U.S. employers posted the most jobs in two decades in August, and hiring also reached a record high, fresh evidence that companies are desperate to staff up amid solid economic growth.

Job openings rose a slight 0.8 percent to 7.14 million, the highest on records dating back to December 2000, the Labor Department said Tuesday. That is also far more than the 6.2 million of people who were unemployed that month.

The number of available jobs has swamped the number of unemployed for five straight months. Hiring has been solid, which has pushed down the unemployment rate to a nearly five-decade low of 3.7 percent. Strong demand for workers when so few are out of work.

President Donald Trump celebrated the report on Twitter, tweeting: “Incredible number just out… Astonishing! It’s all working!” Trump added that the stock market was “up big” and referenced “Strong Profits.”

Yet so far, pay raises have been modest. Average hourly earnings rose 2.8 percent in September compared with a year earlier. That’s much higher than several years ago, but below the roughly 4 percent gain that is typical when unemployment is so low.

It’s a sharp turnaround from the Great Recession and its aftermath. In 2009, there were as many as six unemployed workers for each available job. Now, that number has fallen below one.

Employers hired roughly 5.8 million people in August, the report showed. That is also the most on record, but that increase partly reflects population growth. The percentage of the workforce that found jobs in August ticked up to 3.9 percent from 3.8 percent in July. That matched an 11-year high first reached in May.

Job openings rose in August in professional and business services, which include mostly higher-paying positions in engineering, accounting and architecture, as well as temporary help. Postings in that category have jumped 27 percent from a year ago.

Construction firms are also desperate for workers, posting 298,000 open jobs. That’s nearly 39 percent more than a year ago. Job openings also increased in finance and insurance and health care.

Openings fell in August from the previous month in manufacturing, retail, and slipped slightly in hotels and restaurants.
…

Concerns about debt diplomacy on China’s expansive infrastructure megaproject — the Belt and Road — have become an increasing source of debate from Asia to Africa and the Middle East. In recent weeks, more than $30 billion in projects have been scrapped and other loans and investments are under review.

Public opposition is also testing the resolve of ruling authorities from Hanoi to Lusaka, the capital of Zambia, as concerns about Chinese investment build.

In late August, Malaysia’s newly elected Prime Minister Mahathir Mohamad canceled more than $20 billion in Belt and Road projects for railway and pipelines, and Pakistan lopped another $2 billion off plans for a railway following a decision late last year to cancel a $14 billion dam project, citing financial concerns. Nepal canceled its dam project last month and Sierra Leone announced last week that it was dropping an airport project over debt concerns.

In some countries such as Vietnam, it is just the idea of Chinese investment — against the backdrop of the Belt and Road — that has led to push back.

Following public protests, Vietnam recently decided to postpone plans for several special economic zones.

Several Belt and Road projects have seen setbacks in countries where debt concerns have coincided with political elections and a change of power — be it Pakistan, Malaysia or the Maldives, says economist Christopher Balding.

“The people in these countries are very worried about the level of debt that these countries are taking on in regard to China and I think that is very important to note,” Balding said. “It’s not just anti-China people that are driving this, but that there is a lot of concern on the ground in the countries about that.”

China says there are no political strings attached to its investments and loans. It also argues it is providing funding in places others will not. But Beijing’s takeover of a port in Sri Lanka last year and the sheer volume of Chinese investments along the Belt and Road project have done little to ease those concerns.

String of ports

Late last year, according to the New York Times, China agreed to forgive Sri Lanka’s debt in exchange for a 99-year lease of Hambanthota Port and 15,000 acres of surrounding land.

The government of Sri Lanka denies it divested land to a Chinese company, but the deal has convinced some that China is setting up debt traps to then take over the infrastructure that Chinese state-run companies build.

Hambanthota is one of 42 ports where China has participated in construction and operations, with more on the horizon.

In 2021, China will take over operation of one of Israel’s largest ports in Haifa. Beijing is also being eyed as a possible candidate for the development of Chabahar port in Iran, which is near the Iran-Pakistan border.

The port proposal remains in limbo, however, due to U.S. sanctions. And that’s not the only obstacle, according to David Kelly, research director at the Beijing-based group China Policy.

“It’s in the driest and most remote part of Iran,” Kelly said. “It looks like a real loser commercially, unless it handles a lot of oil.”

Analysts say the Middle East, with its oil money and deep pockets, is less at risk for debt traps.

However, the port that is most likely to follow in Sri Lanka’s footsteps is Djibouti, a strategically important country on the Horn of Africa, where China recently established its first overseas military base.

According to official figures, Djibouti’s debt is more than 88 percent of the GDP and China owns $1.4 billion of that. That kind of debt overhang could lead to the same type of concessionary agreements as in Sri Lanka, analysts note.

Debt traps

A report released earlier this year by Washington, D.C.-based Center for Global Development said 23 of the 68 countries where China is investing for Belt and Road projects are at high risk of debt distress. Another eight, including Djibouti, are vulnerable to debt distress linked to future projects.

China argues its investments are aimed at boosting trade and commerce and giving developing countries a leg up.

China Policy’s Kelly says places where the debt situation is more critical are countries such as land-locked and poverty-stricken Zambia. There, concerns are causing a very public push for the government to disclose the full burden of Chinese debt.

“The upset and upheaval in Zambia recently, where you’ve got African civil society coming out and making this case,” Kelly said, “That is always going to be more significant where you have the local people, making a local case.”

BRI indigestion

Oh Ei Sun, a senior fellow with the Singapore Institute of International Affairs, says cancellations and changes are what he calls Belt and Road indigestion.

Concerns about debt traps and debt diplomacy will not have an impact on China going forward, he says, but stops, starts and cancellations will continue.

Oh says China’s model of development — build infrastructure and the economy will grow — may have worked at home, but it doesn’t always fit along the Belt and Road.

“In many of these Belt and Road initiative countries, if you lay out the infrastructure, it doesn’t automatically mean that trade and investment will take place,” Oh said, “Some of these projects will have to be more attuned to the local requirements of particular countries.”
…

The U.S. government’s budget deficit hit $779 billion in the fiscal year that ended Sept. 30, while spending increased and tax revenues remained nearly flat, the Treasury said Monday.

It was the biggest deficit since 2012, and $113 billion more than the figure a year ago. The 2018 deficit amounted to 3.9 percent of the country’s more than $18 trillion annual economy, up from 3.5 percent last year.

The government’s deficit spending boosted the country’s long-term debt figure to more than $21 trillion, forcing the government to pay an extra $65 billion last year in interest on money the government has had to borrow to run its programs.

In all, government spending rose by $127 billion last year, while tax collections increased by $14 billion.

The Treasury said the annual deficit rose partly because corporate tax collections dropped by $76 billion after Congress approved cuts in tax rates for both businesses and individuals that were supported by President Donald Trump.

Mick Mulvaney, the government’s budget director, said the country’s “booming economy will create increased government revenues — an important step toward long-term fiscal sustainability. But this fiscal picture is a blunt warning to Congress of the dire consequences of irresponsible and unnecessary spending.”
…

Zimbabwe’s government says the country is emerging from a recent economic meltdown that saw shops run out of goods and motorists spend long hours in lines at gas stations. Economists say Zimbabwe’s crisis is not over, as people have no confidence in the currency or in President Emmerson Mnangagwa’s government.

For weeks now, there have been long and winding queues at most fuel stations in Zimbabwe, as the precious liquid has been in short supply. Lameck Mauriri is one of those now tired of the situation.

“We are really striving but things are tough to everyone,” said Mauriri. “I do not know how those in rural areas, how they are surviving, especially if in Harare it is like this. We are sleeping in fuel queues. There is not fuel, there is no bread, there is no drink. There is no everything. No cash, no jobs.”

For a decade, the country has been without an official currency and relied on U.S. dollars, the British pound and South African rand to conduct transactions. In the past three years, however, all three currencies have been hard to find, paralyzing the economy.

The introduction of bond notes — a currency Zimbabwe started printing two years ago to ease the situation — has not helped.

The bond notes were supposed to trade at par with the U.S. dollar; but, on the black market, a dollar now is now equal to close to three bond notes.

Prosper Chitambara, an economist of the Labor and Economic Development Research Institute of Zimbabwe says the bond notes are partly to blame for the price increases and shortages in the country.

“What is lacking in the economy, in the market is confidence. There is a distrust of the formal economic system,” said Chitambara. “The bond notes have definitely contributed a great deal to the current economic situation, a fallacy economic situation. What they have done is for example to increase money supply in the economy. And that money supply is not actually backed by significant productivity in the economy. That actually gives rise to general of inflationary pressures.”

He said the government’s recent introduction of a 2 percent tax on all electronic transactions pushed prices even higher and caused some shops to close.

Ndabaningi Nick Mangwana, Zimbabwe’s secretary in the Ministry of Information and Publicity, says the situation in the country is normal and there is no need for alarm.

“There is no shortage to oil itself, there is no challenge in terms of production of all these essential services,” said Mangwana. “That is why they are there if you go. There were a few people who panicked, closed a couple of shops, but those opened within hours. There was fake news and people panicked, but it is all under control.”

That is not exactly what seems to be the case on the ground. Some shops remain closed and prices continue rising. Long fuel lines remain the order of the day. 
…

World stocks are climbing Friday after two days of sharp losses. Major U.S. stock indexes are up more than 1 percent, but they’re still on track for their biggest one-week loss since late March.

Technology and internet companies were some of the hardest hit over the last two days and they led the market higher Friday. Apple climbed 2.7 percent to $220.18. Consumer-focused companies also rallied, as Amazon jumped 3.8 percent to $1,783.96 and Netflix surged 4.7 percent to $336.30.

The S&P 500 index climbed 37 points, or 1.4 percent, to 2,766 at 9:45 a.m. Eastern time. The benchmark index tumbled 5.3 percent over the past two days and as of Thursday it had fallen for six consecutive days. The S&P is down 5.6 percent from its latest record high, set Sept. 20.

The Dow Jones Industrial Average jumped 305 points, or 1.2 percent, to 25,358. The Nasdaq composite surged 138 points, or 1.9 percent, to 7,467. The Russell 2000 index gained 17 points, or 1.2 percent, to 1,563. That index, which is made up of smaller and more U.S.-focused companies, has fallen into a 10 percent “correction” since reaching a record high at the end of August.

On the New York Stock Exchange, winners outnumbered losers eight to one.

Stocks in Europe and Asia also recovered some of their recent losses. The French CAC 40 and the DAX in Germany both rose 0.8 percent while Britain’s FTSE 100 was 0.7 percent higher. Japan’s Nikkei 225 index gained 0.5 percent after sinking early in the day and following a nearly 4 percent loss on Thursday. Hong Kong’s Hang Seng surged 2.1 percent and the Kospi in South Korea rose 1.5 percent.

The market’s recent losing streak started when strong economic data and positive comments from Federal Reserve Chair Jerome Powell helped set off a wave of selling in the bond market. Investors were betting that the U.S. economy would keep growing at a healthy pace. The sales pushed bond prices lower and yields higher. That drove interest rates sharply higher, which worried investors who felt that a big increase in interest rates could eventually stifle economic growth. Higher yields also make bonds more appealing to investors versus stocks.

