In the coming weeks, as Houston turns its attention to rebuilding areas devastated by Tropical Storm Harvey, people like Jay De Leon are likely to play an outsized role — if they stay around.

De Leon, 47, owns a small construction business in Houston, and he and his 10 employees do exactly the kind of demolition and refurbishing the city will need. But like a large number of construction workers in Texas, De Leon and most of his workers live in the United States illegally, and that could make things complicated.

The Pew Research Center estimated last year that 28 percent of Texas’s construction workforce is undocumented, while other studies have put the number as high as 50 percent. Construction employed 23 percent of working undocumented adults in Texas at the end of 2014, higher than any other sector, according to the Migration Policy Institute.

Undocumented immigrants nervous

However, undocumented immigrants are growing increasingly nervous in Texas because of an immigration crackdown by the Trump administration that has cast a wide net.

In addition, a new Texas law that would have taken effect later this week bars cities from embracing so-called sanctuary policies, where they offer safe harbor to illegal immigrants, and allows local police to inquire about a person’s immigration status. A federal judge Wednesday temporarily blocked most of the law from taking effect.

De Leon, who has lived in the country for 20 years and has two citizen children, says the changes have spooked the city’s migrant workforce. In recent weeks, he said, one of his employees left the state and another returned to Mexico. Both feared that if they stayed they risked arrest.

Departing workers, he says, pose a problem for Houston in the wake of Harvey, which has caused flood damage to commercial buildings, houses, roads and bridges expected to run into tens of billions of dollars.

“The situation that Houston is going through now with the hurricane is going to be the trial by fire for the Republicans and the governor that approved these radical laws,” De Leon said. “They will need our migrant labor to rebuild the city. I believe that without us it will be impossible.”

Undocumented workers perform a wide range of construction jobs, from framing and dry-walling to plumbing and wiring.

Shortage of U.S. trained workers

Stan Marek, chief executive of Marek Construction in Texas, said his company doesn’t hire undocumented immigrants and has long had difficulty finding enough trained U.S. workers.

“It’s a crisis,” Marek said. “We are looking at several thousand homes that have flood damage. There is no way the existing (legal) workforce can make a dent in it.”

Marek would like to see the federal government grant emergency work authorization for undocumented workers in the rebuilding effort, he said. Otherwise, those immigrants are likely to be hired by firms that do not pay payroll taxes or provide benefits like workers’ compensation and legally mandated overtime.

It isn’t yet possible to estimate how many construction jobs will be added in Texas as it rebuilds, but in the 12 months after Hurricane Katrina hit in 2005, Louisiana added 14,800 jobs in the sector, U.S. government data shows.

About 25 percent of the construction workers involved in the cleanup of New Orleans were undocumented, according to a study by researchers at Tulane and UC Berkeley universities. Those without papers were “especially at risk of exploitation,” the study found.

Worker exodus

The labor shortages are likely to grow worse, many builders warn. Earlier this year, a group of Hispanic contractors sent a letter to Texas Governor Greg Abbott warning that the pending ban on sanctuary city policies would make it “difficult to find and retain experienced workers.”

Javier Arrias, chairman of the Hispanic Contractors Association de Tejas and one of the letter’s signers, told Reuters that “many construction workers are already moving to other states.”

Abbott’s office did not respond to a request for comment about the role undocumented workers might play in the recovery.

Elizabeth Theiss, president of Houston-based anti-immigration group Stop the Magnet, sees another option besides looking to workers in the country illegally. She says the rebuilding effort should be used to help train U.S. veterans and other citizens who need jobs.

Theiss acknowledged that reconstruction might proceed more slowly, at least initially, if immigrants without work documents are not part of the effort, but she noted that rebuilding would be slow under any scenario.

Personal hardships

Whatever role undocumented people play in rebuilding Houston, they could face hardships rebuilding their own lives.

While the Federal Emergency Management Agency provides emergency food, water and medicine to anyone, regardless of immigration status, cash assistance and other longer term aid is only available to citizens and immigrants in households where at least one family member has legal status.

Immigrant advocates are launching private fundraising drives to help fill the void.

“It is deeply tragic and un-American that so many of those working men and women who will be rebuilding Houston and the rest of the state will be doing so while facing tragedy in their own lives,” said Jose Garza, executive director of the Workers Defense Project.

De Leon said his family was lucky and did not suffer flood damage. He is now busy rounding up supplies for immigrant families stuck at shelters who are afraid to seek out more help from authorities.

In the end, he says, President Donald Trump has to know “it’s going to be impossible to rebuild Houston without the labor force of immigrants. It is illogical, what he says with his words and what really has to happen.”
…

Michigan is likely to be the state most hurt by changes to the NAFTA trade agreement, according to a Fitch Ratings report released Wednesday, as U.S. President Donald Trump renewed threats to scrap the deal.

Trump has threatened three times in the past week to abandon the North American Free Trade Agreement, revisiting his view that the United States would probably have to start the process of exiting the accord to reach a fair deal for his country.

A second round of talks starts Friday in Mexico City to renegotiate the 1994 accord binding the United States, Mexico and Canada.

Business groups have largely praised NAFTA and hope to persuade all three governments to make minimal changes to the pact. U.S.-Canada-Mexico trade has quadrupled since NAFTA took effect in 1994, surpassing $1 trillion in 2015.

Michigan’s auto sector

While several other states export a significant amount of products to Canada and Mexico, Michigan is an outlier in Fitch’s analysis because of the state’s global role in the automotive sector and proximity to Canada, the report said.

Sixty-five percent of the Michigan’s exports went to Canada and Mexico in 2016, totaling 7.4 percent of its gross state product, it said.

“Any state that is particularly export dependent or exposed to trade, if there’s a falloff in trade it’s going to hit income and sales taxes and that’s going to weaken state revenues,” said Michael D’Arcy, a director of U.S. public finance at Fitch. “Cuts would have to be made.”

Anna Heaton, a spokeswoman for Republican Michigan Governor Rick Snyder, said in a statement to Reuters that Canada, Michigan’s No.1 trading partner, has been important to the state’s economic recovery but he understands that sometimes policies need to change.

11 states trade heavily with Canada

According to the report, 11 U.S. states send at least 30 percent of their exports to Canada. By merchandise value, 82 percent of North Dakota’s exports went to Canada in 2016. Forty-three percent of New Mexico’s exports were sent to Mexico.

Several states also import a substantial amount of Canadian goods.

“A unilateral U.S. withdrawal from NAFTA would sharply increase import tariffs overnight, entailing potentially substantial costs for U.S. importers and consumers,” the report said.

Major metropolitan areas could also be affected by U.S. trade policy changes, with Texas’s El Paso MSA, or metropolitan statistical area, left vulnerable to NAFTA changes, the report said. Exports to Canada and Mexico accounted for 91 percent of the MSA’s exports.
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An abattoir located among herding communities in Ethiopia’s eastern Somali region, known more for droughts and famine than business opportunities, is an unusual stop for a U.S. aid administrator.

But USAID chief Mark Green stopped at the Jijiga Export Slaughter House (JESH) during a visit to the town of Jijiga on Wednesday to see the effects of a crippling drought that has pushed some areas to the south to the brink of famine.

The abattoir buys goats, sheep, cows and camels for slaughter from herders for export to the Middle East, giving families cash to buy food during the drought.

