YCLOAK

When Oregon lawmakers created the state’s legal marijuana program, they had one goal in mind above all else: to persuade illicit pot growers to leave the black market.

That meant low barriers to entry that also targeted long-standing medical marijuana growers, whose product is not taxed. As a result, weed production boomed — with a bitter consequence.

Now, marijuana prices here are in free fall, and the craft cannabis farmers who put Oregon on the map decades before broad legalization say they are in peril of losing their now-legal businesses as the market adjusts.

Oregon regulators on Wednesday announced they will stop processing new applications for marijuana licenses in two weeks to address a severe backlog and ask state lawmakers to take up the issue next year.

​California takes heed

Experts say the dizzying evolution of Oregon’s marijuana industry may well be a cautionary tale for California, where a similar regulatory structure could mean an oversupply on a much larger scale.

“For the way the program is set up, the state just wants to get as many people in as possible, and they make no bones about it,” Hilary Bricken, a Los Angeles-based attorney specializing in marijuana business law, said of California. “Most of these companies will fail as a result of oversaturation.”

A staggering inventory

Oregon has nearly 1 million pounds (453,600 kilograms) of marijuana flower, commonly called bud, in its inventory, a staggering amount for a state with about 4 million people. Producers told The Associated Press wholesale prices fell more than 50 percent in the past year; a study by the state’s Office of Economic Analysis found the retail cost of a gram of marijuana fell from $14 in 2015 to $7 in 2017.

The oversupply can be traced largely to state lawmakers’ and regulators’ earliest decisions to shape the industry.

They were acutely aware of Oregon’s entrenched history of providing top-drawer pot to the black market nationwide, as well as a concentration of small farmers who had years of cultivation experience in the legal, but largely unregulated, medical pot program.

Getting those growers into the system was critical if a legitimate industry was to flourish, said Sen. Ginny Burdick, a Portland Democrat who co-chaired a committee created to implement the voter-approved legalization measure.

Lawmakers decided not to cap licenses; to allow businesses to apply for multiple licenses; and to implement relatively inexpensive licensing fees.

The Oregon Liquor Control Commission, which issues licenses, announced Wednesday it will put aside applications for new licenses received after June 15 until a backlog of pending applications is cleared out. The decision comes after U.S. Attorney Billy Williams challenged state officials to address Oregon’s oversupply problem.

“In my view, and frankly in the view of those in the industry that I’ve heard from, it’s a failing of the state for not stepping back and taking a look at where this industry is at following legalization,” Williams told the AP in a phone interview.

But those in the industry supported the initial decisions that led to the oversupply, Burdick said.

“We really tried to focus on policies that would rein in the medical industry and snuff out the black market as much as possible,” Burdick said.

​Consolidation

Lawmakers also quickly backtracked on a rule requiring marijuana businesses have a majority ownership by someone with Oregon residency after entrepreneurs complained it was hard to secure startup money. That change opened the door to out-of-state companies with deep pockets that could begin consolidating the industry.

The state has granted 1,001 producer licenses and has another 950 in process as of last week. State officials worry if they cut off licensing entirely or turn away those already in the application process, they’ll get sued or encourage illegal trade.

Some of the same parameters are taking shape in California, equally known for black-market pot from its Emerald Triangle region.

The rules now in effect there place caps only on certain, medium-sized growing licenses. In some cases, companies have acquired dozens of growing licenses, which can be operated on the same or adjoining parcels. The growers association is suing to block those rules, fearing they will open the way for vast farms that will drive out smaller cultivators.

Beau Whitney, senior economist at national cannabis analytics firm New Frontier Data, said he’s seeing California prices fall.

In contrast, Washington knew oversupply could draw federal attention and was more conservative about licensing. As the market matured, its regulators eased growing limits, but the state never experienced an oversupply crisis.

Colorado has no caps on licenses, but strict rules designed to limit oversupply allow the state to curtail a growers’ farm size based on past crop yields, existing inventory, sales deals and other factors.

Chain stores

In Oregon, cannabis retail chains are emerging to take advantage of the shake-up.

A company called Nectar has 13 stores around the state, with three more on tap, and says on its website it is buying up for-sale dispensaries too. Canada-based Golden Leaf Holdings bought the successful Oregon startup Chalice and has six stores around Portland, with another slated to open.

William Simpson, Chalice’s founder and Golden Leaf Holdings CEO, is expanding into Northern California, Nevada and Canada. Simpson welcomes criticism that he’s dumbing down cannabis the same way Starbucks brought coffee to a mass market.

“If you take Chalice like Starbucks, it’s a known quantity, it’s a brand that people know and trust,” he said.

Amy Margolis, executive director of the Oregon Cannabis Association, says that capping licenses would only spur even more consolidation in the long-term. The state is currently working on a study that should provide data and more insight into what lies ahead.

“I don’t think that everything in this state is motivated by struggle and failure,” she said. “I’m very interested to see … how this market settles itself and (in) being able to do that from a little less of a reactionary place.”

​Craft growers

For now, Oregon’s smaller marijuana businesses are trying to stay afloat.

A newly formed group will launch an ad campaign this fall to tell Oregonians why they should pay more for mom-and-pop cannabis. Adam Smith, who founded the Oregon Craft Cannabis Alliance, believes 70 percent of Oregon’s small growers and retailers will go out of business if consumers don’t respond.

“We could turn around in three to four years and realize that 10 to 12 major companies own a majority of the Oregon industry and that none of it is really based here anymore,” he said. “The Oregon brand is really all about authenticity. It’s about people with their hands in the dirt, making something they love as well as they can. How do we save that?”
…

President Donald Trump’s administration is planning to impose tariffs on European steel and aluminum imports after failing to win concessions from the European Union, a move that could provoke retaliatory tariffs and inflame trans-Atlantic trade tensions.

The tariffs are likely to go into effect on the EU with an announcement by Friday’s deadline, according to two people familiar with the discussions. The administration’s plans could change if the two sides are able to reach a last-minute agreement, said the people, who spoke on condition of anonymity to discuss internal deliberations.

Trump announced in March the United States would slap a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum, citing national security interests. But he granted an exemption to the EU and other U.S. allies; that reprieve expires Friday.

​Europe bracing

Europe has been bracing for the U.S. to place the restrictions even as top European officials have held last-ditch talks in Paris with American trade officials to try to avert the tariffs.

“Realistically, I do not think we can hope” to avoid either U.S. tariffs or quotas on steel and aluminum, said Cecilia Malmstrom, the European Union’s trade commissioner. Even if the U.S. were to agree to waive the tariffs on imported steel and aluminum, Malmstrom said, “I expect them nonetheless to want to impose some sort of cap on EU exports.”

