Archive for the ‘Uncategorized’ Category

Shanghai, Hong Kong stocks plunge on trade war fears

June 19, 2018

Shanghai and Hong Kong stocks plunge on Tuesday on investors’ fears that the US and China could be heading for a full-blown trade war following tit-for-tat tariff threats.

The plummet follows an announcement Monday by US President Donald Trump that he planned to hit the world’s second largest economy with 10 percent levies on $200 billion worth of imports — a move Beijing labelled “blackmail”, threatening to respond in kind.

© AFP | Donald Trump’s tariff announcement has sent Chinese stocks reeling

As the words flew, the benchmark Shanghai Composite Index ended down 3.78 percent, or 114.08 points, at 2,907.82 while Hong Kong was 3.12 percent lower in late afternoon trade.

The Shenzhen Composite Index, which tracks stocks on China?s second exchange, was also down, dropping 5.77 percent, or 97.60 points, to 1,594.05 on turnover of 232.5 billion yuan.

It is the first time the Shanghai index has dipped below 3,000 since September 2016, according to Bloomberg.

Qian Qimin, an analyst of Shenwan Hongyuan Group, said that the number was a psychological threshold for investors.

“Now the defence line has been broken. People are panicking and we are seeing some irrational behaviours,” Qian said.

“The market is really weak right now and there is still uncertainty.”

“Investors are worried the US may impose further restrictions on Chinese tech and Internet products and cause greater uncertainty for the domestic economy,” Zhang Gang, Shanghai-based strategist with Central China Securities Co, told Bloomberg News.

“The Shanghai Composite is unlikely to bottom out any time soon.”

AFP

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The GOP’s Immigration Meltdown

June 19, 2018

Restrictionists may cost Republicans their majorities in Congress.

An undated photo showing a U.S. Border Patrol Processing Center in McAllen, Tx.
An undated photo showing a U.S. Border Patrol Processing Center in McAllen, Tx. PHOTO: US CUSTOMS AND BORDER PATROL/HANDOUT/EUROPEAN PRESSPHOTO AGENCY/SHUTTERSTOCK

Are Republicans trying to lose their majorities in Congress this November? We assume not, but you can’t tell from the party’s internal feuding over immigration that is fast becoming an election-year nightmare over separating immigrant children from their parents. This is what happens when restrictionists have a veto over GOP policy.

Democrats fanned out across the U.S. this weekend to highlight the turmoil caused by the Trump Administration’s new “zero-tolerance” policy of detaining all adult aliens crossing the border illegally. That means separating parents from children who arrive together because courts have said migrant children can’t be jailed.

Children are put into tent encampments or other sites while their parents are processed for deportation. That can take several days, which is bad enough, though much longer if the adults challenge their deportation. Trump officials are defending the policy as a deterrent to illegal entry, but surely they understand that separating parents from children is morally unacceptable and politically unsustainable.

The immediate solution should be for the Administration to end “zero-tolerance” until it can be implemented without dividing families. Congress can also act to allow migrants to be detained with children in facilities appropriate for families. Until that is possible, better to release those who have no criminal past rather than continue forced separation.

This episode underscores the larger GOP dysfunction as it debates how to deal with the former immigrant children known as Dreamers. The threat of Dreamer deportation isn’t imminent while the courts consider Barack Obama’s legalization order and Donald Trump’s revocation of that order. But it is sure to return with urgency next year.

A bipartisan majority in Congress wants to solve the problem of these young adults brought to the U.S. illegally as minors. But a minority of House Republicans continues to block a compromise that would solve the Dreamer problem and give Mr. Trump more money for border security.

Last month conservatives sank food-stamp reforms to pressure leadership into holding a vote on immigration legislation by Judiciary Chairman Bob Goodlatte. The bill imposes an e-Verify mandate, a flawed agriculture visa program and sharp cuts to family-based immigration, among other restrictionist priorities. Moderate Republicans who represent large numbers of Hispanics would have to sell out employers to protect Dreamers.

To side-step this trap, moderates threatened a discharge petition to force votes on four immigration bills including the Goodlatte legislation. Whichever bill passed with the most votes would have gone to the Senate.

House leaders thwarted the discharge petition by promising votes this week on the Goodlatte bill and a compromise bill that would fulfill Mr. Trump’s priorities: $25 billion for a border wall, limits on family migration and an end to the diversity visa lottery. The bill would also repurpose 88,000 or so diversity-lottery and other visas for a merit-based green-card program that Dreamers could apply for with a path to citizenship. Another 65,000 visas for family-based preferences would be reallocated to employment-based categories.

