Tax Cut, US Economy, Fair Trade on Trump’s Davos Agenda

U.S. President Donald Trump will be entering something of a lion’s den when he visits the elitist enclave of Davos next week, rubbing shoulders with the same “globalists” that he campaigned against in winning the 2016 election.

Aides said some of Trump’s advisers had argued against him attending the World Economic Forum in order to steer clear of the event, which brings together political leaders, CEOs and top bankers.

But in the end, they said, Trump, the first sitting U.S. president to attend the forum since Bill Clinton in 2000, wanted to go to call attention to growth in the U.S. economy and the soaring stock market.

A senior administration official said Trump is expected to take a double-edged message to the forum in Switzerland, where he is to deliver a speech and meet some world leaders.

Invest in US

In his speech, Trump is expected to urge the world to invest in the United States to take advantage of his deregulatory and tax cut policies, stress his “America First” agenda and call for fairer, more reciprocal trade, the official said.

During his 2016 election campaign, Trump blamed globalization for ravaging American manufacturing jobs as companies sought to reduce labor costs by relocating to Mexico and elsewhere.

“Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache,” he said June 28, 2016, in Pennsylvania.

Trump retains the same anti-globalist beliefs but has struggled to rewrite trade deals that he sees as benefiting other countries.

Merkel and Macron

Trump will be speaking two days after German Chancellor Angela Merkel and French President Emmanuel Macron take the stage in Davos.

Both ardent defenders of multilateralism and liberal democratic values, they are expected to lay out the counter-argument to Trump’s “America First” policies. Merkel and Macron have lobbied Trump hard to keep the United States in the Paris climate accord and Iran nuclear pact, only for him to distance himself from those deals.

Trump will meet with British Prime Minister Theresa May in Davos, the White House said.

Bark becomes bite?

There is acute concern in European capitals that 2018 could be the year Trump’s bark on trade turns into bite, as he considers punitive measures on steel and threatens to end the 1990s-era North American Free Trade Agreement with Canada and Mexico.

He has backed off withdrawing from a U.S. trade agreement with South Korea and while he has threatened to terminate NAFTA, he has yet to do so.

Trump’s tax cuts are a source of concern in Europe, where policymakers are discussing steps to extract more tax dollars out of U.S. multinationals such as Google and Amazon. European governments now fear a “race to the bottom” on corporate tax rates and a shift to more investment in the United States by some of their big companies.

Trade war

In a Reuters interview on Thursday, Trump lamented that it is rare that he meets the leader of a foreign country that has a trade deficit with the United States.

Based on official data for the year to November, China exported goods worth $461 billion and the United States ran a trade deficit of $344 billion. Trump said he would be announcing some kind of action against China over trade. He is to discuss the issue during his State of the Union address to the U.S. Congress on Jan. 30.

Asked about the potential for a trade war with China depending on U.S. action over steel, aluminum and solar panels, Trump said he hoped a trade war would not ensue.

“I don’t think so, I hope not. But if there is, there is,” he said.

Trump and the U.S. Congress are racing to meet a midnight Friday deadline to pass a short-term bill to keep the U.S. government open and prevent agencies from shutting down.

Trump could still go to Davos next week as planned even if the federal government shuts down, senior U.S. administration officials said Friday, citing the president’s constitutional authority to conduct diplomacy.


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Bankers Association Warns of Uncertainty Tied to Government Shutdown

The largest banking trade group in the United States says shutting down the government could hurt investor and consumer confidence, but would hit the overall economy indirectly.

Speaking as the American Bankers Association unveiled its annual economic forecast in Washington, Ellen Zentner, chair of the ABA’s advisory committee, said “no one likes the uncertainty of a government shutdown.”

Citing the most recent shutdown in October 2013, which lasted 16 days, Zentner said that while the economic impact might have been minimal, the effect on the American psyche went deeper.