European officials said they expected the U.S. to announce its final decision Thursday. The people familiar with the talks said Trump could make an announcement as early as Thursday.

U.S. Commerce Secretary Wilbur Ross attended meetings at the Organization for Economic Cooperation and Development in Paris on Wednesday, and U.S. Trade Representative Robert Lighthizer joins discussions in Paris on Thursday.

The U.S. plan has raised the threat of retaliation from Europe and fears of a global trade war — a prospect that is weighing on investor confidence and could hinder the global economic upturn.

​

If the U.S. moves forward with its tariffs, the EU has threatened to impose retaliatory tariffs on U.S. orange juice, peanut butter and other goods in return. French Finance Minister Bruno Le Maire pledged that the European response would be “united and firm.”

Limits on cars

Besides the U.S. steel and aluminum tariffs, the Trump administration is also investigating possible limits on foreign cars in the name of national security.

“Unilateral responses and threats over trade war will solve nothing of the serious imbalances in the world trade. Nothing,” French President Emmanuel Macron said in an impassioned speech at the Organization for Economic Cooperation and Development in Paris.

In a clear reference to Trump, Macron added: “These solutions might bring symbolic satisfaction in the short term. … One can think about making voters happy by saying, ‘I have a victory, I’ll change the rules, you’ll see.’”

But Macron said those “who waged bilateral trade wars … saw an increase in prices and an increase in unemployment.”

Tariffs on steel imports to the U.S. can help local producers of the metal by making foreign products more expensive. But they can also increase costs more broadly for U.S. manufacturers who cannot source all their steel locally and need to import the raw material. That hurts the companies and can lead to more expensive consumer prices, economists say.

Ross criticized the EU for its tough negotiating position.

“There can be negotiations with or without tariffs in place. There are plenty of tariffs the EU has on us. It’s not that we can’t talk just because there’s tariffs,” he said. He noted that “China has not used that as an excuse not to negotiate.”

But German Economy Minister Peter Altmaier insisted the Europeans were being “constructive” and were ready to negotiate special trade arrangements, notably for liquefied natural gas and industrial goods, including cars.

WTO reforms

Macron also proposed to start negotiations between the U.S., the EU, China and Japan to reshape the World Trade Organization to better regulate trade. Discussions could then be expanded to include other countries to agree on changes by the end of the year.

Ross expressed concern that the Geneva-based World Trade Organization and other organizations are too rigid and slow to adapt to changes in global business.

“We would operate within (multilateral) frameworks if we were convinced that people would move quickly,” he said.

Ross and Lighthizer seemed like the odd men out at this week’s gathering at the OECD, an international economic agency that includes the U.S. as a prominent member.

The agency issued a report Wednesday saying “the threat of trade restrictions has begun to adversely affect confidence” and tariffs “would negatively influence investment and jobs.”
…

The two largest resort operators in Las Vegas would lose more than $10 million a day combined if housekeepers, cooks and others go on strike, a possibility starting Friday, the union representing thousands of casino workers said Wednesday.

The Culinary Union detailed how it thinks a one-month strike would impact MGM Resorts International and Caesars Entertainment, which operate more than half the properties that would be affected if 50,000 workers walk off the job. Workers last week voted to authorize a strike as disputes over workplace training, wages and other issues have kept the union and casino operators from agreeing on new contracts.

The union conceded that it is difficult to estimate how the strike at more than 30 casino-hotels would affect Las Vegas overall because the last citywide strike took place in 1984, when the city had 90,000 fewer hotel rooms and only about 12.8 million annual visitors. Last year, more than 42.2 million people visited.

Contract expires midnight Thursday

But it says MGM and Caesars would see a 10 percent reduction in revenue because of the loss of group and independent travelers. A strike also could happen as fans head to Las Vegas for the Stanley Cup Final.

“Furthermore, one might assume a 10 percent worsening of operating margins due to the use of less experienced and less skilled replacements … to keep the doors open, rooms cleaned, food cooked, and cocktails served, not to mention other factors such as the disruptions to management staff’s regular work,” the union wrote.

Using the companies’ earnings reports for the first three months of the year, the union’s estimates show a one-month strike could reduce MGM’s earnings before interest, taxes and other items by more than $206 million and Caesars’ by over $113 million.

Contracts expire at midnight Thursday for bartenders, housekeepers, cocktail and food servers, porters, bellmen, cooks and other kitchen workers at properties on the Las Vegas Strip and downtown Las Vegas, including Caesars Palace, Bellagio, Stratosphere, Treasure Island, The D and El Cortez.

Dealers are not part of the Culinary Union. Casino-resorts that would not be affected by the strike include Wynn Las Vegas, Encore, The Venetian and Palazzo.

More talks scheduled

MGM, which employees 24,000 of the workers, said it met with union negotiators Monday and has more talks scheduled this week. The company says it remains confident that it “can resolve the outstanding contract issues and come to an agreement that works for all sides.”

Caesars said it “expects to agree to a new 5-year contract with the Culinary Union on or about June 1 when the current contract expires.” About 12,000 of its workers are part of the negotiations for new five-year contracts.

The union said it is asking for training on new skills and job opportunities as the companies adopt technology that can displace workers. It also wants an independent study to analyze the workload of housekeepers and contract language that would protect workers if properties are sold.

“What is going to happen to my position?” said Fernando Fernandez, a guest runner at Caesars Palace. “I think they are going to be disappearing it, because robots are going to be available to deliver everything.”

He said he wants training to fix or program the robots that he believes could eventually replace him.

The union says it has asked MGM for average annual wage increases of 4 percent for each of the five years. A document says the company has countered with an approximate 2.7 percent increase.

Caesars workers are asking for an increase of 4.2 percent effective Friday, and annual increases of about 4 percent thereafter. Another document shows the company has offered an approximate 2.8 percent increase for each of the five years.

The average hourly wage of union workers is $23, including benefits such as premium-free health care, a pension and a 401(k) retirement savings plan and $25,000 down-payment assistance for first-time homebuyers.
…

Malaysia and China are looking to re-balance ties as the new government of Prime Minister Mahathir Mohammad seeks to renegotiate billions of dollars of Chinese backed infrastructure spending, with the goal of reducing the country’s national debt.

China is Malaysia’s leading foreign direct investor at over $3.38 billion, ahead of the U.S., Japan and Singapore, with major infrastructure deals negotiated during the previous government of Najib Razak.

The main contract is a $14 billion (55 billion ringgit) East Coast Rail Link, as well as manufacturing, real estate and sovereign wealth fund bonds.