This should be acceptable to moderates, and White House aide Stephen Miller has urged conservatives to support the bill. But then former aide Steve Bannon riled up the restrictionists by blasting the compromise as “amnesty.” The restrictionists don’t want anything to pass because they want to use immigration to drive conservative turnout in November.

This is self-destructive politics. This year is the GOP’s best opportunity for immigration reform in a decade. If Republicans lose their House majority, they will have less leverage when the Supreme Court rules on legalization for Dreamers. If the Obama program is upheld, Mr. Trump won’t have obtained money for his border wall or anything else.

As for November, House control will be won or lost in swing districts where legalizing the Dreamers is popular and separating families isn’t. Members like California’s Steve Knight and Florida’s Carlos Curbelo need to show voters that they’re working toward a solution for Dreamers.

Even better would be for Congress to pass the leadership’s compromise that legalizes Dreamers, ends the family separation fiasco, and gives Mr. Trump some of his priorities. Republicans would solve a problem while depriving Democrats of a potent issue.

But that will only happen if Mr. Trump sells it. On immigration he’s been a study in confusion, one day preaching compassion for Dreamers while deploring “amnesty” the next. The smart play is for Republicans to show they can solve at least some immigration problems.

If Mr. Trump wants to lose the House and risk impeachment, he’ll take Mr. Bannon’s bad advice and keep giving Democrats a daily picture of children stripped from their parents.

Appeared in the June 19, 2018, print edition.

https://www.wsj.com/articles/the-gops-immigration-meltdown-1529364334?mod=hp_opin_pos1

Trump Resisting a Growing Wrath for Separating Migrant Families

June 19, 2018

President Trump and two members of his cabinet mounted an aggressive defense on Monday of his policy of separating children from their parents at the border in response to a growing outcry from members of both parties.

“They could be murderers and thieves and so much else,” Mr. Trump said of the people crossing the border. “We want a safe country, and it starts with the borders, and that’s the way it is.”

President Donald Trump gestures as he signs a “Space Policy Directive” during a meeting of the National Space Council in the East Room of the White House, Monday, June 18, 2018, in Washington, as Vice President Mike Pence watches. (AP Photo/Susan Walsh)

By  Katie Rogers and Sheryl Gay Stolberg
The New York Times

Attorney General Jeff Sessions also defended the practice, while insisting that “we do not want to separate parents from their children,” and later, at a tumultuous White House news briefing, Kirstjen Nielsen, the secretary of homeland security, gave a forceful explanation of the administration’s actions, arguing that it had no choice, and insisting that the only way the practice could end would be through congressional action.

Unlike Mr. Trump, she did not repeat the false accusation that only the Democrats, the minority party, were to blame for what she said was Congress’s failure to act to end a policy that, by some counts, has resulted in nearly 2,000 children taken away from their parents in a six-week period.

Ms. Nielsen insisted that the children who had been taken into custody were well cared for, but she was not able to answer several questions from reporters who demanded specifics about their whereabouts and care. She said she had not seen widely circulated footage of families penned behind chain-link cage fencingnor heard audio taken of children wailing inside detention centers.

“Parents who entered illegally are by definition criminals,” Ms. Nielsen said. “By entering our country illegally, often in dangerous circumstances, illegal immigrants have put their children at risk.”

Read the rest:

NYT:https://www.nytimes.com/2018/06/18/us/politics/trump-immigration-germany-merkel.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news

See also

CNN: 5 ways Kirstjen Nielsen’s press conference on family separation was a total disaster

https://www.cnn.com/2018/06/18/politics/kirstjen-nielsen-press-conference/index.html

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USA Today: DHS Secretary Kirstjen Nielsen says ‘loopholes’ in law separate families at the border

https://www.usatoday.com/story/news/politics/2018/06/18/dhs-secretary-kirstjen-nielsen-says-loopholes-law-separate-families-border/712095002/

US Senate takes the first step to temporarily block F-35 deliveries to Turkey

June 19, 2018

The U.S. Senate took a step late Monday to block the delivery of F-35 warplanes to Turkey with an amendment in a $716 billion defense policy bill.

