The Federal Reserve has already achieved one of its two mandates: With the unemployment rate at just 4.4 percent, the Fed has essentially maximized employment.

 

It’s the Fed’s other goal — price stability — that’s stayed persistently out of reach. Inflation has been edging further below the Fed’s 2 percent target. Problem is, too-low inflation tends to slow consumer spending, the U.S. economy’s main fuel. Many consumers delay purchases if they think the same price — or a lower one — will be available later.

 

Low inflation will likely be a key discussion point when the Fed holds its latest policy meeting this week. The central bank has raised its benchmark interest rate twice this year, but no one expects another hike when its meeting ends Wednesday. And unless inflation picks up, some analysts foresee no further rate increase this year.

 

Fed Chair Janet Yellen deepened the uncertainty earlier this month when she sounded less sure about her position that a slowdown in inflation this year was due to temporary factors.

Yellen conceded that Fed officials were puzzled by recent developments. Her remarks lifted financial markets as investors interpreted her words to suggest that the Fed might slow its pace of rate increases.

 

“In the past, Yellen was pretty confident that inflation would come back, but that is now in doubt,” said Sung Won Sohn, economics professor at California State University-Channel Islands.

 

Over the past 12 months, the inflation gauge the Fed monitors most closely has risen just 1.4 percent, according to the latest data. That’s down from a 1.9 percent year-over-year increase in January. In part, it’s why some economists say they suspect the Fed may be keeping its rate increases on hold, waiting to see if inflation in coming months rebounds from its current slowdown.

 

After leaving its key rate at a record low near zero for seven years after the financial crisis erupted in 2008, the Fed has raised it modestly four times — in December 2015, December 2016 and twice so far this year, in March and June. Even now, the rate remains historically low, in a range of 1 percent to 1.25 percent.

 

Months ago, the Fed had signaled its readiness to raise rates three times this year on the assumption that it needed to be more aggressive to ensure that consistently low unemployment didn’t contribute to high inflation later on.

 

In June, Yellen and other officials sought to explain away the unwelcome slip in inflation as a result of such onetime factors as a plunge in consumer cellphone charges and a dip in prescription drug prices.

 

But in delivering the Fed’s semiannual report to Congress this month, Yellen acknowledged some doubt. She described inflation as a “two-edge” problem, with the threat that prices could either rise too slowly or suddenly jump if a tight job market triggered wage pressures that stoked inflation.

 

Yellen didn’t rule out another rate increase this year. But investors have themselves grown more uncertain, with the CME Group’s closely watched gauge foreseeing a 47 percent chance of another rate increase by year’s end.

 

Diane Swonk, chief economist at DS Economics, said she still thinks the Fed will raise rates one more time this year — in December — but only if her forecast of a rebound in inflation comes true.

 

“I think we are going to get to a third rate hike this year, but it will be driven by the inflation data,” she said. “There is a real desire on the part of the Fed to hit the pause button until the haze clears and they can see more clearly what is happening.”

 

Mark Zandi, chief economist at Moody’s Analytics, said he believes the Fed will act again by December, in part because of concerns that stock prices and other asset prices have been lifted too high by investors who have become too optimistic about how long the Fed will delay its tightening of credit.

 

“The valuations in financial markets are very high right now,” Zandi said. “This has got to be making Fed officials nervous.”

 

Zandi also said he thought the Fed could provide details this week about its plans to start paring its enormous $4.5 trillion in holdings of Treasury and mortgage bonds, which it accumulated after the 2008 financial crisis in a drive to ease long-term borrowing rates.

Some say they think the Fed will begin in either September or October to begin shrinking those holdings, a move that is expected to put gradual upward pressure on long-term borrowing rates, including mortgages.

 

Eventually, Zandi predicted, as the job market strengthens further, the Fed will have to switch from worrying about inflation that is too low to inflation that will start to exceed its 2 percent target. He said he foresees three additional Fed rate increases next year.

 

 
…

Lucy Harris thinks Britain’s decision to leave the European Union is a dream come true. Nick Hopkinson thinks it’s a nightmare.

The two Britons — a “leave” supporter and a “remainer” — represent the great divide in a country that stepped into the unknown just over a year ago, when British voters decided by 52 percent to 48 percent to end more than four decades of EU membership.

They are also as uncertain as the rest of the country about what Brexit will look like, and even when it will happen. Since the shock referendum result, work on negotiating the divorce from the EU has slowed to a crawl as the scale and complexity of the challenge becomes clearer.

Harris, founder of the pro-Brexit group Leavers of London, says she is hopeful, rather than confident, that Britain will really cut its ties with the EU.

“If we haven’t finalized it, then anything’s still up for grabs,” she said. “Everything is still to play for.”

She’s not the only Brexiteer, as those who support leaving the EU are called, to be concerned. After an election last month clipped the wings of Britain’s Conservative government, remainers are gaining in confidence.

“Since the general election I’ve been more optimistic that at least we’re headed toward soft Brexit, and hopefully we can reverse Brexit altogether,” said Hopkinson, chairman of pro-EU group London4Europe. “Obviously the government is toughing it out, showing a brave face. But I think its brittle attitude toward Brexit will break and snap.”

Many on both sides of the divide had assumed the picture would be clearer by now. But the road to Brexit has not run smoothly.

First the British government lost a Supreme Court battle over whether a vote in Parliament was needed to begin the Brexit process. Once the vote was held, and won, Prime Minister Theresa May’s Conservative government officially triggered the two-year countdown to exit, starting a race to untangle four decades of intertwined laws and regulations by March 2019.

Then, May called an early election in a bid to strengthen her hand in EU negotiations. Instead, voters stripped May’s Conservatives of their parliamentary majority, severely denting May’s authority — and her ability to hold together a party split between its pro-and anti-EU wings.

Since the June 8 election, government ministers have been at war, providing the media with a string of disparaging, anonymously sourced stories about one another. Much of the sniping has targeted Treasury chief Philip Hammond, the most senior minister in favor of a compromise “soft Brexit” to cushion the economic shock of leaving the bloc.

The result is a disunited British government and an increasingly impatient EU.

EU officials have slammed British proposals so far as vague and inadequate. The first substantive round of divorce talks in Brussels last week failed to produce a breakthrough, as the EU’s chief negotiator, Michel Barnier, said Britain must clarify its positions in key areas.

Barnier said “fundamental” differences remain on one of the biggest issues — the status of 3 million EU citizens living in Britain and 1 million U.K. nationals who reside in other European countries. A British proposal to grant permanent residency to Europeans in the U.K. was dismissed by the European Parliament as insufficient and burdensome.

There’s also a fight looming over the multibillion-euro bill that Britain must pay to meet previous commitments it made as an EU member. British Foreign Secretary Boris Johnson recently asserted the bloc could “go whistle” if it thought Britain would settle a big exit tab.

“I am not hearing any whistling. Just the clock ticking,” Barnier replied.

