Russia Demands Compensation for US Tariffs on Aluminum, Steel

Russia demanded compensation from the U.S. for its worldwide tariffs on foreign aluminum and steel Thursday, becoming the third influential member of the World Trade Organization to do so.

China, the European Union and India have also objected, arguing the tariffs are a “safeguard” measure to protect U.S. domestic products from imports, which require compensation for major exporting countries.

The Trump administration has rejected that argument and says the tariffs are for national security reasons and are therefore allowed under international law.

The U.S. has agreed to negotiate with China and has informed the EU and India it is willing to discuss any other issue, while maintaining their compensation claims are unwarranted.

It is unclear what Moscow’s demand means in practice because it did not challenge the tariffs through a WTO appeals mechanism through which the organization’s 164 members can negotiate solutions to trade disputes.

China is the only country that has pursued that course and India has asked to be present at negotiations with the U.S. on the issue.

U.S. allies Australia, Canada, the EU, Mexico and South Korea have received temporary exemptions from the tariffs, pending negotiations with the U.S.

 


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House Panel Cuts Food Stamps, Renews Farm Subsidies

A bitterly divided House panel Wednesday approved new work and job training requirements for food stamps as part of a five-year renewal of federal farm and nutrition policy.

The GOP-run Agriculture Committee approved the measure strictly along party lines after a contentious, five-hour hearing in which Democrats blasted the legislation, charging it would toss up to 2 million people off food stamps and warning that it will never pass Congress.

The hard-fought food stamp provisions would tighten existing work requirements and expand funding for state training programs, though not by enough to cover everybody subject to the new work and training requirements.

Agriculture panel chair Michael Conaway said the provisions would offer food stamp beneficiaries “the hope of a job and a skill and a better future for themselves and their families.”

Food stamps

At issue is the Supplemental Nutrition Assistance Program, or SNAP, which provides food aid for more than 40 million people, with benefits averaging about $450 a month for a family of four.

The food stamp cuts are part of a “workforce development” agenda promised by GOP leaders such as Speaker Paul Ryan, R-Wis., though other elements of the agenda have been slow to develop.

“The timing is just perfect, given the fact that we have more than 5 million jobs that are open and available,” said Rep. Glenn Thompson, R-Pa., who said the GOP provisions would cement “a pathway to opportunity” for the poor and “give them better access to skills-based education.”

But Democrats said the provisions would drive up to 2 million people off the program, force food stamp recipients to keep up with extensive record keeping rules, and create bulky state bureaucracies to keep track of it all, while not providing enough money to provide job training to all those who would require it.

“This legislation would create giant, untested bureaucracies at the state level. It cuts more than $9 billion in benefits and rolls those savings into state slush funds where they can use the money to operate other aspects of SNAP,” said Rep. Collin Peterson of Minnesota, top Democrat on the panel. “Let me be clear: this bill, as currently written, kicks people off the SNAP program.”

Currently, adults ages 18-59 are required to work part-time or agree to accept a job if they’re offered one. Stricter rules apply to able-bodied adults without dependents between the ages of 18 and 49, who are subject to a three-month limit of benefits unless they meet a work requirement of 80 hours per month.

Under the new bill, that requirement would be expanded to apply to all work-capable adults, mandating that they either work or participate in work training for 20 hours per week with the exception of seniors, pregnant women, caretakers of children younger than 6, or people with disabilities.

Farm safety net

In addition to food stamps, the measure would renew farm safety-net programs such as subsidies for crop insurance, farm credit, and land conservation. Those subsidies for farm country traditionally form the backbone of support for the measure among Republicans, while urban Democrats support food aid for the poor.

The legislation has traditionally been bipartisan, blending support from urban Democrats supporting nutrition programs with farm state lawmakers supporting farm programs.

The measure mostly tinkers with those programs, adding provisions aimed at helping rural America obtain high-speed internet access, assist beginning farmers, and ease regulations on producers.

“When you step away from the social nutrition policy, much of this is a refinement of the 2014 farm bill. So we’re not reinventing the wheel. That makes it dramatically simpler,” said Rep. Frank Lucas, R-Okla., a former chairman of the committee. “Most folks are generally satisfied with the fundamentals of the farm safety net.”

That satisfaction has helped fuel speculation that this year’s renewal of food and farm programs will fail because just a short-term renewal of current policies would satisfy many lawmakers. The Senate is taking a more traditional bipartisan approach that’s sure to avoid big changes to food stamps.