Carl Thayer, a professor of politics at Australia’s University of New South Wales, says Malaysia is seeking to move beyond anti-Chinese rhetoric that had been an undercurrent of the May 9 national polls.

Thayer said during the campaign Chinese investment in Malaysia was an issue, amid concerns Malaysia was excessively indebted to China.

“But Prime Minister Mahathir since the election has basically declared that the existing agreements will stand — that’s with any country. But there will be a review of these agreements with China. And the key project there seems to be the east coast rail line which is seen as a ‘white elephant’, costing a lot of money and not really delivering,” he said.

The East Coast Rail line is a key portion of Beijing’s Belt and Road initiative (BRI) infrastructure into South East Asia covering 688 kilometers connecting the South China Sea with the Thai Border.

The new government says the fresh negotiations are a bid to reduce the national debt burden, put at $251.32 billion (one trillion ringgit ) or 80 percent of national output (GDP).

Prime Minister Mahathir sees a need to reassess the projects and the Chinese investment strategy generally, especially depending on imported Chinese labor and technicians.

“We need to find out what benefit there is to us. To find out firstly the train is not going to be viable; secondly, its not benefiting Malaysia as much as we would like to see,” Mahthir told VOA.

“We don’t want to have a huge number of immigrants in Malaysia. Some of the Chinese companies have done that; that is not foreign direct investment,” he said.

WATCH: Mahathir Seeks to Implement Reforms

He said such projects as the rail link need to be scaled back in order to reduce the cost to renegotiate the loans and ensuring greater Malaysian participation.

“I think we will be able to convince [China] that some restructuring of the terms of the borrowing and the projects and all that will have to be done in order to reduce spending, in order to reduce the loans that we took from foreign countries,” Mahathir said.

In media reports Mahathir said he planned to scrap a 350 kilometer bullet train line from Singapore to the Malaysian capital of Kuala Lumpur.

The project, valued at around $20 billion, had attracted bidding interest from China, Japan and South Korea.

But Mahathir said this project “would be dropped” as it was unnecessary” and would “not earn a single cent.”

University of New South Wales’ Thayer expects China will be pragmatic in dealings with the new government.

“It’s got massive investments in Malaysia it would want to protect. China would roll with the punches and take the long view. Eventually that Malaysia — as I indicated — all the fundamentals are there to continue the relationship.”

“Trade is managed in Malaysia’s favor; substantial growing Chinese investment building infrastructure projects, some of which are needed, others maybe excessive, renewing, renegotiating the balance in that relationship, but not lurching to the U.S. camp,” Thayer said.

Both Mahathir and wealthy Malaysian businessman Robert Kouk, who sits on a powerful advisory panel to the Malaysian government, recently met China’s ambassador to Malaysia, Bai Tian. Mahathir later said Malaysia’s “strong ties with China will continue to flourish.”

James Chin, director of the South East Asia Institute at the University of Tasmania, says China’s Malaysian investments are also key to China’s regional strategic goals.

“Part of the reason China is such a big player in Malaysia is due to the geopolitical realities facing China. People do not realize that Malaysia is the only country in South East Asia that surrounds the South China Sea,” Chin said.

China has established disputed claims over much of the South China Sea.

But Bridget Walsh, based at the John Cabot University in Italy, said eventually Malaysia-China ties will return to a steady course.

“China is the regional global power in terms of economic issues, especially in South East Asia, and it is going to play a very big role and Malaysia is looking for new economic drivers,” Walsh said.

Walsh said outside infrastructure projects, China will look to other economic areas to continue a role in Malaysia’s economy. “And I think there are people in the system that understand that,” she said.

David Boyle contributed to this report.

 
…

 

U.S. Commerce Secretary Wilbur Ross said Wednesday a U.S.-European Union trade deal could still be reached even if the United States imposes tariffs on EU steel and aluminum imports.

EU and U.S. officials are holding last-minute negotiations two days before U.S. President Donald Trump decides to apply tariffs on Europe.

The threat of tariffs has increased prospects of retaliation and a global trade war that could hinder the global economy.

“There can be negotiations with or without tariffs in place,” Ross said at the Organization for Economic Cooperation and Development in Paris. “There are plenty of tariffs the EU has on us. It’s not that we can’t talk just because there’s tariffs.”

The Trump administration is also exploring possible limits on foreign auto imports, citing national security. 

The EU wants exemptions on steel and aluminum tariffs, which Trump hopes will benefit the U.S., or impose tariffs on U.S. peanut butter, orange juice and other products.

In a speech at the OECD, French President Emmanuel Macron said Europe should stand its ground in the face of unilateral actions and warned against trade wars.

“Unilateral responses and threats over trade wars will solve nothing of the serious imbalances in world trade. Nothing,” he proclaimed.

In an apparent reference to Trump’s proposed tariffs, Macron said, “These solutions might bring symbolic satisfaction in the short term. …. One can think about making voters happy by saying, ‘I have a victory. I’ll change the rules. You’ll see.’” 

Macron also called on the EU, the U.S., China and Japan to draft a World Trade Organization reform plan for the G-20 summit in Argentina later this year.

“The new rules must meet the current challenges of world trade: massive state subsidies creating distortions of global markets, intellectual property, social rights and climate protection,” he said. 

But Macron’s multilateral approach has produced limited results to date, as Trump has withdrawn from the Paris Climate Accord and the Iran nuclear deal, and is threatening to disrupt trade relations between China, the EU and other economic powers.

 

 
…

China vows it will fight back if the United States goes through with plans to impose huge tariffs on Chinese goods.

President Donald Trump’s administration said in a statement Tuesday it planned to impose 25 percent tariffs on $50 billion of Chinese goods that contain “industrially-significant technology.” It said the proposed tariffs are in response to China’s practices with respect to technology transfer, intellectual property, and innovation.  

Chinese Foreign Ministry Spokeswoman Hua Chunying blasted the Trump administration’s apparent reversal Wednesday in Beijing. Hua warned the administration risked squandering its credibility in international relations with every “flip flop” and contradiction of its previous stance.

Hua stressed Beijing is not afraid of engaging in a trade war, and will take “forceful” measures if the tariffs are imposed.

The White House said it will announce the final list of covered imports by June 15, 2018, and the tariffs will be imposed shortly thereafter.

Trump announced in April he planned to impose tariffs on $150 billion worth of Chinese goods, and Beijing responded by declaring it will retaliate by imposing similar amount of tariffs of imported American goods.

After two rounds of trade talks aimed at avoiding a full-blown trade war, U.S. Treasury Secretary Steven Mnuchin announced the two sides had reached a deal for Chinato buy more American goods to “substantially reduce” the huge trade deficit with the United States.