EU officials insist there can be no discussion of a future trade deal with Britain until “sufficient progress” has been made on citizens’ rights, the exit bill and the status of the Irish border.

“We don’t seem to be much further on now than we were just after the referendum,” said Tim Bale, professor of politics at Queen Mary University of London. “I’m not sure anybody knows just how this is going to go. I’m not sure the government has got its negotiating goals sorted. I’m not sure the EU really knows what [Britain’s goals] are either.

“I think we are going to find it very, very hard to meet this two-year deadline before we crash out.”

The prospect of tumbling out of the bloc — with its frictionless single market in goods and services — and into a world of tariffs and trade barriers has given Britain’s economy the jitters. The pound has lost more than 10 percent of its value against the dollar in the last year, economic growth has slowed and manufacturing output has begun to fall.

Employers’ organization the Confederation of British Industry says the uncertainty is threatening jobs. The group says to ease the pain, Britain should remain in the EU’s single market and customs union during a transitional period after Brexit.

That idea has support from many lawmakers, both Conservative and Labour, but could bring the wrath of pro-Brexit Conservatives down on the already shaky May government. That could trigger a party leadership challenge or even a new election — and more delays and chaos.

In the meantime, there is little sign the country has heeded May’s repeated calls to unite. A post-referendum spike in hate crimes against Europeans and others has subsided, but across the country families have fought and friendships have been strained over Brexit.

“It has created divisions that just weren’t there,” said Hopkinson, who calls the forces unleashed by Brexit a “nightmare.”

On that, he and Harris agree. Harris set up Leavers of London as a support group after finding her views out of synch with many others in her 20-something age group.

“I was fed up with being called a xenophobe,” she said. “You start this conversation and it gets really bad very quickly.”

She strongly believes Britain will be better off outside the EU. But, she predicts: “We’re in for a bumpy ride, both sides.”
…

Authorities in Madrid asked Spain’s anti-trust watchdog on Saturday to investigate whether Uber’s new low-cost airport transfer service constitutes unfair competition.

The city council’s request follows the ride-hailing app’s return to the Spanish capital last year after the CNMC competition regulator called for the government to lift a ban on the U.S. company.

The firm’s recently launched Uber Airport service offers a tariff of 15-29 euros for a ride between Madrid’s Barajas international airport and the city center. Standard taxi fares for the trip are fixed at 30 euros.

“(Uber Airport) could violate several articles of the Law of Unfair Competition and consumer rights, if it is proven that the service is being operated at prices below operational costs and with the sole intention of gaining customers through unfair competition,” Madrid City Council said in statement.

No one at Uber could immediately be reached to comment.

European regulations

Uber, which expanded into Europe six years ago, has come under attack from established taxi companies and some EU countries because it is not bound by strict local licensing and safety rules that apply to some of its competitors.

Spanish taxi drivers have held three strikes so far this year, arguing that ride-hailing apps, which are regulated in Spain under VTC licenses typically used for private, chauffeur-driven vehicles, constitute unfair competition because they do not meet current regulations and pay less tax.

In May, the European Court of Justice (ECJ) dealt a blow to the company by ruling that it should be considered a transport service and not an app.
…

The state government in India’s capital told Philip Morris International Inc and other tobacco companies Saturday to remove all advertisements from tobacco shops in the city, warning them of legal action if they do not comply.

The order, sent by Delhi state’s chief tobacco control officer S. K. Arora, comes days after Reuters reported that Philip Morris was promoting Marlboro cigarettes, the world’s best-selling brand, by advertising them at tobacco shops and distributing free cigarette samples. Government officials say such tactics flout the law.

The strategy was laid out in hundreds of pages of internal Philip Morris documents reviewed by Reuters that cover the period from 2009 to 2016. 

​Tobacco ads illegal

Indian officials have previously said tobacco advertising using brand names or promotional slogans is illegal under the country’s Cigarettes and Other Tobacco Products Act and its accompanying rules. But Philip Morris and India’s leading cigarette maker ITC Ltd say they comply with regulations and that the law allows advertising inside a kiosk.

Arora said the federal health ministry had told him that all brand advertisements, irrespective of where they were placed, were not allowed in the country.

Philip Morris and ITC did not immediately respond to requests for comment Saturday.

Tobacco companies have continued to advertise at sale points despite repeated warnings from the Delhi state government in recent years. Philip Morris has been paying a monthly fee to some tobacco vendors to display the company’s colorful advertisements, the Reuters investigation found.

Arora also told Reuters he “will investigate and conduct raids” to check on distribution of free cigarettes at social events. 

“If violations are found, action as per law will be taken,” Arora said.

Tobacco law enacted in 2003

India enacted its national tobacco control law in 2003 and has since added rules to strengthen it, but government officials say companies get away with violations because law enforcement is weak.

The federal health ministry Friday said it planned to seek an explanation from Philip Morris and other tobacco companies about their marketing practices following the Reuters investigation that was published earlier this week. 

Philip Morris and ITC did not respond to requests for comment.
…

An Australian man who died in a Sydney car crash may be the 18th death linked to faulty Takata air bags, after police said he was killed when hit in the neck by shrapnel from an air bag.

Police did not say the air bag in the Honda CR-V was from manufacturer Takata, whose faulty air bags have been linked to 17 deaths and more than 180 injuries worldwide.

However, Honda Australia director Stephen Collins confirmed on Saturday that the vehicle involved was linked to the worldwide recall.

“The vehicle involved, a 2007 Honda CR-V, was the subject of Takata airbag inflator recalls,” Collins said in a statement, in which he offered the company’s condolences to the family of the dead driver. “Honda Australia is working closely with authorities to provide whatever assistance is required.”

Takata has declared 2.7 million vehicles to have potentially defective airbags.

Takata Corp filed for bankruptcy last month after being forced to recall around 100 million air bags worldwide, but that figure could be set to double pending an ultimatum set by U.S. regulators.

Dozens of models of vehicles and nearly 20 automakers have been affected by the air bag recalls, with Takata’s automaker customers having so far borne much of the estimated $10 billion cost of replacing the faulty products.

Some automakers still use Takata inflators for replacements in the recalls, although some including Honda Motor Co, Toyota Motor Corp and Nissan Motor Co have said they will stop using Takata inflators for new contracts for future models.
…

The Carrier manufacturing facility in Indianapolis, Indiana, owned by United Technologies Company, was in the limelight during the 2016 presidential election when then-candidate Donald Trump criticized UTC’s announcement it was moving jobs from the facility to Mexico. While Trump’s postelection negotiations, including tax incentives, encouraged Carrier to remain in Indianapolis, hundreds of employees still face layoffs this year. VOA’s Kane Farabaugh has more from Indiana.
…

President Donald Trump was expected to sign an executive order Friday authorizing a comprehensive review of the U.S. manufacturing sector to help ensure the security of the nation, according to White House officials.