The worst losses went to stocks that have led the market in recent years, including technology companies, as well as companies that do better when economic growth speeds up, like industrial firms.

Banks rose as they began to report their third-quarter results. Citigroup jumped 2.4 percent to $70.04. Last year’s corporate tax cut and rising interest rates have helped banks make more money.

Bond prices turned lower as the stock market stabilized. The yield on the 10-year Treasury note rose to 3.16 percent from 3.13 percent.

High-dividend stocks lagged the rest of the market, and utilities and household goods makers were little changed. Those stocks held up a bit better than the rest of the market over the last six days. Investors view them as relatively safe, steady assets that look better when growth is uncertain and the rest of the market is in turmoil.

U.S. crude oil added 0.6 percent to $71.43 a barrel in New York. Brent crude, the international standard, was up 0.6 percent to $80.77 a barrel in London.

The dollar rose to 112.17 yen from 111.94 yen. The euro fell to $1.1548 from $1.1594.
…

Just in case any of the global central bankers and finance ministers gathered in Indonesia missed the message delivered repeatedly this week, the host nation said it again Friday: Everyone stands to lose if trade wars are allowed to escalate.

Indonesian President Joko Widodo didn’t mention the United States or China, the world’s two largest economies, but it was clear who he was talking about in an address to the plenary session of the International Monetary Fund and World Bank meetings on the island of Bali.

“Lately it feels like the relations among the major economies are becoming more and more like Game of Thrones,” Widodo said in a speech peppered with references to the HBO series about dynasties and kingdoms battling for power.

“Are we so busy fighting with each other and competing against each other that we fail to notice the things which are increasingly threatening, all of us alike, rich and poor, large and small,” he said.

Poorer and populous emerging market countries like his are among the most vulnerable to the fallout from the ongoing U.S.-Sino tariff war, and rising U.S. interest rates that are drawing investors away and driving down currencies.

“All these troubles in the world economy, are enough to make us feel like saying: ‘Winter is coming,'” Widodo said, using a phrase that characters in the popular fantasy series constantly repeat to refer to spectral dangers that could destroy them all.

With rivalry growing in the world economy, Widodo said “the situation could be more critical compared to the global financial crisis 10 years ago.”

The market ructions have now cascaded through to developed markets with Wall Street extending a slide into a sixth session on Thursday amid the trade war fears.

The United States and China have slapped tit-for-tat tariffs on hundreds of billions of dollars of each other’s goods over the past few months.

The tariffs stem from the Trump administration’s demands that China make sweeping changes to its intellectual property practices, rein in high-technology industrial subsidies, open its markets to more foreign competition and take steps to cut a politically sensitive U.S. goods trade surplus.

Rubbing salt in U.S. wounds, China reported on Friday an unexpected acceleration in export growth in September and a record $34.13 billion trade surplus with the United States.

Mnuchin: China trade talks must include yuan

In an interview with Reuters, U.S. Treasury Secretary Steven Mnuchin said that he told China’s central bank chief that currency issues need to be part of any further U.S.-China trade talks and expressed his concerns about the yuan’s recent weakness.

Mnuchin also said that China needs to identify concrete “action items” to rebalance the two countries’ trade relationship before talks to resolve their disputes can resume.

The U.S. Treasury chief and People’s Bank of China Governor Yi Gang extensively discussed currency issues on the sidelines of the meetings in Bali.

Mnuchin’s comments on China’s currency come ahead of next week’s scheduled release of a hotly anticipated Treasury report on currency manipulation, the first since a significant weakening of yuan began this spring.

Mnuchin said re-launching trade talks would require China to commit to taking action on structural reforms to its economy.

If the relationship could be rebalanced, he said the U.S.-China total annual trade relationship could grow to $1 trillion from $650 billion currently, with $500 billion of exports from each country.

G-20 members and trade issues

Meanwhile, the chairman of a meeting of finance leaders from the Group of 20 leading industrialized and emerging economies admitted that the trade tensions within the group could only be solved by the countries directly involved.

“The G-20 can play a role in providing the platform for discussions. But the differences that still persist should be resolved by the members that are directly involved in the tensions,” Nicolas Dujovne, Argentina’s Treasury Minister, told a news conference after chairing the G-20 meeting in Bali.

More than 19,000 delegates and other guests, including ministers, central bank heads and some leaders, were attending the IMF-World Bank meetings, and Widodo asked them to “cushion the blows from trade wars, technical disruption and market turmoil.”

“I hope you will each do your part to nudge our various leaders in the right direction,” Widodo said, adding that “confrontation and collision impose a tragic price.”

The IMF’s twice-yearly report on the Asia Pacific region, released Thursday, warned that the market rout seen in emerging economies could worsen if the Federal Reserve and other major central banks tightened monetary policy more quickly than expected.

At Friday’s plenary, IMF managing director Christine Lagarde estimated that the escalation of current trade tensions could reduce global GDP by almost one percent over the next two years.

IMF forecasts of global economic growth for both 2018 and 2019 were cut to 3.7 percent, from 3.9 percent in its July forecast.

“Clearly, we need to de-escalate these disputes,” Lagarde told the plenary session.
…

Elon Musk replied with a tweet saying “This is incorrect” after the Financial

Times reported that outgoing Twenty-First Century Fox Inc. Chief Executive James Murdoch was the lead candidate to replace him as Tesla Inc. chairman.

Tesla has until Nov. 13 to appoint an independent chairman of the board, part of settlements reached last month between Tesla, Musk and U.S. regulators after Musk tweeted in August that he had secured funding to take the electric car maker private.

The SEC settlement capped months of debate and some investor calls for stronger oversight of Musk, whose recent erratic public behavior raised concerns about his ability to steer the money-losing company through a rocky phase of growth.

The U.S. Securities and Exchange Commission, which said Musk’s tweeted statements about going private were fraudulent, allowed the billionaire to retain his role as CEO while requiring he give up his chairmanship.

Musk had said he was considering taking Tesla private at a price of $420 a share, a number that is slang for marijuana. He tweeted the three-word denial of the Financial Times story on Wednesday at 4:20 pm PDT (2320 GMT), about six hours after the newspaper’s post.

In a vote of confidence for Musk, shareholder T. Rowe Price Group Inc. said in a regulatory filing on Wednesday that it had raised its stake to 10.2 percent at the end of September from just under 7 percent in June.

The Financial Times cited two people briefed on discussions saying Murdoch was the lead candidate for the job. Murdoch, already an independent director of Tesla, has signaled he wants the job, the report said.

The son of Fox mogul Rupert Murdoch, he joined Tesla’s board last year after years of work with media companies. He has no experience in manufacturing and has never led a company that makes cars or electric vehicles.

Murdoch could not immediately be reached for comment. Tesla did not respond to a request for comment. Twenty-First Century Fox declined to comment.

​Board roles

Musk is the public face of Tesla, and any chairman would have to contend with his powerful personality. Thanks to his vision and audacious showmanship, Tesla’s valuation has at times eclipsed that of established U.S. automakers with billions in revenues, and the company has garnered legions of fans, despite repeated production issues.

“The question when it comes to James Murdoch is, ‘Is he the guy who’ll be able to establish that level of authority with Elon Musk?’ ” asked Abby Adlerman, CEO of Boardspan, a corporate governance consulting company.

Murdoch, who at 45 is a near contemporary of 47-year-old Musk, recently navigated a takeover battle between Fox and Comcast Corp. to buy European pay-TV company Sky, which he also chaired.

His record in ensuring Sky’s independent shareholders were represented throughout was exemplary, media analyst Alice Enders said.

“His experience is very recent and very relevant,” she said.

Investor concerns that Tesla’s board was too closely tied to Musk led to the company’s addition of two independent directors, including Murdoch, in July 2017.

Earlier this year, leading U.S. proxy advisers Glass Lewis & Co. and Institutional Shareholder Services and union-affiliated investment adviser CtW Investment Group had recommended investors cast votes “against” the re-election of Murdoch as a Tesla director at the company’s annual meeting held on June 5.

While CtW cited a lack of relevant experience and a “troubled history as an executive and director,” both proxy firms warned that Murdoch already served on too many boards.

Murdoch currently serves on the boards of Twenty-First Century Fox and News Corp. He stepped down from Sky Plc on Tuesday following the completion of Comcast’s takeover of the broadcaster.

He was appointed chief executive of Sky, founded by his father, in 2003, becoming the youngest CEO of a FTSE 100 company.

“Under his leadership, Sky went down the technology route,” Enders said. “It’s no accident he oversaw that strategy, which was really distinct from the strategy other pay-TV companies followed, and in my view was his most valuable contribution.”

Murdoch replaced his father as chairman of Sky in 2007, but was forced out in 2012 after being embroiled in Britain’s phone-hacking scandal. He returned to Sky’s board in 2016 after rebuilding his career at Fox.
…

Parties to a new global treaty to combat the illicit sale of tobacco products have taken the first steps toward cracking down on this multi-billion dollar trade.  At a three-day meeting at the headquarters of the World Health Organization in Geneva they have outlined a plan to shut down the lucrative black market trade in tobacco.

A global tobacco treaty (Protocol to Eliminate Illicit Trade in Tobacco Products) entered into force on September 25, with 48 countries joining the new protocol, which is part of the WHO Framework Convention for Tobacco Control (FCTC).  Two-thirds of the parties have enacted or strengthened national legislation aimed at tackling illicit trade in tobacco products.

Parties attending the meeting have set up a working group to create a monitoring system to track and trace the movement of tobacco products. They hope this global information sharing system will be up and running by 2023.  

Head of the FCTC Secretariat, Vera da Costa e Silva, says illicit trade accounts for one in 10 cigarettes consumed.  She says these cigarettes are low-priced and more affordable for young people and vulnerable populations.  She says this results in increased consumption of the toxic product by these groups.

She told VOA the black market in tobacco thrives in both rich and poor countries, but it is a much bigger problem in developing countries.

“In the streets of developing countries, you can see all over the world sales of illicit trade of tobacco products.  They are openly in their markets…. When it comes to the distribution, this is linked to street sales, to bootlegging as well through borders and even to sales to and by minors.  That is a real problem of illicit trade in tobacco products,” she said.

Da Costa e Silva said this flourishing illegal trade undermines tobacco control policies and public health.  She said it also fuels organized crime and increases tobacco profits through tax evasion, resulting in substantial losses in governments’ revenues.   

She said studies show governments lose $31 billion in taxes annually from the illegal trafficking in tobacco products.  

The World Health Organization reports seven million people die prematurely every year from tobacco-related causes.

 
…

One of Donald Trump’s top economic advisers says the president is not trying to improperly influence the U.S. central bank.

The director of the National Economic Council, Larry Kudlow, spoke to the television network CNBC a day after Trump said the U.S. Federal Reserve is “loco” (crazy) for raising interest rates. On Thursday, Trump continued his attacks on the central bank, calling the Fed “out of control,” but denied he has plans to fire Fed Chair Jay Powell. 

