) last year, but that was down by 50 percent from 2017, according to the Shenzhen Qiancheng Internet Finance Research Institute.

The outstanding loan balance stood at 1.2 trillion yuan ($177 billion) at the end of 2018, down 25 percent from a year earlier, according to Diyi Wangdai, a web site that reports on the industry.

P2P lenders are part of a privately run Chinese finance industry the national bank regulator estimated in 2015 had grown to $1.5 trillion.

The internet has helped financial platforms attract money from financial novices with little knowledge of the risks involved.

Many lend to factories and retailers or invest in restaurants, car washes and other businesses. But inexperience and poor risk control means a downturn in business conditions can bankrupt them.

Finance as a whole has come under tougher scrutiny after a 2015 plunge in stock prices led to accusations of insider trading and other offenses.

In one of China’s biggest financial scams, authorities say depositors lost 50 billion yuan ($7.7 billion) in online lender Ezubo before it was seized by regulators in 2015.

The founder and his brother were sentenced to life in prison in 2017.

 
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President Donald Trump said Sunday “big progress” is being made in U.S. trade talks with China on what he calls “so many different fronts.”

“Our country has such fantastic potential for future growth and greatness on an even higher level,” the president tweeted.

Trump said last week he might put off the March 1 deadline to increase tariffs on China if a trade deal is close.

But a China trade expert who served in the Obama administration says he has only seen “incremental progress” toward a trade deal with China.

“The realistic approach is that the deadline gets extended and the negotiations possibly go into the end of this year, I would suspect,” former Assistant Trade representative for China Jeff Moon tells VOA.

Moon believes negotiators on both sides are failing to address the real reason the U.S. imposed stiff sanctions on China in the first place — allegations that it is stealing U.S. intellectual property, and China’s demands that U.S. firms turn over trade secrets if they want to keep doing business in China.

“It’s not possible to resolve those issues in two weeks. Those are very complex issues that require longer talks…so a quick settlement is not a good settlement. It just glosses things over,” Moon said.

He forecast things getting “messy” over the long run if those matters are not settled.

He also said Trump has “muddied” the negotiations by letting politics creep into the trade talks with such issues as North Korea.

Trump has threatened to hike tariffs on $200 billion in Chinese imports to the U.S. from 10 to 25 percent if there is no trade deal reached by March 1.

China has accused the U.S. of violating global trade rules, saying it is preventing the Chinese economy from thriving.

Current U.S. sanctions on China were met with retaliation from Beijing by sanctions on U.S. goods.
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It’s billed as North America’s largest and longest-running auto show, now in its 111th year. The 2019 Chicago Auto Show offers a lineup of nearly 1,000 vehicles occupying nearly 1 million-square-feet of space at the McCormick Place Convention Center.

A special preview for members of the media at the annual show is a chance for manufacturers to show off their latest and greatest products about to enter the market.

What is notable about this year’s event is what some manufacturers aren’t showing off — new sedans.

Customers want trucks, SUVs

“Over 10 years, there has been a consistent movement of customers in the United States and around the world, but even more so in the United States, moving away from sedans and more traditional passenger sedans into more utility vehicles,” said Joe Hinrichs, president of Ford Motor Co.’s Global Operations.

“Nearly 7 out of 10 vehicles sold today are trucks or SUVs in the U.S. market. They like the ride high, the seating height, the utility of the vehicle. And now, we can give them the fuel efficiency that they used to get out of sedans. So, that’s where customers are going.”

All reasons Ford is going the extra mile and planning to invest $1 billion to upgrade its Chicago manufacturing facility, which produces the popular Explorer Sport Utility Vehicle, or SUV — also used as a law enforcement vehicle — and the new Lincoln Mariner luxury SUV.

But while Ford is offering new options for consumers, it is also discontinuing models of the Focus, Fiesta and Fusion cars, ending production later this year.

“We’ve been planning our business to incorporate the expectation that some of those cars will go away,” Hinrichs said. “Then bring in new products to enter the market to supplement some of that volume that was lost so that we can keep our plants full.”

The new family car

“We have the debate a lot about is the compact SUV the new family sedan, and in many instances, you can say yes,” said Steve Majuros, marketing director for cars and crossovers for the General Motors Chevrolet brand. He introduced two new trucks in Chevy’s popular Silverado lineup to media at the auto show.

The prominence, and choices, of SUVs, crossovers and trucks in GM’s current lineup promoted at the auto show stands in contrast to its perennial attraction in recent years, the Chevrolet Volt. Even though it is the top-selling electric plug-in vehicle of all time, sagging sales have led GM to cease production in March.

“Volt was a great product for us,” said Majuros. “(It) had a great run — two generations. But what has happened is as the ability to produce pure electric and the kind of cost configuration and range of what people are looking for, Volt had its time, but was a great stepping stone for us to lead us to the future, which was pure electrification.”

Joining the Volt on the chopping block is the Cruze, a compact car manufactured at GM’s Lordstown Assembly plant in Ohio. Chevrolet does plan to keep making the Malibu midsize sedan and the Bolt all-electric vehicle, among a few other options.

“We’re not abandoning the car market completely,” Majuros assured. “We’re right-sizing our portfolio. We’re reacting to what the consumers are looking for.”

What they are looking for are trucks and SUVs, which made up about 70 percent of the 17 million vehicles sold in the U.S. in 2018, a trend expected to continue this year.
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The store checkout line may be a thing of the past sooner than we think. A year after Amazon opened its first store without a cashier, retailers and start-ups are competing to get similar technology in other stores worldwide, so shoppers do not have to stand in line. VOAs Deborah Block has a report.
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President Donald Trump received an update on trade talks with China on Saturday at his Florida retreat after discussions in Beijing saw progress ahead of a March 1 deadline for reaching a deal.

Trump, at his Mar-a-Lago club, was briefed in person by U.S. Trade Representative Robert Lighthizer, Commerce Secretary Wilbur Ross, White House Chief of Staff Mick Mulvaney and trade expert Peter Navarro, said White House spokeswoman Sarah Sanders. Treasury Secretary Steven Mnuchin, economic adviser Larry Kudlow and other aides joined by phone. 

