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The Trump administration on Friday revised its negotiating objectives for revamping the North American Free Trade Agreement, largely to reflect the demands it has made in NAFTA talks on agriculture, intellectual property and investment.

The revised objectives are now in line with U.S. proposals to eliminate Canada’s import tariffs on dairy, poultry and egg products and to allow more protections for seasonal U.S. produce that is sensitive to imports from Mexico.

The U.S. Trade Representative’s office said it is keeping in place most of its NAFTA objectives, first published in July, including a first-ever goal of reducing U.S. trade deficits.

USTR Robert Lighthizer said that the revisions are aimed at keeping Americans informed about what the Trump administration is seeking in a revised NAFTA.

“If we are able to achieve these objectives, we will both modernize and rebalance NAFTA to better serve the interests of our workers, farmers, ranchers and businesses,” Lighthizer said in a statement.

The new objectives on investment and intellectual property rights add considerable detail, partly aimed at reflecting existing demands and partly aimed at setting precedents for future trade agreements.

On investment, the objectives now seek to provide “meaningful procedures for resolving investment disputes, while ensuring the protection of U.S. sovereignty and the maintenance of strong U.S. domestic industries.”

U.S. negotiators are seeking to allow countries to “opt in” to an investor-state dispute settlement mechanism and to eliminate panels that arbitrate anti-dumping disputes between NAFTA countries.

But the new objectives for NAFTA investment rules also seek to prohibit forced technology transfers and technology localization, a goal that seems more aimed at addressing U.S. complaints about Chinese investment practices.

On intellectual property, the new objectives specify that the USTR will seek U.S. equivalent standards on trademarks, patents, copyrights with some appropriate exceptions, undisclosed test or other data and trade secrets.

The wording on rules of origin goals was also slightly revised to conform with the U.S. demand that NAFTA-built cars and trucks contain 50 percent U.S.-specific content.

 
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It’s been more than two months since Hurricane Harvey destroyed or damaged tens of thousands of homes across Houston and east Texas, and cleanup is expected to last 20 months, overtaking Hurricane Katrina as the most expensive rebuilding effort in U.S. history. Undocumented workers are part of the daunting task of reconstructing America’s fourth-largest city. VOA’s Ramon Taylor reports they are doing so despite multiple risks.
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After more than a decade of making cars and SUVs — and, more recently, solar panels — Tesla Inc. wants to electrify a new type of vehicle: big trucks.

The company unveiled its new electric semitractor-trailer Thursday night near its design center in Hawthorne, California.

CEO Elon Musk said the semi is capable of traveling 500 miles on an electric charge and will cost less than a diesel semi considering fuel savings, lower maintenance and other factors. Musk said customers can put down a $5,000 deposit for the semi now and production will begin in 2019.

“We’re confident that this is a product that’s better in every way from a feature standpoint,” Musk told a crowd of Tesla fans gathered for the unveiling.

​One-fourth of transit emissions

The move fits with Musk’s stated goal for the company of accelerating the shift to sustainable transportation. Trucks account for nearly a quarter of transportation-related greenhouse gas emissions in the U.S., according to government statistics.

Musk said Tesla plans a worldwide network of solar-powered “megachargers” that could get the trucks back up to 400 miles of range after 30 minutes.

Tesla, Musk stretched

But the semi also piles on the chaos at Palo Alto, California-based company. Tesla is way behind on production of the Model 3, a new lower-cost sedan. It’s also ramping up production of solar panels after buying Solar City Corp. last year. Musk has said Tesla is also working on a pickup and a lower-cost SUV and negotiating a new factory in China. Meanwhile, the company posted a record quarterly loss of $619 million in its most recent quarter.

Musk, too, is being pulled in many different directions. He leads rocket maker SpaceX and is dabbling in other projects, including high-speed transit, artificial intelligence research and a new company that’s digging tunnels beneath Los Angeles to alleviate traffic congestion.

“He’s got so much on his plate right now. This could present another distraction from really just making sure that the Model 3 is moved along effectively,” said Bruce Clark, a senior vice president and automotive analyst at Moody’s.