The National Defense Authorization Act (NDAA) bill containing the amendment that aims to prohibit F-35 sales to Turkey still needs to be passed by the House and is not expected to become law until later in the summer.

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Turkey’s Foreign Minister Mevlüt Çavuşoğlu said earlier that Turkey would turn to other markets if the United States does not allow it to buy Lockheed Martin’s F-35 jets.

Çavuşoğlu said Russia or any other country that is a NATO member could be an alternative and that it would not be right to depend only on one country. “Turkey cannot remain without alternatives or help,” the foreign minister added.

“If the U.S. imposes sanctions on us or takes such a step, Turkey will absolutely retaliate. What needs to be done is the U.S. needs to let go of this,” the Foreign Minister said in another speech.

The NDAA bill backs President Donald Trump’s call for a bigger, stronger military but also sets up a potential battle with the White House over Chinese telecommunications firm ZTE Corp.

Before it can become law, the bill must be reconciled with one already passed by the House of Representatives. That compromise measure must then be passed by both chambers and signed into law by Trump.

Lockheed Martin, the maker of the warplane, said that it still expects to hand over F-35s to Turkey in a ceremony that is set to take place in Fort Worth, Texas on June 21.

Trump may veto the bill over the sanctions it proposes against the Chinese telecom company ZTE.

The bill is more likely to include a much less stringent provision, included in the House bill, that would bar the Defense Department from dealing with any entity using telecommunications equipment or services from ZTE or Huawei Technologies, another Chinese company.

Ankara has previously slammed plans to block Turkey’s role in the making of the F-35s. Parliamentary Foreign Affairs Committee Head Volkan Bozkır said that the U.S. has been threatening Turkey with a move regarding the F-35 deal if Turkey purchased S-400 missile defense systems from Russia.

ASELSAN, a Turkish defense giant that developed electronic optical targeting systems and air intervention controls for F-35 fighter jets, is also of the opinion that such a move would harm the U.S.

ASELSAN Chairman Haluk Görgün said that the F-35 project would collapse altogether if the U.S. decided to halt the delivery of the jets to Turkey. “It is not possible. It would collapse the F-35 program. I consider this as a personal statement. Turkey is a significant partner in this project,” Görgün said.

Turkey ordered 100 aircraft – including, according to reports, F-35B short takeoff and vertical landing (STOVL) variants.

Several Turkish firms are involved in the making of the fighter jets as part of Turkey’s partner role in the joint program. For instance, Alp Aviation partook in the production of the bodywork and landing gear. Ayesaş supplied the missile remote control interface and panoramic cockpit imaging system, and Fokker Elma produced electrical cabling and internal connection systems for F-35s. Moreover, Havelsan provided the training systems for F-35 jets, while Kale Aviation produced the body structure, connections and landing gear locking systems.

https://www.dailysabah.com/defense/2018/06/19/us-senate-takes-the-first-step-to-temporarily-block-f-35-deliveries-to-turkey

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South China Sea: Philippine President Duterte Wants China Out

June 19, 2018
President Duterte wants China out of the Philippine-claimed areas in the West Philippine Sea (South China Sea)
President Duterte walks with Foreign Affairs Secretary Alan Peter Cayetano during the 120th anniversary of the Departmernt of Foreign Affairs in Pasay City yesterday.

Krizjohn Rosales
Alexis Romero (The Philippine Star) – June 19, 2018 – 12:00am

MANILA, Philippines — President Duterte wants China out of the Philippine-claimed areas in the West Philippine Sea (South China Sea), but yesterday reiterated he would not declare war over the maritime row as Beijing is not a pushover that can be scared easily.

Duterte, who has been accused of not doing enough to assert the Philippines’ maritime rights, said he was not ready to sacrifice the lives of soldiers and policemen for a war he could not win.

He also claimed that his administration has protested the actions of China in the West Philippine Sea but did not elaborate.“With regard to South China Sea, what do you want? What kind of pugnacious attitude would I have to adopt to convince the Chinese to get out? If I threaten them or file a thousand protests, which we did, we just did not publish them. We protested actually,” the President said during the 120th anniversary of the Department of Foreign Affairs (DFA) in Pasay City.

He added that China has adopted an intransigent attitude.

“But if you talk to them, they will listen,” he said. “I cannot hit China. China is no pushover. You cannot scare him, and even the United States has shown a little bit of apprehension… There’s always a parity now of arms and that. You know that if you go against China, Russia will join the fray,” the President said.