The House measure also would cut funding for land conservation programs long championed by Democrats, prompting criticism from environmental groups. At the same time, it contains a proposal backed by pesticide manufacturers such as the Dow Chemical Company that would streamline the process for approving pesticides by allowing the Environmental Protection Agency to skip reviews required under the Endangered Species Act.

The panel adopted by voice vote a proposal by Rep. Jeff Denham, R-Calif., to prohibit the slaughter, trade or import or export of dogs and cats for human consumption in the United States.


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SunPower Buys US Rival SolarWorld to Head Off Trump Tariffs

SunPower Corp. on Wednesday said it would buy U.S. solar panel maker SolarWorld Americas, expanding its domestic manufacturing as it seeks to stem the impact of Trump administration tariffs on panel imports.

The White House cheered the deal, saying it was proof that Trump’s trade policies were stimulating U.S. investment.

Terms of the transaction were not disclosed.

The news sent SunPower’s shares up 12 percent on the Nasdaq to their highest level since before President Donald Trump imposed 30 percent tariffs on imported solar panels in January.

“The time is right for SunPower to invest in U.S. manufacturing,” chief executive Tom Werner said in a statement.

SunPower is based in San Jose, California, but most of its manufacturing is in the Philippines and Mexico. The company had lobbied heavily against the solar trade case brought last year by U.S. manufacturers, including SolarWorld, which said they could not compete with a flood of cheap imports.

‘This is great news’

The deal is a win for the Trump administration’s efforts to revive U.S. solar manufacturing through the tariffs. SunPower will manufacture its cheaper “P-series” panels, which more directly compete with Chinese products, at the SolarWorld factory in Hillsboro, Oregon, it said. It will also make SolarWorld’s legacy products.

“This is great news for the hundreds of Americans working at SolarWorld’s factory in Oregon and is further proof that the president’s trade policies are bringing investment back to the United States,” White House deputy press secretary Lindsay Walters said in an emailed statement.

The announcement comes as SunPower is seeking an exemption from tariffs on its higher-priced, more efficient panels manufactured overseas. It has argued to the U.S. trade representative, which will make a decision on exemptions in the coming weeks, that those products should be excluded because there is no U.S. competitor that makes a similar product.

In a note to clients, Baird analyst Ben Kallo said the SolarWorld deal would enable the company to compete against Chinese imports should SunPower’s products not receive an exemption. But he added that skeptics “may question the company’s ability to generate profits with U.S. manufacturing.”

Capital injection

The deal will inject much-needed capital into SolarWorld’s long-suffering manufacturing plant and give it the support of a major market player. SunPower is one of the largest solar companies in the world and is majority owned by France’s deep-pocketed oil giant Total SA.

The U.S. arm of Germany’s SolarWorld AG opened the Hillsboro factory in 2008 as it sought to capitalize on surging solar demand in the United States. But its start coincided with a dramatic increase in the production of cheaper solar products in Asia, and SolarWorld struggled to compete.

Twice, in 2012 and 2014, trade cases brought by SolarWorld prompted the U.S. Commerce Department to slap import duties on solar products from China and Taiwan. Yet prices on solar panels continued their free fall, and in 2017, the company joined rival Suniva in asking for new tariffs.

SolarWorld called the outcome “ideal” for its hundreds of employees in Hillsboro.

Suniva’s future in doubt

During the trade case and after the tariffs were announced, the solar  industry’s trade group, the Solar Energy Industries Association, argued that the tariffs would not be enough to keep SolarWorld and Suniva afloat.

Indeed, Suniva’s future remains uncertain after a U.S. bankruptcy court judge this week granted a request by its biggest creditor that will allow it to sell a portion of the company’s solar manufacturing equipment through a public

auction.


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US Manufacturers Seek Relief From Steel, Aluminum Tariffs

President Donald Trump’s tariffs on imported aluminum and steel are disrupting business for hundreds of American companies that buy those metals, and many are pressing for relief.

Nearly 2,200 companies are asking the Commerce Department to exempt them from the 25 percent steel tariff, and more than 200 other companies are asking to be spared the 10 percent aluminum tariff.

Other companies are weighing their options. Jody Fledderman, chief executive of Batesville Tool & Die in Indiana, said American steelmakers have already raised their prices since Trump’s tariffs were announced last month. Fledderman said he might have to shift production to a plant in Mexico, where he can buy cheaper steel.

A group of small- and medium-size manufacturers are gathering in Washington to announce a coalition to fight the steel tariff.