Kudlow said, “We all know the Fed is independent. The president is not dictating policy to the Fed.”  

The Federal Reserve slashed the benchmark interest rate nearly to zero in an emergency, temporary effort to boost economic growth hurt by a severe recession 10 years ago. Since then, the economy has stopped shrinking and resumed growth, unemployment has fallen to historic lows, and wages and inflation have begun to rise modestly.  

Low interest rates boost growth by making it cheaper for businesses and families to borrow money to build factories or buy homes.  Economists warn that keeping interest rates too low for too long could spark strong inflation that pushes up prices and wages so sharply that they damage the economy.  

To fend off inflation, the Fed has been slowly raising rates a quarter of a percentage point at a time. They are expected to continue this effort to gradually return rates to their historic averages.

A common conflict grows out of the fact that incumbent elected politicians get the blame if the economy is not growing strongly. That gives presidents and others a political incentive to keep interest rates low, regardless of the consequences.  

That is why central banks in the United States and elsewhere are often set up to be insulated from political pressure — so they can make decisions based on economic merit rather than potential popularity.

When the independence of a central bank is seriously questioned, markets and currencies can fall, because investors lose confidence in the economic management of a nation.

U.S. stock markets fell sharply again Wednesday with the benchmark Dow Jones industrial average off nearly 550 points, a drop of more than 2 percent.

This was the second sharp loss for U.S. stocks in as many days, with a total loss for the Dow at more than 1,300 points. Many key European and Asian stock indexes also declined. 
…

A stock market rout that started on Wall Street rolled through Asia, driving China’s benchmark to a four-year low Thursday and knocking down indexes in Japan, Korea and Australia.

The Shanghai Composite index plunged 5.2 percent to its lowest level since November 2014, and Japan’s Nikkei 225 fell by an unusually wide margin of almost 4 percent. Markets across Southeast Asia recorded similar declines.

“Equity markets were pulverized today,” with investors in “full out retreat,” Stephen Innes of OANDA said in a commentary. The “latest sneeze” from Wall Street “could morph into a global markets pandemic,” he added.

​Interests rates worry investors

Investors are wary of possible further U.S. interest rate hikes, which will raise the cost of corporate borrowing and weigh on economic growth.

On Wednesday, President Donald Trump said the Federal Reserve “is making a mistake” with its campaign of rate increases. “I think the Fed has gone crazy,” he charged.

“Equity investors are surprised by the pace at which rates have risen,” said Marcella Chow, global market strategist at J.P. Morgan Asset Management in a report.

Tariff fight, too

Sentiment also has been dampened by the spreading U.S.-Chinese tariff fight over Beijing’s technology policy. The International Monetary Fund cut its outlook for global growth this week, citing interest rates and trade tensions.

The U.S. Treasury is to release a currency report that some analysts suggest might change the official stance on China’s exchange rate policy. Chow said it was unclear whether the Treasury might label Beijing a “currency manipulator,” a status that could trigger penalties, or whether it could be “another pre-text for the next round of tariffs.”

Adding to potential U.S.-China tensions, the Justice Department announced Wednesday it arrested an official of China’s Ministry of State Security on charges of trying to steal trade secrets from U.S. aerospace companies.

The numbers

Tokyo’s Nikkei 225 gave up 3.9 percent to 22,590.86 and the Shanghai Composite index lost 5.2 percent to 2,583.46. Hong Kong’s Hang Seng index shed 3.7 percent to 25,220.67. The Kospi in South Korea fell 4.4 percent to 2,129.67. Australia’s S&P/ASX 200 slipped 2.7 percent to 5,883.80. Stocks plunged in Taiwan and fell across Southeast Asia.

On Wednesday, U.S. stocks slumped as concerns over rising interest rates and trade tensions caused a sell-off in technology and internet stocks. The Dow Jones Industrial Average suffered its worst loss in eight months, falling 3.1 percent to 25,598.74.

The S&P 500 index sank 3.3 percent to 2,785.68. The Nasdaq composite, which has a large contingent of technology stocks, was 4.1 percent lower at 7,422.05. It has fallen 7.5 percent in just five days. The Russell 2000 index of smaller-company stocks shed 2.9 percent, to 1,575.41.

Apple and Amazon, the two most valuable companies in the S&P 500, each had their worst day in 2½ years. Apple slipped by 4.6 percent while Amazon lost 6.2 percent.

Amazon has soared 50 percent this year, but its stock has fallen 14 percent from its all-time high in early September.
…

U.S. President Donald Trump said that Wednesday’s stock market sell-off was in fact a long-awaited “correction,” and that the Federal Reserve, which has been raising U.S. interest rates, had gone “crazy.” 

Trump’s use of the word correction to describe the sell-off could be significant. A stock market correction is defined as a decline of at least 10 percent from the high point of the past 52 weeks, suggesting that major U.S. indices have further to fall.

Despite Wednesday’s sell-off, the S&P 500 would still need to more than double its losses. It has fallen nearly 5 percent from its all-time closing high on Sept. 20. The Nasdaq has fallen 8.5 percent from its record closing high on Aug. 29. An additional 1.5-percentage-point fall would confirm a correction for that index.

Stocks have sold off in recent days on worries about higher borrowing costs. A spike in Treasury yields and solid U.S. economic data have sparked concerns that the Federal Reserve may pick up the pace of its interest rate hikes.

“Actually it’s a correction that we’ve been waiting for a long time, but I really disagree with what the Fed is doing,” Trump told reporters before a political rally in Pennsylvania.

The U.S. stock market sell-off on Wednesday saw the S&P 50 and the Dow marking their biggest daily declines since Feb. 8, and technology stocks were at the center of the carnage. Steve Massocca, senior vice president at Wedbush Securities in San Francisco, said he thought the downturn would b short-lived.

“There’s a greater than 50-50 chance there’s a rebound, if not tomorrow, then the day after, given the severity of the move,” he said.

But some investors and analysts expressed concern about the market’s direction.

“It’s probably the beginning of the correction,” said Oliver Pursche, vice chairman and chief market strategist at Bruderman Asset Management in New York.

‘Fed is making a mistake’

The Fed last raised interest rates in September and left intact its plans to steadily tighten monetary policy, as it forecast that the U.S. economy would enjoy at least three more years of economic growth.

But those actions have drawn scorn from Trump, who has accused the Fed of moving too fast in raising rates when inflation is minimal and government data points to a strong economy.

“I think … the Fed is making a mistake. They’re so tight. I think the Fed has gone crazy,” Trump said.

U.S. presidents have rarely criticized the Fed in recent decades because its independence has been seen as important for economic stability. Trump has departed from that practice and has said he would not shy from future criticism should the Fed keep lifting rates.

The Federal Reserve is mandated by Congress to aim for low inflation and low unemployment. U.S. consumer price inflation is currently above 2 percent annually and the unemployment rate is the lowest in about 40 years.
…

Mat Beren and his friends used to drive by the vast greenhouses of southern British Columbia and joke about how much weed they could grow there.

Years later, it’s no joke. The tomato and pepper plants that once filled some of those greenhouses have been replaced with a new cash crop: marijuana. Beren and other formerly illicit growers are helping cultivate it. The buyers no longer are unlawful dealers or dubious medical dispensaries; it’s the Canadian government.

On Oct. 17, Canada becomes the second and largest country with a legal national marijuana marketplace. Uruguay launched legal sales last year, after several years of planning.

It’s a profound social shift promised by Canadian Prime Minister Justin Trudeau and fueled by a desire to bring the black market into a regulated, taxed system after nearly a century of prohibition.

It also stands in contrast to the United States, where the federal government outlaws marijuana while most states allow medical or recreational use for people 21 and older. Canada’s national approach has allowed for unfettered industry banking, inter-province shipments of cannabis, online ordering, postal delivery and billions of dollars in investment; national prohibition in the U.S. has stifled greater industry expansion there.

Hannah Hetzer, who tracks international marijuana policy for the New York-based Drug Policy Alliance, called Canada’s move “extremely significant,” given that about 25 countries have already legalized the medical use of marijuana or decriminalized possession of small amounts of pot. A few, including Mexico, have expressed an interest in regulating recreational use.

“It’s going to change the global debate on drug policy,” she said. “There’s no other country immediately considering legalizing the nonmedical use of cannabis, but I think Canada will provide almost the permission for other countries to move forward.”

At least 109 legal pot shops are expected to open across the nation of 37 million people next Wednesday, with many more to come, according to an Associated Press survey of the provinces. For now, they’ll offer dried flower, capsules, tinctures and seeds, with sales of marijuana-infused foods and concentrates expected to begin next year.

Overseeing distribution

The provinces are tasked with overseeing marijuana distribution. For some, including British Columbia and Alberta, that means buying cannabis from licensed producers, storing it in warehouses and then shipping it to retail shops and online customers. Others, like Newfoundland, are having growers ship directly to stores or through the mail.

Federal taxes will total $1 per gram or 10 percent, whichever is more. The feds will keep one-fourth of that and return the rest to the provinces, which can add their own markups. Consumers also will pay local sales taxes.

Some provinces have chosen to operate their own stores, like state-run liquor stores in the U.S., while others have OK’d private outlets. Most are letting residents grow up to four plants at home.

Canada’s most populous province, Ontario, won’t have any stores open until next April, after the new conservative government scrapped a plan for state-owned stores in favor of privately run shops. Until then, the only legal option for Ontario residents will be mail delivery — a prospect that didn’t sit well with longtime pot fan Ryan Bose, 48, a Lyft driver.

“Potheads are notoriously very impatient. When they want their weed, they want their weed,” he said after buying a half-ounce at an illicit medical marijuana dispensary in Toronto. “Waiting one or two three days for it by mail, I’m not sure how many will want to do that.”

British Columbia, home of the “B.C. Bud” long cherished by American pot connoisseurs, has had a prevalent marijuana culture since the 1970s, after U.S. draft-dodgers from the Vietnam War settled on Vancouver Island and in the province’s southeastern mountains. But a change in government last year slowed cannabis distribution plans there, too, and it will have just one store ready next Wednesday: a state-run shop in Kamloops, a few hours’ drive northeast of Vancouver. By contrast, Alberta expects to open 17 next week and 250 within a year.

Unlawful operations

No immediate crackdown is expected for the dozens of illicit-but-tolerated medical marijuana dispensaries operating in British Columbia, though officials eventually plan to close any without a license. Many are expected to apply for private retail licenses, and some have sued, saying they have a right to remain open.

British Columbia’s ministry of public safety is forming a team of 44 inspectors to root out unlawful operations, seize product and issue fines. They’ll have responsibility for a province of 4.7 million people and an area twice as large as California, where the black market still dwarfs the legal market that arrived in January.

Chris Clay, a longtime Canadian medical marijuana activist, runs Warmland Centre dispensary in an old shopping mall in Mill Bay, on Vancouver Island. He is closing the store Monday until he gets a license; he feared continuing to operate post-legalization would jeopardize his chances. Some of his eight staff members will likely have to file for unemployment benefits in the meantime.