The White House offered no additional detail. 

Both the United States and China reported progress in five days of negotiations in Beijing this week, but the White House said much work remained to be done to force changes in Chinese trade behavior. 

Shortly after the meeting with his trade team, Trump said on Twitter the talks in Beijing were “very productive.” 

At a White House press conference on Friday, he said the talks with China were “very complicated” and that he might extend the March 1 deadline and keep tariffs on Chinese goods from rising. 

U.S. duties on $200 billion worth of Chinese imports are set to rise from 10 percent to 25 percent if no deal is reached by March 1 to address U.S. demands that China curb forced technology transfers and better enforce intellectual property rights. 

China’s vice premier and chief trade negotiator, Liu He, and Lighthizer are to lead the next round of talks next week in Washington. 
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Payless ShoeSource is shuttering all of its 2,100 remaining stores in the U.S. and Puerto Rico, joining a list of iconic names like Toys R Us and Bon-Ton that have closed down in the last year. 

The Topeka, Kan.-based chain said Friday that it will hold liquidation sales starting Sunday and wind down its e-commerce operations. All of the stores will remain open until at least the end of March and the majority will remain open until May. 

The debt-burdened chain filed for Chapter 11 bankruptcy protection in April 2017, closing hundreds of stores as part of its reorganization. 

At the time, it had over 4,400 stores in more than 30 countries. It remerged from restructuring four months later with about 3,500 stores and eliminated more than $435 million in debt. 

The company said in an email that the liquidation did not affect its franchise operations or its Latin American stores, which remain open for business as usual. It lists 18,000 employees worldwide. 

Shoppers are increasingly shifting their buying online or heading to discount stores like T.J. Maxx to grab deals on name-brand shoes. That shift has hurt traditional retailers, even low-price outlets like Payless. Heavy debt loads have also handcuffed retailers, leaving them less flexible to invest in their businesses. 

But bankruptcies and store closures will continue through 2019, so there’s “no light at the end of the tunnel,” according to a report by Coresight Research. 

Before this announcement, there had been 2,187 U.S. store closing announcements this year, with Gymboree and Ascena Retail, the parent of Lane Bryant and other brands, accounting for more than half the total, according to the research firm. This year’s total is up 23 percent from the 1,776 announcements a year ago. Year-to-date, retailers have announced 1,411 store openings, offsetting 65 percent of store closures, it said. 

Payless was founded in 1956 by two cousins, Louis and Shaol Lee Pozez, to offer self-service stores selling affordable footwear. 
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Chinese President Xi Jinping met Friday with members of the U.S. trade delegation in Beijing where China and the U.S. are attempting to hammer out a trade deal.

U.S. Treasury Secretary Steven Mnuchin posted on Twitter Friday that he and U.S. Trade Representative Robert Lighthizer had “productive meetings with China’s Vice Premier Liu He.”

Another round of negotiations between the two countries will continue next week in Wahington, Chinese state media reported.

Earlier, a top White House economic adviser expressed confidence in the U.S. – China trade negotiations in Beijing.

“The vibe in Beijing is good,” National Economic Council Director Larry Kudlow told reporters at the White House Thursday.

Kudlow provided few details but said the U.S. delegation led by Lighthizer was “covering all ground.”

“That’s a very good sign and they’re just soldiering on, so I like that story,” Kudlow said, “And I will stay with the phrase, the vibe is good.”

Negotiators are working to strike a deal by March 1, to avoid a rise in U.S. tariffs on $200 million worth of Chinese goods from 10 percent to 25 percent. President Donald Trump suggested earlier this week that if talks are seeing signs of progress, that deadline could be pushed back.

When asked Thursday if there would be an extension, Kudlow said, “No such decision has been made so far.”

Analysts such as William Reinsch, a former president of the National Foreign trade Council and senior advisor at the Center for Strategic and International Studies, say the talks are complicated by the three main areas under negotiation.

“Market access, which I think is well on the way to completion. Some Chinese offers on intellectual property, which I think they are not going to offer what we want…And some compliance in enforcement matters.”

Reinsch told VOA’s Mandarin service that U.S. negotiators are specifically seeking ways to hold China accountable for the commitments it makes in any deal.

Munich security conference

While American and Chinese negotiators continue talks in Beijing, both countries are setting up for another potential face-off in Europe.

The U.S. and China are sending large delegations to Friday’s Munich Security Conference in Germany, a high-level conference on international security policy. Vice President Mike Pence leads the U.S. delegation while Politburo member Yang Jiechi will be the most senior Chinese official.

Yang Jiechi is heading the largest-ever Chinese delegation to the conference traditionally attended by the U.S. and its European allies. He is pushing back against Washington’s campaign pressing Europe to exclude Chinese tech giant Huawei from taking part in constructing 5G mobile networks in the region.

U.S. officials say allowing the Chinese company to build the next generation of wireless communications in Europe will enhance the Chinese government’s surveillance powers, threatening European security.

Although the technology behind 5G is complex, Brad Setser, a senior fellow at the Council on Foreign Relations and former deputy assistant secretary at the U.S. Treasury Department, said the decisions for European countries is simple.

“Given the nature of modern telecommunication, countries do have to make a choice about whether or not they believe that Huawei, given its relationship, not an ownership relationship, with Chinese government, can be trusted to provide the backbone of their future telecommunication system.”

Both Pence and U.S. Secretary of State Mike Pompeo warned allies in Poland and other Central European countries this week on the dangers of closer ties with Beijing and collaboration with Chinese firms. In Budapest, Hungary on Monday, Pompeo said American companies might scale back European operations if countries continue to do business with Huawei.

Huawei has repeatedly denied its products could be used for espionage.

U.S. prosecutors have filed charges against Huawei including bank fraud, violating sanctions against Iran, and stealing trade secrets. The company refuted these accusations and rejected charges against its chief financial officer Meng Wanzhou, who is currently on bail in Canada following her arrest in December.

This year’s Munich Security Conference topics include the “great power competition” between the United States, China, and Russia. Conference organizers have listed US-China tensions as one of their top 10 security issues of 2019.