Uncertain market

Tesla is venturing into an uncertain market. Demand for electric trucks is expected to grow over the next decade as the U.S., Europe and China all tighten their emissions regulations. Electric truck sales totaled 4,100 in 2016, but are expected to grow to more than 70,000 in 2026, says Navigant Research.

But most of that growth is expected to be for smaller, medium-duty haulers like garbage trucks or delivery vans. Those trucks can have a more limited range of 100 miles or less, which requires fewer expensive batteries. They can also be charged overnight.

Long-haul semi trucks, on the other hand, would be expected to go greater distances, and that would be challenging. Right now, there’s little charging infrastructure on global highways. Without Tesla’s promised fast-charging, even a midsized truck would likely require a two-hour stop, cutting into companies’ efficiency and profits, says Brian Irwin, managing director of the North American industrial group for the consulting firm Accenture.

Irwin says truck companies will have to watch the market carefully, because tougher regulations on diesels or an improvement in charging infrastructure could make electric trucks more viable very quickly. Falling battery costs also will help make electric trucks more appealing compared to diesels.

But even lower costs won’t make trucking a sure bet for Tesla. It faces stiff competition from long-trusted brands like Daimler AG, which unveiled its own semi prototype last month. 

Fleet operators want reliable trucks, and Tesla will have to prove it can make them, said Michelle Krebs, executive analyst with the car shopping site Autotrader.
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The Venezuelan government and its state-owned oil company PDVSA have officially defaulted on billions of dollars’ worth of bonds, the latest chapter of the country’s deep financial collapse.

 The International Swaps and Derivatives Association, a group of banks and brokers that determines whether an entity like Venezuela has failed to make on-time payments on its debts, voted Thursday to say that Venezuela had defaulted.

The vote will trigger what is known as a “credit event” on securities like credit default swaps, which investors buy as a type of insurance against a potential default. The 15-member group must now decide how it will settle the swaps.

Two rating agencies — Fitch and Standard & Poor’s — already determined this week that Venezuela’s government was in default.

PDVSA bonds were trading at 26.5 cents on the dollar, compared with roughly 30 cents back in September, according to FactSet.  

Venezuela’s debt skyrocketed to over $120 billion under the late President Hugo Chavez as the government spent heavily on social programs while oil prices were high. About half its debt is in the form of dollar-denominated bonds.

A drop in oil prices and mismanagement crushed the economy, leading to widespread shortages of food and other basics amid triple-digit inflation.

At a meeting with investors Monday, Vice President Tareck El Aissami tried to assure creditors that the country’s debts will continue to be paid. But those in attendance said they learned of no concrete plans for reorganizing the debt.

 
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Businesses striving to stamp out slavery from their supply chains should not dismiss struggling suppliers but train them to improve the lives of workers, and technology can play a part, leading companies including Apple and Walmart said on Wednesday.

In recent years modern-day slavery has increasingly come under the global spotlight, putting ever greater regulatory and consumer pressure on firms to ensure their supply chains are free of forced labor, child labor and other forms of slavery.

From cosmetics and clothes to shrimp and smartphones, supply chains are often complex with multiple layers across various countries – whether in sourcing the raw materials or creating the final product – making it hard to identify exploitation.

As companies delve deeper into their supply chains to examine workers’ conditions, they should not punish suppliers who violate human rights but help them raise standards and work more efficiently, said Paula Pyers of U.S. tech giant Apple.

“We are loathe to terminate a business relationship in cases of violations,” Pyers, Apple’s head of supplier responsibility, told the Thomson Reuters Foundation’s annual Trust Conference, which focuses on slavery and women’s empowerment.

“We want to teach and train suppliers to make them better,” said Pyers, adding that Apple has helped more than 11.5 million workers to learn their rights, and returned at least $28 million to 35,000 employees forced to pay fees to obtain their jobs.

Turning to tech

About 25 million people globally were estimated to be trapped in forced labor in 2016, according to the International Labor Organization (ILO) and rights group Walk Free Foundation.

With consumers increasingly conscious of slave labor and willing to pay more for ethically sourced goods, big brands should lead by example to inspire their suppliers to get into line, and also to boost profits, said Jan Saumweber of Walmart.