“That will be frustrating, but overall I’m thrilled,” Clay said. “I’ve been waiting decades for this.”

Licensed growers

The federal government has licensed 120 growers, some of them enormous. Canopy Growth, which recently received an investment of $4 billion from Constellation Brands, whose holdings include Corona beer, Robert Mondavi wines and Black Velvet whiskey, is approved for 5.6 million square feet (520,000 square meters) of production space across Canada. Its two biggest greenhouses are near the U.S. border in British Columbia.

Beren, a 23-year cannabis grower, is a Canopy consultant.

“We used to joke around all the time when we’d go to Vancouver and drive by the big greenhouses on the highway,” he said. “Like, ‘Oh man, someday. It’d be so awesome if we could grow cannabis in one of these greenhouses.’ We drive by now, and we’re like, ‘Oh, we’re here.”‘

Next to Canopy’s greenhouse in Delta is another huge facility, Pure Sunfarms, a joint venture between a longtime tomato grower, Village Farms International, and a licensed medical marijuana producer, Emerald Health Therapeutics. Workers pulled out the remaining tomato plants last winter and got to work renovating the greenhouse as a marijuana farm, installing equipment that includes lights and accordion-shaped charcoal vents to control the plant’s odor. By 2020, the venture expects to move more than 165,000 pounds (75,000 kg) of bud per year.

Some longtime illegal growers who operate on a much smaller scale worry they won’t get licensed or will get steamrolled by much larger producers. Provinces can issue “micro-producer” licenses. But in British Columbia, where small-time pot growers helped sustain rural economies as the mining and forestry industries cratered, the application period hasn’t opened yet.

Sarah Campbell of the Craft Cannabis Association of BC said many small operators envision a day when they can host visitors who can tour their operations and sample the product, as wineries do.

Officials say they intend to accommodate craft growers but first need to ensure there is enough cannabis to meet demand when legalization arrives. Hiccups are inevitable, they say, and tweaks will be needed.

“Leaving it to each province to decide what’s best for their communities and their citizens is something that’s good,” said Gene Makowsky, the Saskatchewan minister who oversees the province’s Liquor and Gaming Authority. “We’ll be able to see if each law is successful or where we can do better in certain areas.”

British Columbia safety minister Mike Farnworth said he learned two primary lessons by visiting Oregon and Washington, U.S. states with recreational marijuana. One was not to look at the industry as an immediate cash cow, as it will take time to displace the black market. The other was to start with relatively strict regulations and then loosen them as needed, because it’s much harder to tighten them after the fact.

Legalization will be a process more than a date, Farnworth said.

“Oct. 17th is actually not going to look much different than it does today,” he said.
…

Cambodian Prime Minister Hun Sen is facing economic pressure to reverse a recent crackdown on opposition groups and basic freedoms in his country.

Cambodia faces an economic collapse from the slated withdrawal of crucial European Union trade preferences that will likely force its leader to walk back a prolonged political crackdown, observers and labor groups say.

The EU told Cambodia on Friday it will lose duty-free access to the world’s biggest market within 12 months for its “blatant disregard” of human and labor rights standards attached to trade preferences it is granted as a developing nation.

Unless the government takes significant actions to redress an autocratic backslide including reinstating the country’s banned opposition in the next six months, the “Everything But Arms” (EBA) preferences will be withdrawn.

“This could be disastrous. I mean, if I were an investor looking at certainly the garment sector I would be very concerned about now,” said political economist Sophal Ear, an associate professor of diplomacy and world affairs at Occidental College in Los Angeles.

“I would pause any expansion plans because it would be like wait, things could go completely haywire,” he said.

Moeun Tola, Executive Director of the Center for Alliance of Labor and Human Rights, said a huge number of workers would be forced into unemployment and the ball is now in Hun Sen’s court.

“If the government really care about the nation and our people, they should reconsider the demands/recommendations from EU,” he said.

Garment manufacturing is Cambodia’s biggest industry, accounting for about 40 percent of the gross domestic product and some 800,000 jobs, while the EU is by far its largest export market, absorbing almost $6 billion worth of goods last year according to its own figures.

Preferential access to that market is seen by some of Hun Sen’s critics as one of the few meaningful negotiating chips to counter an autocratic leader increasingly emboldened by Chinese support.

Statements of concern and threats to review the EBA in the past have been brushed off by his government as empty and bemoaned by some of his critics frustrated with a lack of concrete punitive international intervention.

‘Defense of sovereignty’

The immediate reaction to the announcement from Hun Sen, who has ruled for more than 30 years, has been defiance.

“No matter what measures they want to take against Cambodia, in whatever way, Cambodia must be strong in its defense of its sovereignty,” he said in a post to his Facebook page Monday.

In the lead-up to Cambodia’s July election, Hun Sen claimed defense of the national sovereignty necessitated the banning of the opposition Cambodia National Rescue Party — which he said was made up of agents of malicious foreign governments — and the jailing of its leader Kem Sokha.

Most independent media were also crushed while members of civil society, journalists, activists and internet users who expressed dissent were jailed. Hun Sen’s party went on to win every seat in an election the EU deemed “not legitimate.”

Political analyst Ou Virak said Hun Sen’s public defiance of the EU was predictable, though privately discontent was brewing among the premier’s inner circle and vast network of rich benefactors.

“You have to understand Hun Sen. He wants to save face, he doesn’t want to appear that he’s a pushover and so he will try to do it in a way that it seems he didn’t give much or he didn’t cave in,” he said.

Increasing pressure

Conciliatory moves have come since the election, with Hun Sen facilitating pardons for jailed activists and Kem Sokha moving from jail into a somewhat loose form of house arrest.

Moeun said that pressure could stretch all the way to Beijing, stressing that as the biggest investors in the Cambodia’s garment factories, Chinese investors stood to lose heavily should the industry collapse.

A severe knock-on effect would be felt in Cambodia’s microfinance industry as well, because so many garment workers were indebted to such institutions, Tola warned.

“Both micro-finance and banks will be hard to grab their assets in order to pay off the loan as there will be protest or chaos to do that,” he wrote.

Ngeth Chou, a Senior Consultant at Emerging Markets Consulting, said more than two-thirds of Cambodian households had debt with microfinance institutions.

“So the household depends largely on their children who work in the garment sector so that becomes a high risk for the microfinance sector,” he said.

Ear said that while no one wanted to see the kind of economic hardship such a collapse would bring, the EU had created both a credible threat and a way out for the Cambodian government.

“The key is to cause the actions you desire in the next six months before sanctions actually begin and to have the same effect so that you don’t actually punish Cambodia or Cambodians in particular who don’t deserve to be punished for the actions of their leaders.

“Then you don’t have to tank the economy. But that would be the result of anything of the sort that is being proposed,” he said.

Representatives of the Garment Manufacturers Association in Cambodia could not be reached by VOA.

The U.S. has also initiated concrete punitive action against Hun Sen’s regime, sanctioning one of his top commanders in June.

Many more members of his inner circle could follow under the Cambodia Democracy Act of 2018 — a targeted sanctions bill which was passed by the U.S. House of Representatives in late July.

Moeun said if the EU did suspend the EBA, he was sure they would also impose such targeted sanctions, as would the U.S..

“Other allies will follow,” he wrote.
…

Dark, dirty and slow, Zimbabwe’s trains, like much else in the impoverished southern African country, have seen better days.

Once the preferred mode of transport for most Zimbabweans, the state-run rail service mirrors the decline in the country’s economic fortunes during the last two decades under the leadership of former President Robert Mugabe.

Gilbert Mthinzima Ndlovu, a veteran of Zimbabwe’s 1970s independence war and a security guard at the National Railways of Zimbabwe (NRZ) for 35 years, yearns for the old days when trains were full and arrived on time.

“Times are different now as we have few passengers,” the off-duty Ndlovu told Reuters as he rested in a badly lit first class cabin during the journey from the capital Harare to his home in Bulawayo, Zimbabwe’s second city.

Now the 10-hour journey can take 16 hours, he said.

Not surprising, then, that many Zimbabweans prefer to make the 440 km (273 mile) journey by bus or public taxi in around five hours than have to endure a cold overnight train ride – even if at $10 the train ride costs only half as much.

The train carriages often lack lighting and water, and the toilets are filthy. The signalling and information systems are often vandalized and some tracks overgrown with grass and weeds because they have not been used in years.

NRZ is now trying to improve its fortunes.

Last year South African logistics group Transnet won a $400 million joint bid to recapitalize NRZ and fix some of the problems, including acquiring and refurbishing carriages.

But for now passengers have to make do with a broken train service.

“Today you can’t even buy food from the train and all the coaches are filthy, with no water and the lights are not working,” said one passenger who declined to give his name.
…

Last month, Patrick Ho, a former Hong Kong official fighting foreign bribery charges in New York, thought he had finally received a break.

In a dramatic move in the high-profile bribery case, prosecutors on Sept. 14 dropped all criminal charges against Cheikh Gadio, a former Senegalese foreign minister they had accused of helping Ho bribe African officials.

Arguing that the government’s move undermined its case against Ho, Ho’s lawyers urged a federal judge in New York to release their client from a federal jail. 

But the presiding judge, Loretta Preska, wasn’t buying it. She dismissed the motion, Ho’s fifth unsuccessful request for bail. And prosecutors said Gadio has agreed to cooperate, expressing confidence that his testimony against Ho will strengthen their case. 

“(Far) from weakening the case, Gadio’s testimony will provide substantial evidence of the defendant’s guilt,” prosecutors wrote in a court filing. 

Left largely unnoticed in the U.S., the corruption case against Ho has sent shockwaves across Asia, putting the spotlight on an open secret in global business circles — rampant bribery of foreign governments by Chinese companies seeking business deals around the world.    

China has largely ignored the problem, according to China experts.  While the government of President Xi Jinping has launched a much-publicized domestic anticorruption campaign, experts say Chinese authorities have yet to bring a single foreign bribery case against a Chinese company or executive.  

Ho has denied any wrongdoing.  

Ho, 69, and Gadio, 62 were arrested in New York last November and charged as part of a conspiracy to bribe African officials on behalf of CEFC China Energy, a Shanghai-based energy conglomerate with ties to the country’s military. 

At the time, Ho headed China Energy Fund Committee, a Virginia and Hong Kong-based NGO funded by CEFC China Energy, while Gadio ran a business consulting firm when he was a member of Senegal’s parliament. 

In one of two bribery schemes, prosecutors alleged that Ho and Gadio met on the sidelines of the United Nations in late 2014 to engage in a conspiracy to pay a $2 million cash bribe to Idriss Deby, the president of Chad.The payment was offered in exchange for helping CEFC Energy’s entry into Chad’s rich energy sector, according to prosecutors. 

Gadio allegedly introduced Ho to Deby and served as a middleman during discussions between the Chinese executives and Chadian officials. The complaint did not make clear whether any payment was made to Deby, but it did say that Gadio received $400,000 for his services. 