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EU Pushes to Approve Japan Trade Deal

The European Commission will put forward a proposed free-trade agreement with Japan for fast-track approval Wednesday, hoping to avoid a repeat of the public protests that nearly derailed a trade pact with Canada two years ago.

The European Union and Japan concluded negotiations to create the world’s largest economic area in December, signaling their rejection of the protectionist stance of U.S. President Donald Trump. Now they want to see it go into force.

The agreement would remove EU tariffs of 10 percent on Japanese cars and the 3 percent rate for most car parts. It would also scrap Japanese duties of some 30 percent on EU cheese and 15 percent on wines, and secure access to large public tenders in Japan.

Canada deal memories

The commission, which negotiates trade agreements for the EU, will present its proposals to the 28 EU members, along with another planned trade agreement with Singapore. EU countries, the European Parliament, and the Japanese parliament will have to give their assent before the trade pact can start.

The EU is mindful of protests against and criticism of the EU-Canada Comprehensive Economic and Trade Agreement (CETA) in 2016, which culminated in a region of Belgium threatening to destroy the deal. It provisionally entered force last September.

Both Brussels and Tokyo want to ensure the agreement can enter force early in 2019, ideally before Britain leaves the EU at the end of March. If it does, it could apply automatically to Britain during a transition period until the end of 2020.

Otherwise, it might not.

Before Brexit

Many of Japan’s carmakers serve the EU from British bases, and it has said having a deal in force during the transition would buy it more time to establish a separate trade agreement with Britain.

One reason the Japan deal may get rapid approval is that it does not deal with investment protection, which critics say allows multinational companies to influence public policy with the threat of legal action.

The agreement could then enter force after approval by the national governments and the European Parliament, rather than also having to secure clearance from national and even regional parliaments.

In fact, EU and Japanese negotiators have not agreed on the way in which foreign investors should be protected.


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Chinese City Turns to Wind Power Lottery

The city of Yanan, a major wind power base in northwest China’s Shaanxi province, has introduced a lottery system to decide which wind projects will go ahead this year, a sign that grid constraints are forcing local governments to restrict capacity.

China has been aggressively developing alternative power as part of its efforts to cut pollution and greenhouse gas emissions. Grid-connected wind power reached 163.7 gigawatts (GW) last year, up 10.1 percent on the year and amounting to 9.2 percent of total generating capacity.

But capacity expansion has outpaced grid construction, and large numbers of wind, solar and hydropower plants are unable to deliver all their power to consumers as a result of transmission deficiencies, a problem known as curtailment.

Grid constraints

According to a Yanan planning agency notice seen by Reuters, the city was given permission to build 900 megawatts of wind capacity this year, but 1,300 megawatts (or 1.3 GW) have already been declared eligible for construction, forcing authorities to whittle the total number of projects.

“After study it was decided that the lottery method should be used to determine what plans will be submitted (for approval) to the provincial development and reform commission,” it said.

The authenticity of the document was confirmed by a local municipal government official. He declined to give his name or provide details.

China aims to raise the share of non-fossil fuels in its total energy mix to around 15 percent by the end of the decade, up from 12 percent in 2015.

​Renewable power grows

But while renewable power has grown rapidly, around 80 GW of wind capacity was still unable to transmit electricity to consumers in 2015. Wasted wind power amounted to around 12 percent of total generation in 2017, according to the energy regulator.

An environmental group is suing grid companies in the northwest for failing to fulfill its legal obligation to maximize purchases of local renewable power.

To try to prevent waste, China has drawn up guidelines aimed at preventing new plant construction in regions suffering from surplus capacity.

It also released draft guidelines last month for a new renewable energy certificate system that will force regions to meet mandatory clean electricity utilization targets. The plan is expected to help alleviate curtailment.


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Venezuela Arrests Two Chevron Executives Amid Oil Purge

Chevron said on Tuesday two of its executives were arrested in Venezuela, a rare move likely to spook foreign energy firms still operating in the OPEC nation stricken by hyperinflation, shortages and crime.

Venezuelan Sebin intelligence agents burst into the Petropiar joint venture’s office in the coastal city of Puerto La Cruz on Monday and arrested the two Venezuelan employees for alleged wrongdoing, a half-dozen sources with knowledge of the detentions told Reuters.

Venezuela’s Information Ministry and state oil company PDVSA did not respond to a request for information about the detentions, which come amid a crackdown on alleged graft in the oil sector.

One of the detainees, Carlos Algarra, is a Venezuelan chemical engineer and expert in oil upgrading whom Chevron had brought in from its Argentina operations. The other, Rene Vasquez, is a procurement adviser, according to his LinkedIn profile.