The Trump administration said in its statement trade talks with China will continue and it will request China remove all of its many trade barriers, including non-monetary trade barriers, and that tariffs and taxes between the two countries be “reciprocal in nature and value.” 

China in violation

The Trump administration’s decision to take action is a result of an investigation conducted by the U.S. Trade Representative under Section 301 of the Trade Act of 1974 to determine whether Beijing’s trade practices may be “unreasonable or discriminatory” and that may be “harming American intellectual property rights, innovation or technology development.”After a seven-month investigation, the USTR found the policies were in violation.

U.S. Commerce Secretary Wilbur Ross is set to go to Beijing this week 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.
…

Anglo American unit De Beers is launching a company to sell laboratory-produced diamonds for jewelry in a departure from its century-old business model of promoting natural stones.

Real diamonds created over thousands of years remain the priority, but De Beers is responding to customer demand for more affordable jewelry using stones made in days or weeks and sold for hundreds rather than thousands of dollars.

“They’re not to celebrate life’s greatest moments, but they’re for fun and fashion,” De Beers Chief Executive Officer Bruce Cleaver said of synthetic stones in a telephone interview.

“We have always said we are a natural diamonds business. We remain a natural diamonds business,” he said, adding that manmade diamonds used in fashion would not undermine the business for real diamonds as they served different markets.

As the world’s biggest seller of natural diamonds by value, De Beers is a leader in technology and security processes to guarantee the authenticity of natural stones.

To ensure there is no confusion between manmade gems that have little resale value and the real thing, the manufactured diamonds used in jewelry will include a tiny mark showing they are made by Element Six, a unit of De Beers that until now has focused on making stones for industrial uses.

The technology to insert the mark has been developed by Opsydia, an offshoot of Oxford University, and the diamonds will be sold by a new company called Lightbox Jewelry beginning in September in the United States, the world’s leading diamond jewelry market where demand hit an all-time high last year.

De Beers’ parent, Anglo American, was hit by the commodity price crash of 2015-16, but has recovered strongly and is leading the sector this year with a 13 percent rise in its share price.

The diamond business accounted for 16 percent of the Anglo American group’s full-year earnings.

Element Six does not publish separate earnings figures, but industry sources say it has returned to profit as recovering oil prices have increased demand for industrial stones for drill bits used in oil exploration.

If the move by De Beers into fashion jewelry gains traction, Element Six’s existing capacity will need to expand.

De Beers plans to invest $94 million over four years to build an Element Six factory near Portland, in the U.S. state of Oregon, which should produce more than half a million rough carats a year when fully operational in about 2020.

That remains modest in comparison to De Beers’ investment in maintaining production of natural diamonds of $3 billion over five-to-seven years.
…

Taiwan will struggle to stop a shrinking pool of mostly poor diplomatic allies from shifting allegiance to its rival, China, because it lacks the amounts of money they want, experts and officials in Taipei say.

The number of countries that recognize Taiwan diplomatically fell to 18 last week after Burkina Faso severed 24 years of relations.

The West African country, one of the world’s poorest, established formal relations with China days later and became the fourth country to make the change since 2016.

Taiwan had extended medical and farming support to Burkina Faso, but Taiwanese media said China had offered $50 billion last year. China often sends investors to Africa to tap natural resources and build infrastructure.

Failure to match Chinese money could shift more allies from Taipei to Beijing, experts believe, minimizing Taiwan’s voice in the United Nations and hurting its struggle to be seen internationally as separate from China.

“Quantitatively, China can undoubtedly offer much more than Taiwan and can offer that over a spectrum that is much wider than the Taiwan side’s spectrum,” said Fabrizio Bozzato, a Taiwan Strategy Research Association fellow.

China sees Taiwan as part of its territory rather than a state entitled to diplomacy. Each side has ruled itself since the Chinese civil war of the 1940s.

Backed by more than 170 countries including the world’s most powerful, China insists the two sides eventually unify despite polls showing Taiwanese prefer autonomy.

Taiwan’s government says China pays Taiwanese allies to switch allegiance as a way to put pressure on President Tsai Ing-wen. Tsai took office in Taiwan two years ago and rejects Beijing’s idea that the two sides belong to a single China.

Funding limitations in Taiwan

Taiwan gives aid to its allies based on evaluations of what each one needs to develop socially or economically, foreign ministry spokesman Andrew Lee said. It may set a timeline of two to three years, Lee said. Common types of aid are scholarships, farming technology and medial programs.

Taiwan has a limited budget, Lee told a news conference Tuesday.

“Our government maintains a steady stance, and the most important thing now is what the president has indicated and foreign minister has emphasized, which is no diplomatic acts that are related to so-called money diplomacy,” he said.

“Presently, with our government financial problems and our foreign affairs budget being only so much, we must use the smallest budget to do the biggest deployment, so in this aspect we must positively use our creativity.”

On Tuesday Taiwan agreed to expand economic and infrastructure aid to Haiti with an eye toward luring more Taiwanese investors to the impoverished Caribbean country. They reached that deal as Haitian President Jovenel Moise visited Taipei.

Taiwan seldom specifies amounts of aid to particular countries, which are mostly in the Caribbean, Central America and the South Pacific.

More money, faster, from China

China as a Communist country need not vet aid money through parliament or test the opinion of citizens who may prefer the aid money be kept at home, analysts say. It has more money as well as farther-reaching programs to distribute it, they add.

One channel is the $1 trillion Belt-and-Road Initiative for building new infrastructure around Eurasia.

China also can encourage its tourists to visit impoverished countries as a source of hospitality income, Bozzato said. Chinese took 130.5 million trips overseas last year, more than in 2016.

Some money from China reaches its allies “under the table,” he said. China is “richer” than Taiwan and is seen as a “great power that keeps on rising,” he said.

South Pacific nations allied with the United States, he said, “can extract resources both from the traditional Western partners and the new Chinese partner.”

Exporters from nations allied with Beijing have access to the world’s biggest consumer market, as well.

When the Dominican Republic cut ties with Taiwan May 1, its presidential office website said domestic industries had “requested greater diplomatic, commercial and economic growth with the People’s Republic of China.”

Since the African nation of Sao Tome and Principe left Taiwan for China in 2016, Beijing has pledged $146 million for the modernization of its international airport and construction of a deep-sea container port to facilitate Chinese trade in Africa.

Taiwanese aid had focused on farming, energy and public health.

Countries that need peacekeeping can look to China for help because it’s a United Nations Security Council member, as well, said Huang Kwei-bo, international affairs college vice dean at National Chengchi University in Taipei. Taiwan has no U.N. seat.