White House National Trade Council Director Peter Navarro told reporters Friday industrial supply chains will also be reviewed in the effort to address possible industrial vulnerabilities that may have been created as a result of U.S. factory closings.

Administration officials say there is a dearth of U.S. companies that can repair submarine propellers and circuit boards and produce parts such as flat panels in the event of a war.

“America’s defense industrial base is now facing increasing gaps in its capabilities,” Navarro said, adding that “certain types of military-grade semiconductors and printed circuit boards have become endangered species.”

The order will call for a 270-day review that will be conducted by the Pentagon, along with the departments of Commerce, Energy, Homeland Security, Labor and the National Security Council.

The Commerce Department is already reviewing the possibility of imposing steel tariffs for national security reasons as a possible way to reshape international trade without negotiating new agreements with foreign countries.
…

Businesses owned by U.S. President Donald Trump have filed requests for visas with the Department of Labor to hire dozens of temporary foreign workers.

The news of the requests comes during the White House’s “Made in America Week,” urging American companies to hire American workers, a central theme of Trump’s presidential campaign.

The president’s Mar-a-Lago Resort and his nearby golf club in southern Florida are seeking to bring in the workers under the H-2B visa program, which allows companies to hire temporary, non-agricultural workers when American workers can’t be found. The jobs would run during the clubs’ busy season between October and May.  

Mar-a-Lago is seeking to hire 70 cooks, servers and housekeepers, while the golf club is looking for six cooks.

The Department of Labor certifies companies to apply for the visas, which are issued by the Department of Homeland Security.  

Trump announced a one-time expansion of the H-2B visa program earlier this week, increasing the number of available visas from 66,000 to 81,000. 
…

An international energy watchdog warns that the decline in global investment in the oil sector could lead to energy shortages when prices start to rebound. The International Energy Agency says energy investments have declined 20 percent in the past three years as oil profits fell. One analyst tells VOA that is a short-term recipe for long-term problems. Mil Arcega reports.
…

The government of Peru’s President Pedro Pablo Kuczynski said on Thursday that it was firing its special counsel in a corruption probe of Brazilian builder Odebrecht, sparking accusations of interference.

Justice Minister Marisol Perez said she dismissed special attorney Katherine Ampuero for blocking Odebrecht’s sale of its irrigation company Olmos. Perez said the decision put thousands of jobs at risk and deprived the state of revenues it would have seized as payment for reparations under a new anti-graft law.

Ampuero argued that Odebrecht would have used the sale of Olmos to pay its creditors abroad instead of Peru, which the company denied.

“Trust in Ampuero was lost because she did not apply the law, and by not applying the law she created economic loss for the state,” Perez told reporters on Thursday.

The announcement put the Odebrecht graft probe in Peru under increased scrutiny and renewed tensions between Kuczynski’s year-old government and the opposition-controlled Congress, which has already pressured three of Kuczynski’s ministers to step down.

“The president should ask Perez to resign immediately,” Popular Force lawmaker Hector Becerril said in broadcast comments on local broadcaster RPP. “This is a government of lobbyists.”

Odebrecht has been offloading its assets as it faces at least $2.6 billion in fines and graft probes in several countries where it has admitted bribing officials. In Peru, the company has been negotiating a plea deal with the attorney general’s office in which Ampuero had taken part as the state’s representative.

Anti-corruption state attorney Julia Principe said she was fired for refusing to dismiss Ampuero and noted that Ampuero had asked the attorney general’s office in March to look into any links that Kuczynski might have had with Odebrecht.

“This situation is a clear interference by the executive branch,” Principe said in a news conference flanked by Ampuero.

Kuczynski’s office did not immediately respond to requests for comment. Kuczynski has denied knowing about or being involved in the $29 million in bribes that Odebrecht has said it paid to officials in Peru over a decade.

Last year Odebrecht said it agreed to sell Olmos to Brookfield Infrastructure Partners LP and Suez SA for an undisclosed sum.

The sale will remain blocked pending an appeals court’s decision on whether to allow it.
…

India’s top builders have pledged to make at least a fifth of their new housing developments sustainable by 2022, as the country looks to tap sectors other than renewable energy to meet its ambitious climate goals.

The campaign is led by the Sustainable Housing Leadership Consortium (SHLC) comprising builders Godrej Properties, Mahindra Lifespaces, Shapoorji Pallonji, Tata Housing and VBHC Value Homes. It is backed by the Ministry of Housing.

Builders will use mainly local and recycled material, and design homes that conserve water and electricity and make best use of natural light and wind patterns, while also pursuing more energy-efficient methods of construction.

“The construction industry has one of the biggest carbon footprints, so it’s really important for us to take action to minimize the impact,” said Jainin Desai, head of design and sustainability at developer Mahindra Lifespaces.

“This initiative pushes us to incorporate sustainability right from the selection of the site to the design, the use of materials and in increasing awareness in the industry, as well as among our clients,” he told the Thomson Reuters Foundation.

India is the world’s third-biggest emitter of greenhouse gases that cause global warming.

As a signatory to the 2015 Paris Agreement on climate change, India is committed to reducing its carbon emissions by a third by 2030.

It is doing so with tougher emission norms, more electric vehicles and giant solar power plants to replace energy generated by coal.

The real-estate sector is responsible for nearly a quarter of the country’s carbon dioxide emissions. Those emissions come mainly from energy-intensive processes in making construction materials such as steel, cement and bricks.

As India’s economy grows at a fast clip, demand for homes, offices, roads, airports and factories is also rising. The demand for homes is particularly acute: in urban areas alone, there is a shortage of about 20 million homes.

Prime Minister Narendra Modi has made affordable housing a priority, with incentives such as subsidized loans to meet a 2022 target of “Housing for All.” This has led to a boom in construction across the country.

The effort by SHLC – an initiative of the World Bank’s International Finance Corporation under the eco-cities program of the European Union – will add 110 million sq ft of green housing by 2020.

Green homes the norm?

While “green” homes were built at a premium earlier and therefore had a niche appeal, newer technologies and greater demand have narrowed the cost differential between them and traditional housing to “almost nothing” now, Desai said.

Developers and buyers are also able to tap financing more easily for sustainable projects, as banks and investors look beyond renewable energy. The SHLC campaign is backed by HDFC Bank and PNB Housing Finance.

“India has huge funding requirements in … sustainable housing, metro rail networks, urban waste management and infrastructure development, that can be met through green financing options,” said Sanjeev Jha, India head of Global Capital Markets at Bank of America Merrill Lynch.

India, a relatively new player to green financing, has issued nearly $4.5 billion worth of green bonds so far, he said.

For homeowners, green homes will create savings of 198 million kWh per year in electricity consumption, and 108 billion liters in water savings, according to SHLC.

This will reduce India’s carbon footprint by approximately 0.2 million metric tons of carbon dioxide, it estimates.