A $1.5-million loan from Feed the Future, a $1 billion-a-year agricultural program launched during U.S. President Barack Obama’s presidency in 2010, helped purchase refrigerators and trucks for the facility, which employs 100 people from local villages.

To Green, the slaughterhouse represents what USAID can do to help attract private-sector money into investments that boost the productivity of small farmers in developing countries.

While at the abattoir, Green announced 12 countries that will benefit from Feed The Future investments in 2017, signaling that the program will survive proposed deep cuts to USAID’s budget this year.

The 12 countries are Bangladesh, Ethiopia, Ghana, Guatemala, Honduras, Kenya, Mali, Nepal, Niger, Nigeria, Senegal and Uganda.

Green said investments like the Jijinga slaughterhouse not only created markets for American businesses but helped communities out of poverty. Herders can earn as much as $80 per goat when they sell to the slaughterhouse.

“I’m under no illusions; the development journey in many places in the world is a long one, but I want us to always be thinking what we can do that nudges something towards a day when people get to take care of themselves,” he said.

“This is a place where we see some of the benefits and the potential for Feed the Future,” Green added.

JESH Chief Executive Faisal Guhad said the abattoir had been open for a year but was forced to close for three months last year because of the drought.

The facility currently processes about 10,000 animals a month. Guhad said he hoped to quadruple that in the second year of operation.

Demand for Ethiopian goat meat was currently high because of the annual haj pilgrimage to the holy city of Mecca, said Guhad.

“We opened at the wrong time. El Nino happened to us and we started again after it rained,” said Guhad. “We’re now in the second month of starting again.”

The facility employs about 108 people from the community and plans to increase hiring to 200, said Guhad.

In the Jijinga area, planting for the March to May rains, known as the belg, is already delayed, and aid workers say they have seen a growing number of women and children at food distribution centers. The hunger crisis is predicted to worsen until the harvest begins in September.

Many parts of the Ethiopian highlands are still recovering from the 2016 drought, which was attributed to the El Niño weather phenomenon in the Pacific Ocean.
…

A flood of Indian business in fast-growing Vietnam has solidified commercial ties to help Hanoi upgrade an alliance with a powerful Asian neighbor and offset dependence on its historic rival, the more massive China.

Indian investment in Vietnam has reached $2 billion and bilateral trade hit $10 billion over the year ending in March on its way to $15 billion by 2020, said Radha Krishnan, vice chairman of the Indian Business Chamber of Vietnam.

“As of now that is very easily achievable,” Krishnan said. “The last three … years exports from Vietnam to India have picked up momentum.”

Vietnam has many trade partners

Last year the two countries agreed to upgrade a “strategic partnership,” giving Vietnam more Indian market access, and they will drop import tariffs in 2022 as part of a trade deal with a bloc of Southeast Asian countries.

Those totals hardly match those of Vietnam’s long-time investment sources such as Taiwan, South Korea and China. But their growth offers Vietnam a line to the world’s second-largest country, helping to reduce dependence on China, which is the world’s second-largest economy and Vietnam’s biggest trading partner.

China-Vietnam set a trade target of $100 billion in 2016, but the pair disputes a swathe of the South China Sea. Their dispute sparked clashes in 1974, 1988 and 2014.

“The Vietnamese government, they don’t want to get an unbalanced investment portfolio where any particular country or region is dominant, because then it just unbalances everything else — foreign policy, domestic politics and everything,” said Frederick Burke, partner with the international law firm Baker McKenzie in Ho Chi Minh City.

“As far as people who think about strategic issues are concerned, they would like the Indians to be probably more present in the market, because they’re probably behind mainland China in particular,” he said. “Everybody wants to balance the two out, be friends with both. That’s the ideal situation.”

Robust trade but also continuing disputes with China

Vietnam depends on China for cheap mass market goods, as well as raw materials for export manufacturing. The two Communist countries fought a border war in the 1970s shortly after what was then South Vietnam lost the Paracel Islands to China. That archipelago is part of the South China Sea.

In 2014, the placement of a Chinese oil rig in the South China Sea east of Vietnam touched off a boat-ramming incident and deadly anti-China riots on land. In June, a Chinese military official cut short his Vietnam visit as the host drilled for oil offshore.

Over the past two decades, Indian farming, garment and pharmaceutical investment have reached Vietnam because of its eager partners, Krishnan said. Low-cost but advanced Indian technology has helped Vietnam farm in dry weather, produce sugar and process cashews, he said. Tata Power of India runs a $1.8 billion thermal power plant in Vietnam.

For the past three years, the overseas subsidiary of India’s government-run ONGC has worked with PetroVietnam Exploration Production Corporation to search for oil and gas in the South China Sea.

About 80,000 Indians visit Vietnam every year, often as tourists looking for business opportunities, and 20,000 go the other way, sometimes as travelers to Buddhist landmarks, Krishnan said.

India has its own reasons for strengthening trade with Vietnam

India, for its part, is keen to resist China’s expansion in Asia. The two Asian powers are easing just this week a more than two-month-old military standoff in Bhutan. China claims the area in question, and Bhutan called on India to help when the Chinese came to work on a highway project.

Countries that build trade, investment and economic ties do not always become political allies, but in the India-Vietnam case, that fate is “natural,” said Alexander Huang, strategic studies professor at Tamkang University in Taiwan. China, he added, is unlikely to flinch at India because Vietnam is chasing stronger ties with other powerful countries, as well.

“You don’t need to be a grand strategist to think of diversifying your market,” Huang said. “Of course it will have some kind of impact, but so far I do not see one to the degree that will fundamentally change the Chinese perception over Vietnam, because the United States is improving relationships with Vietnam, Japan is improving relationships with Vietnam.”

A need to resist continued Chinese expansion

Beijing’s “belligerence” and escalation of territorial disputes in the seas to the Bhutan border have “served to bring a coalition of China-wary states closer,” said Mohan Malik,professor at the Asia-Pacific Center for Security Studies in Honolulu.

Elsewhere in Asia, Indonesia, Myanmar and the Philippines have also tried to balance foreign policies between China and the West, often through trade and investment.

China is expected to keep a special eye out for India’s maritime ties with Vietnam. The Indian oil company could work again in the waters off Vietnam, Krishnan said. Officials in Hanoi, he said, would try to protect that investment and others.

“I don’t think it’s going to be a big problem per se,” said Krishnan. “We are very, very positive that both governments will be able to handle that very, very positively. I don’t think investments made in Vietnam by a foreign country or company will be at risk.”
…

The U.S. economy rebounded sharply in the spring, growing at the fastest pace in more than two years amid brisk consumer spending on autos and other goods.

 

The gross domestic product, the broadest measure of economic health, grew at an annual rate of 3 percent in the April-June quarter, the Commerce Department reported Wednesday. It was the best showing since a 3.2 percent gain in the first quarter of 2015.

 

The result is a healthy upward revision from the government’s initial estimate of 2.6 percent growth in the second quarter. The growth rate in the January-March quarter was a lackluster 1.2 percent.

 

Improvements in consumer spending, particularly on autos, and business investment powered second-quarter growth. Those revisions offset a bigger drag from spending by state and local governments.

This was the second of three estimates the government will provide for second quarter growth. Even with the upward revision, the weak start to the year means that growth over the past six months has averaged 2.1 percent, the same modest pace seen for the recovery that began in mid-2009.