“Responsible sourcing is key towards our goal of being the most trusted retailer,” said Saumweber, senior vice president of responsible sourcing at Walmart, the world’s largest retailer.

She said Walmart has turned to technology to improve workers’ rights worldwide – from hotlines to a smartphone app in the style of TripAdvisor that allows Burmese migrants working in Thailand’s fishing industry to review their employers.

Speaking on a panel about best business practices to tackle modern slavery, several experts said cleaning up supply chains would only be sustainable if this resulted in greater profits.

“Investors can direct trillions of dollars to companies with strong human rights policies and clean supply chains,” said Jean Baderschneider, head of Global Fund to End Slavery, a public-private partnership seeking $1.5 billion to combat the crime.

“But it can’t be a case of charity or philanthropy – they need to see better returns through having clean supply chains.”

But firms’ efforts to tackle slavery, from codes of conducts to audits, are often lip service and deflect attention from a need for tougher measures, said Bobby Banerjee, professor of management at the University of London’s Cass Business School.

“The problem with CSR (corporate social responsibility) is that there is too much C, and not enough S or R,” he said.

“Forced labor is not an aberration, but a viable management practice … an outcome of the economic system we live in.”
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U.S. President Donald Trump pushed Thursday for adoption of a wide-ranging overhaul of the country’s complex tax laws as he met with the majority Republican caucus in the House of Representatives shortly before a scheduled vote on the issue.

Republican leaders in the House have voiced optimism that they have enough votes to approve the changes that would cut the corporate tax rate from 35 percent, one of the higher rates in the world, to 20 percent and cut taxes for millions of middle-class taxpayers, but not everyone. The measure would add $1.5 trillion to the country’s long-term $20 trillion in debt.

Trump, without a major legislative victory in his first 10 months in office, has been urging Congress to adopt a tax overhaul by Christmas; but, the changes are controversial and no Democratic lawmakers have announced their support.

Senate’s plan

Republican leaders in the Senate are advancing their own tax plan, but its fate is uncertain, with Republicans only holding a 52-48 majority. Senator Ron Johnson of Wisconsin on Wednesday became the first Republican senator to announce his opposition to both the Senate and House versions of the changes because he said they do not cut taxes enough to help small businesses.

Democrats have opposed the Republican tax-cutting effort, which they say greatly benefits the country’s wealthiest taxpayers, without enough help for people who earn way less money. Virtually every U.S. taxpayer would be affected by the changes being considered, but the overhaul is in such a state of flux in Congress that individuals have been hard-pressed to determine whether they would get a tax cut or not.

Trump said on his Twitter account, “Tax cuts are getting close!”

But he disparaged opposition Democratic lawmakers for their lack of support, saying, “Why are Democrats fighting massive tax cuts for the middle class and business (jobs)? The reason: Obstruction and Delay!”

A key House Republican leader, Congressman Kevin Brady, said the House plan “represents a bold path forward that will allow us as a nation to break out of the slow-growth status quo once and for all.”

Obamacare mandate

Trump, however, has complicated his push for tax reform by asking that Congress include a provision that would end the requirement that most Americans buy health insurance or pay a fine if they do not. Congress already failed earlier this year to overhaul national health care policies championed by former President Barack Obama, a law commonly known as Obamacare.

Democratic lawmakers, and some Republicans, are opposed to attaching the health law change on buying insurance in the tax legislation, which if it is kept in the tax proposal, could imperil its passage, especially in the Senate.

While he was on his five-nation Asia trip, Trump tweeted, “I am proud of the (Republican) House & Senate for working so hard on cutting taxes (& reform.) We’re getting close! Now, how about ending the unfair & highly unpopular (individual) Mandate in OCare & reducing taxes even further?”

 
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Republicans are muscling their massive tax bill through the House, with President Donald Trump urging them on to a critically needed legislative victory and GOP House leaders exuding confidence they have the votes.

But the tax overhaul hit a roadblock Wednesday as Sen. Ron Johnson of Wisconsin became the first Republican senator to say he opposes his party’s politically must-do tax legislation. That signaled potential problems for GOP leaders.

Passage of a similar package seemed assured Thursday in the House, where a handful of dissidents conceded they expected to be steamrolled by a GOP frantic to claim its first major legislative victory of the year.