“Our long-term goal is to make green homes 100 percent of the industry portfolio,” Desai said. “We see green homes becoming the default choice.”
…

While Western drivers like the “new car smell” of a vehicle fresh off the production line, Chinese would rather their cars didn’t smell of anything — a cultural divide that’s testing carmakers seeking an edge to revive sales in the world’s biggest auto market.

At Ford Motor Co., for example, 18 smell assessors, dubbed “golden noses,” at its research plant outside the eastern city of Nanjing test the smell of each material that goes inside a Ford car to be sold in China and around Asia.

The China smell test isn’t unique, but illustrates the lengths automakers go to to attract buyers in markets where consumer attitudes vary widely.

Smell matters

“In North America, people want a new car smell and will even buy a ‘new car’ spray to make older cars feel new and fresh. In China it’s the opposite,” says Andy Pan, supervisor for material engineering at the Ford facility, which employs around 2,300 people.

The smell of a new car in China can have an outsized effect.

A J.D. Power report last year showed that unpleasant car smells were the top concern for Chinese drivers, ahead of engine issues, road noise or fuel consumption.

The smell assessors at Ford, whose China sales are down 7 percent this year, carry out 300 tests a year, a third more than their counterparts in Europe. They rate the odor of all materials used in a car from “not perceptible” to “extremely disturbing.”

Pungent materials, from carpets to seat covers and steering wheels, are noted as smelling of anything from “burnt tire” and “bad meat” to “moth balls” or “dirty socks”. Some are sent back to the supplier.

Seats for Ford cars in China are stored in perforated cloth bags to keep them ventilated before being installed, as opposed to plastic wrapping in the U.S. market where consumers are less concerned about chemical smells.

“The smell inside the car can often be pretty pungent,” said Tom Lin, a 24-year-old high-school teacher in Zhejiang province, who bought a local Roewe brand car last October. He said there was still a bit of an odor six months later.

“With the next car I buy, I’m going to take more care to check out any odd smells,” he said.

Looking for an edge

To be sure, smell is just one factor for automakers to get right in China, where picky buyers are always looking for fresh car models and Beijing is making a big drive toward new energy vehicles.

In a slower market — consultancy IHS forecasts vehicle sales will slip slightly this year — firms are looking for an extra edge to appeal to consumers, beyond price discounts, says IHS analyst James Chao.

Local rivals Geely Automobile and BYD Co. Ltd. tout their in-car air filters to protect drivers from China’s harmful air pollution, and BMW says it is adding larger touch screens and tweaking colors to appeal to Chinese buyers.

Concern about chemicals, pollution

Smell is key though, reflecting a wider concern in China about chemicals and pollution.

“When I lived in the United States I might look at the suspension or the engine,” said Don Yu, China general manager at CGT, which makes materials to cover car seats and dashboards for General Motors, Volkswagen and Ford.

“In China, though, people open the car and sit inside, if the smell isn’t good enough they think it will jeopardize their health.”

For Ford’s “golden noses” that means a strict routine.

Testers undergo a tough selection process, proving themselves on blind smell tests before being chosen.

“We have to have very healthy habits; we can’t smoke, we can’t drink,” says one of the team, 33-year-old Amy Han, adding she avoids spicy food and doesn’t wear nail polish, strong perfume or even a leather jacket to keep her smell sense sharp.
…

Venezuela’s severe economic crisis will worsen if President Nicolas Maduro presses ahead with a controversial new congress that would further undermine investor confidence in the OPEC nation, the head of the country’s biggest business guild said.

Despite months of protests by the majority-backed opposition and widespread international condemnation, the ruling Socialist Party is holding a vote on July 30 to set up a legislative superbody known as a Constituent Assembly.

The assembly would have powers to rewrite the constitution and abolish the existing opposition-controlled legislature in what foes fear would enshrine a leftist dictatorship.

“What country in the world has a successful socialist model? None!” Carlos Larrazabal, 60, president of Fedecamaras told Reuters on Tuesday during its annual meeting in the sweltering western city of Maracaibo.

“In a constituent process, with the characteristics that are being proposed, there is no legal certainty and that does not attract investment but rather scares it away,” added the U.S-educated economist.

Fedecamaras has long been at odds with the government after

a former head briefly became interim president in a 2002 coup against late socialist leader Hugo Chavez.

Though officials have given few details on what the Constituent Assembly – which the opposition is boycotting – might do, investors fear its legal and economic ramifications.

Comments by a Socialist Party candidate that the assembly could rewrite parts of the constitution that allow joint ventures with foreign companies have spooked some in the country’s oil sector – though state energy company PDVSA later reassured partners that would not happen.

The political showdown comes amid a brutal economic crisis: inflation is in triple digits, the currency has fallen 99 percent against the dollar since Maduro was elected in 2013, and millions are struggling with food shortages.

A Reuters poll of economists on Wednesday forecast Venezuela would shrink 6 percent this year and another 3.0 percent in 2018.

“The forecasts are catastrophic. We have no positive expectations,” Maria Uzcategui, president of retailers’ guild Consecomercio, told Reuters at the Maracaibo conference.

‘Real Solutions’

Consecomercio estimates almost a million jobs in the private sector were lost in the last 18 months, and 1,150 businesses looted amid this year’s violent anti-Maduro protests.

Venezuela’s private sector wants to see an end to currency controls, enacted by Chavez in 2003 to curb capital flight, and price controls, which crimp production.

“Those would be the real solutions,” said Uzcategui.

Some 100 people have died in nearly four months of anti-Maduro unrest. On Sunday, Venezuela’s opposition capitalized on anger and held an unofficial vote in which they said 7.5 million participated and 98 percent rejected the Constituent Assembly.

The campaign is due to escalate on Thursday with a national strike, recalling events prior to a short-lived coup against former leader Chavez in 2002.

Fedecamaras’ line on the strike is that each employer and employee must decide for themselves whether to follow the opposition call for a 24-hour shutdown.

Maduro says the July 30 vote is necessary to achieve peace in the volatile South American nation, and also defeat an “economic war” being waged against his government by the opposition and Washington.

“Here, there is no economic war… They’ve expropriated more than 1,500 businesses, taken more than 5.2 million hectares… The economic war is in fact against all these companies that were private that now don’t produce!” said Larrazabal.
…

Argentina said Wednesday that it has sent the regional bloc Mercosur its ratification of the group’s 2010 trade agreement with Egypt, and the pact will go into force within a month.

The trade deal, which covers food, cars, auto parts and industrial supplies, was signed by Egypt and Mercosur members Argentina, Brazil, Uruguay and Paraguay in 2010, but it did not go into effect because Argentina’s Congress had not approved it.

Argentina’s Congress signed off on the deal in May, and Argentina has sent Mercosur its formal ratification, the last step needed for implementation, Argentina’s production ministry said.

“In 30 days the agreement will be in full force,” the ministry said in a statement Wednesday.

The deal will eliminate tariffs on 60 percent of Argentina’s exports immediately and phase in reduced tariffs for other products over 10 years, the ministry said.