In the second scheme, Ho allegedly paid a bribe of $500,000 to Sam Kutesa, the Ugandan foreign minister, in 2016 in exchange for Kutesa’s help in helping CEFC Energy gain business contracts in Uganda’s financial and energy sectors, according to the criminal complaint.The bribe was paid after Kutesa finished his one-year term as president of the U.N. General Assembly and returned to Uganda. 

While the charges against Gadio were never presented to a grand jury, Ho was indicted on multiple counts of foreign bribery and money laundering. 

Ho pleaded not guilty.  

Timothy Belevetz, a former federal prosecutor now a partner at the Holland & Knight law firm, said bribery cases under the foreign bribery law known as the Foreign Corrupt Practices Act rarely go to trial.

“This is an opportunity for law to be made,” Belevetz said. 

FCPA was passed in 1977 in response to disclosures that U.S. companies were bribing foreign officials to secure business deals. The law has since been amended, giving the Justice Department and the Securities and Exchange Commission broad jurisdiction over foreign companies that have subsidiaries in the United States or trade on U.S. stock exchanges. 

In recent years, the Justice Department, working with international law enforcement agencies, has brought a growing number of corruption cases against foreign companies and executives paying bribes to foreign government officials.

While the Justice Department has previously charged U.S. and European companies with paying bribes to Chinese officials, never before has it tried the representative of a Chinese company on charges of bribing foreign officials in exchange for business contracts.

At the heart of the Ho bribery case is the question of whether any payment promised or made to the African officials was a bribe, as prosecutors call it, or a charitable donation, as defense lawyers put it. 

As Ho’s Nov. 5 trial approaches, prosecutors have revealed how Gadio’s testimony, as well as evidence of Ho’s business dealings with Iran and alleged arms sales to African nations, will help their case at trial.

In a recent court filing, prosecutors wrote that Gadio will testify that Ho handed $2 million in cash, hidden in a gift box, to Deby, and only after Deby “refused to accept this obvious bribe” did Ho draft a letter pledging $2 million to “charitable causes” in Chad. 

Gadio will also tell a jury that Ho never asked him about the status of the donation, indicating Ho had no “interest in doing charitable works in Chad.”

“This expected testimony considerably strengthens the government’s proof beyond the already-strong case reflected in the detailed Complaint,” prosecutors wrote. 

Prosecutors have also indicated in recent days that they intend to introduce evidence of Ho’s involvement in other corrupt actions.

In a court filing last week, prosecutors disclosed they have evidence that shows Ho had offered a bribe to John Ashe, a diplomat from Antigua and Barbuda who served as president of the U.N. General Assembly the year before Kutesa held the post. (Ashe was implicated in another corruption case involving a Chinese national but he died in 2016 before the case went to trial). 

Prosecutors also plan to introduce evidence of Ho’s interest in doing business with Iran while the country was under U.S. sanctions, and brokering arms sales to Libya and Qatar. 

In an October 2014 email, one of several cited in court documents, Ho suggested that CEFC China serve as a “middleman” to help Iran access funds it kept in a Chinese bank under U.S. sanctions to pay a Hong Kong bank for precious metals.

The complaint had hinted at Ho’s willingness to help Chad procure weapons from China, but new government filings allege that Ho’s interest in arms dealing extended beyond Chad. 

In March 2015, according to an intercepted email, Ho asked an unidentified intermediary to send him a list of weapons and military equipment requested by Libya so that “we can execute that right away.”

A month later, Ho emailed the intermediary. “Qatar needs toys quite urgently. Their chief is coming to China, and we hope to give them a piece of good news.”

Prosecutors say they want to introduce the emails as background evidence “to show the development and nature of the relationship” between Ho and Gadio. 

Belevetz said that as with other white-collar criminal cases, the case against Ho will turn more on documents such as emails and wire transfer records than testimonies of witnesses. 

In white-collar cases, “you often have a paper trail that shows what was said,” Belevetz said.

Edward Kim, one of Ho’s lead attorneys, declined to comment.

Sean Hecker, Gadio’s lawyer, said in a statement to VOA, “Dr. Gadio looks forward to continuing to cooperate with U.S. authorities before returning to Senegal to continue his service to the Senegalese people and the important pursuit of establishing peace and security across the Sahel Region.”
…

The Trump administration is moving to allow year-round sales of gasoline with higher blends of ethanol, a boon for Iowa and other farm states that have pushed for greater sales of the corn-based fuel.

President Donald Trump was expected to announce he will lift a federal ban on summer sales of high-ethanol blends during a trip to Iowa on Tuesday.

“It’s an amazing substance. You look at the Indy cars. They run 100 percent on ethanol,” Trump said at the White House before he left for Iowa.

He said he wanted more industry and more energy and he wanted to help farmers and refiners.

‘I want low prices’

“I want more because I don’t like $74,” Trump said referring to the current price of a barrel of crude oil. “It’s up to $74. And if I have to do more — whether it’s through ethanol or another means — that’s what I want. I want low prices.”

The long-expected announcement is something of a reward to Iowa Sen. Chuck Grassley, who as Senate Judiciary Committee chairman led a contentious but successful fight to confirm Brett Kavanaugh to the Supreme Court. The veteran Republican lawmaker is the Senate’s leading ethanol proponent and sharply criticized the Trump administration’s proposed rollback in ethanol volumes earlier this year.

At that time Grassley threatened to call for the resignation of the Environmental Protection Agency’s chief, Scott Pruitt, if Pruitt did not work to fulfill the federal ethanol mandate. Pruitt later stepped down amid a host of ethics investigations.

A senior administration official said Monday that the EPA would publish a rule in coming days to allow high-ethanol blends as part of a package of proposed changes to the ethanol mandate. The official spoke on condition of anonymity ahead of Trump’s announcement.

The change would allow year-round sales of gasoline blends with up to 15 percent ethanol. Gasoline typically contains 10 percent ethanol.

The EPA currently bans the high-ethanol blend, called E15, during the summer because of concerns that it contributes to smog on hot days, a claim ethanol industry advocates say is unfounded.

In May, Republican senators, including Grassley, announced a tentative agreement with the White House to allow year-round E15 sales, but the EPA did not propose a formal rule change.

The senior administration official said the proposed rule intends to allow E15 sales next summer. Current regulations prevent retailers in much of the country from offering E15 from June 1 to Sept. 15.

Lifting the summer ban is expected to be coupled with new restrictions on trading biofuel credits that underpin the federal Renewable Fuel Standard, commonly known as the ethanol mandate. The law sets out how much corn-based ethanol and other renewable fuels refiners must blend into gasoline each year.

Production misses mark

The Renewable Fuel Standard was intended to address global warming, reduce dependence on foreign oil and bolster the rural economy by requiring a steady increase in renewable fuels over time. The mandate has not worked as intended, and production levels of renewable fuels, mostly ethanol, routinely fail to reach minimum thresholds set in law.

The oil industry opposes year-round sales of E15, warning that high-ethanol gasoline can damage car engines and fuel systems. Some carmakers have warned against high-ethanol blends, though EPA has approved use of E15 in all light-duty vehicles built since 2001.

A bipartisan group of lawmakers, many from oil-producing states, sent Trump a letter last week opposing expanded sales of high-ethanol gas. The lawmakers called the approach “misguided” and said it would do nothing to protect refinery jobs and “could hurt millions of consumers whose vehicles and equipment are not compatible with higher-ethanol blended gasoline.”

The letter was signed by 16 Republicans and four Democrats, including Texas Sen. John Cornyn, the No. 2 Republican in the Senate, and Utah Sen. Orrin Hatch, a key Trump ally. New Jersey Democratic Sen. Robert Menendez, whose state includes several refineries, also signed the letter.

A spokeswoman for the Renewable Fuels Association, an ethanol industry trade group, said allowing E15 to be sold year-round would give consumers greater access to clean, low-cost, higher-octane fuel while expanding market access for ethanol producers.

“The ability to sell E15 all year would also bring a significant boost to farmers across our country” and provide a significant economic boost to rural America, said spokeswoman Rachel Gantz.
…

Sales of U.S. military equipment to foreign governments rose 33 percent to $55.6 billion in the fiscal year ended Sept. 30, a U.S. administration official told Reuters on Tuesday.

The increase in foreign military sales came in part because the Trump administration rolled out a new “Buy American” plan in April that loosened restrictions on sales while encouraging U.S. officials to take a bigger role in increasing business overseas for the U.S. weapons industry.

There are two major ways foreign governments purchase arms from U.S. companies: Direct commercial sales, negotiated between a government and a company; and foreign military sales, where a foreign government typically contacts a Department of Defense official at the U.S. embassy in their capital. Both require approval by the U.S. government.

About $70 billion worth of foreign military sales notifications went to Congress this year, slightly less than the year before, the administration official said.

The $55.6 billion figure represents signed letters of agreement for foreign military sales between the United States and allies.

The largest U.S. arms contractors include Boeing, Lockheed Martin, Raytheon, General Dynamics and Northrop Grumman.
…

U.S. President Donald Trump on Tuesday again criticized the Federal Reserve, telling reporters the central bank was going too fast in raising rates when inflation is minimal and government data point to a strong economy.

“Well, I like to see low interest rates. The Fed is doing what it thinks is necessary, but I don’t like what they’re doing because we have inflation really checked, and we have a lot of good things happening,” Trump said to reporters on the White House lawn before departing for an Iowa event. “I just don’t think it’s necessary to go as fast.”

The U.S. Federal Reserve last raised interest rates in September and left intact its plans to steadily tighten monetary policy, as it forecast that the U.S. economy would enjoy at least three more years of economic growth.

The Federal Reserve is mandated by Congress to aim for low inflation and low unemployment. Currently, U.S. consumer price inflation is above 2 percent annually and the unemployment rate is the lowest in about 40 years.

“Also, very importantly I think, the numbers we’re producing are record-setting,” Trump added. “I don’t want to slow it down, even a little bit, especially when you don’t have the problem of inflation. And you don’t see that inflation coming back. Now, at some point it will and you go up.”

Trump has publicly stated his concerns before, but on Tuesday said he had not discussed them personally with Federal Reserve Chair Jerome Powell, explaining that “I like to stay uninvolved.”
…

Foreign companies have been flocking to Vietnam.

Earlier this year, one of the world’s biggest private equity firms Warburg Pincus added banking and logistics to its Vietnam portfolio, pushing its total investment into the country over the $1 billion mark.

Auto players like JAC Motors of China, as well as Kamaz, the largest truck maker in Russia, have recently turned to Vietnam. The Southeast Asian country is seeing money pour in from all over the globe, whether it’s Indonesia’s Gojek in ride-hailing, or Qatar’s Ooredoo in telecommunications. 

With a trade war rippling across the Pacific and fears of interest rate contagion in emerging markets, much of Asia looks bleak. So why is the economy in communist Vietnam such a bright spot?

Stability is key

Gross domestic product is forecast to expand 7 percent this year. The currency and inflation are stable. Growth is expected in exports, manufacturing, foreign direct investment, and other indicators that show Vietnam outpacing rivals in the 10-member Association of Southeast Asian Nations.