The scenario, he said, would only mean the explosion of all nuclear bombs and “it’s going to be goodbye for everybody.”

For him, striking a deal with China has benefits, hinting of a possible joint exploration between the two countries.

“We have a deal. I can import the arms, the guided missiles, I can fight better. Because there is a new art of war now, it is not in the open field… China is not my ace. But certainly I can have the arms. Something good will happen, I’m sure, and that will be when we start to dig or anybody else, start to dig the minerals there,” the President added.

He also downplayed reports that members of Chinese Coast Guard forcibly seized the catch of Filipino fishermen in Panatag (Scarborough) Shoal, saying it was a “barter” and not an outright seizure of fish.

Last week, Filipino fishermen confirmed that Chinese Coast Guard forcibly took their prime catch from Panatag Shoal, a traditional fishing ground off Zambales that is within the Philippines’ exclusive economic zone.

The fishermen said the Chinese Coast Guard personnel gave them noodles, cigarettes and bottled water in exchange for the fish but these were not enough to feed their families.

Chinese Ambassador Zhao Jianhua has assured the Philippines that the Chinese government would probe the incident and would punish “rotten apples” who are guilty of harassing the Filipino fishermen.

Meanwhile, Foreign Affairs Secretary Alan Peter Cayetano told diplomats and officials who have doubts and are having a hard time following Duterte’s foreign policy that “it’s not too late” to have a change of heart.

He praised the work of diplomats, officials and personnel of the DFA, saying it is an agency that never sleeps because of the tasks relating to foreign policies and the protection of rights and welfare of overseas Filipino workers (OFWs).  – Pia Lee-Brago

https://www.philstar.com/headlines/2018/06/19/1825891/duterte-wants-china-out-west-philippine-sea-no-war

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What Economists Say About Trump’s New China Trade Threats

June 19, 2018
Trump is betting he can win in ‘poker game’ with China — Agricultural exporters may benefit from China tariffs on U.S.
U.S. President Donald Trump

Photographer: Andrew Harrer/Bloomberg

President Donald Trump is threatening to slap tariffs on another $200 billion in Chinese imports as trade tensions between the world’s two largest economies reach new heights.

Here’s how economists and China-watchers are reacting to the brewing trade war:

William Zarit, chairman of American Chamber of Commerce
in China, in an interview with Bloomberg TV:

“If there is a next $200 billion, depending on what those products are, I think the USTR will continue to minimize the hit” on the U.S. economy. Part of the U.S. strategy is to limit Chinese investment, licensing and joint ventures of high-tech technologies that it sees as in its “national economic interests.”

“China needs to open it up. Innovation is done globally. Open up the innovation globally and open up the investment so that both China and the U.S. and other countries can really benefit from this Made-in-China 2025 strategy.”

Rajiv Biswas, Asia Pacific chief economist
at IHS Markit in Singapore:

“The Trump administration is calculating that it will win this high stakes game of poker, since the large U.S. bilateral trade deficit of $375 billion means that China will run out of U.S. imports that it can hit with tariff countermeasures long before the U.S. does.”

“The collateral damage from an escalating U.S.-China trade war will be widespread, hitting many Asian countries that are part of China’s manufacturing supply chain in sectors such as electrical and electronic products.”

“However, there will also be some winners from the trade diversion effects of rising tariffs on U.S.-China trade. For example, Chinese tariffs on U.S. imports of agricultural products will result in Chinese importers switching orders to suppliers in other agricultural exporting nations, such as Australia, New Zealand, Brazil and Canada.”

“While China can apply tariffs to an additional $80 billion of U.S. imports, there are some key U.S. technology imports such as semiconductors, where it will hurt China’s own industrial competitiveness to impose steep tariffs on U.S. imports. The U.S. strategy of applying intensifying pressure on China through Section 232 and Section 301 tariffs, combined with proposed legislation in the U.S. Senate that would continue to ban U.S. sales to China’s communications multinational ZTE, is creating the perfect storm for China’s export industry.”

“With a compromise trade deal between the U.S. and China unlikely to be agreed quickly, a protracted and intensifying U.S.-China trade war is looming in the second half of 2018 with significant collateral damage to other Asian exporters that are part of China’s manufacturing supply chain.”