Tariffs in Argentina on imports of beef, pears, apples and cars and auto parts from Egypt will also be lifted, it added.

The announcement comes as Mercosur has been seeking to finalize trade deals with other blocs and countries, including the European Union, Canada and South Korea, after pro-business governments took office in Argentina and Brazil.
…

Asia’s richest man, Wang Jianlin, suddenly finds himself cornered. The giant Dalian Wanda Group, which he heads, is facing a range of regulatory investigations and actions from the Chinese authorities. 

The latest move involves asking banks to stop financing overseas forays of the Wanda Group, which owns an array of foreign assets, including a Hollywood studio and AMC Theaters, the biggest exhibitor of movies in the U.S. 

The Group faced a regulatory probe into its financial deals in early June, which was followed by an announcement that Wanda had sold off part of its business to a Tianjin based real estate developer for $9.3 billion.

The government action against a businessman known for his strong connections with the Communist Party has caused a stir in the business community, with many asking if the government is sending out a political message to all privately owned businesses, informed sources said. 

Role of politics

“That is a surprising development in a lot of different ways. Wang Jianlin has many friends all through the political establishment in China,” said Christopher Balding, an associate professor of finance and economics at Peking University HSBC Business School. 

The industry in China is debating about whether the Wanda Group has been hit by a policy measure or Wang has fallen from the grace of the political establishment. 

“I don’t think this [action] is particularly targeting Mr. Wang, the chairman of Wanda Group, or purposefully targeting the Wanda group,” said Peng Liu, professor of real estate and hotel management at the Cornell University. “Actually, those [moves] are in line with the government action on control of financial risks.” 

Wanda Group’s recent deals include the $930 million acquisition of the Nordic Cinema Group in January, and the $1.1 billion purchase of Carmike Cinemas, the fourth-largest cinema operator in America. But Wang faced a rare setback early this year when he was forced to abandon a $1 billion takeover of Hollywood-based Dick Clark Productions.

On the face of it, the government is asking companies to cut down on their financial risks and stop adding pressure on China’s foreign exchange reserves.

But the signals go deeper than that because the action involves one of China’s best-known companies and comes ahead of a crucial Communist Party meeting which will determine the fate of some of the country’s top leaders. 

“It is not far fetched to say that there is definitely a political message being sent, and they are using Wanda as an example to other companies, (to say) ‘don’t do this’,” Balding said, adding, “And it is also a signal that there is a political fighting going on behind the scenes.”

Corporate vs government power

Giant multinationals are sometimes regarded as the sources of big power, who often influence government policies in different countries. Beijing may not be comfortable with additional power groups during its own influence gathering pursuit through the Belt and Road program, analysts said. 

Yue Su, an economist with The Economist Intelligence Unit (EIU), pointed out the government has been investigating two other companies, Fosun and Anbang, who were engaged in aggressive buying of business assets overseas. 

“The government is also worried that these companies are trying to move asset abroad and keep their debt within the country, which is worsening domestic economic conditions,” he said. 

Wider impact

Besides Wanda, many Chinese companies have been forced to revise their investment plans as the government reversed its earlier policy of encouraging them to acquire foreign brands and assets.

Beijing has since intensified its battle against capital flight amid a reduction in foreign exchange reserves early this year. This came as a shock to several companies who were forced to cut down their long range plans for growth in the international market.

“Another thing that needs to be pointed out is it was only 12-24 months ago that Chinese regulators were strongly encouraging Chinese companies to go out and make foreign acquisitions,” Balding said. “So, this was not done in a vacuum. So while Wanda may have pushed the limits, they were doing nothing more than what they were being encouraged to do by Chinese regulators.”

The government action to cut off funding to Wanda, and possibly to other companies, may have major consequences for China’s industrial economy.

“So consequently if their access is cut off, that could have a very significant impact on not just their ability to make foreign acquisitions but to do a lot of different things,” Balding said.

Peng Liu said the government will make a distinction in the case of its Belt and Road program and allow overseas investments by Chinese companies who wish to do so under that program. 

“The belt and road program is the government’s strategy. I think that is different. Corporations will find the match in terms (their) business vision and growth strategy and the government’s strategy on infrastructure and global collaboration in development,” he said.
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German automaker Daimler says it is voluntarily recalling 3 million diesel cars in Europe to improve their emissions performance.

The Stuttgart-based company, which makes Mercedes-Benz luxury cars, says it is taking the step to reassure drivers and strengthen confidence in diesel technology.

Diesels have been under a cloud since Daimler’s competitor Volkswagen admitted equipping vehicles with illegal software that meant they passed emissions tests, but then exceeded limits in everyday driving. There has been a push for diesel bans in some German cities because of concerns about levels of nitrogen oxide emitted by diesels.

The Daimler announcement comes hours after the regional government in the company’s home region of Baden-Wuerttemburg agreed to abandon proposals to restrict diesels if older diesels could be mechanically fixed to pollute less, the dpa news agency reported.

Daimler CEO Dieter Zetsche said Tuesday that “the public debate about diesel engines is creating uncertainty – especially for our customers.”

The recall will cover nearly all vehicles made under the EU5 and EU6 emissions standards and start in the next few weeks. The company said it would cost 220 million euros ($254.21 million), but that customers wouldn’t pay anything.

Daimler said in May that German investigators had searched its offices in connection with investigations of Daimler employees because of suspicion of fraud and criminal advertising relating to the possible manipulation of exhaust controls in cars with diesel engines. The company has said it is cooperating with the investigation.
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Cake and conversation, it seems, can go only so far to mend longstanding economic rifts between the United States and China.

Three months after President Donald Trump and his Chinese counterpart, Xi Jinping, shared chocolate cake at an amiable summit in Florida, tensions between the world’s two biggest economies are flaring again.

Just as officials of the two nations prepare to meet Wednesday in Washington, the Trump administration is considering slapping tariffs on steel imports, a step that risks igniting a trade war. For the United States, it’s a perilous option to address a problem caused largely by China’s overproduction of steel.

And Trump is criticizing China again for failing to use its economic leverage to rein in its neighbor and ally, the nuclear rogue state North Korea.

Could this week’s U.S.-China Comprehensive Dialogue produce a meaningful breakthrough in economic relations?

Most China watchers are skeptical.

“I’m not looking for anything worthwhile,” says Derek Scissors, a China specialist at the conservative American Enterprise Institute.

For one thing, the points of difference between the two countries run deep. For another, Xi faces political pressures at home and won’t want to cause a stir in Beijing.

For all the tensions between the two nations, Trump’s words about Xi himself have remained warm. He has suggested that the personal bond he formed with Xi when the two met April 6-7 at Trump’s Mar-a-Lago resort can overcome fundamental differences on trade and national security. Last week, the president called his Chinese counterpart a “friend of mine,” ”a terrific guy” and “a very special person.”