“You could threaten Taiwan a bit and it would give you more money, but that’s still not as much as Beijing can offer,” Huang said.

 

 
…

Greece’s largest labor unions are staging a general strike against plans to extend austerity measures, in a 24-hour protest that halted ferry services to the islands, and disrupted flights, public transport and other services.

 

Wednesday’s strike also closed schools and left public hospitals running on emergency staff.

 

Government budget austerity measures are due to continue for at least two more years after the international bailout ends in August, starting with another major round of pension cuts next January. Hundreds of protesters gathered in central Athens as several protest marches are planned in the capital and other cities Wednesday.

 

“The government is continuing disastrous policies for society and the economy, forcing unsustainable measures onto the backs of wage-earners and retired people,” the country’s largest union, the GSEE, said.

 

“The constant deterioration in the living standards is part of a downward trend that people [in government] chose not to see.”

 

Greece is currently negotiating the terms of its bailout exit with European creditors, including how its finances will be monitored and the conditions of a promised debt relief package. But the talks, due to be concluded in a few weeks, have been overshadowed by the political crisis in Italy and the resulting financial turmoil.

 

Eurozone member Greece has relied on money from three consecutive bailouts since losing market access in 2010. The rescue funds have been provided by a eurozone bailout fund and the International Monetary Fund, though the IMF has held off on a cash contribution toward Greece latest program.

 

A new round of administrative and market reforms demanded by creditors is due to be voted on in parliament on June 14.

 

 
…

Consumer confidence rebounded in May, but households were a bit pessimistic about their short-term income prospects even as they expected strong job growth to persist, which could restrain consumer spending.

The Conference Board said on Tuesday its consumer confidence index rose 2.4 points to a reading of 128.0 this month from a downwardly revised 125.6 in April. The index was previously reported at 128.7 in April.

“If consumers don’t step up their spending … then the growth outlook this year may disappoint on the weak side,” said Chris Rupkey chief economist at MUFG in New York.

U.S. financial markets were little moved by the data amid a deepening political crisis in Italy. The dollar rose to a 10-month high against the euro, while U.S. Treasury yields fell.

Stocks on Wall Street dropped, with the S&P 500 and Dow Jones Industrial Average touching near three-week lows.

The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, increased to 26.6 in May, the best reading since May 2001, from 22.7 in April.

That measure, which closely correlates to the unemployment rate in the Labor Department’s employment report, suggests that labor market slack continues to shrink.

But consumers were less upbeat about their short-term income prospects. The share of consumers expecting an improvement in their income fell to 21.3 percent this month from 21.8 percent in April. The proportion expecting a decrease rose to 8.2 percent in May from 7.9 percent in the prior month.

Buying plans drop

The weak income readings are despite massive tax cuts which the Trump administration claimed would boost paychecks for American workers. The $1.5 trillion tax cut package came into effect in January.

Consumers also showed a reluctance to commit to purchases of big-ticket items this month, with intentions to buy automobiles, houses and appliances declining. Consumer spending braked sharply in the first quarter and there are signs that it picked up early in the April-June period.

A separate report on Tuesday showed the S&P CoreLogic Case-Shiller composite index of home prices in 20 metropolitan areas increased 0.5 percent in March after rising 0.8 percent in February. House prices gained 6.8 percent in the 12 months to March after rising by the same margin in February.

The solid gains are at odds with recent data which had suggested a cooling in house prices. The Federal Housing Finance Agency reported last week that house prices edged up 0.1 percent in March from February.

The regulator’s index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae or Freddie Mac.

“While the weakness in the FHFA house price data raised some concerns that the trend in house price appreciation had started to shift lower, so far, the Case-Shiller data do not support that view,” said Daniel Silver, an economist at JPMorgan in New York.

The house price inflation is being fueled by an acute shortage of homes available for sale, which is hurting the housing market.
…

The White House says it plans to impose 25 percent tariffs on $50 billion of Chinese goods that contain “industrially-significant technology” as trade talks between United States and China continue.

The White House said Tuesday the proposed tariffs are in response to China’s practices with respect to technology transfer, intellectual property, and innovation.  It will announce the final list of covered imports by June 15, 2018, and the tariffs will be imposed shortly thereafter.

The Trump administration made the announcement in a statement called “Steps to Protect Domestic Technology and Intellectual Property from China’s Discriminatory and Burdensome Trade Practices.”

Other punitive steps include implementing stronger investment restrictions and enhanced export controls for Chinese citizens and companies related to the acquisition of industrially significant technology to protect national security. 

The proposed investment restrictions and export controls will be announced by June 30, 2018 and adopted shortly thereafter, according to the White House.

Trade barriers

In addition, the Trump administration said trade talks with China will continue and it will request China remove all of its many trade barriers, including non-monetary trade barriers, and that tariffs and taxes between the two countries be “reciprocal in nature and value.” 

In response to the latest threat of tariffs from the White House, the Chinese Ministry of Commerce said in a short statement it is “surprised” by the announcement but added it “also expects it.”

The Chinese ministry’s statement claimed the White House move “was apparently contrary to the consensus both sides reached recently.”

“China has the confidence, ability, and experience to safeguard its core interests, China urged the United Sates to act in accordance to the spirit of their recent joint statement,” it said.

In April, Trump announced he planned to impose tariffs on $150 billion worth of Chinese goods, and Beijing responded by declaring it will retaliate by imposing similar amount of tariffs of imported American goods.

China in violation

The Trump administration’s decision to take action is a result of an investigation conducted by the U.S. Trade Representative under Section 301 of the Trade Act of 1974 to determine whether Beijing’s trade practices may be “unreasonable or discriminatory” and may be “harming American intellectual property rights, innovation or technology development.”

After a seven-month investigation, the USTR found the policies were in violation.

The United States and China subsequently conducted two rounds of trade talks aimed at avoiding a full-blown trade war. The last round of trade talks was concluded on May 19 after both sides reached a deal for Beijing to buy more American goods to “substantially reduce” the huge trade deficit with the United States. But there was no mention of any specific import and export targets in the statement agreed to by the two countries.

Following the trade talks in Washington, U.S. Treasury Secretary Steven Mnuchin announced the world’s two biggest economic powers have agreed to back away from imposing tough new tariffs on each other’s exports.

Trump initially touted the agreement, but later contended he was neither pleased nor satisfied with the result.

U.S. Commerce Secretary Wilbur Ross is set to go to Beijing this week 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.
…

In an effort to stem the outcry over the arrest of two black men at one of its stores, Starbucks will close 8,000 U.S. stores Tuesday afternoon for anti-bias training for its employees. 