 

During last year’s presidential campaign, Donald Trump attacked the Obama administration’s economic record, pledging to double GDP growth to 4 percent or better. His first budget, sent to Congress earlier this year, projects growth rates will climb to a sustained annual rate of 3 percent, a goal that many private economists believe is still too optimistic.

 The nonpartisan Congressional Budget Office sees growth averaging 1.9 percent over the next decade, a forecast much closer to estimates made by private economists.

 

Many economists had been forecasting growth in the current July-September quarter would be around 3 percent. Some are now saying that the devastation from Hurricane Harvey could shave about a half-percentage point off growth this quarter. However, analysts believe the pace of growth will bounce back once the rebuilding begins and oil refineries get back to full production, bringing down prices.

For the entire year, Mark Zandi, chief economist at Moody’s Analytics, is forecasting growth of 2.1 percent. That would mark an improvement over last year when the economy grew a meager 1.5 percent, the poorest showing since 2009 when GDP shrank by 2.9 percent.

Zandi is forecasting that growth in 2018 will be an even stronger 2.8 percent. But he said 0.4 percentage point of that forecast reflects an assumption that the Trump administration will win a tax cut package that will take effect in early 2018. The economy will also be boosted by higher spending on the military and infrastructure projects, he said.

 

“For the first time since the Great Recession ended in mid-2009, the economy is not facing any significant headwinds,” Zandi said.

 

 
…

U.S. sanctions on the finance boss of Venezuela’s oil company PDVSA have led to some exports to the United States being blocked as banks and investment funds refuse to provide letters of credit to potential buyers, three financial sources said.

U.S. businesses are barred from dealing with a sanctioned person or company and one of the sources said the sanctions on PDVSA’s Finance Vice President Simon Zerpa were deterring some businesses from investments with the company as so many of its transactions are linked to the finance department he leads.

A Venezuelan oil shipment to the United States was blocked this month as lenders refused to provide letters of credit to PDVSA customers, the sources said.

Letters of credit, issued by banks, guarantee to a seller that a buyer will pay a specified amount on time when a shipment is accepted. Without a letter of credit, shipments cannot be delivered and the shipper does not get paid. Blocking letters of credit for PDVSA oil chokes off cash that is desperately needed in the OPEC nation.

Petróleos de Venezuela, S.A., commonly known as PDVSA, is the financial motor of President Nicolas Maduro’s leftist government, and it is operating within one of the deepest economic recessions Venezuela has ever experienced and widespread political unrest.

In one instance, U.S. refiner PBF Energy was unable to get a letter of credit for a Venezuelan crude cargo to be received at a U.S. port.

The Suezmax tanker Karvounis has been anchored in the U.S. Gulf for more than a month. It partially discharged its cargo on Aug. 23 in New Orleans, according to Thomson Reuters vessel tracking data. A trader close to the deal said PBF Energy ultimately agreed to a prepayment, removing the need for a credit letter. It was unclear what would happen with the rest of the cargo.

Some U.S. customers can import without a letter of credit if they pay up front.

In July, the United States imposed sanctions on 13 senior Venezuelan officials, including the head of Venezuela’s army, the national police chief, the director of elections, and Zerpa.

At the time, a U.S. official warned that the administration of U.S. President Donald Trump was readying tougher measures that could be part of a “steady drumbeat” of responses to the Venezuelan crisis.

The most serious potential future step would be financial sanctions that would halt dollar payments for the country’ oil, starving the government of hard currency, or a total ban on oil imports to the United States, Venezuela’s biggest customer.

This month the United States imposed its first economic sanctions on Venezuela, banning debt trades for government-issued bonds and bonds issued by PDVSA. 

The problem could spread to more cargoes if banks refuse to extend credit to companies that have a commercial relationship with PDVSA, the sources said.

The sources said foreign oil companies funding projects in Venezuela and financial entities negotiating with PDVSA were avoiding signing agreements that could involve Zerpa.

Major oil company China National Petroleum Corporation (CNPC) has pulled back from funding some operations at its joint venture in Venezuela, a source at PDVSA said.

Neither PDVSA nor the Information Ministry responded to requests for comment. Zerpa was not immediately available to comment.

“PDVSA will face additional trouble just by keeping a sanctioned individual as CFO,” said Jorge Piedrahita, chief executive of broker-dealer Gear Capital Partners, who has been involved with Venezuelan debt for many years.

“Even the Russians and China’s Development Bank should be worried about signing something with him as they can be subject to collateral damage from sanctions just by association.”

A close Maduro ally, Zerpa, 34, rose to prominence by leading the bilateral Venezuela-China fund through which Caracas borrows from Beijing and repays loans in oil and fuel. Venezuela has borrowed over $60 billion from China, earning Zerpa the nickname “Zerpa the Chinese.”

Two additional financial sources said having Zerpa as the company’s head of finance had made it impossible for U.S. entities to assist PDVSA in debt refinancing, even before the U.S. economic sanctions.

Even basic activities, such as a conference call with bondholders, are now essentially unthinkable, the sources said.

Sanctions against Zerpa are having a knock-on effect on Wall Street, affecting imports of food and medicine to Venezuela made through funds headed by Zerpa, according to Delcy Rodriguez, president of Maduro’s new legislative assembly.

“This wasn’t done to affect Venezuelan officials but rather the entire population,” Rodriguez said on Monday.

Zerpa has held several high-profile posts including heading Venezuela’s state economic development bank Bandes and off-budget investment fund Fonden.

Opposition lawmakers have said he is an example of how the late Hugo Chavez’s “21st century socialism” has allowed unprepared political figures to wield power over financial deals.

“I have a negative opinion of him because of the way he handled the Chinese fund,” said opposition lawmaker Angel Alvarado, describing Zerpa as Maduro’s “finance tsar.”

U.S. pressure could force PDVSA to remove Zerpa from his post, at least on paper. However, PDVSA has had issues in the past that have led investors to tread cautiously with Venezuela.

“In part, the sanctions codify an already existing situation in which PDVSA and the Republic have little to no access to international financial markets due to the combination of political risk, unsustainable policies, concerns about legality

of new issues and reputational risk from providing funds to the Venezuelan government,” investment firm Torino Capital wrote in a report to clients after Friday’s sanctions.
…

U.S. President Donald Trump is traveling to the state of Missouri to try to build support for his goal of reforming the country’s tax code.

Administration officials say the president will focus on explaining the need for tax reform, but not the specifics of a plan to do so, during a speech Wednesday in the city of Springfield.  They say he will promote tax cuts as a way to help American workers.

Trump has in the past proposed cutting the corporate tax rate from 35 percent to 15 percent.

The U.S. tax code has not undergone a significant overhaul since 1986.

Trump’s Republican Party controls both houses of the U.S. Congress, but failed in its earlier efforts to overhaul another major program as leaders were unable to get enough votes to change the health care system.
…

In Texas, rebuilding efforts in areas devastated by Hurricane Harvey’s winds and floods face higher costs and some delays because the construction industry has a critical shortage of skilled workers. VOA’s Jim Randle reports.
…

With rising urban populations and ever scarcer water supplies, cities and companies are teaming up to invest billions of dollars in water management projects, a report said on Tuesday.

Around two thirds of cities from London to Los Angeles are working with the private sector to address water and climate change stresses with 80 cities seeking $9.5 billion of investment for water projects, according to a report by the Carbon Disclosure Project (CDP), a non-profit environmental research group.