“If we look back at October 2013, it’s very difficult to see that there was an impact,” she said. “Workers that were nonessential government workers that were furloughed were eventually sent back to work, and they were provided back pay. Where we did see a lasting effect, though, was on business sentiment and consumer sentiment.”

The 2013 shutdown is believed to have cost the United States about $2 billion in lost productivity, and hurt American voters’ trust in lawmakers.

A similar shutdown Friday would force the closure of nonessential government offices and furlough thousands of government workers. Consumer and business confidence has been rising, but the banking group says a prolonged shutdown could dampen that optimism.

From a local business perspective, Zentner says, the impact of a government shutdown is very real.

“It matters for businesses who serve those federal workers that report to work every day and buy lunch while they’re at work,” she said. “If those workers are furloughed, they’re not buying lunch each day, and so as a restaurant, that’s business lost.”

Barring a lengthy and disruptive government shutdown, the ABA is forecasting economic growth to expand 2.4 percent this year and for already-low unemployment to drop further to 3.8 percent by the end of the year.

Workers who have seen little or no wage growth since the recovery could see their paychecks rise by about 3 percent in 2018 and 3.5 percent in 2019, as employers compete for workers in a shrinking labor pool.


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Down to Business: Drought-hit Kenyan Women Trade Their Way Out of Poverty

Widow Ahatho Turuga lost 20 of her goats to drought early last year, but the shopkeeper is planning to reinvest in her herd once she has saved enough money.

“I think I will start with four goats and see how it goes,” she said, rearranging soap on the upper shelf of her shop in Loglogo, a few kilometers from Marsabit town.

She recalled how frequent droughts had left her on the edge of desperation, struggling to care for six of her own children and four others she adopted after their mother died.

But Turuga is finding it easier to cope since taking part in a rural entrepreneurship program run by The BOMA Project, a nonprofit helping women in Kenya’s dry northern areas beat extreme poverty and adapt to climate change.

The U.S. and Kenya-based organization provides two years of business and life-skills training, as well as mentorship.

Groups of three women are each given a startup grant of 20,000 Kenyan shillings ($194.55) and a progress grant of 10,000 shillings to set up a business.

After graduating, they carry on operating their businesses — mainly small shops selling groceries and household goods — either together or on their own.

The women also club together in savings groups of at least 15 people, who put away anything from 400 shillings a month each, and make loans to members at an interest rate of 5 to 10 percent.

Habibo Osman, a mother of five who was in the same group as Turuga, has been able to support her family even after divorcing her husband.

The 1,200 shillings she earns each week from the shop she established as a BOMA business has enabled her to enroll her eldest child, aged five, in nursery school. She is now hoping to save enough to buy her own land.

No more aid

Ahmed “Kura” Omar, BOMA’s co-founder and deputy country director, said his native Marsabit is one of Kenya’s driest counties. It is often hit by prolonged drought, with many families losing livestock in its mainly pastoralist economy, he added.

“Given that there is no foreseeable end to these drought patterns, we need to stop relying on food distribution and aid money, and create more sustainable, life-long solutions,” Kura told Reuters.

BOMA CEO Kathleen Colson said the program aimed to help break the cycle of dependency on aid, giving women power over their lives and the means to move out of extreme poverty.

“People need to be treated with dignity and be empowered to achieve self-sufficiency and effect change on a community level,” she said.

BOMA asks villagers to help identify the poorest women among them to participate in the training. After completing the program, they help other women, a process that raises income levels across the entire area.

Bakayo Nahiro, a widow and mother of six, belongs to the Namayana women’s saving group in Kargi in Marsabit. She has amassed 25,000 shillings in savings, but said profit margins go down in drought periods as people take shop goods on credit when they have no livestock to sell.

Money is power

Jane Naimirdik, a BOMA trainer and mentor, said communities in Marsabit are highly patriarchal, but the program helps women gain a voice in society.