“Vietnam is likely to remain the fastest-growing ASEAN economy in 2018 and 2019, as in 2017,” said Chidu Narayanan, Asia economist at Standard Chartered Bank. “We remain positive on Vietnam’s growth medium term on strong manufacturing activity, as FDI inflows to electronics manufacturing remain strong.”

The bank predicts a current account surplus of 3.7 percent of GDP for 2018, meaning Vietnam takes in more money through trade and investment than it sends abroad. That includes an increase in income from services, such as IT outsourcing.

To explain why the country of 100 million people is outperforming peers, it helps to look at factors like trade, consumer spending, and politics.

On the surface, Vietnam’s communist system would not sound like an appeal for investors. But many actually cite the political stability, albeit through one-party government, as a reason to come here. And in reality most businesses operate in a free market, with some state controls. 

Political stability contributes to economic stability, and it helped Vietnam weather a leadership transition that in other countries could spell volatility. Stock markets were not rattled when the president, Tran Dai Quang, died suddenly of illness last month while in office. He will be succeeded by Communist Party chief Nguyen Phu Trong, a man known for maintaining the status quo.

“There will be no major change in Vietnam’s economic strategy or political system as a result of the passing of President Tran Dai Quang,” said Carl Thayer, emeritus politics professor, the University of New South Wales at the Australian Defence Force Academy.

Vietnam likes trade deals

That economic strategy has been characterized by trade deals with as many countries as possible. Through ASEAN, Vietnam has trade pacts with Australia, New Zealand, China, India, Japan, and South Korea. It also signed the Trans-Pacific Partnership, as well as separate agreements with Russia and the European Union.

This could be part of the reason that investor optimism jumped 6 percentage points between the first and second quarters of 2018, according to a European Chamber of Commerce in Vietnam survey released Oct. 3.

“These results show once again that European companies and investors remain confident in Vietnam,” chamber co-chair Nicolas Audier said. “On the cusp of this historic [EU-Vietnam free trade] deal, which would boost trade and investment on both sides, we hope this positive message from EuroCham and its members will inspire the government to continue opening its markets to foreign investment.”

Also drawing in businesses are Vietnamese shoppers. Consumer confidence was higher in Vietnam than in Thailand, Malaysia and Singapore, market researcher Nielsen reported in March. As citizens’ incomes rise, their spending attracts brands in all manner of products.

Spanish fashion retailer Zara has opened outlets here, while Apple in September appointed its first premium reseller in the country, EDigi, authorized to do official repairs of iPhones and Macs. Vingroup, a conglomerate founded by Vietnam’s richest man, launched a line of cars this month with some promotional juice from soccer star David Beckham.

No economy is perfect

It’s not all coming up roses, of course. Economists say Vietnam needs to keep an eye on borrowing: consumers are using more credit cards, the government is close to its debt ceiling, and banks have more non-performing loans than desired. The real estate sector is also cooling, and the country wants to avoid any of the flak that comes from the trade war between the U.S. and China.

That trade war has made investors bearish on Asia’s biggest economy. Elsewhere in the region, Indonesia is fighting to hold the value of its currency, as investors abscond to take advantage of higher U.S. interest rates.

Philippine inflation is approaching 7 percent, the highest in nearly a decade. In Myanmar, the economic potential that once seemed sky-high is now taking a back seat as that state allows ethnic violence and jails journalists.

Vietnam is not far away but has been spared many of those problems for now. 
…

Malaysia may introduce new taxes and sell assets such as land to pay down debt, Prime Minister Mahathir Mohamad said on Tuesday, as his administration struggles with liabilities of around 1 trillion ringgit ($240.67 billion).

Mahathir, who unexpectedly won a general election in May, has blamed the previous administration of Najib Razak for taking the country into such heavy debt, including that of the 1MDB state fund, which is the subject of corruption and money laundering investigations in Malaysia and other countries.

The government is also looking for new sources of revenue to make up the shortfall it is expected to face after scrapping an unpopular goods and services tax just weeks after the Mahathir-led Alliance of Hope coalition was elected to government.

“We may have to devise new taxes in order to have the money to pay our debts,” Mahathir told an investor conference.

“The other thing we can do is to sell our assets. Land is one of them… Beyond that we may have to sell some of our valuable assets in order to raise funds to pay the debts.”

He did not identify or elaborate on what these assets would be.

Last month, Finance Minister Lim Guan Eng said Malaysia will consider a combination of new debt issuance and asset sales to meet its short-term financing needs.

($1 = 4.1550 ringgit)
…

Netflix has chosen New Mexico as the site of a new U.S. production hub and is in final negotiations to buy an existing multimillion-dollar studio complex on the edge of the state’s largest city, government and corporate leaders announced Monday.

It’s the company’s first purchase of such a property, and upcoming production work in Albuquerque and at other spots around New Mexico is forecast to result in $1 billion in spending over the next decade.

More than $14 million in state and local economic development funding is being tapped to bring Netflix to New Mexico. Republican Gov. Susana Martinez and Albuquerque Mayor Tim Keller, a Democrat, touted the investment and said lengthy efforts to put New Mexico on the movie-making map are paying off.

“This is awesome,” the governor told dozens of people gathered inside a cavernous sound stage at ABQ Studios. “This massive investment will have a huge impact of course on New Mexico and continue our efforts to grow and diversify the economy.”

Martinez acknowledged the state’s reliance on federal funding and oil and gas development, saying more needs to be done to encourage diverse ventures such as Netflix as the private sector is the backbone of the American economy.

Keller said the city has laid the groundwork to make sure the film industry is part of its economic development plan. He called landing Netflix a “transformative victory” for the city.

Netflix projects produced in New Mexico include the Emmy Award-winning limited series “Godless” and “Longmire.” Company officials said previous experience working in the state inspired them to jump at the opportunity to establish a new production hub in Albuquerque.

Netflix earlier this year announced it was establishing its first European production hub in Spain. That operation is expected to help the online video entertainment platform expand its Spanish-language content.

It also has a production hub in Los Angeles and it’s possible the company’s footprint will continue to expand, given the amount of content the online entertainment provider is aiming to create.

“We will look at each place on its merits — the same kind of decision-making that went into the impending purchase of this studio,” said Ty Warren, Netflix’s vice president for physical production. “The combination of great crews, existing infrastructure, financial incentives — it was all part of it.”

Netflix has about 130 million subscribers worldwide.

Officials did not release details about the sales price of the studio complex in New Mexico. The property includes several sound stages, production offices, mill space and a back lot.

Martinez, whose second and final term ends this year, initially talked about trying to rein in New Mexico’s film incentive program and an annual $50 million cap was instituted.

As the state dug its way out of the recession, she said it was important to avoid cuts to critical programs such as education, health care and public infrastructure. She was criticized by many who thought the cap would stifle the growth of the film industry.

In 2013, she signed the “Breaking Bad bill,” named after the Emmy-winning TV drama that filmed primarily in Albuquerque during its five seasons. The legislation enhanced incentives for television productions.

Martinez said the industry has since marked three consecutive record-breaking years in New Mexico and it is lining up to be another monumental year.

The industry has drawn more in-state direct spending from film and TV productions each year since 2014, topping out at $505 million last fiscal year, according to the state film office.
…

U.S. President Donald Trump’s golf courses in Scotland lost more than $6 million in 2017.

A report released Monday said the Trump International Golf Links near Aberdeen lost $1.7 million, slightly lower than the $1.8 million lost in 2016.

His flagship Trump Turnberry resort along the Irish Sea posted a loss of nearly $4.5 million last year, substantially less than the $23.3 million loss posted in 2016. The resort has lost more than $43 million since Trump bought it in 2014.

Trump’s son Eric said in a letter that the 2017 losses at Aberdeen could be attributed to a “crash in the oil price and economic downturn experienced in the northeast of Scotland.”

He pointed to Turnberry as a success story following a major redevelopment there after the 2016 losses. He praised the 2017 number as “one of the most robust financial results in years.”

Trump visited the Turnberry resort in July, costing the U.S. government some $68,800, The Scotsman newspaper reported at the time. It said the State Department paid the resort for the rooms used by Trump and his staff, who stayed there from Friday night to Sunday afternoon.

The Trump organization at the time did not dispute the charges but clarified that the U.S. government was charged at cost and that the resort did not profit from the visit.
…

Pakistan’s new government will open talks with the International Monetary Fund for emergency financial assistance to ease a mounting balance of payments crisis, the finance ministry said Monday.

New Prime Minister Imran Khan spent nearly two months since taking office looking for alternatives to a second IMF bailout in five years, which would likely impose tough conditions on government policy that would limit his vision of an Islamic welfare state.

But on Monday, he decided his finance minister should meet with officials at this week’s annual conference of the IMF and the World Bank in Bali, Indonesia, to discuss a potential package, the finance ministry said in a statement.

“Today, it was decided that we should start talks with IMF,” Finance Minister Asad Umar told GEO TV in an interview Monday night.

The finance ministry did not specify how much in emergency financing the government would seek, but Umar earlier said the government would need at least $8 billion to cover its external debt payments through the end of the year.

Pakistan’s foreign currency reserves dropped in late September to $8.4 billion, barely enough for those debt payments.

The new government blames the previous administration for the country’s economic woes.

‘About time’

Khan’s decision came after the Pakistani stock markets tumbled by 3.4 percent Monday after Khan said the day before that he was still exploring options outside the IMF.

Khan’s government had been seeking economic lifelines from its allies, including new bridge loans from China and a deferred payments scheme for oil with Saudi Arabia, but there were no large-scale deals.

Pakistan’s current account deficit widened 43 percent to $18 billion in the fiscal year that ended June 30, while the fiscal deficit has ballooned to 6.6 percent of gross domestic product.

The rupee has fallen by more than 20 percent in four devaluations since December. On Monday, the currency was trading at 128 per U.S. dollar on the open market and 124.20 in the official interbank rate.

Monday’s news was welcomed by brokers as a clear signal that could help steady markets tired of nearly two months’ of uncertainty since Khan’s government took office.

“It was much needed and about time,” said Saad Hashemy, research director for Pakistani brokerage Topline Securities. “Now what remains to be seen is the amount of funds and the associated to-do list,” he added. “That is, how much more currency devaluation, extent of further interest rate hikes, energy tariff hike, taxation measures etc.”

As the world’s lender of last resort for governments, the IMF typically sets such conditions on its assistance.

If a package is agreed on, it would be Pakistan’s 13th IMF bailout since the late 1980s.

“The challenge for the current government is to ensure that fundamental economic structural reforms are carried out to ensure that this spiral of being in an IMF program every few years is broken once and for all,” the finance ministry said.
…

China has praised investments Saudi Arabia intends to contribute to Chinese-funded massive infrastructure projects under construction in Pakistan, dispelling skepticism Islamabad was risking Beijing’s outrage by inviting a third party to a strictly bilateral deal.

The ongoing massive project, known as the China-Pakistan Economic Corridor (CPEC), is the flagship enterprise of President Xi Jinping’s global Belt and Road Initiative (BRI).