Water investment opportunities are greatest in Latin America, with Quito in Ecuador seeking $800 million to manage its water supply, including building three hydropower stations and cleaning up its contaminated rivers and streams.

City in India prepares for future

The cities most concerned about their water supply lie in Asia and the Pacific, the report found, with serious risks also identified in Africa and Latin America.

The key issues for cities include declining water quality, water shortages and flooding.

The Indian city of Chennai faced extreme floods in 2015 which killed hundreds and left survivors without access to clean water, while businesses were also severely disrupted.

The city is now investing in boosting its resilience to future water crises, with water conservation education, building a storm water management system and new infrastructure.

“We are seeing critical shifts in leadership from cities and companies in response to the very real threat of flooding, for example, to local economies,” said Morgan Gillespy, head of CDP’s Water Program.

Climate change is another underlying threat to all cities with an increase in extreme weather events from droughts to floods, with cities in North America more concerned than those in Europe, the report found.

Tropical Storm Harvey, pounding the U.S. Gulf Coast, has killed at least eight people, led to mass evacuations and paralyzed Houston, the fourth most-populous U.S. city.

The storm is most likely linked to climate change, said the U.N. weather agency.

Companies are also concerned about the effects of climate change on water supplies, with $14 billion of water impacts such as loss of production reported by companies last year, the report found.

WATCH: Worrying About Water

UN predicts global water shortfall

The United Nations predicts a 40 percent shortfall in global water supply by 2030, while global demand is set to increase by 55 percent due to growing domestic use, manufacturing and electricity generation.

“From our work with cities around the world, water has consistently come up as a key resilience challenge,” said Claire Bonham-Carter, Principal and City Resilience Lead at AECOM, a global infrastructure firm and partner on the report.

“Many of them, regardless of size, from Mexico City, Mexico to Berkeley, California, are addressing both long-term water supply issues as well as chronic urban flooding.”
…

The Middle East and North Africa region loses about $21 billion each year because of an inadequate supply of water and sanitation, the World Bank said Tuesday, warning that urgent action is needed to prevent ripple effects on stability and growth.

Poor management of water resources and sanitation in the world’s most water-scarce region costs about 1 percent of its annual gross domestic product, with conflict-hit states losing as much as 2 to 4 percent each year, the bank said in a report issued at the World Water Week conference in Stockholm, Sweden.

Deaths due to unsafe water and sanitation in some parts of the region, particularly countries affected by conflict, are higher than the global average, it added.

“As the current conflict and migration crisis unfolding in the Middle East and North Africa shows, failure to address water challenges can have severe impacts on people’s well-being and political stability,” the report said.

Peril in Yemen

In Yemen, which is reeling from more than two years of conflict, water supply networks serving its largest cities are at risk of collapse due to war-inflicted damage and disrepair, and about 15 million people have been cut off from regular access to water and sanitation, the U.N. children’s agency (UNICEF) said in a separate statement Tuesday.

In Syria, where the conflict is well into its seventh year, water has frequently been used as “a weapon of war,” with pumps deliberately destroyed and water sources contaminated, and about 15 million people are in need of safe water, including an estimated 6.4 million children, UNICEF said.

Overall, 183 million people lack access to basic drinking water in countries affected by conflict, violence and instability around the world, it added.

Better management

With the urban population in the Middle East and North Africa expected to double by 2050 to nearly 400 million, a combination of policy, technology and water management tools should be used to improve the water situation, the World Bank report said.

“Water productivity — in other words, how much return you get for every drop of water used — in the Middle East in general is the lowest on average in the world,” said Anders Jägerskog, a specialist in water resources management at the World Bank and one of the report’s authors.

Middle Eastern and North African countries are using far more water than can be replenished, said the report.

To reverse the trend, technology and innovation are “essential but not enough,” Jägerskog told the Thomson Reuters Foundation. Water governance — in particular, water tariffs and subsidies — must also be addressed, he said.

The region has the world’s lowest water tariffs and spends the highest proportion of GDP on public water subsidies. Such policies lead to excessive use of already scarce water supplies and are not sustainable, said Jägerskog.

Untreated wastewater

Another challenge is that more than half of the wastewater collected in the region is fed back into the environment untreated.

“Along with better water management, there is room for increasing the supply through nonconventional methods such as desalination and recycling,” Guangzhe Chen, senior director of the World Bank’s global water practice, said in a statement.

Improved water management could bring considerable financial returns, the report noted.

Governments could gain $10 billion annually by improving the storage and delivery of irrigation water to users, while increasing agricultural production by up to 8 percent, the report said.

Egypt, Syria and Iran — which have the largest proportion of irrigated land in the region — are the countries that could benefit most.
…

Mexico sees a serious risk the United States will withdraw from NAFTA and is preparing a plan for that eventuality, Economy Minister Ildefonso Guajardo said Tuesday, calling talks to renegotiate the deal a “roller coaster.”

U.S. President Donald Trump has threatened three times in the past week to abandon the North American Free Trade Agreement, revisiting his view that the United States would probably have to start the process of exiting the accord to reach a fair deal for his country.

Trump has vowed to get a better deal for American workers, and the lively rhetoric on both sides precedes a second round of talks starting on Friday in Mexico City to renegotiate the 1994 accord binding the United States, Mexico and Canada.

“This is not going to be easy,” Guajardo said at a meeting with senators in Mexico City. “The start of the talks is like a roller coaster.”

The need for a backup plan in case Trump shreds the deal underpinning a trillion dollars in annual trade in North America has been a long-standing position of Guajardo, who travels to Washington on Tuesday with foreign minister Luis Videgaray to meet senior White House and trade officials.

“We are also analyzing a scenario with no NAFTA,” Guajardo said.

In an interview published earlier on Tuesday in Mexican business daily El Economista, Guajardo said “there is a risk, and it’s high” that the Trump administration abandons NAFTA.

Responding to Guajardo’s comments, Canadian Prime Minister Justin Trudeau said his government would continue to work “seriously” to improve NAFTA.

What is ‘Plan B’?

Earlier this month, Guajardo told Reuters a “Plan B” meant being prepared to replace items such as the billions of dollars in grain Mexico imports from the United States annually.

To that end, and to seek openings in more markets, Mexico is hosting trade talks with Brazil this week. Trade officials are also discussing a possible replacement for the Trans-Pacific Partnership trade pact that Trump ditched after taking office.

Overlapping with the NAFTA talks, Mexico will participate in separate trade meetings with Australia and New Zealand in Peru, and President Enrique Pena Nieto travels to China this weekend.

Still, attempts to diversify trade will not be easy. Some 80 percent of all Mexican exports go to the United States, and economies such as Brazil and China often compete with Mexico.

Guajardo also suggested World Trade Organization tariffs that would kick in if NAFTA crumbled would be more favorable for Mexico, a view held by many Mexican experts who think trade with the United States would survive the demise of the 1994 deal.

“I don’t think it’s going to make that much of a difference in terms of the trading relationship,” said Andres Rozental, a former Mexican deputy foreign minister. “If we have to go to WTO tariffs, for us it’s fairly straightforward.”

Guajardo’s and Videgaray’s trip to Washington was announced after Trump not only threatened to pull out of the trade deal, but again said that Mexico would end up paying for the wall he wants to build between the two countries.