VOA’s Mandarin Service reporter Jingxun Li contributed to this report
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Some taxpayers are getting a bitter surprise this year as their usual annual tax refunds have shrunk — or turned into tax bills — even though President Donald Trump loudly promised them largest tax cut “in American history.”

And with tax season under way, thousands of unhappy taxpayers have been venting their displeasure on Twitter, using hashtags like #GOPTaxscam, and some threatened not to vote for Trump again.

“Lowest refund I have ever had and I am 50 yrs old. No wall and now this tax reform sucks too!!” a woman going by “Speziale-Matheny” wrote from the crucial political swing state of Florida. “Starting to doubt Trump. I voted for him and trusted him too.”

During the year, American wage earners see a portion of each paycheck withheld as income tax, and many then receive a refund the following year if they have overpaid the federal government. That cash boost is eagerly awaited each year, and used to help pay off debt or make large purchases.

But the 2017 tax overhaul — which Republicans promoted as a boon to the middle class — meant many workers paid less in taxes during the year reducing the amount withheld, a change which may have gone unnoticed.

And the reform also cut some popular deductions, sometimes resulting in thinner refunds or even unexpected tax bills.

Early data from the U.S. Internal Revenue Service show that refunds so far this year are 8.4 percent lower than 2018 payouts on average, falling to $1,865 from $2,035.

However, many millions more taxpayers will be filing tax returns by the annual April 15 deadline, meaning this figure could change.

Mark Mazur, assistant Treasury secretary for tax policy under former President Barack Obama, told AFP the negative reaction was “understandable.”

“People focused on the amount of the refund but that’s not the same as their tax liability, the amount of tax they pay for the year,” he said.

Because of lower withholding during the year, some taxpayers have in effect already seen the benefit of the tax cut in their higher paychecks, said Mazur, who is vice president at the Urban Institute.

About five percent of taxpayers — 7.5 million people — will in fact see a tax increase, while about 80 percent should pay less, he said.

‘Angry, disappointed and betrayed’

The IRS on Wednesday said taxpayers who suddenly found they owe taxes could pay their bill in installments and apply for a waiver of penalties normally imposed for failing to pay by the deadline.

“The IRS understands there were many changes that affected people last year, and the new penalty waiver will help taxpayers who inadvertently had too little tax withheld,” IRS Commissioner Chuck Rettig said in a statement.

A key change of the 2017 tax reform is it limited federal deductions for certain state and local taxes like real estate taxes. As a result, many homeowners in states with higher property taxes will owe more to the federal government.

Neil Frankel, a New York accountant, told AFP people were feeling “angry, disappointed and betrayed.”

“I sympathize with them. The new tax law’s withholding tables were incorrect and misleading. A complete shenanigan,” he added.

“Since my clients are mostly professionals, I don’t really hear any screaming,” he said. “However, I do hear long diatribes on hatred for the U.S. government.”

Last year, Treasury Secretary Steven Mnuchin invited taxpayers to use an online calculator to estimate their tax payments, to determine if they should modify their withholding amount.

‘Misleading’ reports

This week, the Treasury Department said media reports on the lower refunds were “misleading.”

“Refunds are consistent with 2017 levels and down slightly from 2018 based on a small, initial sample from only a few days of data,” the department said on Twitter.

But, Mazur said, perception is key: When the administration of former President George W. Bush cut taxes in 2001, it mailed out checks directly.

“Taxpayers remembered that they got that check,” he said.

Under Obama, however, a tax cut showed up as smaller withholdings and fatter checks during each pay cycle.

“Most Americans when they were surveyed didn’t think they got a tax cut from Obama,” he said.
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The Somali government says it will award exploration licenses to foreign oil companies later this year, despite calls from the opposition to wait until laws and regulations governing the oil sector are in place.

Seismic surveys conducted by two British companies, Soma Oil & Gas and Spectrum Geo, suggest that Somalia has promising oil reserves along the Indian Ocean coast, between the cities of Garad and Kismayo. Total offshore deposits could be as high as 100 billion barrels.

The government says it will accept bids for exploration licenses on November 7, and the winners will be informed immediately. It says production-sharing agreements will be signed on December 9, with the agreements going into effect on January 1, 2020.

“We have presented our wealth and resources to the companies,” Petroleum Minister Abdirashid Mohamed Ahmed told the VOA Somali program Investigative Dossier. “We held a roadshow in London [last week], and we will hold two more in two major cities so that we turn the eyes of the world to contest Somalia.”

But several lawmakers have expressed concern the government is moving too quickly. Last week, the head of the National Resource committee in the Upper House of Parliament accused President Mohamed Abdullahi Mohamed’s government of a “lack of due diligence” and violating the constitution.

Barnaby Pace, an investigator for the NGO Global Witness, which exposes corruption and environmental abuses, says Somalia, after decades of internal conflict, does not have the legal and regulatory framework to handle oil deals and the problems they can cause, such as environmental abuses, corruption, and political fights over revenue.

“There is not a clear consensus about how the oil sector could be managed in Somalia,” he said. “And once Somalia makes deals like the one it’s proposing, it may be locked in for many years and find it difficult to renegotiate or change them to best protect itself.”

Former oil officials speak out

Somalia’s parliament passed a Petroleum Law to govern oil sector in 2008 when the country operated under a transitional charter. But constitutional experts say that law was nullified after a constitution was ratified in 2012.

A proposed new law is now before parliament for debate. The bill says negotiations for oil-related contracts will be the responsibility of the Somali Petroleum Agency, which would not be formed until the law is passed.

Ahmed said government’s timetable for awarding licenses is just “tentative,” though he believes the government can keep to its schedule.

But Somali lawmakers and opposition leaders are worried the government is in a needless rush.

Jamal Kassim Mursal was permanent secretary of the Somali Petroleum Ministry until last month when he resigned.

He says when the government came to power in 2017, the ministry was informed that bids for oil exploration licenses would not be considered until the Petroleum Law was passed and “we are ready with the knowledge and skills.”