Chen Xingdong, chief China economist
at BNP Paribas SA in Beijing:

Trump “seems to be aware there is no way to make a substantial cut into trade deficits with China in the short run as the U.S. does not have alternatives to reduce imports from China” and there’s only little things the U.S. can do to increase exports to China.

“In the short term he and his hardliners want to just put pressure on China. He and his hardliners are now seeking a long-term objective to rebalance the economic relationship with China. The real aim is to target China’s tech development or Made in China 2025.”

Jake Parker, vice president of China operations
at U.S.-China Business Council:

“From our perspective, the Trump administration in the 301 case has correctly identified the problems that need to be addressed, particularly IP and technology protection, but tariffs won’t solve these problems, they’ll just damage U.S. economic interests.”

  • Is he concerned that U.S. companies in China will be affected?

“Absolutely. We’re already beginning to see some increased regulatory scrutiny against U.S. companies operating in the market, whether it’s increased customs enforcement, local emissions inspections at our companies’ factories, stricter enforcement of the advertising law. All of these things are beginning to happen.”

“It’s difficult to draw a direct link between U.S.-China trade tensions, but there does seem to be a trend emerging of U.S. companies being targeted by Chinese regulators in response to enhanced conflict between the two sides. We’re obviously also concerned about growing nationalism that could turn anti-American, that would potentially lead to boycotts of U.S. goods.”

Victor Shih, a professor at the
University of California San Diego:

“Obviously, U.S. firms still have a number of major wholly owned and joint-venture operations in China, and at the extreme, the Chinese government can slow or even stop production or sales in these facilities. Of course, China’s growth, which has weakened in recent months, will come under further pressure. Such extreme measures would spell the beginning of an all-out trade and economic war between the United States and China.”

Tao Dong, vice chairman for Greater China at
Credit Suisse Private Banking in Hong Kong:

“It’s obvious that China would run out of ammunition. First, given that it has a trade surplus against the U.S. It has to spread retaliation to the other areas, such as service imports or even the capital account, if it wants to keep the ‘same scale retaliation’ doctrine. To me, however, there is no winner in a trade war. Escalation is not the way out of a mess.”

Michael Every, head of financial markets
research for Rabobank Group in Hong Kong:

“China can’t respond on trade to the U.S. It will obviously squeeze U.S. firms; try to build a coalition against it; and perhaps threaten to devalue the currency by letting it float; or — as a last resort — ultimately maybe even escalate in the geopolitical space, as if to say ‘Do you really want to risk all this for the sake of Made in China 2025?’ That’s their way of showing they are all in. And it’s an open question how the U.S. would respond right now.”

Tommy Xie, an economist at
Oversea-Chinese Banking Corp. in Singapore:

Instead of becoming trapped in a “tit-for-tat vicious cycle, we expect China to expedite its plan to boost its domestic demand via proactive fiscal policies to cut tax and increase expenditure. On a positive note, the recent faster fiscal revenue growth is expected to provide some buffer to the potential trade war.”

“From a monetary policy perspective, maybe it is the time for us to see a more stimulative PBoC. Against the backdrop of rising default risks, slowing growth and a looming trade war, I guess it is not so difficult for the PBoC to make a choice to safeguard the bottom line of no financial risk.”

Shane Oliver, chief economist at AMP Capital in Sydney:

“China will no doubt respond with its own threatened tariffs –- but will be constrained as it only imports $130 billion from the U.S. So the danger is that it resorts to other forms of retaliation like cutting back its purchases of U.S. Treasury Bonds — although this may backfire as it would only push the renminbi up against the dollar, which is not what China wants.”

“Knowing that China only imports $130 billion from the U.S. may be why Trump opted for the amount of $200 billion, knowing China cannot fully match it.”

“At this stage the U.S. probably sees all this as part of a bargaining strategy to get China to change. The danger is that after the May 19 agreement fell through, China finds it harder to trust the U.S.”

Katrina Ell, an economist at Moody’s Analytics in Sydney

“The U.S. is trying to address its objections to the ‘Made in China 2025’ development strategy, where China plans to achieve dominance and self-sufficiency in the high-tech space, toppling other important tech hubs including the U.S. The second is China’s industrial policies. The U.S. takes issue with China’s requirement that U.S. firms share technology in exchange for access to China’s market. It is well acknowledged that local Chinese firms generally receive preferential treatment in business dealings compared with foreign operated firms and the Trump administration is trying to negotiate changes.”