“Big vote tomorrow in the House. Tax cuts are getting close!” Trump enthused in a tweet Wednesday night. “Why are Democrats fighting massive tax cuts for the middle class and business (jobs)? The reason: Obstruction and Delay!”

 Trump planned to visit House GOP lawmakers Thursday at the Capitol in what seemed likely to be a pep rally, not a rescue mission. Eager to act before opposition groups could sow doubts among the rank-and-file, Republican leaders were anxious to hand Trump the first crowning achievement of his presidency by Christmas.

The two chambers’ plans would slash the 35 percent corporate tax rate to 20 percent, trim personal income tax rates and diminish some deductions and credits — while adding nearly $1.5 trillion to the coming decade’s federal deficits. Republicans promised tax breaks for millions of families and companies that would have more money to produce more jobs.

“It represents a bold path forward that will allow us as a nation to break out of the slow-growth status quo once and for all,” said House Ways and Means Committee Chairman Kevin Brady, R-Texas, as his chamber debated the bill Wednesday.

Democrats charged the measures would bestow the bulk of their benefits on higher earners and corporations. In the Senate Finance Committee, they focused their attacks on two provisions designed by Republicans to increase revenue.

One would repeal President Barack Obama’s health law requirement that people buy coverage or pay a fine, a move the nonpartisan Congressional Budget Office projects would result in 13 million more uninsured people by 2027. The other would end the personal income tax cuts in 2026 while keeping the corporate reductions permanent.

“We should be working together to find ways to cut taxes for hardworking middle-class families, not taking health care away from millions of people just to give huge tax cuts to the largest corporations,” said Sen. Bill Nelson, D-Fla.

The Republican-led Finance panel was on track to approve its proposal by week’s end. It shut down Democrats’ initial efforts to modify the bill, voting along party lines against amendments aimed at protecting health care coverage for veterans or people with disabilities, mental illness or opioid addition if the insurance mandate is ended.

But with GOP leaders hoping for full Senate passage early next month, concerns harbored by Johnson and perhaps others would have to be addressed.

Republicans controlling the Senate 52-48 can approve the legislation with just 50 votes, plus tie-breaking support from Vice President Mike Pence. With solid Democratic opposition likely, they can lose just two GOP votes.

Besides Johnson, Republican Sens. Susan Collins of Maine, Jeff Flake of Arizona and Bob Corker of Tennessee have yet to commit to backing the tax measure.

Johnson complained the bills were more generous to publicly traded corporations than to so-called pass-through entities. Those are millions of partnerships and specially organized corporations whose owners pay levies using individual, not corporate, tax rates. While details of the House and Senate bills differ, many pass-through owners would owe more than 20 percent in taxes for much of their income.

“These businesses truly are the engines of innovation and job creation throughout our economy, and they should not be left behind,” Johnson said. But he left the door open to changes that would allow him to support the final version.

A small group of House Republicans largely from New York and New Jersey rebelled because the House plan would erase tax deductions for state and local income and sales taxes and limit property tax deductions to $10,000.

Their numbers seemed insufficient to derail the bill. Asked if they could stop it, Rep. Peter King, R-N.Y., shook his head and said, “I don’t think so.”

Repealing the health law’s individual mandate would save $338 billion over the coming decade because fewer people would be pressured into getting government-paid coverage like Medicaid. Senate Finance Committee Chairman Orrin Hatch, R-Utah, used the savings to make his bill’s personal tax reductions modestly more generous.

Ending the bill’s personal income tax cuts in 2026, derided by Democrats as a gimmick, was designed to pare the bill’s long-term costs. Legislation cannot boost budget deficits after 10 years if it is to qualify for Senate procedures barring bill-killing filibusters. Those delays take 60 votes to block, numbers Republicans lack.

The House measure would collapse today’s seven personal income-tax rates into four: 12, 25, 35 and 39.6 percent. The Senate would have seven rates: 10, 12, 23, 24, 32, 35 and 38.5 percent.

Both bills would nearly double the standard deduction to around $12,000 for individuals and about $24,000 for married couples and dramatically boost the current $1,000 per-child tax credit.