Mexico has refused point blank to pay for a wall. In January, after similar comments led Mexico to scrap a summit with Trump, the two sides agreed not to talk in public about it.
…

Brazil will seek China’s expertise and financing to complete its third nuclear power plant when President Michel Temer makes a state visit to Beijing on Friday, Brazilian government officials said Tuesday.

The Brazilian nuclear energy company Eletronuclear will sign a cooperation agreement with China National Nuclear Corporation (CNNC), signaling their intent to establish a partnership to finish the Angra 3 plant, the officials said.

Construction of the 1,405-megawatt reactor on the coast south of Rio de Janeiro has dragged on for three decades and its completion is now scheduled for 2023, but Brazil does not have the estimated 16 billion reais ($5 billion) needed to finish the job.

Russia is also interested in completing Angra 3 and Eletronuclear, a subsidiary of state-run electric utility Eletrobras, has held talks with the Russian nuclear monopoly Rosatom.

The Chinese corporation is expected to have the advantage in terms of abundant financial resources.

The head of Eletronuclear, Bruno Barretto, signed an initial memorandum with CNNC on the Angra 3 completion in Beijing in December when he visited Chinese banks that are potential financiers, Eletronuclear said in a statement.

Temer’s government has announced plans to privatize Eletrobras, Latin America’s largest utility. But Eletronuclear will be split off and remain in state hands under Brazil’s Constitution, which establishes that nuclear facilities must be government controlled.

Temer said on Tuesday he expects China to be a major player in Brazil’s plans to modernize its ports, airports and other infrastructure projects that will be offered to investors in private concessions.

He also hopes China will finance energy projects.

“China could be one of the big investors in our plans for concessions,” he said in a video message released after he set off for Beijing, where he will meet Chinese President Xi Jinping ahead of the BRICS summit in Xiamen.
…

Brazil’s government has revised a decree that stripped protections from a reserve in the Amazon after environmental groups criticized the original order.

The new decree announced late Monday still lifts the reserve designation from a gold- and copper-rich area larger than the Netherlands in two northern Brazilian states.

 

But President Michel Temer’s administration clarifies that mining will not be allowed in conservation or indigenous areas within the former reserve.

 

The government says the new decree will allow it to crack down on the illegal mining that was taking place in the reserve, while opening up legal mining.

 

The Brazilian branch of the World Wide Fund for Nature said in a statement that the new decree clarifies the need for protection, but the risk of environmental damage remains.
…

In Cambodia, the issue of land rights is a constant source of tension. The country’s biggest dam to date is set to go online in just weeks, adding 400 megawatts of power to the country’s critically overstretched grid. But the social and environmental costs of the project are huge, especially for minority villagers facing displacement. In rural Stung Treng province, some members of an indigenous group are taking a stand. David Boyle has this report.
…

Peru expects a “very ambitious” free trade deal with Australia that covers goods, services and investments to be implemented as early as next year, Peru’s deputy trade minister said on Monday.

The two countries resumed free trade talks in Australia on Monday following a first round of negotiations in July in which “a lot of progress was made,” said Deputy Trade Minister Edgar Vasquez.

“This is going to be an agreement that we should be able to implement as soon as possible, starting in 2018,” Vasquez said by telephone in Lima. “That’s what we’d like to happen and what we think is viable.”

Peru and Australia are important global producers of minerals and their bilateral trade is relatively small.

Forging a free trade deal so quickly would mark one of the first steps toward reducing trade barriers in the Pacific region after U.S. President Donald Trump withdrew the United States from the 12-nation Trans-Pacific Partnership (TPP) trade agreement, which Australia and Peru had signed onto.

The remaining signatories to the TPP are in Australia this week discussing ways to salvage the deal. The 11 countries, which include Japan, Canada and Mexico, have a combined gross domestic product of $12.4 trillion.

Vasquez said the experience of negotiating the TPP had put Peru and Australia on solid footing for quickly hashing out a bilateral agreement.

“We also both have very open economies, so we’re really going to see a broad inclusion of sectors that will benefit from it – goods as well as services and investments,” Vasquez said.

Peru’s trade ministry said last month that rules of origin, migration and e-commerce were also under discussion and that Peru was eager to increase agricultural exports to Australia while spurring trade of mining and other professional services.

Australian trade officials were not immediately available for comment.

Peru’s exports to Australia amounted to $260 million last year, according to Peru’s trade ministry.
…

Mexico’s President Enrique Pena Nieto will travel to China next week to discuss trade and investment, as Mexico looks for ways to decrease its dependence on NAFTA, especially trade with neighboring United States.

He will hold a bilateral meeting with China’s President Xi Jinping and participate in a summit of the BRICS nations, a grouping that includes Brazil, Russia, India, China and South Africa, on Sept. 4 and 5, Mexico’s Foreign Ministry said in a statement.

Pena Nieto’s visit comes as U.S., Mexican and Canadian negotiators meet Sept. 1 to 5 in Mexico City for a round of talks to revamp the 23-year-old North American Free Trade Agreement (NAFTA).

Mexico is trying to increase trade with Latin America and Asia, and on Monday took part in the first of three days of talks in Australia aimed at reviving the Trans-Pacific Partnership trade agreement, disrupted by the withdrawal of the United States.

On Sunday, U.S. President Donald Trump renewed his threat to scrap NAFTA, which he has cast as killing jobs and exacerbating the U.S. deficit, and ripped into trading partners Canada and Mexico.

Pena Nieto is scheduled to participate in a dialogue on emerging markets and a BRICS business forum, “where over 800 business leaders are expected to discuss opportunities for investment, trade, connectivity, financial cooperation, development and the blue economy, or sustainable use of marine resources,” said the ministry.

On Sept. 6, Pena Nieto will visit the offices of Alibaba Group Holding Ltd, China’s top e-commerce firm and one of Asia’s most valuable companies.

Mexico’s government is working to get Mexican products and services, especially from small- and medium-sized firms, onto Alibaba’s platform.
…

The price of a pack of cigarettes has skyrocketed in New York City, while the number of places they are available for sale is set to fall.

New York Mayor Bill de Blasio on Monday signed a sweeping series of anti-smoking bills, part of a comprehensive effort to help reduce the number of smokers in the city by nearly 200,000 over the next few years.

“We are sending a loud and clear message that we will not let their greed kill any more New Yorkers without a fight,” de Blasio said at a bill-signing ceremony at a Brooklyn hospital. “These new laws will not only help reduce the number of smokers in our city, but also save lives.”

The minimum price for a pack of cigarettes will jump from $10.50 to $13, the highest base price for cigarettes in the nation, de Blasio said.

New York health officials hope that with brands forced to charge at least $13 for the cheapest pack, premium brands will also raise their prices to maintain separation from lower-tier smokes.

The planned price hike is one of seven bills aimed at pressuring the city’s 900,000 estimated smokers to quit.

Another new rule will reduce by half the number of retailers licensed to sell tobacco products. About 8,300 businesses now have a license. The numbers will be reduced through attrition, officials said.

Philadelphia and San Francisco have similar licensing restrictions.

Other laws will ban the sale of all tobacco products in pharmacies, require licensing of e-cigarette retailers, and require all residential buildings to have smoking policies that are given to all current and prospective tenants. Some residential buildings will be required to ban smoking in common areas such as hallways.