At a White House event Monday, Trump suggested that the relationship is so strong that he asked during the Florida summit to start exporting U.S. beef to China and that the request was quickly granted. Trump said that the beef industry was so pleased to return to China after a 14-year ban that one executive from Nebraska “hugged me, he wanted to kiss me so badly.”

“We welcome this opportunity,” Kenny Graner, a North Dakota cattle farmer who is president of the U.S. Cattlemen’s Association, says of the China market. “They have a middle class that’s growing in income. It’s big, a lot of people.”

After the meeting, the president softened his accusations of abusive Chinese practices, dropped his threat to label China a currency manipulator and expressed optimism that China would pressure North Korea to scale back its nuclear program.

Still, the Trump-Xi relationship has yet to deliver the substantive changes that Trump the candidate had promised voters – a core piece of his mantra to put “America first.” The economic irritants are likely to vex U.S. and Chinese officials this week.

Trump had campaigned on a promise to shrink America’s trade deficits, which he blames for wiping out American factories and manufacturing jobs. The United States last year ran a trade deficit in goods with China of $347 billion, the amount by which imports exceeded exports. It’s by far the widest gap that U.S. has with any country. Trump says China unfairly subsidizes exports.

Take steel. From 2000 to 2016, China accelerated steel production, raising its share of the world market from 15 percent to nearly 50 percent. As Chinese steel poured into the market, global prices fell, hurting American steelmakers. Scissors notes that China has long promised to stop subsidizing steel and to slow production but hasn’t delivered.

The Trump administration responded by invoking a little-used weapon in American trade law that lets the president tax or restrict imports – if a U.S. Commerce Department investigation finds that they imperil national security. (The result of Commerce’s investigation of steel imports is expected soon.) The rationale was that the American military relies on steel for airplanes, ships and other equipment. Steel also goes into roads, bridges and other infrastructure.

The problem is that the United States already blocks most Chinese steel imports. So any tariffs or limits on imports would instead hurt other countries, including such staunch allies as Canada and South Korea.

Scissors says the United States could try to coordinate sanctions against China by countries that do import Chinese steel.

David Dollar, a former World Bank and U.S. Treasury official who is now at the Brookings Institution, thinks Xi isn’t likely to make a bold move to cut Chinese steelmaking capacity – or enact other economic reforms – in advance of the Chinese communist party’s National Congress this fall. At the meeting, Xi will want to further tighten his grip on the party.

What’s more, the European Union and others are likely to lash back if the U.S. imposes sanctions on foreign steel, thereby running the risk of a broader trade war.

Then there’s North Korea. As a presidential candidate, Trump attacked China for refusing to pressure Pyongyang to back off from developing nuclear weapons. After the Mar-a-Lago summit, though, Trump praised Beijing for agreeing to help deal with North Korea. As a reward, he abandoned his vow to accuse China of manipulating its currency to benefit Chinese exporters.

This month, North Korea defiantly proceeded with its first launch of an intercontinental ballistic missile. Trump tweeted his complaint:

“Trade between China and North Korea grew almost 40% in the first quarter. So much for China working with us – but we had to give it a try!”

Brookings’ Dollar says the administration will likely continue to be disappointed.

“China is not going to do anything dramatic” to pressure North Korea, he says. “They don’t want that regime to collapse” and thereby destabilize the Korean peninsula and likely send North Korean refugees into China.

Overall, Dollar expects more turbulence between Washington and Beijing. The Obama administration, he notes, had kept the relationship stable despite economic differences by working with China on such issues as the Paris climate agreement and the Iran nuclear deal. But Trump has pulled out of the Paris deal and denounced the Iran pact.

“We’re going to see more volatility in the U.S.-China relationship than we’ve seen in years,” Dollar says.

 
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Nepalis stand to lose millions of dollars held in high-value Indian bank notes that India banned last year and has yet to exchange, a Nepali central bank official said on Tuesday.

Indian Prime Minister Narendra Modi in November banned 500 rupee ($7.77) and 1,000 rupee bank notes as part of a drive against unaccounted wealth in India that has also hit Nepal where Indian rupees are widely used.

People holding the notes in India were given a little less than two months to exchange them at banks.

In March, officials from the Reserve Bank of India (RBI) visited Nepal and promised to allow every Nepali citizen to exchange 4,500 Indian rupees ($70) worth of the old notes for new ones.

“That was only a verbal assurance but no formal decision from India has come to us,” said Chinta Mani Shivakoti, a deputy governor of the central Nepal Rastra Bank.

“Even if this amount was exchanged, individuals holding more than 4,500 Indian rupees risk losing the excess,” Shivakoti said.

Nepal depends heavily on funds from workers in India, who sent home $640 million in 2016, or about 3 percent of its gross domestic product.

The Indian central bank declined to comment. An Indian Finance Ministry spokesman also declined to comment, saying it was a central bank matter.

India fears that if it agrees to Nepal’s demand to allow Nepalis to exchange unlimited amounts, a large number of Indians may launder their ill-gotten old notes through Nepal.

Shivakoti said Nepal’s banks hold 78.5 million Indian rupees worth of the old notes, while business officials estimate that up to 10 billion in old Indian rupees ($155 million) may be held by individuals in Nepal’s informal sector.

Another NRB official, Bhisma Raj Dhungana, said the delay in resolving the issue was causing concern.

“India should have allowed the exchange facility much earlier,” Dhungana said.

Ordinary Nepalis say they have been hit badly by the delay.

“My savings are worth no more than waste papers. I can’t do anything about it,” said Saila Thakuri, who has 8,000 Indian rupees in old notes sent by his son who works in a restaurant in New Delhi.

 
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House Republicans on Tuesday unveiled a 10-year budget blueprint that would dramatically increase military spending while putting the GOP on record favoring Medicare cuts opposed by President Donald Trump.

The GOP plan, authored by Budget Chairman Diane Black, R-Tenn., would also pave the way for overhauling the U.S. tax code this fall, and would pair that effort with cuts to benefit programs such as food stamps. The plan also lays out a plan to balance the budget inside a decade through deep cuts to a wide swath of domestic programs — though GOP leaders have no intention of actually carrying out the cuts.

 

Black announced a committee vote for Wednesday, but action by the entire House could be delayed by an ongoing quarrel between the GOP’s tea party and moderate factions over spending cuts.

 

Medicare is the second largest mandatory program after Social Security, and the House GOP plan again proposes to turn Medicare into a voucher-like program in which future retirees would receive a fixed benefit to purchase health insurance on the open market. Republicans have proposed the idea each year since taking back the House in 2011, but they’ve never tried to implement it — and that’s not going to change now, even with a Republican as president.

 

The plan, in theory at least, promises to balance the budget through unprecedented and unworkable cuts across the budget. It calls for turning this year’s projected $700 billion or so deficit into a tiny $9 billion surplus by 2027. It would do so by slashing $5.4 trillion over the coming decade, including almost $500 billion from Medicare, $1.5 trillion from Medicaid and the Obama health law, along with enormous cuts to benefits such as federal employee pensions, food stamps, and tax credits for the working poor.