Each plan would erase the current $4,050 personal exemption and annul or reduce other tax breaks. The House would limit interest deductions to $500,000 in the value of future home mortgages, down from today’s $1 million, while the Senate would end deductions for moving expenses and tax preparation.

Each measure would repeal the alternative minimum tax paid by higher-earning people. The House measure would reduce and ultimately repeal the tax paid on the largest inheritances, while the Senate would limit that levy to fewer estates.

 
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Zimbabwe’s economy has been hammered by political unrest, soaring inflation, a shortage of foreign cash, a trade deficit and many other problems. Residents say the economic turbulence has driven thousands of people out of the country and makes daily life challenging. But an economic analyst says Zimbabwe has an educated workforce and a battered-but-functional infrastructure that could boost agricultural production and manufacturing, and eventually bring recovery. VOA’s Jim Randle reports.
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The Angolan economy is set to grow 1.1 percent this year as sub-Saharan Africa’s third-largest economy enjoys a mild recovery, the International Monetary Fund said Wednesday following a 10-day visit to the country.

But Ricardo Velloso, the Brazilian economist who led the visit, said macroeconomic imbalances remain that need to be tackled by the new government.

In a statement, he highlighted the wide spread between the parallel and official market exchange rates and a backlog of foreign exchange purchase requests in commercial banks as points of continuing concern.

Velloso said the team met members of the new government which it felt understood the challenges facing the economy, and gave a thumbs up to the administration’s six-month economic plan known as “Plano Intercalar.”

“The Plano Intercalar is adequately focused on the goals of stepping up fiscal consolidation efforts, introducing greater exchange rate flexibility, and improving governance and the business climate to promote faster and inclusive growth as well as economic diversification,” the statement said.

After nearly a decade of rapid growth, Angola slipped into recession last year as a fall in the price of oil led to a massive drop in government revenue and access to hard currency.

The official unemployment rate is at 25 percent, though likely in reality much higher, and a dollar fetches more than double the official rate on the black market.

President Joao Lourenco, who took office in September, has vowed to get the economy back on track promising to diversify away from oil and combat corruption.
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Electric trucks are having a moment in the spotlight, but they won’t replace diesel-powered trucks in big numbers until they overcome costs and other limitations.

Tesla Inc. plans to unveil a semitractor-trailer this week, its first foray into trucking after more than a decade of making cars and SUVs. German automaker Daimler AG showed off its own electric semi last month and says it could be on sale in a few years. Truck rental company Ryder just added 125 all-electric vans made by California startup Chanje to its fleet.

“It’s kind of like the checkered flag is being waved,” said Glen Kedzie, energy and environmental counsel with the American Trucking Associations. “We’ve seen different fuels come and go, and electric has gotten to the front of the line.”

Battery cost is the key

As battery costs fall and more options enter the market, global sales of pure electric trucks are expected to grow exponentially, from 4,100 in 2016 to 70,600 in 2026, according to Navigant Research. Delivery companies, mail services and utilities will be among the biggest purchasers, and most of the growth will come from Europe, China and the U.S.

Most electric trucks on the road will be medium-duty vehicles like delivery vans or garbage trucks. They’re quiet and emission-free, and they can be plugged in and charged at the end of a shift. They’re ideal for predictable urban routes of 100 miles or less; a longer range than that requires more batteries, which are heavy and expensive.

One issue: Cost. A medium-duty electric truck costs about $70,000 more than equivalent diesel trucks, according to the consulting firm Deloitte. Buyers considering electrics have to weigh what they can save on fuel and maintenance costs, since electrics have fewer parts.

Heavy-duty trucks like electric semis have even further to go before they can be competitive with diesels. Some of those trucks are used for shorter routes, but to achieve a longer range of 300 miles, they require more batteries.

Electrification is expensive

Deloitte estimates electrification adds around $150,000 to the cost of a heavy-duty vehicle, or more than double the cost of some diesel tractor-trailers. Electric semi trucks will have the added problem of long charging times and little highway charging infrastructure.

“I see it being relevant but not ready for prime time,” Chanje CEO Bryan Hansel said of long-haul electric trucks. He thinks it will be five years or more before the battery technology and infrastructure can support cross-country electric trucking.