Opponents of the price increase say it may push many smokers into buying untaxed, unregulated cigarettes on the black market.
…

Kenya has become the latest African country to ban the use of polythene plastic bags, imposing stiff fines and even jail time for anyone found using, importing or manufacturing the bags.

In one of the biggest garbage dumping sites in Nairobi, it was business as usual Monday. Loads of plastic bags full of garbage were brought in, a testament to their widespread use in the capital.

But no more, says the government.

A new law went into effect Monday making the manufacture, sale and use of polythene plastic bags illegal. Offenders can get slapped with penalties up to a four-year jail term and a $40,000 fine.

The National Environment Management Authority, with the help security agencies, has been going around Nairobi to urge retailers and manufacturers to heed the new ban.

Geoffrey Wahungu is the director general of NEMA. He is promoting the “take-bag scheme,” basically calling on consumers to bring their own cloth bags or baskets from home.

“I hope soon we’ll start seeing people who are carrying out these recycling materials, or alternative bags, which are eco-friendly. All this is creating much more employment than is being lost,” he said.

Economic impact

Two plastic bag importers unsuccessfully challenged the ban before the High Court Friday. Kenya produces plastic bags for local use and export in the region. The National Association of Manufacturers has argued that the ban will cost more than 60,000 jobs and hurt more than 170 companies.

NEMA gave six months’ notice of the new ban, but it still appears to have taken many in Kenya by surprise.

Some large retailers have already switched to paper, but small traders are feeling the pinch.

Simon Njenga runs a grocery kiosk. He says he lost customers Monday.

He says “the ban pains me a lot because a customer wants to purchase vegetables, but he doesn’t have a bag and I can’t give him one, so they leave my kiosk without buying. The government has to bring back the plastic bags. My livelihood depends on it.”

 

Tanzania, Uganda, Malawi and Cameroon have announced similar bans on plastic bags, although the bans aren’t widely enforced. Rwanda is the only African country so far to both declare a ban and push people to follow the law.

Kenyan Environment Minister Judy Wakhungu told Reuters news agency that manufacturers and importers will be the ones initially targeted for enforcement of the ban.

Experts argue that polythene bags are bad for the environment and public health. The thin plastic bags have been blamed for polluting cities and shorelines and killing animals who eat them.

NEMA says the single-use polythene bags “never fully biodegrade, remaining in the environment as small or even microscopic particles, essentially forever.”

 

 

 

 

 
…

Fall armyworm has spread to Cameroon.  The pest has attacked crops in at least 24 African countries.  In Cameroon, the Ministry of Agriculture says it is particularly concerned about the impact of the fall armyworm infestation in the north and the east of the country. 

Minister-delegate Ananga Messina says fall armyworm has infested six of the central African state’s 10 regions.

She says the armyworms have been a serious threat to food security in Cameroon because cereals like maize, sorghum, rice and legume plants like cow-pea, peanuts and beans are increasingly being attacked every day.  She says the situation is particularly worrisome on Cameroon’s northern border with Nigeria where the population and 100,000 Nigerian refugees are already suffering from food scarcity due to the Boko Haram conflict.

The Ministry of Agriculture says nearly two million people are currently in need of food assistance in northern Cameroon.

Messina told VOA about half of Cameroon’s 23 million inhabitants and millions of livestock risk hunger in the months ahead.  She said the armyworms have extended to Cameroon’s eastern border, putting neighboring Central African Republic at risk, a country gripped by a severe humanitarian crisis after years of conflict.  

Cameroon has launched a task force to manage the infestation.

Some farmers have been using chemicals to kill the pests, but agriculture technician Anicet Mvondo says that is not the best approach.

“The problem is that the insecticide is not good for the health of the farmer,” said Mvondo. “It is not good for the environment.  It kills other organisms in the environment.  Using insecticides is not a good way.  We should try to look for other solutions because these insects on the field are also eaten by other organisms.”

The U.N. Food and Agriculture Organization reports fall armyworm was first detected in four countries in West Africa in early 2016.  It has since spread to at least 20 other countries. 

Experts say the fall armyworms can reproduce rapidly and can fly long distances in moth form, though it remains unknown how the pest spread to West Africa from South America.

The FAO is leading the regional response efforts in Africa, and it says it is drawing from lessons learned in the America’s on sustainable fall armyworm management.  FAO Subregional Coordinator for Southern Africa, David Phiri says methods like regular monitoring and hand-picking of worm larvae can be effective.

“Fall armyworm has a lot of natural enemies and we should enhance their use to control the fall armyworm … So the message is that fall armyworm has come here to stay and also that use of chemical pesticides should be reduced to a minimum,” said Phiri.

Staple crops like maize, sorghum, rice and sugarcane have been hit hard in Africa, though the fall armyworm can ravage more than 80 other plant species.  Losses for Africa are estimated at at least $13 billion.
…

Massive flooding caused by Tropical Storm Harvey along Texas’ refinery-rich coast could have long-standing and far-reaching consequences for the state’s oil and gas industry and the larger U.S. economy. The storm’s remnants left much of Houston underwater on Sunday, and the National Weather Service says it’s not over yet: Some parts of Houston and its suburbs could end up with as much as 50 inches (1.3 meters) of rain.

 

With the heavy precipitation expected to last for days, it’s still unclear how bad the damage will be, but there is already evidence of widespread losses. Key oil and gas facilities along the Texas Gulf Coast have temporarily shut down, and flooding in the Houston and Beaumont areas could seriously pinch gasoline supplies. Companies operating in the Gulf of Mexico have evacuated drilling platforms and rigs, crimping the flow of oil and gas.

Experts believe gasoline prices could increase as much as 25 cents a gallon.

Harvey’s toll on air travel in the U.S. is set to extend into Monday, with the tracking service FlightAware.com reporting that more than 1,400 flights already have been canceled. That’s in addition to more than 2,000 canceled over the weekend.

Economy watchers were looking to oil futures markets Sunday night and stock trading in the U.S. Monday morning for further indications of fallout.

 

Here’s what was known as of Sunday night:

Refineries

Nearly a third of U.S. refining capacity sits in low-lying areas along the coast from Corpus Christi, Texas, to Lake Charles, Louisiana. Beyond the shutdown of refineries at risk of a direct strike from high winds, there’s the threat of flooding and potential power outages for gasoline supplies.

 

Refinery outages continued to spread Sunday, with about 2.2 million barrels per day of refining capacity down or being brought down, according to analysts at S&P Global.

 

Valero Energy Corp., whose two big Corpus Christi refineries escaped damage, said it was working with federal and Texas agencies and its business partners to determine what infrastructure was needed to resume refinery operations.

 

Even before Harvey hit, the prospect of supply disruptions sent gasoline futures to $1.74 a gallon, their highest level since April, before they retreated to around $1.67 by Friday afternoon. At the pump, experts see gasoline increasing 10 cents to 25 cents a gallon.

 

Given the strictures faced by the refineries, “This is the dominoes starting to fall,” Patrick DeHaan, senior petroleum analyst for Gas Buddy, said Sunday. “This is sort of slowly turning out to be the worst-case scenario.”

 

Oil and gas

Companies have evacuated workers from oil platforms in the Gulf of Mexico. The U.S. Bureau of Safety and Environmental Enforcement said Sunday that workers had been removed from 105 of the 737 manned platforms used to pump oil and gas from beneath the Gulf.