Since then, he told VOA, “Nothing has changed — petroleum law is not passed, tax law is not ready, capacity has not changed, institutions have not been built.”

Abdirizak Omar Mohamed is the former petroleum minister who signed the 2013 seismic study agreement with Soma Oil & Gas.

Mohamed said the country needs political consensus and stability before oil drilling. He notes that a resource-sharing agreement between the federal government and Somali federal states has yet to be endorsed by the parliament.

“No company is going to start drilling without agreement with regions,” says Mohamed. “So why rush? It’s not good for the reputation of the country.”

Soma and Spectrum’s advantage

Mursal also objects to an agreement that gives first choice of oil exploration blocks to Soma Oil & Gas, one of the companies that conducted the seismic studies.

According to the agreement, Soma Oil & Gas will choose 12 blocks or 60,000 square kilometers to conduct oil exploration. Among these are two blocks believed to contain large oil reserves near the town of Barawe.

He says the government needs to renegotiate and offer just two blocks instead.

“This is the one that is causing the alarm,” he said. He predicts that if Soma Oil & Gas gets to choose 12 blocks, the company will “flip” some of the blocks to the highest bidder.

In 2015, Soma Oil & Gas was caught up in controversy after allegations of quid pro quo payments to the Somali Ministry of Petroleum. The payments were termed as “capacity building.” The following year, Britain’s Serious Fraud Office closed the case because it could not prove that corruption took place.

Somalia’s current prime minister, Hassan Ali Khaire, was working for Soma Oil & Gas at time. Somali officials say that since taking office, Khaire has “relinquished” his stake in the company, said to be more than 2 million shares.

The other company that conducted seismic surveys, Spectrum, also made payments to the Somali Ministry of Finance, according to Mursal.

Mursal told Investigative Dossier that between 2015 and 2017, Spectrum paid $450,000 every six months to the ministry.

A senior official who previously was involved in the Ministry of Petroleum told VOA that Spectrum paid $1.35 million in all. He said the payment was “consistent,” though, with the advice of the Financial Governance Committee, a body consisting on Somali and donors which gives financial advice to Somalia.

Spectrum has not yet responded to Investigative Dossier requests for an interview.

Current Petroleum Minister Ahmed said the government will do what is best for Somalia, but needs to have a law governing the oil sector in place.

“The parliament has the petroleum law,” he said. “Without it being passed, we can’t touch anything.”

 
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A new report finds the world’s unemployment rate has dropped to five percent, the lowest level since the global economic crisis in 2008. The International Labor Organization reports the jobs being created, however, are poor quality jobs that keep most of the world’s workers mired in poverty.

Slightly more than 172 million people globally were unemployed in 2018. That is about 2 million less than the previous year. The International Labor Organization expects the global unemployment rate of five percent to remain essentially unchanged over the next few years.

The ILO report — World Employment and Social Outlook: Trends 2019 — finds a majority of the 3.3 billion people employed throughout the world, though, are working under poor conditions that do not guarantee them a decent living.  

ILO Deputy Director-General for Policy, Deborah Greenfield says many people have jobs that do not offer them economic security, lack material well-being and decent work opportunities.

“These jobs tend to be informal and characterized by low pay, insecurity and little or no access to social protection and rights at work. Worldwide, 2 billion workers, or 61 percent, were in informal employment,” she said.

Over the past 30 years, the report finds a great decline in working poverty in middle-income countries. But the situation remains serious in low- and middle-income countries. The report says one-quarter of those employed there do not earn enough to escape extreme or moderate poverty.  

Regionally, the ILO reports only 4.5 percent of Sub-Saharan Africa’s working age population is unemployed, with 60 percent employed. ILO Director of Research, Damian Grimshaw, says these good statistics are deceptive.

“In sub-Saharan Africa we find 18 of the top 20 countries with the highest rates of poverty. And they are also the countries with very, very high informal employment. So, higher than 80 percent in most countries in sub-Saharan Africa, despite having some of the lowest unemployment rates in the world,” he said. 

Grimshaw says the unemployment rate is not a good measure of labor market performance or economic performance in countries with high rates of informality.

ILO experts also highlight the lack of progress in closing the gender gap in labor force participation. They note only 48 percent of women are working, compared to 75 percent of men.

Another worrying issue is high youth unemployment. The ILO says one in five young people under 25 are jobless and have no skills. It warns this compromises their future employment prospects.

 
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Democrats pushed on Tuesday for a nationwide paid family leave system in the United States, the only developed nation that does not guarantee pay to workers taking time off to care for children or other relatives.

The proposal would establish a national insurance program to provide workers with up to 12 weeks paid leave per year for the birth of a child, adoption or to care for a seriously ill family member.

The lack of paid family leave takes a particular toll on women who tend to care for children and aging relatives, and the proposed Family Act would bring national policy in line with other countries, supporters say.

The United States is one of only five nations that have no guaranteed paid maternity leave, the other four being Lesotho, Liberia, Papua New Guinea and Eswatini, formerly Swaziland, according to the World Policy Analysis Center, a research group at the University of California, Los Angeles.

Family leave legislation has been introduced in the U.S. Congress in previous years but been unsuccessful.

Now, with Democrats controlling the lower House of Representatives and a record 127 women in the House and Senate, it could have a fighting chance, said Democratic Senator Kirsten Gillibrand of New York, a sponsor of the bill.

“Now we have a majority. We have a real shot at getting this passed, and I am so optimistic we can get this done,” said Gillibrand in a statement.

Gillibrand recently announced her intention to seek the Democratic Party’s nomination for president. Guaranteed paid leave exists in a handful of states but not on the national level.

President Donald Trump has voiced support for six weeks of paid leave but his proposal does not cover care for sick family members.

Opponents say paid leave could be too costly for small businesses to shoulder. Supporters of the Family Act say it could be funded through paycheck deductions at an average weekly cost of $1.50 to workers.

“It’s shameful that America has lagged behind for so long on paid maternity leave,” Toni Van Pelt, head of the National Organization for Women, told the Thomson Reuters Foundation. The Center for American Progress, a Washington-based policy institute, estimates more than $20 billion in U.S. wages are lost each year due to workers lacking access to paid family and medical leave.