“It’s a big prize, but the physics haven’t caught up yet,” he said.

But analysts believe that will change. Battery costs are expected to fall significantly over the next decade as technology improves. Deloitte expects battery costs for trucks to fall from $260 per kilowatt-hour in 2016 to $122 in 2026. That would cut the cost of a 300 kWh battery pack — like the one in Daimler’s prototype semi — from $78,000 to $36,600.

In the meantime, regulations will drive interest in electric trucks. In the U.S., trucks must meet stricter emissions standards through 2027 under rules that went into effect last year. China is also tightening emissions standards. And several major cities, including Paris and Mexico City, have called for a ban on diesels by 2025 to improve air quality.

Incentives are also enticing companies to add electric trucks to their fleets. Companies that buy or lease vans from Chanje are eligible for an $80,000 voucher per vehicle from the state of California, for example. France pays out 10,000 euros ($11,669) to buyers who replace diesel vehicles with electric ones.

UPS has 300 electric trucks

Companies are also experimenting with electrics — and other alternatives, like natural gas — because they want to meet their own sustainability goals and figure out the optimal mix for their fleets. United Parcel Service, for example, has 300 electric trucks in its global fleet of 100,000 vehicles, mostly in the U.S. and Europe, said Scott Phillippi, UPS’s Senior Director of Maintenance and Engineering for international operations.

Many of UPS’s delivery routes require trucks to travel less than 100 miles per day, a range easily met by an electric truck, Phillippi said. He said electric trucks also help the company take advantage of incentives. UPS has set a goal of having 25 percent of its fleet be made up of alternative fuel vehicles by 2020, in part to encourage manufacturers to keep building and improving such trucks.

“The proof of concept time is over,” he said. “Everybody is starting to agree it’s not a matter of if, it’s a matter of when.”
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Venice is planning to divert massive cruise liners. Barcelona has cracked down on apartment rentals.

Both are at the forefront of efforts to get a grip on “overtourism,” a phenomenon that can disrupt communities, imperil fragile buildings and harm the experience of travelers.

Tourism-phobia has become prevalent in popular destinations, particularly major cities in Europe where visitors often congregate at the same places at the same time.

Slogans such as “Tourists Go Home” and “Tourists Are Terrorists” have been heard, a clear sign of a backlash.

Taleb Rifai, Secretary General of the United Nations’ World Tourism Organization, spoke about the phenomenon at the World Travel Market, an industry meeting in London last week.

Rifai said tourism must be managed in a “sustainable and responsible” way that benefits communities.
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Mexico will respond to U.S. demands for changes in content rules for autos and an automatic expiration clause in the NAFTA trade deal when negotiations on reworking the accord begin again this week, a top government official said on Tuesday.

A fifth round of talks to overhaul the North American Free Trade Agreement starts on Wednesday in Mexico City, notable for U.S. demands that the U.S. Chamber of Commerce has labeled “poison pills.”

Foremost among them are a 50 percent minimum U.S. limit in NAFTA automobile content, the scrapping of a key dispute mechanism and inclusion of a sunset clause that will terminate the pact after five years if it is not renegotiated.

The measures soured the mood among U.S., Mexican and Canadian negotiators when put forward last month, and Mexico’s economy minister, Ildefonso Guajardo, said his country would respond to the auto content and sunset clause plans.

“Those responses will be angled very logically toward what we’re hearing from the business world in Mexico and the United States,” Guajardo said at an event in Mexico City.

The three sides would explore what scope there was for narrowing their positions on that basis, he added.

Industry officials across the region have balked at the auto proposals, arguing they would add bureaucratic hurdles, be hard to enforce and could damage the competitiveness of the sector.

In addition to seeking to establish U.S. minimum thresholds, the team led by U.S. Trade Representative Robert Lighthizer has proposed raising the regional content requirement for NAFTA autos to 85 percent from 62.5 percent at present.

Viability

The coming round, which runs through Nov. 21, would seek to examine the viability of such ambitious targets, Guajardo said.

“It’s one thing for them to say ‘we want 85 percent regional value’ and another for them to explain how to achieve that technically, understanding how the industry works,” he said.