 

“The status quo is unsustainable. A mounting national debt and lackluster economic growth will limit opportunity for people all across the country,” Black said in a statement. “But we don’t have to accept this reality. We can move forward with an optimistic vision for the future and this budget is the first step in that process. This is the moment to get real results for the American people. The time for talking is over, now is the time for action.”

 

But in the immediate future the GOP measure is a budget buster. It would add almost $30 billion to Trump’s $668 billion request for national defense, which already exceeds an existing “cap” on spending by $54 billion. But while Trump proposed taking that $54 billion from domestic agencies and foreign aid, the GOP budget plan would restore most of the cuts, trimming non-defense agencies by just $5 billion.

 

All told, the GOP plan would spend about $67 billion more in the upcoming annual appropriations bills than would be allowed under harsh spending limits set by a failed 2011 budget and debt agreement and pads war accounts by $10 billion. And, like Trump’s budget, the House GOP plan assumes rosy economic projections that would erase another $1.5 trillion from the deficit over 10 years.

 

The measure, called a budget resolution, is nonbinding. It would allow Republicans controlling Congress to pass follow-up legislation through the Senate without the threat of a filibuster by Democrats. GOP leaders and the White House plan to use that measure to rewrite the tax code.

 

As proposed by House leaders, tax reform would essentially be deficit neutral, which means cuts to tax rates would be mostly “paid for” by closing various tax breaks such as the deduction for state and local taxes. However, the GOP plan would devote $300 billion claimed from economic growth to the tax reform effort.

 

But conservatives are insisting on adding cuts to so-called mandatory programs, which make up more than two-thirds of the federal budget and basically run on autopilot. After extended negotiations, Black would instruct 11 House panels to draw up $203 billion worth of mandatory cuts. But neither tea party lawmakers nor moderates are pleased with the idea. Conservatives want larger cuts, while moderates are blanching at voting to cut popular programs such as food stamps.
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The Trump Administration has launched “Made In America Week” to highlight the importance of U.S. manufacturing and tout its policies to bring more such jobs back home from overseas. But as VOA White House Bureau Chief Steve Herman reports, many Trump family products are made in foreign factories, leading to criticism of the president’s trade campaign.
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Foreign fishing vessels, many from China, prowl the waters off West Africa every day. They capture millions of fish — catches that used to go to local boats. The fish are then shipped to China, Europe and the United States, satisfying a global demand for seafood and fueling a multibillion-dollar industry.

The foreign vessels make life hard for West African fishermen.  

Foreign trawlers from Asia and Europe have cost West Africa’s economy 300,000 jobs and $2 billion in income, according to John Hocevar, a marine biologist with Greenpeace.

However, what to do about the problem — and possible damage to regional fish populations — has eluded experts and officials.

Chinese presence

Exact numbers are difficult to come by, but experts agree no single country has a greater presence off the coast of West Africa than China.

In a 2015 report, Greenpeace estimated that, two years earlier, China had 426 distant water fishing vessels off Africa’s West Coast.

Between 2000 and 2011, 64 percent of China’s average annual catches, valued at more than $7 billion, came from that area, according to The Pew Charitable Trusts.

Fishing isn’t a big part of China’s economy, representing less than one percent of total gross domestic product. But for many in China’s coastal provinces, it’s both a livelihood and way of life, according to Haibing Ma, the China program manager for the Worldwatch Institute, a nonprofit group that researches sustainability.

Chinese fishers have traveled to Africa because their own fish stock has nearly run out. “Overfishing has destroyed the sustainability of China’s inshore fisheries,” Ma said.

Lack of oversight

Fishing practices are inherently difficult to monitor and regulate. Oceans are vast, vessels are hard to reach, and a mix of local and international laws and regulations complicates enforcement.

Domestic laws regulate waters up to 200 miles off the coast, and international laws control waters past that, according to Todd Dubois, assistant director of the National Oceanic and Atmospheric Administration Fisheries Office for Law Enforcement.

This complex environment has led to a variety of creative ways to maximize profits without breaking the law.

For example, legislation in Guinea-Bissau has kept large industrial fishing vessels away from its coast.  So, fishing companies have deployed small boats that don’t need licenses from nearby countries such as Senegal. Those boats will fish in Guinea-Bissau and return their catches to a large “mothership,” which in turn takes its bounty back to Senegal to be traded.

In other cases, “floating factories” — large, nearby vessels used for processing and packaging catches — have enabled other boats to catch small pelagics, such as mackerels and sardines, quickly and on a massive scale for prolonged periods.

And bottom trawls, a kind of gear that contributes to overfishing, were installed on most Chinese vessels studied by Greenpeace in 2015.

Many see international fishing off Africa’s West Coast as an exploitation of local resources by foreign powers. But some of the most damaging practices occur within the law, and local African economies sometimes benefit from illegal fishing.

In Mauritania, for example, a Chinese company made a secret deal with the local government to build a fish-processing factory and bring 80 large vessels to the coast in exchange for a $100 million investment in the country.

That deal may have benefited both countries, says Andre Standing, an adviser at the Coalition for Fair Fisheries Arrangements, but it has had a profoundly negative impact on small-scale fishermen.

Responsible practices

Fishing, even when done on a massive scale, can be sustainable, provided there’s adequate planning and reporting. That means understanding the vulnerability of local fish populations and managing catches accordingly.

“Some reproduce very fast and can handle quite heavy fishing, such as tuna, and some of the small pelagics like the sardines,” Standing said, but other fish, such as sharks, develop very slowly. “We’re already seeing across Africa and across the world that industrial fishing and long line fishing in particular, they’ve decimated populations of the other types of fish.”

Standing cautions against drawing conclusions about the entire Chinese fishing industry. Individual fishing companies need to be judged on their own merits, he said. There are good Chinese companies, just as there are bad European companies.

China’s presence off Africa’s west coast shows no signs of shrinking, though. The Chinese government has enabled the industry to expand far beyond the country’s own shores. In 2013, the government gave the fishing sector about $6.5 billion in subsidies, according to a brief Standing wrote for the Africa Center for Strategic Studies.

Whether considering the actions of China, the European Union, or local African governments and businesses, the root of the problem comes from a lack of focus on long-term sustainability, according to Standing.

“In many areas, there really isn’t this careful, precautionary approach to managing fishing intensity,” he said. “A lot are being driven by short-term profit, and that’s really at the heart of the unsustainable nature of fisheries.”

Zhan Yang, Teng Xu and Ricci Shryock contributed to this report.
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The United States needs more foreign workers to keep some American businesses from floundering, according to a decision announced by U.S. officials Monday.

The Department of Homeland Security (DHS) said it will make 15,000 additional H-2B visas available for companies to hire temporary, non-agricultural foreign workers before the end of the fiscal year Sept. 30.