One in every four U.S. mothers returns to work 10 days after giving birth, according to Paid Leave for the United States, a group promoting family leave.
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American whiskey makers are feeling the pain after their major overseas markets imposed hefty duties on their liquor in retaliation against President Donald Trump’s tariffs on aluminum imports.

U.S. global whiskey exports, which include rye and bourbons, recorded a nifty 28 percent year-over-year increase in the first six months 2018, the Distilled Spirits Council said on Tuesday.

But once levies from Canada, Mexico, China and the European Union took effect, the collective whiskey exports from 37 U.S. states fell by 8 percent in the period from July to November last year, compared with the same five months in 2017, according to the Washington-based industry trade group.

The tariff-induced drop wiped out the overseas sales gain the industry had enjoyed in the first half of 2018, the group’s data showed.

“Tariffs are starting to have a negative effect on exports,” Christine LoCascio, the group’s senior vice president of international trade, told a press conference. “Many of the small distillers have felt the effect on day one.”

In 2017, American whiskey producers exported $1.1 billion worth of their products. Nearly 60 percent was shipped to the EU, 12 percent to Canada and the rest to other countries, including China.

On the other hand, the distillers fared better at home.

In 2018, American whiskey rang up a 6.6 percent increase in  revenues from a year earlier to $3.6 billion, the group’s data showed.

In the wake of the EU’s imposing 25 percent tariffs last June, U.S. whiskey exports fell 8.7 percent in the following five months, compared with the same period in 2017.

Canada’s 10 percent duties that took effect on July 1 resulted in an 8.3 percent sales decline in that country for American whiskey producers in the July-November period compared with the same period a year earlier, the group said.
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Federal Reserve Chairman Jerome Powell traveled Tuesday to a historically black university in the Mississippi Delta to deliver a message that the nation’s prosperity has not been felt in many such areas around the country.

Powell said that many rural areas had been left out and needed special support, such as access to affordable credit to start small businesses and high-quality education to train workers.

In his comments, Powell did not address the future course of interest rates or the Fed’s decision last month to announce that it planned to be “patient” in its future interest rate hikes. That decision triggered a big stock market rally from investors worried that the Fed was in danger of pushing rates up so much it could bring on a recession.

Addressing the current economy, Powell said that economic output remained solid and he did not feel the possibility of a recession “is at all elevated.” He noted that unemployment is currently near a 50-year low.

“We know that prosperity has not been felt as much in some areas, including many rural places,” Powell said in an address to a conference on economic development at Mississippi Valley State University. “Poverty remains a challenge in many rural communities.”

He noted that 70 percent of the 473 counties in the United States designated as having persistent levels of poverty were in rural areas. Among the problems being faced in the Mississippi Delta, Powell said, were the loss of jobs in agriculture and low-skilled manufacturing because of automation and outsourcing of manufacturing jobs.

Powell said many rural communities have limited access to education resources.

“Mississippi is one of several mostly rural states where nearly half of residents lack access to good quality childcare, which is the main source of early childhood education,” Powell said.

Decades of research has shown that children who grow up in areas with better quality K-12 classes and with higher-quality teachers fare better later in life, Powell said. Rural areas also are at a disadvantage because of inadequate work training programs, he said.

“Rural areas where traditional industries are declining and where new employers may be moving in often experience a mismatch between the skills of local workers and those demanded by the new employers,” Powell said.

Powell also noted the impact from a long-term decline in the number of community banks due to consolidation in the industry. The Fed last year held discussions with community leaders in rural areas that had recently experienced the closure of a branch bank.

“We found that small businesses, older people and people with limited access to transportation are most affected,” Powell said.

He said the Fed had renewed its efforts to avoid unnecessary regulations on community banks to make sure federal rules were not contributing to the decline in community banks.

Asked about the Community Reinvestment Act, the 1977 law that requires the Fed and other federal banking regulators to encourage financial institutions to help meet the credit needs of low- and moderate-income neighborhoods, Powell said the Fed was committed to finding ways to provide better delivery of credit to under-served communities and not weaken the law.
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Ugandans will be able to buy government securities through a mobile money platform in a move by the east African country to become less dependent on commercial banks and institutional investors for its funding.

The government said in a statement on Tuesday that the measure, which was approved at a Cabinet meeting on Monday, would boost savings and investment among ordinary Ugandans as well as driving economic growth.

Ugandans with mobile money accounts, many of whom had limited access to banks, will now be able to directly buy government debt. The move follows a similar move by Kenya in 2017 and will also open the market up to Uganda’s Diaspora.

Mobile money allows subscribers to transfer money and make payments for services and products via their mobile phones and has developed rapidly in Africa, where it is now widely used.

Of Uganda’s population of 41 million, about 23.6 million are mobile phone subscribers.

MTN Uganda, a unit of South Africa’s MTN Group is likely to be the main beneficiary of the change among telecoms operators as it has the largest mobile money customer base, followed by Airtel, a unit of India’s Bharti Airtel.

Uganda has traditionally auctioned its debt — mainly Treasury bills and bonds — via bids submitted through commercial banks who act as primary dealers and the government expects the mobile money plan to cut its cost of borrowing.

“Widening the scope of investors reduces the dependence on a few players such as commercial banks, offshore players and institutional investors which tend to bid highly in the auctions given that Government has limited choice,” it said.

Critics are concerned about Uganda’s appetite for credit, which has seen its public debt reach 41.5 percent of gross domestic product (GDP) as of June.

They fear that escalating borrowing could spark a crisis like those in the 1990s and early 2000s before debt forgiveness by the World Bank on Uganda’s loans.

The Bank of Uganda, the country’s central bank, said last year that its debt stock including credit agreed but not yet disbursed had reached 50 percent of GDP.
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Disruptions from last month’s partial government shutdown caused a “shocking” deterioration in the IRS’ telephone help for taxpayers in the first week of the filing season, the agency’s watchdog said in a report released Tuesday.