The agency estimated that platforms accounting for about 22 percent of oil production and 26 percent of natural gas output in the Gulf had been shut down.

“After the storm has passed, facilities will be inspected,” the agency said in a news release. “Once all standard checks have been completed, production from undamaged facilities will be brought back on line immediately. Facilities sustaining damage may take longer to bring back on line.”

Shipping

The shipping industry also is expected to be disrupted by the worst hurricane to hit the Texas coast in more than 50 years. Shipping terminals along the Texas coast shut down as the storm approached. Port operations in Corpus Christi and Galveston closed, and the port of Houston said container terminals and general cargo facilities closed around midday Friday. Rates increased for carrying freight between the Gulf and the U.S. East Coast.

Travel

More than 1,400 flight cancellations are reported for Monday, according to FlightAware.

Houston’s two airports were closed to all flights except those connected to relief efforts. Houston Bush Intercontinental Airport was not expected to reopen Monday until noon at the earliest. Houston International Airport was scheduled to remain closed until Wednesday morning.

Airlines were offering customers the chance to reschedule trips that would take them to Houston, San Antonio or Austin from Friday through the weekend.

Utilities

                   Researchers at Texas A&M University estimated that the storm would knock out power for at least 1.25 million people in Texas. They said the hardest-hit areas will include Corpus Christi, which is on the coast, and San Antonio, which is about 140 miles (225 kilometers) inland.

Insurance

A firm that does forecasts for insurance companies expects wind-damage claims in the low billions of dollars, and possibly reaching as high as $6 billion.

 

Risk Management Solutions Inc. said storm surges and inland flooding could be an even bigger source of losses. If the firm is correct, that would put homeowners and the government-backed National Flood Insurance Program at risk.

The flood program is run by the Federal Emergency Management Agency, which owes the Treasury about $23 billion in funds borrowed to cover the cost of past disasters, according to a recent report by the U.S. Government Accountability Office.

Homeowner policies offered by insurance companies typically don’t cover flood damage, yet a relatively small percentage of homeowners have flood insurance through the federal program.

Property data firm CoreLogic estimated that insured losses for home and commercial properties, as of Friday, would be $1 billion to $2 billion from wind and storm-surge damage.

 

 
…

The head of the U.S. central bank says the financial system is safer now than it was before the recession, and urges Washington to make some adjustments in financial regulations, rather than trash them.

Federal Reserve Chair Janet Yellen says the recession of 2008 cost nine million American jobs and meant millions of people lost their homes. She says financial reform regulations were intended to make it less likely that big institutions would fail in the future and to provide an orderly way to resolve the debts of big financial companies that do fail without government bailouts.

She says financial firms, particularly very large ones that could hurt the entire economy if they fail, are now required to keep larger reserves. That way if one loan goes bad, the firm is less likely to have to hastily sell off other assets at bad prices to cover the losses. Low reserve levels prompted a downward spiral when many fragile firms ran into trouble all at once, all of them trying to sell assets and no one willing to buy them.

Yellen acknowledges that over-regulation could hamper the lending and risk-taking needed for economic growth, but she says some research shows the current level of regulation hurts lending, while other research shows it helps.

In a Friday speech to a gathering of top economic officials from around the world at a resort in Wyoming, she said Fed officials are looking at ways to simplify regulations for small banks that would not cause problems for the national economy if they failed.

Small banks complain the cost of complying with complex regulations makes it hard to make loans. Small banks are important because they are often the source of capital for small companies, and such small, growing firms are the source of most new jobs.

Yellen’s closely-watched speech at the annual gathering of economists at a resort in Jackson Hole, Wyoming, comes after criticism from Republicans and others that stricter regulation is hurting lending and economic growth.

President Donald Trump has called for repealing a key part of the regulations called “Dodd-Frank” named after the legislators who crafted the law.
…

South Korea this week pushed back against the United States’ demand to renegotiate the free trade agreement (FTA) between the close allies. 

U.S. President Donald Trump has repeatedly criticized the five-year-old Korea-U.S. (KORUS) FTA as a horrible deal that created a $27 billion U.S. trade deficit with South Korea last year, and has said his administration would either renegotiate or terminate it.

Agree to disagree

At Washington’s urging, an initial special session was held on Tuesday by video conference between South Korean Trade Minister Kim Hyun-chong and his American counterpart, U.S. Trade Representative (USTR) Robert Lighthizer, to negotiate amendments to the trade pact.

Afterwards the South Korea trade minister said the two sides disagreed on the need to amend the trade deal.

“We have found that the two sides have different views on the effects of the U.S. and South Korea Free Trade Agreement, the reason behind the trade deficit, and necessity for an amendment to the U.S. and South Korea FTA,” said Trade Minister Kim Hyun-chong.

South Korean officials maintain the bilateral trade deficit is not the result of the FTA, but of the underperforming South Korean economy, where demand for imports have declined, contrasted with the more robust U.S. economy.

“For the last 10 years, South Korea’s market economy was not good, so the U.S. did not get opportunities to sell its products (to South Korea). If South Korea’s economy gets better and the U.S. economy gets worse, we may face the opposite situation,” said Chung Sye-kyun, the speaker of the South Korean National Assembly on Thursday at an event organized by the American Chamber of Commerce in Korea.

KORUS supporters in Seoul also argue the FTA benefits the U.S. economy and American workers. Last year, Korean companies like the electronics giant Samsung and the automaker Hyundai, employed 45,000 Americans and contributed $138 billion to the U.S. economy, according to the American Chamber of Commerce in Korea.

‘Korea unique standards’

The USTR released a statement Wednesday saying it will continue bilateral talks to amend or modify the agreement and specifically identified the “burdensome regulations which often exclude U.S. firms or artificially set prices for American intellectual property” as a major issue of contention.

The auto industry accounts for nearly 80 percent of the bilateral trade deficit, as American car sales in South Korea have been slow, while Korean automobile sales in the United States have soared. The American business community has long blamed the deficit in part on non-tariff related “Korea unique standards,” often linked to environmental regulations or certification procedures that they say are imposed to protect the domestic market. Foreign companies are then forced to spend an inordinate amount of time and money to deal with these regulations that are often introduced without notice or clear explanations.

South Korean authorities have downplayed charges of unfair trade practices, saying most complaints have been resolved through negotiations without the need for amending the FTA.

The South Korean Trade Minister said while this week’s meeting did not reach any agreement on how to proceed, neither side talked about terminating the FTA. 

The Korea Times newspaper in Seoul on Friday published an editorial advising the South Korean government that “a good offense is the best defense” in any upcoming trade negotiations. It recommended Seoul press Washington to loosen its intellectual property rights protections and rules regarding disputes between investors and the state, and to threaten to reduce agriculture and energy imports if the situation becomes overly contentious.

The potential rift over trade comes at a time when Washington and Seoul have been emphasizing their close military alliance and joint support for increasing sanctions on North Korea to pressure the Kim Jong Un government to return to international denuclearization talks.

This week some 17,500 American and 50,000 South Koreans troops are participating in joint strategic military exercises that deal with how to respond to possible North Korean attack scenarios.

Youmi Kim in Seoul contributed to this report
…

South Korea this week pushed back against the United States’ demand to renegotiate the free trade agreement (FTA) between the close allies. 