The practice of grouping women in threes creates mutual accountability but also offers protection from husbands who may want to take money from them, she added.

“We once handled a case where the husband tried to take the wife’s savings by force, but we approached [him] and told him the money did not belong to his wife but to the women’s savings group and he understood,” said Naimirdik.

Moses Galore, Kargi’s village chief, said no such incidents had been reported to him, and men appreciated their wives’ financial contribution to the household.

Magatho Mifo, a BOMA business owner, said her husband was happy about her commercial activities as she could now provide for her family while he travels for days in search of pasture for his herd.

Her neighbors’ wives and children buy goods on credit when the men are away looking for grazing, and repay her when they return. This helps the community during lean times and generates more income for her business, she said.

“My husband sometimes gets angry when I attend the women’s group meetings, because they can last a long time, but once I arrive home with a bag of food or something else, all is forgotten,” said Khobobo Gurleyo, another entrepreneurship program member.

Business partnerships

BOMA mentor Naimirdik said the women are also trained in conflict management to strengthen their business partnerships.

Ideally, each group includes women of different ages so as to benefit from the experience of older members and to make the program sustainable as it passes to subsequent generations, she said.

In addition, the women receive information about family planning and the importance of having small families, as well as child and maternal health and hygiene, she added.

The BOMA Project has reported positive results in the communities where it works in Marsabit County and Samburu East, with about 15,700 women enrolled in its program since 2008.

Data collected during a 2016 exit survey of participants found that after two years, 99 percent of BOMA businesses were still open.

Members experienced a 147 percent increase in their income, and a 1,400 percent increase in their savings, alongside a 63 percent drop in children going to bed hungry.

The BOMA Project plans to expand its program across East Africa’s drylands by partnering with governments and other development agencies.

In Kenya, it is undertaking a pilot program with the government involving 1,600 women in Samburu, in addition to its existing work.

The project aims to reach 1 million women and children by 2022, said CEO Colson.


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Turkey Business Lobby Calls for End to Emergency Rule

Turkey’s main business lobby on Thursday called on the government to end the state of emergency as parliament extended it for a sixth time since it was imposed after an attempted coup in 2016.

Emergency rule allows President Tayyip Erdogan and the government to bypass parliament in passing new laws and allows them to suspend rights and freedoms. More than 50,000 people have been arrested since its introduction and 150,000 have been sacked or suspended from their jobs.

The Turkish parliament on Thursday voted to extend the state of emergency, with the ruling AK Party and the nationalist opposition voting in favor.

Rights groups and some of Turkey’s Western allies fear Erdogan is using the crackdown to stifle dissent and crush his opponents. Freedom House, a Washington-based watchdog, downgraded Turkey to “not free” from “partly free” in an annual report this week.

In order to preserve its international reputation, Turkey needs to start normalizing rapidly, Erol Bilecik, the head of the TUSIAD business lobby said.

“The first step in that regard is bringing an end to the state of emergency,” he told a meeting in Istanbul.

Parliament was due to extend emergency rule after the national security council on Wednesday recommended it do so.

The state of emergency has negatively impacted foreign investors’ decisions, another senior TUSIAD executive said.

“As Turkey takes steps towards becoming a state of law, direct investments will increase, growth will accelerate, more jobs will be created,” Tuncay Ozilhan said, adding that he hoped this would be the last extension of emergency rule.

The government says its measures are necessary to confront multiple security challenges and root out supporters of the cleric Fethullah Gulen, whom it blames for the coup attempt. Gulen has denied any involvement.

But critics fear Erdogan is pushing the NATO member towards greater authoritarianism.

Some 30 emergency decrees have been published since the failed coup. They contain 1,194 articles and cover defense, security, the judiciary, education and health, widely restructuring the relationship between the state and the citizen.

A total of 2,271 private educational institutions have been shut down in the crackdown, as well as 19 labor unions, 15 universities, 49 hospitals and 148 media outlets.