On April 12, two black men went to a Philadelphia store and did not buy anything; instead, they told the store manager they were waiting for a friend to join them. They were asked to leave and an employee called police, which led to their arrest, prompting protests and accusations of racism. 

A video of the incident that was posted on social media became a major embarrassment for the coffee chain.

Soon after, Starbucks announced a policy change, welcoming anyone to sit in its cafes or use its restrooms, even if they don’t buy anything.

Previously, it was left to individual store managers to decide whether people could access Starbucks premises without making a purchase. 

“We are committed to creating a culture of warmth and belonging where everyone is welcome,” Starbucks said in a statement. 

The company has asked employees to follow established procedure when dealing with “disruptive behaviors,” and are still asked to call 911 in case of “immediate threat or danger” to customers or employees. 

The men who were arrested in April, settled with Starbucks earlier this month for an undisclosed sum and an offer of a free college education for each of them. 

They also reached a deal with the city of Philadelphia for a symbolic $1 each and a promise from city officials to set up a $200,000 program for young entrepreneurs.

 

 
…

China told the World Trade Organization’s dispute settlement body on Monday that U.S. accusations that Beijing forced companies to hand over technology as a cost of doing business in China were groundless.

U.S. President Donald Trump has accused China of stealing American ideas and announced a plan for a $50 billion tariff penalty against Chinese goods.

Both sides launched legal complaints at the WTO over the issue earlier this year.

“There is no forced technology transfer in China,” Chinese Ambassador Zhang Xiangchen told the meeting, according to a copy of his remarks provided to Reuters.

“According to the U.S.’s view, China forces the U.S. companies to transfer technologies by imposing joint venture requirements, foreign equity limitations and administrative licensing procedures,” Zhang said.

“But the fact is, nothing in these regulatory measures requires technology transfer from foreign companies.”

Zhang said the U.S. argument involved a “presumption of guilt.” The U.S. Trade Representative believed U.S. firms in China faced an obligation to hand over technology, while failing to produce a single piece of evidence.

Some of its claims were “pure speculation,” he said, adding that the USTR saw Chinese M&A activity as a Chinese government conspiracy.

‘Diligence and entrepreneurship’

Technology transfer was a normal commercial activity that benefited the United States most of all, he said, while Chinese innovation was driven by “the diligence and entrepreneurship of the Chinese people, investment in education and research, and efforts to improve the protection of intellectual property.”

Legal experts say Washington needs WTO backing to implement its tariffs as far as they relate to WTO rules, while China has rejected the tariff plan wholesale and resorted to WTO action to stop it.

Under WTO rules, if disputes are not settled amicably after 60 days, the complainant can ask for a panel of experts to adjudicate, escalating the dispute and triggering a legal case that takes years to settle.

The United States, which launched its complaint on March 23, could have used the dispute meeting on Monday to take that step. China could do so at next month’s meeting.

But since the dispute erupted, U.S.-China trade policy has been the subject of high-level bilateral talks. Trump tweeted cryptically that “our trade deal with China is moving along nicely” but that it probably needed a “different structure.”

The United States put China’s technology transfer policies on the agenda of Monday’s meeting, without elaborating. A copy of the U.S. remarks was not immediately available.
…

New Zealand will slaughter more than 100,000 cows in an effort to eradicate a bacterial disease.

The government and agricultural leaders announced Monday that it will spend over $600 million over the next decade to rid the country of Mycoplasma bovis, which causes udder infections, pneumonia, arthritis and other illnesses. The bacteria is not a threat to humans, but can cause production delays on farms.

“This is a tough call,” said Prime Minister Jacinda Ardern. “But the alternative is to risk the spread of the disease across our national herd.”

Mycoplasma bovis has been detected on more than three dozen farms since it was first detected in New Zealand last year, leading to the slaughter of about 26,000 cattle. The country is the world’s largest exporter of milk and dairy products.

 
…

Myanmar’s anti-corruption commission has in recent weeks sued a senior bureaucrat and begun investigating a disgraced minister, indicating a crackdown on corruption promised by the government is finally happening. Often criticized as weak and unambitious, the commission’s stepped-up efforts suggest the Southeast Asian country is joining a regional trend.

On May 25, the Myanmar President’s Office confirmed the resignation of Planning and Finance Minister Kyaw Win, after the Anti-Corruption Commission revealed he was being investigated for bribery. The commission is also pursuing a criminal case against Food and Drug Administration Director-General Than Htut for allegedly demanding more than $11,000 in bribes from a construction company.

Anti-Corruption Commission chairman Aung Kyi told VOA that, at this stage in the probe against Kyaw Win, “I do not have any obligation to reveal what type of corruption he committed.” The commission has announced they delivered the investigation report to the President’s Office on May 25, but its findings aren’t yet public.

Last week, Myanmar’s upper house of parliament passed amendments to the Anti-Corruption Law that would grant the commission powers to investigate conspicuously wealthy office-holders on their own initiative. Currently, the commission, which was reconstituted in November, must wait for complaints to be submitted to it with “strong evidence.”

Political will

The commission had previously only pursued cases against low-ranking officials, and was noticeably absent in large scandals. One example was the multi-million-dollar misappropriation of development funds by the former chief minister of Magwe Region, who was merely ordered to return a portion of the money last year.

Ko Ye, national coordinator for the Myanmar Alliance for Transparency and Accountability, told VOA the recent moves seemed to signal genuine “political will,” which he considered the most important ingredient in any anti-corruption fight.

Marie Cauchois Pegie, advisor to the United Nations Office on Drugs and Crime — which is helping Myanmar meet its commitments under the U.N. Convention against Corruption it ratified in 2012 — told VOA the amendment was clearly a step forward.

However, the inadequate protection of whistle-blowers remains a critical shortcoming. Complainants risk counter-suits in a court system that many see as beholden to powerful interests.

With the amendment, the commission sought a reduction in maximum prison sentences for complainants providing “false” information from five years to six months. However, the upper house only approved a reduction to three years.

The corruption law mandates that “necessary protection” be provided to those supplying evidence. But, as Pegie notes, “implementation is not really foreseen,” and the country lacks a witness protection program.

Going after tigers

At the start of his tenure as finance minister in 2016, Kyaw Win earned a reputation for dishonesty by listing a Ph.D. on his resume from a made-up university. He has since presided over a slowdown in the economy and growing frustration among businessmen and investors, making him a politically expedient target.

Myanmar’s new president Win Myint, at his inauguration in March, declared fighting corruption a top priority. His first public meeting was with the Anti-Corruption Commission, in which he commanded them to be bolder in the face of interference from powerful figures.