In a written statement, DHS Secretary John Kelly called the move a “one-time increase,”

The Trump administration promotes what it calls a “Hire American” policy and the president has repeatedly called for more limited immigration. Pressed by a reporter about how the policy announcement to allow more foreign workers into the U.S. supports American jobs, a DHS spokesperson said that without those extra workers, U.S. businesses could suffer “irreparable harm.”

Exemption is not renewed

In order to hire foreign workers through the non-immigrant visa program, businesses must show there are not enough U.S. workers “able, willing, qualified, and available” for the jobs.

The H-2B program is capped at 66,000 new visas annually; of that, 33,000 is reserved for workers who are hired during the first half of the fiscal year (Oct. 1 — March 31) and the remainder are for the latter half (April 1 — Sept. 30).

Since 2015, however, some returning workers were able to participate beyond the cap, increasing the number of H-2B visas issued last year to nearly 85,000, according to State Department data.

But Congress did not renew the returnees exemption when it expired last fall, effectively curbing the number of available visas. Businesses that rely heavily on seasonal workers, like the tourism industry, said they have struggled to fill vacancies since then.

Businesses need to petition for visas

Part of budget legislation passed in May, however, gave the Department of Homeland Security — which includes U.S. CItizenship and Immigration Services — discretion to go over the 66,000 cap to compensate for the shortfall.

Businesses will be able to petition for the additional visas when the rule is published in the General Register later this week, according to senior DHS officials. Previous applicants who did not make the earlier cut-off for the fiscal year will have to reapply, the officials added, but if hired by the end of the fiscal year, they will be able to work past Sept. 30.

President Donald Trump uses the H-2B visa program to staff his Florida private club, where he has hosted visiting heads of state since his inauguration in January. 

 
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EU foreign ministers approved on Monday measures to allow Ukraine to export more industrial and agricultural products free of tariffs to the bloc in recognition of reforms undertaken by Kyiv and the country’s fragile economy.

By the end of September, Ukraine will be able to export greater tonnage of farm products, including grains, honey and processed tomatoes for three years.

The EU will also remove for the same period import duties on fertilizers, dyes, footwear, copper, aluminum, televisions and sound recording equipment.

The measures add to a free-trade agreement provisionally in place since January 2016 that has opened both markets for goods and services.

“It is our duty to support Ukraine and strengthen our economic and political ties, also in the face of the ongoing conflict on its soil,” said Estonia Foreign Minister Sven Mikser, whose country holds the six-month rotating presidency of the European Union.

Trade has been at the heart of a dispute between Russia and the European Union over relations with Ukraine, with Moscow and Brussels both competing to bring Kyiv closer to their side through offers of greater economic integration.

While Kyiv has moved westward, Russia has sought to destabilize Ukraine, EU governments and NATO say, by annexing Crimea and providing separatists with weapons and troops in Ukraine’s industrial east.
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On a sweltering summer morning in the southern Indian city of Chennai, a dozen garment workers crowd into a small courtroom for the latest hearing in a protracted battle over low wages in factories supplying global fashion brands.

The women are among tens of thousands of workers in Tamil Nadu state – the largest hub in India’s $40 billion-a-year textile and garment industry – who are seeking millions of dollars in compensation following a landmark court ruling last year that declared they had long been grossly underpaid.

The Madras High Court ordered that the garment workers should receive a pay rise of up to 30 percent – the first minimum wage hike for 12 years – and that they could claim arrears going back to 2014.

But 12 months on, many factory bosses have failed to pay up.

Squeezed into a corner at the back of the stuffy Chennai courtroom, a middle-aged woman leans against the blue walls, clutching polythene bags full of documents to prove her claim.

Normally she spends her days hunched over a sewing machine, stitching skirts, shirts and dresses destined for high streets around the world.

But for months she has been taking days off work to attend court.

“I forgo a day’s salary to come for these hearings. It may not seem like a big amount, but for us it is hard earned money,” said the 48-year-old seamstress, who did not wish to be identified fearing it would impact her case. “I am only asking for what is rightfully mine. And they won’t even tell me how they are calculating my dues.”

More than 150 claims have been filed against tailoring and export garment manufacturing units in the Chennai region alone, according to data requested by the Thomson Reuters Foundation under the Right to Information Act.

The claims, which would benefit at least 80,000 workers at factories around the port city, add up to more than 490 million Indian rupees ($7.6 million).

But workers’ unions say these claims are probably the tip of the iceberg as they only represent cases filed by government labor inspectors.

Salary cuts

Under the 2016 Madras court ruling, Tamil Nadu’s garment and textile workers should see their pay rise from a monthly average of 4,500 to 6,500 rupees – which campaigners say is comparable to wages for textile jobs in most other states.

But workers say managers have defaulted or delayed on payments since the ruling, with some even introducing pay cuts.

Despite the state’s minimum wage laws, salaries continue to be “grossly low” for thousands of workers who are still not given pay slips or are often hired only as apprentices, campaigners say.

“Instead of paying workers their correct salaries, companies are finding ways to surreptitiously squash their rights,” said Selvi Palani, a lawyer helping workers’ unions fight their cases. “There is a court order but the money is not on the table.

Workers continue to be underpaid.”

Sujata Mody of Penn Thozhilalargal Sangam, a women workers’ union, said some companies that had raised wages were now docking pay for sick days, and for factory meals and shuttle buses which were previously free, meaning many workers had seen little or no change in pay.

Some factories were also firing more expensive workers on trivial grounds, she added.

“The workers are struggling to be heard and the managements are coming up with new forms to deduct their income,” Mody said.

Repeated delays

Under the 1948 Minimum Wages Act, state governments are required to increase the basic minimum wage every five years to protect workers against exploitation, but textile manufacturers have repeatedly challenged pay rises in Tamil Nadu.

The state’s labor commissioner, Ka Balachandran, said inspectors were verifying every company’s records to check that wages were now in line with last year’s ruling.

“We are doing everything to ensure workers get fair wages, and get it quickly,” he added.

But manufacturers in Tamil Nadu say the hike is too high, putting them at a disadvantage to competitors in other states. Some say they are already paying workers more than the minimum wage.

“The new norms are not distinguishing clearly between skilled and non-skilled workers,” said S Shaktivel of the Tirupur Exporters’ Association.

He said some companies had launched an appeal against the order at the Madras High Court.

In the Chennai labor court, case numbers are called out in quick succession.

The seamstress, who is expecting arrears of up to 5,000 rupees, strains to listen over the slow whirring of the ceiling fan.

“My financial situation is not very good,” she whispers. “My husband had surgery a few months back, we have a loan to pay back and a house to run. The company owes me arrears for almost one year. I need that income desperately.”

Her case is called. The lawyer representing the company asks for more time. Another date is set, with the judge warning against further delays.

“I hope I get a good settlement,” the seamstress said as she left court. “After all these years, I would like to stop working, but that looks unlikely. At least if they paid me properly, I would feel a little better.”
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