The two co-heads of Turkey’s pro-Kurdish opposition party, parliament’s third-largest, are in jail on terrorism charges, as are several of the parties deputies.

The Turkish Journalists’ Association says about 160 journalists are in jail, most held since the failed coup. Last year, the Committee to Protect Journalists called Turkey the world’s top jailer of journalists.


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Nigeria Moves Closer to Turning Long-awaited Oil Bill Into Law

Nigeria moved closer to turning the first part of a long-awaited oil industry bill into law after the lower house passed the same version of the legislation approved by the Senate last year, a lawmaker in the House of Representatives said on Thursday.

It is the first time both houses have approved the same version of the bill. It still needs the president’s signature to become law.

The legislation, which Nigeria has been trying to pass for more than a decade, aims to increase transparency and stimulate growth in the country’s oil industry.

Under President Muhammadu Buhari’s administration, the Petroleum Industry Bill was broken up into sections to ease passage.

The House of Representatives passed the first part called the Petroleum Industry Governance Bill (PIGB) on Wednesday.

“The PIGB, as passed yesterday, is the same as passed by the Senate. We have harmonized everything and formed the National Assembly Joint Committee on PIB,” Alhassan Ado Doguwa, a lawmaker in the House of Representatives, told reporters in the capital Abuja.

“Every consideration of the bills is now under the joint committee. We have broken the jinx after 17 years. We are working on the other accompanying bills.”

Doguwa is the chairman of the lower house’s Ad-hoc Committee on the Petroleum Industry Bill (PIB) as well as of the National Assembly Joint Committee on PIB.

The joint committee is working on two more bills as part of the PIB.

The governance section deals with management of the Nigerian National Petroleum Corporation (NNPC).

Uncertainty over terms affecting taxation of upstream oil development has been the main sticking point holding back billions of dollars of investment for the oil industry. This will be addressed later in an accompanying bill.

Shell, Chevron, Total, ExxonMobil and Italy’s Eni are major producers in Nigeria through joint ventures with the state oil firm NNPC.

The PIGB would create four new entities whose powers would include the ability to conduct bid rounds, award exploration licenses and make recommendations to the oil minister on upstream licenses.

“It’s an unprecedented step forward. The PIB is something that has defied the last two governments,” Antony Goldman of PM Consulting said.

“The detail of what is agreed will determine the extreme to which the bill takes politics out of the sector and tackles systemic corruption.”

 

 

 

 


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Emirates Throws Airbus A380 a Lifeline With $16 Billion Deal

The Middle East’s largest airline, Emirates, announced Thursday it struck a deal with Airbus to purchase 20 A380 aircraft with the option to buy 16 more in a deal worth $16 billion, throwing a lifeline to the European-made double-decker jumbo jets.

 

The Dubai-based Emirates already has 101 A380s in its fleet and 41 more on order, making it the largest operator of the jumbo jet.

 

“This new order underscores Airbus’ commitment to produce the A380 at least for another ten years,” said Airbus chief salesman John Leahy.

 

“This order will provide stability to the A380 production line,” Emirates Chairman and Chief Executive Sheikh Ahmed bin Saeed Al Maktoum said in a statement after the deal was signed in Dubai on Thursday morning.

 

Emirates, which is owned by the Dubai government in the United Arab Emirates, said the additional A380s will be delivered to the airliner from 2020 onwards and that some of the new A380s will be used as fleet replacements.

 

Airbus chief salesman John Leahy had warned only three days earlier that if the company couldn’t work out a deal with Emirates, it would have to shut down the superjumbo’s production line. Airbus has spent years and billions developing the double-decker jumbo jet, even as skeptics questioned whether it could generate enough demand to justify its cost and the bigger runways it requires.

 

An Airbus A380 has a list price of $445.6 million, but airlines and manufacturers often negotiate lower prices.

 

Airbus delivered just 15 of the planes last year, and aims to deliver 12 more this year.