“Not at all,” said Lijian Zhao, the deputy chief of the Chinese embassy in Islamabad, when asked by VOA whether his country was upset with possible Saudi financing in CPEC projects.

In a detailed interview, the senior Chinese diplomat asserted that Beijing itself has been encouraging Islamabad to engage in investments in CPEC from other countries.

CPEC is estimated to bring $62 billion in Chinese investments to Pakistan over the next 15 years for building transportation networks, special economic zones and power plants to help Islamabad improve its manufacturing capacity and overcome energy shortages.

China has already invested more than $19 billion in 22 “early harvest” projects in Pakistan since the two countries launched the massive infrastructure development project four years ago.

The Chinese investment has helped Pakistan upgrade and construct new highways and power plants that have effectively addressed electricity shortages in Pakistan. It has also created more than 70,000 jobs for locals.

“If any other party would like to contribute positive factors to promote the interconnectivity and prosperity of the region on the basis of consultation, I think this is a positive factor,” Chinese Foreign Ministry spokesman Lu Kang told reporters Monday. He was responding to Pakistan’s invitation to the Saudis to invest in the bilateral development project.

The centerpiece of the project is Pakistan’s Chinese-built and operated deep-water Gwadar port on the Arabian Sea, which is regarded as the gateway to CPEC.

​Saudi investment

Pakistani Petroleum Minister Ghulam Sarwar Khan announced last week after talks with a visiting Saudi delegation that Riyadh has “in principle” agreed to establish a multibillion-dollar oil refinery complex in Gwadar.

Zhao said that contrary to “misreporting and propaganda in the Western media,” all CPEC projects are doing “very well” on the ground and moving fast, with nine of the 22 completed, and the rest in the process of completion.

“In the initial phase, a network of roads and power plants has been established, laying the foundation for building special economic zones and bringing high-quality Chinese technology, as well as labor-intensive industries, to Pakistan to help build [the] manufacturing capacity of the country,” he explained.

The industrial cooperation will help create tens of thousands of much-needed jobs for Pakistan. It will enable the country to produce more high-quality, export-oriented goods that would help generate crucial foreign exchange for the country, Zhao said.

When the Chinese foreign minister visited Islamabad last month to “recalibrate” relatively smaller projects in the next phase to improve health, education and agricultural sectors, as well as provide clean drinking water, both countries agreed to bring “CPEC benefits directly to ordinary Pakistanis,” Zhao noted.

“In the next five years, we should further encourage other countries to participate, in terms of bringing financing, construction and equipment to CPEC projects,” he added.

​Chinese ‘debt trap’

The Chinese diplomat strongly dispelled the impression that China is burdening Pakistan with expansive loans to push the country into a “debt trap.”

Of the $19 billion invested so far under CPEC, Zhao explained, about $6 billion has been given to Islamabad as “concessional loans,” with an interest rate of just over 2 percent and a grace period varying from five to eight years. The loan repayment timeframe for different projects ranges from 12 to 15 years, he added.

The rest of the $13 billion has come from China as direct foreign investment to Pakistan under agreements strictly between the Chinese government and companies, making Beijing the largest investor in the past five years, Zhao said.

He dismissed as mere speculation that Pakistan and China are renegotiating ongoing CPEC projects, saying “state-to-state agreements are not up for revision once they are implemented on the ground.”

Instead, he said, the two sides have resolved to complete ongoing projects as early as possible to go for CPEC’s geographical expansion so it can be extended to the West, if required, to Afghanistan and other countries, including neighboring Iran.

Zhao said China would welcome European countries, Japan and United States investments in CPEC.

“This bilateral undertaking is purely an economic mission, and it has nothing to do with expanding [China’s] territorial or political influence,” he insisted.

​CPEC opportunities

Just two months in office, Pakistan Prime Minister Imran Khan on Monday attempted to address media speculation that his government plans to renegotiate CPEC agreements, allegedly due to transparency and debt worries.

“The flagship China-Pakistan Economic Corridor under the BRI initiative of President Xi Jinping also offered opportunities to other countries to invest in CPEC projects and reap benefits in various sectors,” Khan told a meeting of his senior cabinet ministers in Islamabad.

The meeting discussed CPEC progress and Khan’s upcoming state visit to China later this month, an official statement said.

“Strengthening the all-weather Pakistan-China strategic cooperative partnership is the cornerstone of Pakistan’s foreign policy, and early implementation of CPEC projects would help realize the true potential of Pakistan-China economic relations, not only for the two countries, but for the entire region,” Khan said.

​Pakistan’s economic woes

Pakistan’s foreign exchange reserves are rapidly depleting, as the country faces a mounting balance-of-payments crisis and urgently requires about $12 billion to meet its liabilities. Skeptics blame CPEC-related imports of heavy machinery and other equipment for Pakistan’s massive trade deficit.

Finance Minister Asad Umar announced Monday the government has decided to approach the International Monetary Fund (IMF) for a bailout package to tackle the national economic crisis.

The United States has already cautioned IMF against lending money to Pakistan, suspecting the country may use it to settle Chinese debts, assertions both Islamabad and Beijing strongly rejected.

Chinese President Xi has pushed the BRI as a means of increasing international trade and goodwill through massive infrastructure spending.

Morgan Stanley has estimated the initiative will cost $1.3 trillion by 2027. Xi has called it the “project of the century,” comparing it to the ancient Silk Road that made China a hub of international commerce.

Thailand, Laos, Sri Lanka and the Maldives have all voiced complaints about the terms of the loans from China, which many have described as debt traps. Newly elected Malaysian Prime Minister Mahathir Mohamad canceled a $20 billion rail project in August, for example.

Officials of the new Pakistani government insist their criticism of CPEC are not aimed at China, but at the former government for not prioritizing the projects in a way that would have brought early benefits to economically burdened citizens of the country.
…

For the first time, researchers have been able to track the amount of Chinese investment in Australia.  From the purchase of large cattle properties to residential real estate, the scope of Chinese money has led to fraught discussions about the scale of foreign influence in Australia. The results of the research may have some surprises for some Australians who have been wary of China’s influence and the size of Chinese investments in their country.

The comprehensive new database shows how much Chinese investors are pouring into Australia. Between 2013 and 2017 the figure was more than $28 billion (U.S. dollars).Most of the money was spent on mining projects and real estate, although increasingly larger amounts are being invested by the Chinese in tourism in Australia.

Academics from the Australian National University say this is proof that Chinese investment is maturing and becoming more sophisticated.

Working with business representatives and the Australian government, researchers are for the first time charting the real value of Chinese investment.The flow of money from China has been politically sensitive, with concerns that valuable Australian farmland and real estate have become foreign-owned.

Professor Peter Drysdale, researcher at the Australian National University, says his work will help to foster a more accurate debate about China’s role.

“Getting an accurate picture of what is going on is half the battle in having a sensible public discussion,” said Drysdale. “Making it possible to have a better informed discussion about what Chinese investment actually does in Australia and what its effect is on the Australian economy.”

The database was compiled by painstaking analysis of thousands of transactions from sources such as the Foreign Investment Review Board and the Australian Bureau of Statistics.

The research highlighted that Chinese investment in Australia was at its highest in 2016, at $10.5 billion, but dropped to $6.2 billion in 2017.

While the report does not offer explanations for the sharp fall, bilateral business relations between Beijing and Canberra have been under increasing pressure because of diplomatic friction over alleged Chinese meddling in Australia’s domestic politics and the media.

Despite the tensions, China remains Australia’s most valuable trading partner.

 
…

Last-minute changes to a new North American trade deal sank U.S. hopes of making Canada and Mexico allow higher-value shipments to the countries by online retailers, such as Amazon.com, a top Mexican official said on Friday.

The revised pact was set to double the value of goods that could be imported without customs duties or taxes from the United States through shipping companies to Mexico.

But Canada’s adoption of a more restrictive threshold during its efforts last month to salvage a trilateral deal prompted Mexican negotiators to follow Canada’s lead, Economy Minister Ildefonso Guajardo said on Friday.

The final version of the trade agreement will insulate retailers in both countries from facing greater competition from e-commerce companies like Amazon.com Inc and eBay Inc.

“It was the solution liked much more by Mexican businesses,” Guajardo told local television.

The change was came so last-minute that it was not written into the agreement published last weekend.

The new deal, called the United States-Mexico-Canada Agreement (USMCA), was meant by U.S. President Donald Trump to create more jobs in the United States. Trump had been highly critical of the prior NAFTA agreement since before he ran for president.

U.S. negotiators originally pushed Mexico and Canada to raise import limits to the U.S. level of $800 from current thresholds of $50 and C$20, respectively.

Traditional retailers in Mexico opposed such a big hike, fearing online companies would sell cheap imports from Asia through the United States. Even so, Mexico initially agreed in August to raise the threshold on customs duties and taxes to $100 in its bilateral deal with the United States.

Guajardo said that Canada, after Mexico had finished negotiations, set its sales tax exemption at just C$40, about $30, and put a ceiling of C$150, about $117, on custom duties exemptions.

The Retail Council of Canada said the deal will protect retailers against a “massive change in the competitive landscape.”

Mexico decided to follow suit, Guajardo said, favoring local clothing, footwear and textile industries, as well as the finance ministry that collects duties and taxes.

Mexican negotiators lowered the sales tax exemption back to the $50 level, while raising the customs duties limit to $117, matching Canada, Guajardo said.

“Mexico offered a deal where it really didn’t concede anything,” said Adrian Correa, a senior lawyer at FedEx Corp.

Mike Dabbs, eBay’s government relations director for the Americas, said separate tax and custom duty thresholds could create confusion.

“That does not help the experience for small businesses and consumers,” he said.
…

U.S. job growth slowed sharply in September likely as Hurricane Florence depressed restaurant and retail payrolls, but the unemployment rate fell to near a 49-year low of 3.7 percent, pointing to a further tightening in labor market conditions.

The Labor Department’s closely watched monthly employment report on Friday also showed a steady rise in wages, suggesting moderate inflation pressures, which could ease concerns about the economy overheating and keep the Federal Reserve on a path of gradual interest rate increases.

Nonfarm payrolls increased by 134,000 jobs last month, the fewest in a year, as the retail and leisure and hospitality sectors shed employment. Data for July and August were revised to show 87,000 more jobs added than previously reported.

The economy needs to create roughly 120,000 jobs per month to keep up with growth in the working-age population.

“The weaker gain in payrolls in September may partly reflect some hit from Hurricane Florence,” said Michael Pearce, senior U.S. economist at Capital Economics in New York. “There is little in this report to stop the Fed continuing to raise interest rates gradually.”

Economists polled by Reuters had forecast payrolls increasing by 185,000 jobs in September and the unemployment rate falling one-tenth of a percentage point to 3.8 percent.

Fed Chairman Jerome Powell said on Tuesday that the economy’s outlook was “remarkably positive” and he believed it was on the cusp of a “historically rare” era of ultra-low unemployment and tame inflation.

The U.S. central bank raised rates last week for the third time this year and removed the reference in its post-meeting statement to monetary policy remaining “accommodative.”