Arrests comfirmed

The U.S. company confirmed the arrests, which are believed to be the first to affect a foreign oil company’s direct employees.

“Chevron Global Technology Services Company is aware that two of its Venezuelan-based employees have been arrested by local authorities,” Chevron said in a statement.

“We have contacted the local authorities to understand the basis of the detention and to ensure the safety and wellbeing of these employees. Our legal team is evaluating the situation and working towards the timely release of these employees.”

Disagreements lead to arrests

A Chevron spokeswoman declined to provide further details on the case or the status of its operations. The U.S. State Department did not immediately respond to a request for comment.

The executives were arrested after disagreements with their PDVSA counterparts over procurement processes, two of the sources said.

The arrests highlight risks for foreign companies in Venezuela, home to the world’s biggest crude reserves but heaving under a fifth straight year of recession. Some insiders say a fracturing ruling elite is using the purge to wage turf wars or settle scores.

“Our view has been that oil industry companies would do well to be cautious and stop assuming that good relations with PDVSA can last forever due to a common interest in pumping oil,” said Raul Gallegos, associate director with the consultancy Control Risks. “The level of corruption in PDVSA, especially under a military administration, can and will trump production logic.”

Other oil executives jailed

President Nicolas Maduro since last year has overseen the arrest of dozens of oil executives, including the former energy minister and PDVSA president.

The purge comes years after industry analysts began criticizing PDVSA for widespread graft. The government long decried such accusations as “smear campaigns.” But last year, Maduro changed his tone and started blaming “thieves” for rampant graft in the oil sector and an economic crisis that has spawned malnutrition, disease and emigration.

Vowing a cleanup, Maduro replaced many jailed executives with soldiers, but the unpopular management has spurred a wave of resignations.


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IMF: World Economy Expands Next 2 Years; Growth Fades After 2020

International Monetary Fund experts say the global economy will continue growing well for the next two years, but expect expansion to slow after 2020.

IMF research director Maurice Obstfeld said Tuesday fading trade could hurt growth and, “The first shots in a potential trade war have now been fired.” He repeated a warning the international rules that nurtured “unprecedented” economic growth after World War II are at risk of being “torn apart.”

Many economists worry that Trump administration efforts to slap tariffs on China and other U.S. trading partners are sparking retaliatory taxes on U.S.-made products that raise the cost of trading and hurt demand, stifling economic growth. Administration officials disagree, and insist their trade and tax policies will boost growth and not spark soaring deficits.

Trade squabbles are a key issue this week as top economic officials and experts gather from 189 nations in Washington for meetings of the IMF and the World Bank.

Obstfeld and his colleagues are also worried that efforts to stimulate economic recovery from the 2008 recession, such as low interest rates and massive purchases of bonds, are now ending. They put the current global growth rate at 2.9 percent, and say this moment of good growth is the time to make changes in tax and other policies that will help economies weather inevitable future downturns.

Growth in advanced economies like the United States is hampered by an aging population with larger numbers of people retiring and leaving the workforce. Slow growth in productivity and high levels of government and private debt are also threats to future growth.

The IMF predicts the world’s second-largest economy, China, will expand at a 6.6 percent rate this year and 6.4 percent in 2019. The global lender says China will continue changing its economic focus from investment and manufacturing toward consumption and services, but warns that a rising debt clouds the nation’s medium-term outlook.

 


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Ramaphosa Team to Seek $100B Investment for South Africa

South African President Cyril Ramaphosa appointed a team of business and finance experts on Monday to hunt the globe for $100 billion in investment to boost the ailing economy.

The team of economic envoys includes ex-finance minister Trevor Manuel as well as a former top banker.

Ramaphosa became president in February after winning the leadership of the ruling African National Congress last year on promises to revive the economy and crack down on corruption.

Monday’s appointments to the team also include economist Trudi Makhaya, who becomes special economic adviser to the president, former Treasury Director General Lungisa Fuzile, ex-Deputy Finance Minister Mcebisi Jonas and former Standard Bank chief executive Jacko Maree.

“These are people with valuable experience in the world of business, investment and finance and they have extensive networks across a number of major markets,” said Ramaphosa before leaving Johannesburg for a Commonwealth Heads of Government Meeting in London.

Ramaphosa said the envoys would travel to Europe, Asia and across Africa to build an “investment book” to help plug a substantial shortfall of foreign and local direct investment.

“We are modest because we want to over-achieve,” Ramaphosa said, explaining why the government was targeting $100 billion rather than a much larger sum.