 

Leahy told reporters Monday that Emirates is the only airline with the ability to commit to a minimum of six planes a year for a minimum of eight to 10 years, or what is needed to make the Airbus program viable.

 

“It’s positive news for both sides,” airline analyst John Strickland of JLS Consulting said. “The A380 is critical to Emirates’ hub-and-growth strategy and equally the airline is key to Airbus’ continuation of the program. It will be a great relief to Airbus to have secured this order, but they have to work aggressively to secure orders from other airlines too now.”

 

Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum said the deal reflects Emirates’ commitment to advancing “Dubai’s vision to grow further as a world-class destination and aviation hub.” Dubai’s main airport, where Emirates is based, is among the busiest in the world with more than 80 million travelers passing through in 2016.

 

Airbus tweeted news of the deal, saying it was “glad to announce” Emirates’ commitment to the A380.

 

Shares in Airbus rose on the news of the deal, gaining 2.2 percent on the day, to 91.67 euros in Paris.

 

At Dubai’s biennial Air Show in November, Airbus suffered an embarrassment when it was scheduled to announce it had a struck a deal with Emirates for its A380, only to see Boeing sit on the podium with the airline and sign a $15.1 billion deal.

 

Emirates’ fleet relies solely on the Airbus 380 and the Boeing 777 for its flights.

 

 


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Trump Considering ‘Big Fine’ Against China in Trade Dispute

President Donald Trump said Wednesday the United States was considering a big “fine” as part of a probe into China’s alleged theft of intellectual property, the clearest indication yet that his administration will take retaliatory trade action against China.

In an interview with Reuters, Trump and his economic adviser Gary Cohn said China had forced U.S. companies to transfer their intellectual property to China as a cost of doing business there.

The United States has started a trade investigation into the issue, and Cohn said the United States Trade Representative would be making recommendations about it soon.

“We have a very big intellectual property potential fine going, which is going to come out soon,” Trump said in the interview.

While Trump did not specify what he meant by a “fine” against China, the 1974 trade law that authorized an investigation into China’s alleged theft of U.S. intellectual property allows him to impose retaliatory tariffs on Chinese goods or other trade sanctions until China changes its policies.

Trump said the damages could be high, without elaborating on how the numbers were reached or how the costs would be imposed.

“We’re talking about big damages. We’re talking about numbers that you haven’t even thought about,” Trump said.

U.S. businesses say they lose hundreds of billions of dollars in technology and millions of jobs to Chinese firms, which have stolen ideas and software or forced them to turn over intellectual property as part of the price of doing business in China.

The president said he wanted the United States to have a good relationship with China, but Beijing needed to treat the United States fairly.

Trump said he would be announcing some kind of action against China over trade and said he would discuss the issue during his State of the Union address to the U.S. Congress on Jan. 30.

Asked about the potential for a trade war depending on U.S. action over steel, aluminum and solar panels, Trump said he hoped a trade war would not ensue.

“I don’t think so, I hope not. But if there is, there is,” he said.

China cites ‘market behavior’

In Beijing, foreign ministry spokesman Lu Kang said there were no laws in China to force foreign investors to transfer technology, but acknowledged such things may happen as part of “market behavior” between companies working with each other.

“There is absolutely no government meddling in these actions,” Lu told a daily news briefing on Thursday. “At the same time, I want to stress that China will resolutely protect its legitimate rights,” he added, without elaborating.

Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics, said the penalties under Section 301 of the Trade Act of 1974, which authorized the investigation into China’s intellectual property practices, would probably include a package of both tariffs and restrictions on Chinese investment in the United States.

“I suspect the U.S. measures will involve restrictions in areas where we don’t have WTO (World Trade Organization) obligations,” Schott said. “Trump likes to talk about tariffs so that may be part of the package too. The Chinese would have the legal right to retaliate against tariff increases.”