Ahead of the 2020 election, the National League for Democracy government is anxious to deflect widespread criticism over the slowing pace of reform.

Myanmar political analyst Yan Myo Thein told VOA pervasive corruption in everyday life could turn an anti-graft drive into a vote winner. Yet, he said this would require the government to keep “going after tigers, not just flies.”

However, Hunter Marston, analyst at the Brookings Institution in Washington, told VOA it was possibly too late for such a drive to pay electoral dividends by 2020. Given Myanmar’s sluggish court system, this is plausible. He suggested a winning strategy might better focus on rural poverty-alleviation measures.

A regional mix

Elsewhere in Southeast Asia, the region’s mix of one-party states, multi-party democracies and military regimes make it hard to draw clear lines between the aims or approaches of governments conducting anti-graft drives.

In Vietnam, a crackdown since 2016 has seen ex members of the Communist Party Politburo and Central Committee sentenced, and dozens tried in single cases.

Carl Thayer, emeritus professor at the University of New South Wales in Canberra, told VOA this has addressed a genuine spiraling of graft over the previous ten years, mostly linked to giant state-owned enterprises and associated banks.

However, he said a desire by the Communist Party to reassert control of the state has been a key impetus, and he downplayed the role of public opinion. Any recent popular dividend, he said, may have been “cancelled out by a crackdown on free expression and Internet communication.”

Aung Tun, a Myanmar independent researcher on corruption, said this authoritarianism made Vietnam an inappropriate model. He suggested Indonesia, a multi-party democracy with a strongly empowered anti-corruption commission and robust civil society, could point the way ahead.

However, Indonesia’s commission has pursued high-level targets since 2003, while corruption remains endemic. Its example suggests that clean government requires a degree of societal change that could take a generation, or more.

 

 

 
…

Ivanka Trump’s brand continues to win foreign trademarks in China and the Philippines, adding to questions about conflicts of interest at the White House, The Associated Press has found.

 

On Sunday, China granted the first daughter’s company final approval for its 13th trademark in the last three months, trademark office records show. Over the same period, the Chinese government has granted Ivanka Trump’s company provisional approval for another eight trademarks, which can be finalized if no objections are raised during a three-month comment period.

Taken together, the trademarks could allow her brand to market a lifetime’s worth of products in China, from baby blankets to coffins, and a host of things in between, including perfume, make-up, bowls, mirrors, furniture, books, coffee, chocolate and honey. Ivanka Trump stepped back from management of her brand and placed its assets in a family-run trust, but she continues to profit from the business.

 

Noah Bookbinder, the executive director of Citizens for Responsibility and Ethics in Washington, said on Twitter that the recent approvals create “more conflicts of interest and more potential for using the White House for self-enrichment.” His government watchdog group was behind one of several lawsuits against President Donald Trump for violations of the emoluments clause of the constitution, which bars officials from accepting gifts from foreign states unless they are approved by Congress.

 

As Ivanka Trump and her father have built their global brands, largely through licensing deals, they have pursued trademarks in dozens of countries. Those global trademarks have drawn the attention of ethics lawyers because they are granted by foreign governments and can confer enormous value. Concerns about political influence have been especially sharp in China, where the courts and bureaucracy are designed to reflect the will of the ruling Communist Party.

 

Chinese officials have emphasized that all trademark applications are handled in accordance with the law.

 

More approvals are likely to come. Online records from China’s trademark office indicate that Ivanka Trump’s company last applied for trademarks — 17 of them — on Mar. 28, 2017, the day before she took on a formal role at the White House. Those records on Monday showed at least 25 Ivanka Trump trademarks pending review, 36 active marks and eight with provisional approval.

 

The World Intellectual Property Organization’s global brand database also shows that her company, Ivanka Trump Marks LLC, won three trademarks in the Philippines after her father took office. Two of them cover clothing, including lingerie and baby clothes, were filed on Feb. 8, 2017 and registered in June and November. The third, filed on Mar. 1, 2017, covers clothing and footwear and was registered in July.

 

Companies register for trademarks for a variety of reasons. They can be a sign of corporate ambition, but in many countries, like China, where trademark squatting is rampant, companies also file defensively, to block copycats from grabbing legal rights to a brand’s name. Trademarks are classified by category and may include items that a company does not intend to market. Some trademark lawyers also advise clients to register trademarks for merchandise that is manufactured in China, even if it’s not sold there.

 

Ivanka Trump does not have a large retail presence in China, but customs records show that the bulk of her company’s U.S. imports are shipped from China.

 

The brand’s secretive Chinese supply chains have been the subject of some controversy. A year ago Monday, three men working for China Labor Watch, a New York-based non-profit, were arrested while investigating labor abuses at Ivanka Trump suppliers in China. After thirty days in detention, they were released on bail, but continue to live under police surveillance.

 

Li Qiang, the group’s founder, said Monday that he hopes bail will be lifted soon and that the case will not go to trial.

 

Police in Ganzhou, the southeastern Chinese city where the men were detained, could not be reached for comment. The Chinese law firm that handles Ivanka Trump’s intellectual property in China also did not immediately respond to requests for comment.

 

 

 
…

Vietnam is imitating China in its efforts to grow economically and lags its larger neighbor only by about a decade, experts say.

The two communist countries, though political rivals, have built up their state-controlled economies on job creation through factory work for export. 

China opened that effort to foreign investment in 1978 and Vietnam got started 10 years later. Now Vietnam is grappling with corruption, traffic gridlock and the sinking performance of state-run companies as its middle class grows, all hallmarks of China’s development.

In the latest sign of similarity, Vietnam’s National Assembly is examining a bill to let the country run three special economic zones. It has a chance of passing next month. The zones would offer foreign factory investors tariff exemptions and long land leases, Vietnamese news website VnExpress International says. China created its first four zones in 1979 to attract foreign investment. It now has 32.

“I don’t know whether it’s deliberate or otherwise, but it seems there is that hint of taking that page from the CPC playbook — Chinese Communist Party,” said Song Seng Wun, economist in the private banking unit of CIMB.

“Vietnam has a Communist Party, so I suppose there is that kind of ‘if China is doing it, we can also perhaps adapt it to Vietnamese conditions.’”

Controlled economy and factory work

Governments in both countries turned to factory work to employ large, uneducated populations, said Ralf Matthaes, founder of the Infocus Mekong Research consultancy in Ho Chi Minh City.

Reliance on factory work, especially for export, drove Chinese economic growth of about 10 percent per year over the decade to 2010. Vietnam’s economy has expanded at more than 6 percent annually since 2015.

Vietnam, like China a decade ago, depends largely on production of low-tech exports such as garments, furniture and car parts. China is moving up the value chain into high tech, and leaning more on services.