In the week of Jan. 28, the official start of the tax season, Internal Revenue Service staffers answered only 48 percent of calls seeking help in filing returns, with an average wait time of 17 minutes, the report from the office of the National Taxpayer Advocate said. That compares with 86 percent of calls answered, and an average wait of 4 minutes, at the same time last year.

In addition, 93 percent of taxpayers who phoned during the last week in January to arrange installment tax payments were unable to speak with an assistant.

The difference between the two years “for levels of service and wait times for phone lines … is shocking,” the advocate, Nina Olson, wrote in her annual report to Congress. “These numbers translate into real harm to real taxpayers. The IRS will be facing tough decisions in light of the shutdown’s impact.”

The report flagged other problems at an agency that was already straining, even before the shutdown, from the burden of a complex new tax law, inadequate funding and antiquated computer systems. The IRS’ workforce faced a huge backlog — including 5 million pieces of mail to process — when it returned to full strength Jan. 28 after the 35-day partial shutdown, which had furloughed most of its employees.

During the shutdown, the Trump administration made money available to pay hundreds of billions in refunds and ordered nearly 60 percent of the IRS workforce back to work without pay to handle tax returns and questions. Yet fewer than half the recalled employees had returned to their jobs by the time the shutdown had ended, according to congressional and government aides.

The disruption raised the possibility of delayed processing of returns and refunds — an annual check that about three-quarters of U.S. taxpayers typically count on. Lower-income households, especially, depend on refunds as their biggest cash infusion of the year.

The IRS has said that when taxpayers file electronically and use direct deposit to their bank accounts, roughly nine out of 10 refunds will continue to be issued this year in fewer than 21 days.

Still, anger is being vented on social media from people who have already filed their taxes and received smaller-than-expected refunds. President Donald Trump had pledged that under his tax-cut law, families would receive an average $4,000 tax cut. Most taxpayers did receive a tax cut. But because of how some workers had adjusted the amount of money withheld from their paychecks, to account for the complex tax changes, their refund has ended up smaller than they had anticipated.

The average refund paid in the first week of the filing season, which ended Feb. 1, was $1,865 — down 8.4 percent from $2,035 in the same week last year — according to the IRS. In her report, Olson did not address how the tax law or the shutdown might have affected refunds. But during the early part of the shutdown, no IRS employees were authorized to answer the phone lines, issue refunds, establish installment agreements with taxpayers or review pending agency actions.

Olson’s report found that the IRS’ systems for detecting fraud in tax returns are hobbled by high rates of false positives and long processing times. That “continues to plague the IRS and harm legitimate taxpayers,” it says.

The report also found that:

• Taxpayers have difficulty navigating the IRS, reaching the right personnel to resolve their issues and holding IRS employees accountable.

• The use of the IRS’ Free File, an electronic tax filing program in partnership with 12 private software providers, has steadily declined in recent years. The agency isn’t adequately overseeing and testing the program to understand why taxpayers aren’t using it and how it could be improved.

• The IRS lacks a coordinated approach to overseeing professional tax preparers.

• The agency’s expanding use of private debt collectors continues to burden taxpayers who are likely suffering economic hardship.

 
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Toys R Us fans in the U.S. should see the iconic brand re-emerge in some form by this holiday season.

Richard Barry, a former Toys R Us executive and now CEO of the new company called Tru Kids Brands, told The Associated Press he and his team are still working on the details, but they’re exploring various options including freestanding stores and shops within existing stores. He says that e-commerce will play a key role.

Toys R Us, buckling under competition from Amazon and several billions of dollars of debt, filed for Chapter 11 reorganization in September 2017 and then liquidated its businesses last year in the U.S. as well as several other regions including the United Kingdom.

In October, a group of investors won an auction for Toys R Us assets, believing they would do better by potentially reviving the toy chain, rather than selling it off for parts. Starting Jan. 20, Barry and several other former Toys R Us executives founded Tru Kids and are now managing the Toys R Us, Babies R Us and Geoffrey brands. Toys R Us generated $3 billion in global retail sales in 2018. Tru Kids estimates that 40 percent to 50 percent of Toys R Us market share is still up for grabs despite many retailers like Walmart and Target expanding their toy aisles.

“These brands are beloved by customers,” said Barry. He noted that the company will focus on experiences in the physical stores, which could be about 10,000 square feet. The original Toys R Us stores were roughly about 40,000 square feet.

Barry said he and his team have been reaching out to toy makers and have received strong support. But he acknowledged that many had been burned by the Toys R Us liquidation.

Tru Kids, based in Parsippany, New Jersey, about a 20 minute drive from Wayne, New Jersey, where Toys R Us was based, will work with licensing partners to open 70 stores this year in Asia, India and Europe. Outside the U.S., Toys R Us continues to operate about 800 stores.

 
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Battling a sharp rise in food costs, Turkish authorities opened their own markets on Monday to sell cheap vegetables directly to shoppers, cutting out retailers who the government has accused of jacking up prices.

Crowds queued outside municipality tents to buy tomatoes, onions and peppers in Istanbul’s Bayrampasa district, waiting for an hour for items selling at half the regular shop prices.

The move to set up state markets follows a 31 percent year-on-year surge in food prices in January and precedes local elections next month in which President Tayyip Erdogan’s AK Party faces a tough challenge to maintain support.

Traders blamed storms in southern Turkey’s farming region for food price inflation, as well as rising costs of labor and transport. Authorities called it “food terror” and said they would punish anyone trying to keep prices artificially high.

“This was a game. They started manipulating prices, they tried to make prices skyrocket,” President Tayyip Erdogan said in a campaign speech on Monday.

“This was an attempt to terrorize (society),” Erdogan said.

Under the government initiative, municipalities are selling vegetables at around 50 percent of prices recorded by the Turkish Statistical Institute in January. A maximum of three kilos of goods per person is allowed.

The move will be extended to rice and pulses such as lentils, as well as cleaning products, Erdogan said.

The project is currently taking place only in Istanbul, where around 50 sites are selling the cut-price goods, and in the capital Ankara. That means it is unlikely to have a direct impact on national inflation figures, but could mitigate the price rises for residents of Turkey’s two largest cities.