U.S. President Donald Trump has repeatedly criticized the five-year-old Korea-U.S. (KORUS) FTA as a horrible deal that created a $27 billion U.S. trade deficit with South Korea last year, and has said his administration would either renegotiate or terminate it.

Agree to disagree

At Washington’s urging, an initial special session was held on Tuesday by video conference between South Korean Trade Minister Kim Hyun-chong and his American counterpart, U.S. Trade Representative (USTR) Robert Lighthizer, to negotiate amendments to the trade pact.

Afterwards the South Korea trade minister said the two sides disagreed on the need to amend the trade deal.

“We have found that the two sides have different views on the effects of the U.S. and South Korea Free Trade Agreement, the reason behind the trade deficit, and necessity for an amendment to the U.S. and South Korea FTA,” said Trade Minister Kim Hyun-chong.

South Korean officials maintain the bilateral trade deficit is not the result of the FTA, but of the underperforming South Korean economy, where demand for imports have declined, contrasted with the more robust U.S. economy.

“For the last 10 years, South Korea’s market economy was not good, so the U.S. did not get opportunities to sell its products (to South Korea). If South Korea’s economy gets better and the U.S. economy gets worse, we may face the opposite situation,” said Chung Sye-kyun, the speaker of the South Korean National Assembly on Thursday at an event organized by the American Chamber of Commerce in Korea.

KORUS supporters in Seoul also argue the FTA benefits the U.S. economy and American workers. Last year, Korean companies like the electronics giant Samsung and the automaker Hyundai, employed 45,000 Americans and contributed $138 billion to the U.S. economy, according to the American Chamber of Commerce in Korea.

‘Korea unique standards’

The USTR released a statement Wednesday saying it will continue bilateral talks to amend or modify the agreement and specifically identified the “burdensome regulations which often exclude U.S. firms or artificially set prices for American intellectual property” as a major issue of contention.

The auto industry accounts for nearly 80 percent of the bilateral trade deficit, as American car sales in South Korea have been slow, while Korean automobile sales in the United States have soared. The American business community has long blamed the deficit in part on non-tariff related “Korea unique standards,” often linked to environmental regulations or certification procedures that they say are imposed to protect the domestic market. Foreign companies are then forced to spend an inordinate amount of time and money to deal with these regulations that are often introduced without notice or clear explanations.

South Korean authorities have downplayed charges of unfair trade practices, saying most complaints have been resolved through negotiations without the need for amending the FTA.

The South Korean Trade Minister said while this week’s meeting did not reach any agreement on how to proceed, neither side talked about terminating the FTA. 

The Korea Times newspaper in Seoul on Friday published an editorial advising the South Korean government that “a good offense is the best defense” in any upcoming trade negotiations. It recommended Seoul press Washington to loosen its intellectual property rights protections and rules regarding disputes between investors and the state, and to threaten to reduce agriculture and energy imports if the situation becomes overly contentious.

The potential rift over trade comes at a time when Washington and Seoul have been emphasizing their close military alliance and joint support for increasing sanctions on North Korea to pressure the Kim Jong Un government to return to international denuclearization talks.

This week some 17,500 American and 50,000 South Koreans troops are participating in joint strategic military exercises that deal with how to respond to possible North Korean attack scenarios.

Youmi Kim in Seoul contributed to this report
…

When Ha Tran of Ho Chi Minh City shops for food, clothes or electronics, she avoids merchandise she can tell comes from Vietnam’s giant neighbor, China. It might not work, she said, and China is no friend of Vietnam anyway.

“China exports many low-quality products to Vietnam, but we know they don’t export products to other countries around the world (that are) that bad, so we try to avoid the products that are made in China,” said Ha, 24, a design company worker in the Vietnamese financial hub city. Vietnamese prefer to buy stuff from Japan or the West. “We’ve tried (Chinese goods) many times in the past but it turns out like they get broken very easily.”

Political ties between Vietnam and China are another “factor” discouraging purchases, she said.

 

Ha is hardly a shopping renegade. Consumers around Vietnam typically shun “Made-in-China” purchases to protest what they see as poor-quality goods from a country that already has a record of disputes with their country. The two sides dispute, for example, a tract of territory in the South China Sea east of Vietnam. Competing claims sparked naval battles 1974 and 1988. The two also fought a land border war in the 1970s.

Vietnamese feel China has an unfair upper hand in the maritime dispute by using its larger military to control the contested Paracel Islands.

Consumers make up a growing force in Vietnam, as the Boston Consulting Group forecasts more than a third of the country’s nearly 93 million people to be middle class or higher by 2020. Fast growth in export manufacturing has added to Vietnam’s wealth since 2012 by creating jobs.

“If they find a product that might be the same price, and they find out that one product is Chinese and another product is from Japan, Korea or anywhere else, you know which one they’re going to go for,” said Oscar Mussons, senior associate with the Dezan Shira & Associates business consultancy in Ho Chi Minh City. “Vietnamese people see them not as big brothers, but as rivals.

“This is also because of recent problems, like Chinese are hitting national icons like the islands in the South China Sea,” Mussons said. “For Vietnamese, this is something that cannot be accepted in any way, even through you don’t hear much about or the government doesn’t try to make much publicity about it.”

 

Vietnamese officials have tried to sideline political disputes with China since anti-Chinese riots of 2014 killed more than 20 people and threatened to scare off investors. China’s go-ahead to construct an oil rig in the disputed sea touched off the rioting.

But Vietnam still counts China as its biggest trade partner. Combined imports and exports came to $25.5 billion in the first four months of the year, according to Vietnamese media reports. Export manufacturers in Vietnam rely as well on China for raw materials.

On top of the political issues, Vietnamese consumers widely suspect China sends lower-quality merchandise to its shelves. Giant Chinese firms, often bigger than Vietnamese counterparts, can send over excess merchandise for sale at low prices because of their production run sizes.

“Generally amongst Vietnamese, China-made products are perceived to be of low quality. Some of this is fact, but some of this is also driven by social media posts and ensuing perceptions,” said Jason Moy, principal with the Boston Consulting Group in Singapore. Lower-income, less educated consumers are particularly prone to those perceptions, he added. “Hence, Chinese products are generally selected when they are the last or only option.”

Trade in shoes, toys and daily necessities along the land border particularly leaves cheap but possibly suspect Chinese goods in Vietnam, where lower-income people buy them for their low prices, said Le Hong Hiep, research fellow with ISEAS Yusof Ishak Institute in Singapore. Goods trucked across the border in some cases have “pushed Vietnamese merchandise out of their traditional markets,” Le said.

An organized boycott against Chinese goods after the riots of 2014 gained little traction because poorer people couldn’t afford merchandise from other places, he said.

Although Chinese smartphones are gaining a solid reputation, Ha said she once bought a made-in-China phone for her mother because it was all they could afford. It broke after “several months,” she said, so the family bought another phone.

Only Chinese thong flip-flops are worth the money, she said, because at about $1 per pair you can afford to scrap and replace a pair after a few uses.

“People are conscious of the kind of low standards, low quality of Chinese products,” Le said. “I think one of the reasons is that many of these products are consumer items and small items, and they are imported by border trade, not through official channels which normally have stricter regulations and inspections to ensure the quality.”

 

Shoppers with more money prefer Japanese products as top quality, especially ever-popular motor scooters and consumer electronics, Moy said.Korean food and consumer electronics are also gaining favor with consumers, he said. 
…