Political and policy uncertainty damaged investment and business confidence during nine-year presidency of Ramaphosa’s predecessor, Jacob Zuma, when South Africa’s credit rating was slashed to junk by two of the top three agencies and economic growth slowed to a crawl.

The tide has begun to turn under Ramaphosa, with Moody’s last month keeping the country at investment grade and changing the outlook to stable from negative.

The economic outlook has also improved, with the World Bank raising its 2018 growth forecast to 1.4 percent this month from 1.1 percent forecast in September, a touch below the Treasury’s projection of 1.5 percent.

Ramaphosa has sacked or demoted a number of ministers allied to his scandal-ridden predecessor, and reinstated Nhlanhla Nene as finance Minister after Zuma fired him in 2015.


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Russia’s Drive to Replace Western Power Technology Hits Snag

Russia’s drive to build a large power-generating turbine to lessen its dependence on Western technology has suffered a major set-back after a prototype broke beyond repair, two sources familiar with the project told

Reuters.

In the past few years Russia has imported the large-capacity gas turbines required to run modern power stations from firms such as Siemens, GE and Alstom.

After Western sanctions were imposed on Russia over the conflict with Ukraine four years ago, Russian President Vladimir Putin urged officials to replace imported technology with home-grown substitutes in energy, software, aerospace and medicine.

The mishap with the 110 Megawatt turbine, a capacity large enough to power a sizeable town, underlines the technical challenges.

Testing was underway on a prototype 110 MW turbine at the Saturn engineering plant in Rybinsk, central Russia, in December last year according to one of the two sources, who are both in the energy sector and familiar with the results of the tests.

“The turbine fell apart,” said the first source, who spoke on condition of anonymity because of the sensitivity of the subject. “They tried to repair it in time for March, but they did not manage it.”

March was the target date for completion of tests on the turbine. Putin, in power since 1999, won a second consecutive term in an election on March 18.

The first source, and a second source, both said it was not possible to rebuild the prototype turbine and the project would have to start again with new equipment.

“The turbine broke up,” said the second source, who requested anonymity because he is not authorised to speak to the media. “There’s no turbine, that’s it.”

“Not fatal”

Without any home-grown equivalents, Russia should in most cases still be able to buy turbines from Western suppliers, but U.S. and European Union sanctions have made it harder to import Western power technology under certain circumstances.

Last year Russia clandestinely delivered turbines made by Siemens to a power station in Crimea, which is subject to sanctions, and the European Union retaliated by imposing extra sanctions on officials and companies involved in the operation.

Setbacks to the domestic turbine program could hamper the modernization of power generation if growing tensions with Western states result in tighter sanctions since Russia’s modernisation plan is focused on using gas turbines.

The technical hitch also carries a potential political cost: Putin has publicly trumpeted progress in replacing Western technology imports, so any failures will jar with the picture of success he has painted.

The new turbine is being developed by a consortium of ODK, a unit of state-owned conglomerate Rostec that owns the Saturn factory where the testing was being conducted, Russian state technology firm RUSNANO, and state energy firm InterRAO.

In a statement, ODK said one of the mechanisms of the prototype turbine had malfunctioned. It said that would delay work on the project, but could be fixed. “It is not fatal for the project.” It said set-backs were to be expected since this

was a pioneering project for Russia.

RUSNANO acknowledged there had been an accident but gave no details. It said it remained committed to the turbine project and expects it will be completed. InterRAO declined to comment.

Russia’s Trade and Industry Ministry, which oversees the machine-building sector, declined to comment and referred questions to Rostec.

Western sanctions

Large capacity gas turbines have been in use around the world for years but their construction is tricky to perfect.

Because they operate at extremely high speeds and high temperatures, they need to be engineered to very precise standards and they use sophisticated electronic control systems to make sure that they operate efficiently.

For many years Russia made no major investment in developing the technology because it was able to import the turbines or the know-how to produce them. A scheme started in the 1990s to develop a large-capacity turbine produced prototypes but they did not go into production.

At a meeting in Russia’s second city of Saint Petersburg in May last year, chaired by Prime Minister Dmitry Medvedev, Energy Minister Alexander Novak said a 110 MW turbine had been developed and testing should be completed by March 2018.

“This is the first Russian produced powerful machine with 100-percent domestic manufacture and it will, of course, help us to completely substitute purchases of foreign equipment of this capacity,” Novak told the meeting. His ministry did not respond to questions on Tuesday about the set-back.


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