Barely managing

Mustafa Dilli, 55, said he was struggling to make ends meet and hoped shops would follow suit by lowering their prices. “I think I can only shop here from now on,” he said. “We barely make it through to the end of the month.”

Several shoppers in Bayrampasa said they hoped the sales would carry on after next month’s vote. “I am curious whether this will continue after the elections,” 43-year-old housewife Nebahat Deniz said as she bought spinach and eggplants.

Agriculture Minister Bekir Pakdemirli, visiting a tent set up by the Ankara municipality, said the project would continue as long as it is needed, and could become permanent.

Last week, authorities inspected fresh produce wholesalers and imposed fines totaling 2 million lira ($380,000) on 88 firms for setting unreasonably high prices, according to the Trade Ministry.

At an Istanbul food market in a covered parking lot, traders complained that they could not compete with municipality stalls they said were subsidized by taxpayers and had been set up to win votes.

Standing behind an array of peppers, tomatoes and fresh greens, one trader said he was being hit by rising costs across the board.

“Prices in the food market are affected by the price of plastic bags, employee wages, stall fees, taxes, fuel prices.

All of them are increasing the cost of the goods,” said the trader, who only gave his first name, Yusuf.

“The government does not have these costs,” Yusuf said. “All of their costs are paid from the money out of our pockets.”

Another vendor, Erkan, said municipality sales were aimed purely at maximizing votes. “After the election, municipality sales will halt,” he said.

Erkan said the profit margin at his own stall, which supports three or four families, was very tight. “If we buy for 8 liras per kilo from the wholesaler we sell with little profit. We sell the goods for 9 liras for example,” Erkan said.
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Mexican President Andres Manuel Lopez Obrador said on Monday contracts private companies have with state-run power utility CFE should be revised to keep electricity prices low, sending shares in one Mexican contractor tumbling

“We are urging companies that have agreements with the Federal Electricity Commission (CFE) to come together to review contracts and above all to reach an agreement that electricity prices will not increase,” Lopez Obrador said during his morning press conference.

Lopez Obrador noted that the state-run utility is already contractually obliged to pay billions of dollars to the private firms that developed seven gas pipelines to supply power stations, even though the projects are incomplete and unable to deliver gas.

Those companies are Mexican energy infrastructure firm IEnova, a unit of U.S.-based Sempra Energy; TransCanada Corp; and Mexican tycoon Carlos Slim’s Carso, said CFE chief Manuel Bartlett.

“If the pipelines can’t be built, as is happening in seven large gas pipelines, the companies still have to be paid even if there is no gas,” said Lopez Obrador.

IEnova’s shares dropped 6.7 percent, TransCanada’s were down 0.5 percent and Carso slipped 0.21 percent after the comments. In a statement to the Mexican stock exchange, IEnova said it has one pipeline that entered into operation in 2017, but that the supplies to CFE were interrupted due to “sabotage.”

Lopez Obrador has been a staunch critic of landmark 2013-14 energy reforms that ended the wholesale electricity monopoly held by CFE and opened up the Mexican oil industry to private investment.

“We are looking to achieve a voluntary restructuring of agreements and commitments within the framework of the law … The Mexican government is committed to not increasing electricity prices for consumers, but we want private companies to help in this initiative,” he said.

The reforms ended state oil company Pemex’s decades-long monopoly by allowing private producers to operate projects on their own as well as enter into partnerships with Pemex known as farm-outs.
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U.S. Steel Corp. will restart construction on an idled manufacturing facility in Alabama, and it gave some of the credit to President Donald Trump’s trade policies in an announcement Monday.

Trump’s “strong trade actions” are partly responsible for the resumption of work on an advanced plant near Birmingham, the Pittsburgh-based company said in a statement. The administration’s tariffs have raised prices on imported steel and aluminum.

The manufacturer also cited improving market conditions, union support and government incentives for the decision.

Work will resume immediately, the company said, and the facility will have an annual capacity of 1.6 million tons (1.5 million metric tons).

U.S. Steel said it also will update other equipment and plans to spend about $215 million, adding about 150 full-time workers. The furnace is expected to begin producing steel in late 2020.

The 16,000-member United Steelworkers praised the decision to resume work, which followed an agreement with the union reached last fall.

“This decision paves the way for a solid future in continuing to make steel in Alabama and the Birmingham region,” Leo W. Gerard, the president of the international union, said in a statement.

U.S. Steel shut down its decades-old blast furnace at Fairfield Works in 2015, idling about 1,100 employees, and said it would replace the operation with an electric furnace.

The company then blamed conditions in the steel, oil and gas industries as it suspended work in December 2015 on an electric arc furnace at its mill in Fairfield, located just west of Birmingham. The project stalled until the announcement Monday.

Trump imposed tariffs of 25 percent on steel imports and 10 percent on imported aluminum on June 1, 2018. The move was to protect U.S. national security interests, he said, but other countries said the taxes break global trade rules, and some have imposed tariffs of their own.

 
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International Monetary Fund chief Christine Lagarde on Sunday met Pakistani Prime Minister Imran Khan and assured him that IMF stands ready to support his country.

The meeting took place on the sidelines of the World Government Summit in Dubai, hosted by the United Arab Emirates, both IMF and prime minister Imran Khan’s office said.

“I reiterated that the IMF stands ready to support Pakistan,” Lagarde said in a statement following meeting Khan.

A team from the International Monetary Fund visited Pakistan in November to discuss a possible bailout with officials, though the talks ended without agreement, but since then the government official said talks were still ongoing on a possible bailout.

Pakistan — which has gone to the IMF repeatedly since the late 1980s — is facing a balance of payments crisis.

“I also highlighted that decisive policies and a strong package of economic reforms would enable Pakistan to restore the resilience of its economy and lay the foundations for stronger and more inclusive growth,” said Lagarde, calling the meeting “good and constructive”.

Pakistan — a regular borrower from the IMF since the 1980s — last received an IMF bailout in 2013 to the tune of $6.6 billion.