U.S. President Donald Trump has threatened to withdraw from NAFTA if he cannot rework it to the benefit of the United States, spooking investors and hurting the Mexican peso.

Mexican and Canadian officials have privately voiced skepticism about the prospect of negotiators making substantial progress on the most divisive issues during the current round.

That does not necessarily mean talks will be bad-tempered.

The White House is pushing for congressional approval of Trump’s planned tax cuts, and officials say that could help set a more measured tone for the round, lest trade disputes create friction with NAFTA-supporting Republican lawmakers.

If Trump makes headway on tax cuts, it is more likely to help NAFTA talks than harm them, said Bosco de la Vega, head of Mexico’s National Agricultural Council (CNA), a farming lobby.

“What we know from our U.S. counterparts is that they’re saying, ‘listen: we see that the future of [NAFTA talks] will depend on the success or failure of the tax reform.’ It will have a direct impact on NAFTA. How much? Who knows?” he said.

Meanwhile, Guajardo expressed confidence that negotiators could make progress on less divisive topics in Mexico City.

“There are some chapters we believe we can finalize this round,” he said, noting that talks on telecommunications and regulatory practices were advancing.
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General Electric’s new Chief Executive John Flannery on Monday outlined steps that will turn the biggest U.S. industrial conglomerate into a smaller, more focused company, surprising some investors who sold the company’s shares to a five-year low.

Flannery’s plan to shrink GE’s multi-industry array of businesses was a reversal of the deal-driven empire building of his predecessors, Jeff Immelt and Jack Welch, and potentially a milestone in the decline of the conglomerate as a business strategy.

Other companies that once emulated the GE model of spreading bets among diverse industries are now unwinding their portfolios as well, something Immelt also did throughout his 16 years as CEO, even as he made acquisitions.

Flannery said he will pare GE down to three core businesses: power, aviation and healthcare. He will keep Immelt’s strategy of building software to complement GE’s machinery, albeit with a narrower focus and reduced budget.

For investors, Flannery’s decision to cut both the dividend and the 2018 earnings forecast by half added up to a whole that was less than they judged GE be worth last week.

GE shares fell to their lowest level in more than five years as investors worried the years-long overhaul would not pare down enough expenses or generate as much cash as they hoped. They closed off the day’s lows, down 7.2 percent to $19.02.

“They need to cut more cost,” said Scott Davis, an analyst at Melius Research. “GE is still a bloated company with duplicate costs up and down the organization.”

GE stock has effectively been dead money since September 2001, when Immelt took over, posting a negative total return even after reinvesting its juicy dividends. Once the most valuable U.S. publicly traded company, GE now has a market value of $168 billion, less than a fifth of Apple.

“You have pessimism around its portfolio of businesses mixed with a pretty harsh cut in the dividend,” said John Augustine, chief investment officer at Huntington Private Bank. “It took them years to get into this mess and it will take them several years to right the ship and get back into a stronger position.”

‘Soul of the Company’

Flannery, who took over as CEO on Aug. 1, said he was “looking for the soul of the company again” and would focus on “restoring the oxygen of cash and earnings to the company.”

He will cut its board to 12 from 18 members, and bring on three new directors early next year.

GE said it already has shed 25 percent of its corporate staff, meaning 1,500 jobs around the world, including some at its Boston headquarters. It is aiming to reduce overhead cost by $2 billion next year, half of that at its troubled power unit that sells electrical generation equipment.

The transition includes GE getting rid of at least $20 billion of assets through sales, spin-offs or other means.

GE will jettison businesses with “a very dispassionate eye,” Flannery said, keeping only units that offer growth, a leading market position and a large installed base.

GE said it would exit its lighting, transportation, industrial solutions and electrical grid businesses, all of which were widely expected, closing factories around the globe.

But it was vague about other disposals.

It plans to get rid of its 62.5-percent stake in oilfield services company Baker Hughes, only months after making the multi-billion dollar investment. Baker Hughes shares lost 3.2 percent.

Flannery offered no quick fixes for investors. He said power, one of the businesses GE would focus on, was “challenged,” but could be turned around in one to two years.