Trump’s threats

Throughout his 2016 election campaign, Trump routinely threatened to impose a 45 percent across-the-board tariff on Chinese goods as a way to level the playing field for American workers. At the time, he was also accusing China of manipulating its currency to gain an export advantage, a claim that his administration has since dropped.

Trump said Wednesday that China stopped meeting the criteria for currency manipulation after his election, and he said making that designation while trying to work with Beijing to rein in North Korea would be tricky.

“How do you say, ‘Hey, by the way, help me with North Korea and I’m going to call you a currency manipulator?’ It really doesn’t work,” Trump said.

The president also said he and Chinese President Xi Jinping had not discussed China’s plans with regard to purchases of U.S. Treasury bonds.

Bloomberg reported earlier this month that Chinese officials reviewing the country’s foreign exchange holdings had recommended slowing or halting purchases of U.S. Treasury bonds.

Trump said he was not concerned such a move would hurt the U.S. economy.

“We never talked about it. They have to do what they do,” he said.


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Exclusive: Trump says Terminating NAFTA Would Yield ‘Best Deal’ in Renegotiations

U.S. President Donald Trump on Wednesday said that terminating the North American Free Trade Agreement would result in the “best deal” to revamp the 24-year-old trade pact with Canada and Mexico in favor of U.S. interests.

Lawmakers as well as agricultural and industrial groups have warned Trump not to quit NAFTA, but he said that may be the outcome.

“We’re renegotiating NAFTA now. We’ll see what happens. I may terminate NAFTA,” Trump said in an interview with Reuters. “A lot of people are going to be unhappy if I terminate NAFTA. A lot of people don’t realize how good it would be to terminate NAFTA because the way you’re going to make the best deal is to terminate NAFTA. But people would like to see me not do that,” he said.

Trump’s comments come less than a week before trade negotiators from the United States, Canada and Mexico meet in Montreal for the sixth of seven scheduled rounds of negotiations to update NAFTA.

The talks are viewed as pivotal for the success of the NAFTA renegotiation effort because major differences remain over aggressive U.S. demands on autos, dispute settlement and a five-year sunset clause — proposals that some business groups have labeled “fatal.”

Trump discussed NAFTA and other trade issues last weekend in Florida with U.S. Trade Representative Robert Lighthizer, who is leading the U.S. negotiating strategy.

Trump’s comments appeared to validate concerns voiced last week by Canadian government sources that the U.S. president, now a year in office, looked increasingly likely to announce a pullout from NAFTA.

Canadian Foreign Minister Chrystia Freeland added that U.S. threats to quit NAFTA had to be taken seriously.

The Reuters interview with Trump also reversed gains on Wednesday in Mexico’s peso, which has been highly sensitive to NAFTA withdrawal talk. But Trump told the Wall Street Journal last week that he would be “a little bit flexible” on the withdrawal threat.

Farm state lawmakers have been making the case to Trump in recent weeks that a NAFTA withdrawal could cause a major tariff increase on U.S. corn and other crops sold to Mexico, hurting a major political support base for Trump in the rural United States.

On Monday, automakers from Detroit and around the world urged the Trump administration not to quit NAFTA and to back away from some of its demands in the negotiations.


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Group Pinpoints Riches Hidden in Europe’s Mountains of Waste

Researchers have completed the first survey of valuable materials they say are waiting to be mined from Europe’s vast landfills and scrapyards.

A group of 17 organizations on Wednesday launched an online database for “urban mining” detailing precious raw materials slumbering in discarded batteries, electronics and cars across the continent.

The project, known by the acronym ProSUM, aims to highlight where billions of euros (dollars) worth of aluminum, copper and gold could be retrieved each year.

The group, which includes the United Nations University, said vehicles are an increasingly rich source of raw materials including lithium — from electric cars — steel and magnesium.

Smartphones, meanwhile, have concentrations of gold that are more than 25 times as high as the richest underground ores and are far easier to extract.


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