The Labor Department said it was possible that Hurricane Florence, which lashed South and North Carolina in mid-September, could have affected employment in some industries. It said it was impossible to quantify the net effect on employment.

Payrolls are calculated from a survey of employers, which treats any worker who was not paid for any part of the pay period that includes the 12th of the month as unemployed. The average workweek was unchanged at 34.5 hours in September. The smaller survey of households from which the jobless rate is derived regards persons as employed regardless of whether they missed work during the reference week and were unpaid as result. It showed 299,000 people reported staying at home in September because of bad weather. About 1.5 million employees worked part-time because of the weather last month.

U.S. stock index futures briefly turned positive after the data before reversing course. The dollar was trading lower against a basket of currencies while U.S. Treasury yields were higher.

Diminishing slack

The drop of two-tenths of a percentage point in the unemployment rate from 3.9 percent in August pushed it to levels last seen in December 1969 and matched the Fed’s forecast of 3.7 percent by the end of this year.

Average hourly earnings increased 0.3 percent in September after a similar rise in August.

With September’s increase below the 0.5 percent gain notched during the same period last year, the annual rise in wages fell to 2.8 percent from 2.9 percent in August, which was the biggest advance in more than nine years.

Wage growth remains sufficient to keep inflation around the Fed’s 2 percent target. As more slack is squeezed out of the labor market, economists expect annual wage growth to hit 3 percent.

Last month, employment in the leisure and hospitality sector fell by 17,000 jobs, the first drop since September 2017. Retail payrolls dropped by 20,000 jobs in September. Manufacturing payrolls increased by 18,000 in September after rising by 5,000 in August.

Construction companies hired 23,000 more workers last month after increasing payrolls by 26,000 jobs in August. Professional and business services employment increased by 54,000 jobs last month and government payrolls rose 13,000.

While surveys have shown manufacturers growing more concerned about an escalating trade war between the United States and China, it does not appear to have affected hiring. In fact, the Fed’s latest survey of national business conditions reflected concerns about labor shortages that are extending into non-skilled occupations as much as about tariffs.

Washington last month slapped tariffs on $200 billion worth of Chinese goods, with Beijing retaliating with duties on $60 billion worth of U.S. products. The United States and China had already imposed tariffs on $50 billion worth of each other’s goods. The trilateral trade agreement between the United States, Canada and Mexico was salvaged in an 11th-hour deal on Sunday.

Despite the Trump administration’s protectionist trade policy, the trade deficit continues to deteriorate. The trade gap increased 6.4 percent to a six-month high of $53.2 billion in August, the Commerce Department reported on Friday. The politically sensitive goods trade deficit with China surged 4.7 percent to a record high of $38.6 billion.

 
…

China’s hopes of negotiating a free trade pact with Canada or Mexico were dealt a sharp setback by a provision deep in the new U.S.-Mexico-Canada trade agreement that aims to forbid such deals with “non-market” countries, trade experts said on Tuesday.

The provision specifies that if one of the current North American Free Trade Agreement partners enters a free trade deal with a “non-market” country such as China, the others can quit in six months and form their own bilateral trade pact.

The clause, which has stirred controversy in Canada, fits in with U.S. President Donald Trump’s efforts to isolate China economically and prevent Chinese companies from using Canada or Mexico as a “back door” to ship products tariff-free to the United States.

The United States and China are locked in a spiraling trade war that has seen them level increasingly severe rounds of tariffs on each other’s imports.

Under the clause, the countries in the updated NAFTA, renamed the U.S.-Mexico-Canada Agreement (USMCA), must notify the others three months before entering into such negotiations.

Derek Scissors, a China scholar at the American Enterprise Institute in Washington, said the provision gave the Trump administration an effective veto over any China trade deal by Canada or Mexico.

If repeated in other U.S. negotiations with the European Union and Japan, it could help isolate Beijing in the global trading system.

“For both Canada and Mexico, we have a reason to think an FTA with China is a possibility. It’s not imminent, but this is a very elegant way of dealing with that,” Scissors said.

“There’s no China deal that’s worth losing a ratified USMCA,” Scissors added.

After months of bashing its Western allies on trade, the Trump administration is now trying to recruit them to join the United States in pressuring China to shift its trade, subsidy and intellectual property practices to a more-market driven focus.

Beijing has demanded that the World Trade Organization recognize it as a “market economy” since its WTO accession agreement expired in December 2016, a move that would severely limit Western trade defenses against cheap Chinese goods.

But the United States and European Union are challenging the declaration, arguing that Chinese state subsidies fueling excess industrial capacity, the exclusion of foreign competitors and other practices are signs it is still a non-market economy.

Canadian Sovereignty Questioned

Canadian Prime Minister Justin Trudeau’s Liberal government, seeking to diversify Canada’s export base, held exploratory talks with China on trade in 2016, but a launch of formal negotiations has failed to materialize.

Tracey Ramsey, a legislator for Canada’s left-leaning New Democrats, said in the House of Commons on Tuesday that the clause was “astonishing” and a “severe restriction on Canadian independence.”

“Part of Canada’s concessions in this deal was to include language that holds Canada hostage to the Americans if we decide to trade with another country,” Ramsey said. “Why did the Liberal (Party) give the go-ahead for the U.S. to pull us into their trade wars?”

Canadian Finance Minister Bill Morneau downplayed the provision, arguing it was not significantly different from NAFTA’s clause that allows any member to leave the pact in six months’ time for any reason.

“It is largely the same. It recognizes though that the non-market economy is of significant importance as we move forward. But I don’t think it’s going to make a material difference in our activities,” Morneau told a business audience.

Mexico’s business community sided with the Trump administration in endorsing the pact.

“We are associating ourselves with countries that promote market freedom and that promote free trade in the world, free trade under equal circumstances,” said Juan Pablo Castañon, head of the Consejo Coordinador Empresarial (CCE), which represented Mexico’s private sector during the NAFTA trade talks.
…

Mexico and Canada on Tuesday urged their governments to resolve a tariff dispute with the United States before signing a new trilateral trade deal that was unveiled this week.

In late May, the Trump administration announced tariffs of 25 percent on steel imports and 10 percent on aluminum imports, prompting quick retaliation from top trading partners including Canada and Mexico.

Late on Sunday, the United States and Canada reached a deal to overhaul the North American Free Trade Agreement (NAFTA), complementing an accord the Trump administration brokered with Mexico, the third member of NAFTA, in late August.

Mexican steel producers association Canacero welcomed the new trade pact, called the United States-Mexico-Canada Agreement (USMCA), but said it viewed “with concern” the ongoing steel dispute and the “serious situation” it created for the industry.

U.S. President Donald Trump said on Tuesday that U.S. steel and aluminum tariffs would remain in place for Canada and Mexico until they “can do something different like quotas, perhaps.”

In a statement, Canacero said it supported efforts to find a solution to the impasse before the leaders of Mexico, the United States and Canada signed USMCA, which officials say could happen at a G20 summit at the end of November.

If no solution can be found, Mexico should put tariffs on U.S. steel to level the playing field, Canacero said.

Mexico has already slapped tariffs on U.S. pork, bourbon, motor boats and other products. Canada has levied tariffs on a range of U.S. imports, including steel and aluminum.

Joseph Galimberti, president of the Canadian Steel Producers Association, said he expected Canada’s government to continue to support the industry after the USMCA breakthrough.

“There is clearly an opportunity to constructively engage the United States between the achievement of a deal in principle and the ratification or signature of that deal,” he said.

Canada is the top exporter of steel and aluminum to the United States. The United Steelworkers of Canada adopted a less conciliatory tone after the new trade deal was announced, calling it a “sell-out” for Canadian workers.

Mexican officials have said they hope the steel and aluminum dispute can be resolved before USMCA is signed.

Since the tariff row broke out, Mexican steel exports to the United States had fallen 30 percent on average, Canacero said.
…

Palu, the Indonesian city devastated by an earthquake, tsunamis and mudslides, has strived to transform itself into a major trading hub, but the city’s buildings and other infrastructure were no match for the triple whammy that has left more than 1,200 people dead. 

The disasters that struck late Friday left the city’s port in ruins, its lone gantry crane atilt in the water. Its airport terminal was a sea of shattered glass and broken ceiling panels. A seven-story, 4-year-old hotel lay flat on its side. Its biggest bridge disintegrated, its picturesque yellow arches mangled in the mud. 

Ringed by coconut, coffee and cocoa farms, over the past two decades Palu has acquired modern shopping malls, hotels and other amenities to suit its ambitions. Poverty has fallen from nearly a third of its 380,000 residents to under one in 10, local officials say. 

A national blueprint calls for developing Palu as part of the “Sulawesi Economic Corridors” — a plan to attract investment and build up trade and commerce in a region that has remained somewhat isolated since the days of the ancient spice trade.  

Given how seismically active the area is — the Palu-Koro fault runs right through the city — it’s been a race against the odds. Historical records show the area has been hit by tsunamis — triggered by powerfully destructive earthquakes — at least seven times in the past two centuries. 

It’s unclear what standards were required, or enforced, in the construction of Palu’s modern buildings.

It’s an issue for all of Indonesia, an archipelago that sits square on the Pacific Ring of Fire. 

Teddy Boen, an expert on earthquake-resistant engineering who has consulted with foreign governments and international organizations, has been researching the problem for a half-century.

“From 50 years ago until today, there is similar damage. Somebody is not doing their job,” he said in a phone interview. “The codes are complete. The manuals are complete. The political will is not there.” 

The collapse of a mezzanine floor inside the Jakarta Stock Exchange in January that injured dozens of people underscores the extent of the problem, even in Indonesia’s capital.

After a tsunami in 2004 killed 230,000 people in Indonesia and elsewhere across Asia, it became apparent that in many communities, sturdy mosques and other strong buildings dating back to colonial times were the only structures still standing while newer structures often crumbled. 

In Palu, the Arkam Babu Rahman “floating mosque” on the city’s waterfront was pushed off-kilter by Friday’s tsunamis, while its worship halls remained intact. But a bigger, 20-year-old structure topped by a heavy dome was gutted as the debris-laden water swept through. 

Few of the buildings in Palu’s suburbs of Petobo, Biromaru and Bala Roa could withstand the sideways mudslide that engulfed those communities in expanses of oozing quicksand.  

Indonesia’s disaster agency spokesman Sutopo Purwo Nugroho said the soil there had liquefied and that authorities believed hundreds of people may have been buried in the mud. In Bala Roa, the ground violently heaved up and then sank in places, trapping many people under their wrecked homes. 

Traditional homes with thatched or tin roofs cannot withstand tsunamis or storm surges from typhoons but pose much less of a risk of severe damage even if they do collapse in an earthquake. Many homes built recently are hybrids, combining traditional styles with unreinforced masonry and tile roofs too heavy for the structures when they are shaken by quakes. 

The rush to rebuild after a disaster involves cutting corners, rather than fortifying buildings to prevent future calamities.

“Now, they say, build back better, build back better, but they do the same thing again,” Boen said. “The earthquake comes, they made the same mistakes and people get killed again.”
…