Companies from Japan, Singapore, South Korea and the West often offshore factory work to China as well as Vietnam to save on labor costs. China has been dubbed the “world’s factory” and Vietnam a “China+1” destination for investors looking to expand production to a cheaper country.

“How do you employ a bunch of unskilled workers?” Matthaes said. “Obviously mass manufacturing is one way. I think even though Vietnam holds Singapore in high regards in terms of ‘Singapore’s our greatest model,’ it’s China.”

Five years ago Vietnam’s ambassador to Singapore called relations with the fellow Southeast Asian country a model as trade links were growing then. Vietnam, though dependent on China for trade, regards China as a political rival. They fought a border war in the 1970s and now dispute sovereignty over parts of the South China Sea.

Managing outcomes of fast growth

Outcomes of factory-driven economic growth that China saw a decade ago are showing now in Vietnam, analysts note.

The number of Vietnamese who are middle class and higher will double between 2014 and 2020 to about one-third of the country’s population of 93 million, the Boston Consulting Group says. China says just 3.1 of its 1.38 billion people lived in poverty last year.

In other signs of following China, Vietnamese workers are known for job hopping within a few months for higher pay and showing it off with expensive smartphones, new cars and meals at expensive restaurants. Traffic is starting to thicken in the financial center Ho Chi Minh City as it has in China’s major cities such as Beijing and Shanghai since 2000.

Vietnam’s crackdown on corruption that went public in 2017 also followed the Chinese anti-graft campaign that experts say became more rigorous in 2012.

It’s Vietnam’s turn now to make its state-owned firms perform well or be sold off, analysts say. State-owned enterprises, another feature of communist countries, dominated the Vietnamese stock exchange from its inception in 2000 through 2005 as those assets were sold, said Kevin Snowball, chief executive officer with PXP Vietnam Asset Management in Ho Chi Minh City.

Thousands of Vietnam’s state firms have been all or partly privatized. China began reforming its state firms about 20 years ago and is still pressing them to change following a decline in profits in 2015 due to issues with corporate governance and labor productivity.

“Vietnam established the stock market in order to sell state assets basically, because when it started, essentially everything that was listed was state owned up until the end of 2005,” Snowball said. 

“The government needs to spend probably 25 billion dollars a year on infrastructure development in order to keep encouraging (foreign direct investment) to come in, and sale of state assets is partially funding that,” he said.
…

New shops appear in New York City every day, but Phluid Project, which recently opened its doors on Broadway, is different. One of the first gender-fluid boutiques in the world, Phluid Project sells clothing for men, women and everyone in between. Both the clothes and the mannequins here are gender-neutral, and as an added selling point, its store owners say the prices are more than affordable. Elena Wolf visited the one-of-a-kind store, where no one feels out of place.
…

Russian state gas giant Gazprom said Saturday it had signed a protocol with the Turkish government on a planned gas pipeline and agreed with Turkish firm Botas to end an arbitration dispute over the terms of gas supplies. 

The protocol concerned the land-based part of the transit leg of the TurkStream gas pipeline, which Gazprom said meant that work to implement it could now begin.

Turkey had delayed issuing a permit for the Russian company to start building the land-based parts of the pipeline, which, if completed, would allow Moscow to reduce its reliance on Ukraine as a transit route for its gas supplies to Europe.

A source said in February the permit problem might be related to talks between Gazprom and Botas about a possible discount for Russian gas.

Turkish President Tayyip Erdogan said earlier Saturday that Turkey and Russia had reached a retroactive agreement for a 10.25 percent discount on the natural gas Ankara buys from Moscow.

Gazprom said in the Saturday statement, without elaborating, that the dispute with Botas would be settled out of court.

 
…

Italy’s would-be coalition parties turned up the pressure on President Sergio Mattarella on Saturday to endorse their euroskeptic pick as economy minister, saying the only other option might be a new election.

Mattarella has held up formation of a government, which would end more than 80 days of political deadlock, over concern about the desire of the far-right League and anti-establishment 5-Star Movement to make economist Paolo Savona, 81, economy minister.

Savona has been a vocal critic of the euro and the European Union, but he has distinguished credentials, including in a former role as an industry minister.

Formally, Prime Minister-designate Giuseppe Conte presents his cabinet to the president, who must endorse it. Conte, a little-known law professor with no political experience, met the president on Friday without resolving the

deadlock.

“I hope no one has already decided ‘no,’ ” League leader Matteo Salvini shouted to supporters in northern Italy. “Either the government gets off the ground and starts working in the coming hours, or we might as well go back to elections.”

Later, 5-Star leader Luigi Di Maio said he expected there to be a decision on whether the president would back the government within 24 hours.

5-Star also defended Savona’s nomination. “It is a political choice. … Blocking a ministerial choice is beyond [the president’s] role,” Alessandro Di Battista, a top 5-Star politician, said.

Mattarella has not spoken publicly about Savona, but through his aides he has made it clear he does not want an anti-euro economy minister and that he would not accept the “diktat” of the parties.

Jittery markets

Savona’s criticism of the euro and German economic policy has further spooked markets already concerned about the future government’s willingness to rein in the massive debt, worth 1.3 times the country’s annual output.

The League and 5-Star have said Savona should not be judged on his opinions, but on his credentials. Savona has had high-level experience at the Bank of Italy, in government as industry minister in 1993-94, and with employers lobby Confindustria.

On his new Facebook page, Conte said he had received best wishes for his government in a phone call with French President Emmanuel Macron.

European Commissioner for Economic Affairs Pierre Moscovici was not hostile when asked about Savona in an interview with France’s Europe1 radio, saying he would work with whomever Italy named.

“Italians decide their own government,” Moscovici said. “Italy is and should remain a country at the heart of the eurozone. … What worries me is the debt, which must be contained.”

The prospect of Italy’s government going on a spending spree on promised tax cuts and welfare benefits roiled markets last week.

On Friday, the closely watched gap between the Italian and German 10-year bond yields, seen as a measure of political risk for the eurozone, was at its widest in four years at 215 basis points.

The chance that the new government will weaken public finances and roll back a 2011 pension reform prompted Moody’s to say — after markets had closed Friday — that it might downgrade the country’s sovereign debt rating.

Moody’s has a Baa2 long-term rating with a negative outlook on Italy. A downgrade to Baa3 would take the country’s debt to just one notch above junk.

Despite the recent surge, Italian yields are well below the peaks they reached during the eurozone crisis of 2011-12, thanks mainly to the shield provided by the European Central Bank’s bond-buying program.
…

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.
…

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.”
…

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.”
…

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
…