Forecasts by the IMF and World Bank suggest the Pakistani economy is likely to grow between 4.0 and 4.5 percent for the fiscal year ending June 2019, compared to 5.8 percent growth in the last fiscal year.

Addressing the World Government Summit, prime minister Khan said his government has started a reform program and was trying to improve its economic policies.

“Reforms are painful but it is essential if we have to get out of our current problems,” Khan told the summit and said his government was making efforts to cut down the fiscal and current account deficit.

Khan hoped that the time has come that “Pakistan will take off”.

Khan has launched a highly publicized austerity drive since being sworn in, including auctioning off government-owned luxury vehicles and buffaloes, in addition to seeking loans from “friendly countries” and making overtures to the IMF.

The United Arab Emirates, Pakistan’s largest trading partner in the Middle East and a major investment sources, recently offered $3 billion to support Pakistan’s battered economy.

Islamabad also secured $6 billion in funding from Saudi Arabia and struck a 12-month deal for a cash lifeline during Khan’s visit to the kingdom in October.

It has also received billions of dollars in Chinese loans to finance ambitious infrastructure projects.

Despite the pledges, the ministry of finance said Pakistan would still seek broader IMF support for the government’s long-term economic planning.

In January, Pakistan launched a new investment certificate for overseas citizens, aimed at easing the country’s balance of payments crisis.

 
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A portion of TransCanada Corp’s Keystone oil pipeline remained shut on Thursday for investigation of a possible leak on its right-of-way near St. Louis, Missouri, a company spokesman said.

TransCanada shut the pipeline on Wednesday between Steele City, Nebraska and Patoka, Illinois and sent crews to assess the situation, spokesman Terry Cunha said in an email.

The 590,000 barrels-per-day Keystone pipeline is a critical artery taking Canadian crude from northern Alberta to U.S. refineries.

Two pipelines operating near the release site will be excavated on Friday to determine the source of the leak, said Darius Kirkwood, a spokesman for the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration. The agency is monitoring the response to the reported leak, he said.

Canadian pipelines are already congested because of expanding production in recent years, forcing the Alberta provincial government to order production cuts starting last month. Canadian heavy oil has attracted greater demand following U.S. sanctions against Venezuela’s state oil company.

The discount on Canadian heavy crude compared to U.S. light oil widened to $10.15 per barrel on Thursday morning from $9.40 earlier, according to Net Energy Exchange.

TransCanada shares eased 0.2 percent to C$55.98 in Toronto.

An official with the Missouri Department of Natural Resources said on Wednesday that the release of oil had stopped and it planned to find the leak on Thursday.

The Missouri Department of Natural Resources did not immediately respond to a request for comment on Thursday.

 
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Fiat Chrysler Automobiles NV and Robert Bosch have agreed to pay lawyers representing owners of U.S. diesel vehicles $66 million in fees and costs, according to court filing on Wednesday and people briefed on the matter.

In a court filing late on Wednesday in U.S. District Court in San Francisco, lawyer Elizabeth Cabraser said after negotiations overseen by court-appointed settlement master Ken Feinberg, the companies agreed not to oppose an award of $59 million in attorney’s fees and $7 million in costs.

The lawyers had originally sought up to $106.5 million in fees and costs.

Under a settlement announced last month, Fiat Chrysler and Bosch, which provided emissions control software for the Fiat Chrysler vehicles, will give 104,000 diesel owners up to $307.5 million or about $2,800 per vehicle for diesel software updates.

The legal fees are on top of those costs. Fiat Chrysler and Bosch did not immediately comment late Wednesday.

Fiat Chrysler is paying up to $280 million, or 90 percent of the settlement costs, and Bosch is paying $27.5 million, or 10 percent. The companies are expected to divide the attorney costs under the same formula, meaning Fiat Chrysler will pay $60 million and Bosch $6 million, the people briefed on the settlement said.

U.S. District Judge Edward Chen must still approve the legal fees. He has set a May 3 hearing on a motion to grant final approval.

The Italian-American automaker on Jan. 10 announced it settled with the U.S. Justice Department, California and diesel owners over civil claims that it used illegal software that produced false results on diesel-emissions tests.

Fiat Chrysler previously estimated the value of the settlements at about $800 million.

Fiat Chrysler is also paying $311 million in total civil penalties and issuing extended warranties worth $105 million, among other costs.

The settlement covers 104,000 Ram 1500 and Jeep Grand Cherokee diesels from the model years 2014 to 2016. In addition, Fiat Chrysler will pay $72.5 million for state civil penalties and $33.5 million to California to offset excess emissions and consumer claims.

The hefty penalty was the latest fallout from the U.S. government’s stepped-up enforcement of vehicle emissions rules after Volkswagen AG admitted in September 2015 to intentionally evading emissions rules.

The Justice Department has a pending criminal investigation against Fiat Chrysler.
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President Donald Trump says Treasury Department official David Malpass is his choice to lead the World Bank.

Trump introduced Malpass on Wednesday as the “right person to take on this incredibly important job.” Malpass is a sharp critic of the 189-nation lending institution.

Malpass says he’s honored by the nomination. He says a key goal will be to implement changes to the bank that he and Treasury Secretary Steven Mnuchin helped negotiate, and to ensure that women achieve full participation in developing economies.

Malpass would succeed Jim Yong Kim, who departed in January three years before his term was to end.

Other candidates will likely be nominated for the post by the bank’s member countries. A final decision on a new president will be up to the bank’s board.
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Treasury Secretary Steven Mnuchin said Wednesday that President Donald Trump had a “quite productive” dinner with Federal Reserve Chairman Jerome Powell. He says they discussed a wide range of subjects, from the state of the economy to the Super Bowl and Tiger Woods’ golf game.

Talking to reporters at the White House, Mnuchin said that Trump was very engaged during the casual dinner Monday night. It took place in the White House residence and marked the first time Powell and Trump have met since Powell took office as Fed chairman a year ago.

Mnuchin said that Powell’s comments were consistent with what he has been saying publicly about the economy. The Fed said in a statement that Powell did not discuss the future course of interest rates.

 
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