GE’s Digital unit, on which Immelt bet billions of dollars, would focus on selling apps to customers in its core businesses, Flannery said. He confirmed that the shift meant sales staff were being let go, as Reuters reported last week.

GE also will cut spending on the digital unit to $1.1 billion in 2018 from $1.5 billion in 2017. GE had previously said it would invest $2.1 billion in its digital unit in 2017, but that tally included money not tied to Predix, GE’s industrial-internet platform, GE said.

Flannery said there is “no retreat on the idea” of GE providing both applications and the Predix platform to connect industrial equipment to computers that can make machines run better. However, getting one of its key applications to run on Predix could take two more years.

Flannery added that some of its healthcare IT business, such as software for imaging and hospital staff scheduling, were still critical to the company and not likely to be divested.

Dividend Cut

The dividend cut, to 48 cents from 96 cents next year, is only the third in the company’s 125-year history and the first not during a broader financial crisis. It is expected to save about $4 billion in cash annually.

“This dividend cut will be a major disappointment to GE’s (roughly 40 percent) retail shareholder base,” said RBC Capital Markets analyst Deane Dray.

The cut will be the eighth-biggest dividend cut in history among S&P 500 companies, according to Howard Silverblatt, senior index analyst of S&P Dow Jones Indices. GE also had the biggest cut when it slashed its dividend by $8.87 billion in 2009, Silverblatt said.

GE forecast 2018 adjusted earnings of $1 to $1.07 a share, compared with its earlier estimate of $2 per share. Wall Street was expecting $1.16, according to Thomson Reuters I/B/E/S.

Industrial free cash flow will total just $6 billion to $7 billion next year, up from an estimated $3 billion in 2017, but far below earlier targets of $12 billion for 2017.

GE said the weak power business had largely prompted the dividend cut and lowered earnings forecast. Demand for new power plants will remain slow through 2019, Flannery predicted.

But GE also was to blame, he said.

“We did not manage the (power) business well,” he said. “That’s a fundamental change we need to make and that’s going to take some time. This is not a magic wand.”
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Mexico’s government is preparing a macroeconomic response in case U.S. President Donald Trump makes good on threats to quit the North American Free Trade Agreement (NAFTA), an event which could wreak havoc on the Mexican economy and hurt the peso.

Mexico’s Foreign Minister Luis Videgaray said on Monday the government and central bank were preparing a plan to address the possibility of a future without NAFTA, but gave few details.

The government has said it is examining how it could adjust Mexican legislation to give investors certainty about their investments if the almost 24-year-old NAFTA collapses.

Underpinning some $1.3 trillion in annual trade between the United States, Canada and Mexico, NAFTA has been a central pillar of recent Mexican economic development. Nearly 80 percent of Mexican exports are shipped to the United States.

Trade negotiators from the United States, Mexico and Canada meet in Mexico City this week to continue talks on overhauling the accord, and Videgaray reiterated the government’s position that the expectation was that talks would ultimately succeed.

Mexico would continue to work on diversifying trade, protect foreign investment, review possible changes to tariff barriers, and prepare a macro-economic response from the finance ministry and the central bank, Videgaray added.

“These are the four lines a plan B must include,” he told Mexican radio. “We have to be prepared for all the scenarios and one of the scenarios is that the United States leaves the treaty, and as we have said, that is not the end of the world, the Mexican economy is much bigger than NAFTA.”

Separately, the International Monetary Fund said in a report on Monday that ending NAFTA would bring back World Trade Organization “most-favored nation” tariffs, which would disrupt Mexican-U.S. trade, and could crimp economic growth, dampen capital inflows and raise risk premia.

The IMF suggested that among various policy responses at Mexico’s disposal, “temporary foreign exchange interventions and liquidity provision could help smooth extreme volatility.”

Concerns that Trump could follow through on his threats to dump NAFTA have battered the Mexican peso in recent weeks.

Additionally, Mexico should continue to implement its structural reforms and boost efforts to diversify trading relationships, which would increase competitiveness and help economic growth over the medium-term, the IMF said.

The IMF sees Mexico’s economy growing 1.9 percent next year after projected expansion of 2.1 percent in 2017.
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