— With assistance by Michael Heath, Kevin Hamlin, Yinan Zhao, and James Mayger

Bloomberg
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Global stocks sell-off as as trade war fears intensify

June 19, 2018

Investors alarmed as the threat of tariffs between two of the world’s key economies deepen

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US President Donal Trump’s plans for more tariffs on China hit shares © AP

Edward White in Taipei and Hudson Lockett in Hong Kong 


Asian stock markets tumbled and Europe opened lower on Tuesday after Donald Trump threatened China with a further $200bn in tariffs, increasing fears that a long-simmering spat between the two countries risks turning into a damaging trade war.

The Shanghai Composite closed down 4 per cent, putting it below the 3,000-point mark for the first time in more than 20 months, while the Shenzhen Composite slumped almost 6 per cent.

Investors’ anxieties were sharpened after Mr Trump late on Monday asked officials to find a further $200bn in Chinese goods that could be subject to tariffs unless Beijing drops its vow to retaliate against an earlier set of US measures.

“We are starting to see signs of deepening market concern now that we can effectively confirm that a bilateral trade war is under way between the US and China,” said Sean Callow, a strategist at Westpac.

The latest exchange between two of the world’s most important economies was enough to send European equities lower at Tuesday’s open, with Germany’s Dax down 1.5 per cent. Futures also pointed to a lower open on Wall Street, with S&P 500 futures 1.2 per cent lower.

In Hong Kong the benchmark Hang Seng was down 3.2 per cent while the Hang Seng China Enterprises index focused on large Chinese companies slid 3.9 per cent.

“The US open is going to be critical to see if Trump’s words and China’s responses can start to really shake the cosy consensus in the US market that everything is absolutely fine and new highs are a god-given right,” said Chris Bailey, European strategist at Raymond James.

The losses came after Mr Trump said in a statement on Monday evening in the US that he had directed the US Trade Representative to identify $200bn of Chinese goods for additional tariffs at a rate of 10 per cent. That came after China responded at the weekend in equal measure to US plans, announced last week, for tariffs on $50bn of Chinese goods .

But Beijing showed no sign of backing down, with China’s commerce ministry saying: “If the US suffers a loss of rationality and issues a [tariff] list, China will have to adopt strong countermeasures, which will be comprehensive measures combining quantity and quality.”

Most other Asia equities benchmarks were down markedly as well with Tokyo’s Topix closing down 1.6 per cent and the Kospi off 1.5 per cent in Seoul. Only the S&P/ASX 200 closed basically flat after walking back earlier gains.

“The fact the sell-off is relatively widespread across Asian assets reflects investors’ recognition that global supply chains mean tariffs on one product leaving a port in China for sale in the US likely involves the exports of several countries and components made by several companies,” said JPMorgan Asset Management strategist Hannah Anderson.

The $200bn in additional tariffs come despite more than a year of negotiations and escalating threats between the world’s two biggest economies. The previously announced US tariffs were set to take effect in early July, as will those announced by China’s finance ministry.

On Monday, Deutsche Bank economists warned that, while the first round of tariffs had a negligible impact on China’s economy, the damage would be much higher if the US initiated another round.

“The Chinese government so far has refrained from punishing US firms doing business in China. But if the trade war escalates, China may go beyond trade and look at the US firms’ business interests in China as candidates for retaliation,” they wrote in a report.

Expectations of tit-for-tat tariffs over the next several months will generate more volatility in global markets, Moody’s analysts Madhavi Bokil and Lillian Li cautioned.

“If trade policy uncertainty and financial market volatility also weaken consumer and corporate sentiment, the second-order impact of tariff increases would be to dampen currently robust global growth momentum,” they wrote in a report.

https://www.ft.com/content/8c4995d2-7387-11e8-aa31-31da4279a601

U.S. Senate passes defense bill, battle looms with Trump over China’s ZTE

June 19, 2018

The U.S. Senate passed a $716 billion defense policy bill on Monday, backing President Donald Trump’s call for a bigger, stronger military but setting up a potential battle with the White House over Chinese telecommunications firm ZTE Corp.

A sign of ZTE Corp is pictured at its service centre in Hangzhou, Zhejiang province, China.
A sign of ZTE Corp is pictured at its service centre in Hangzhou, Zhejiang province, China. PHOTO: STRINGER/REUTERS

The Republican-controlled Senate voted 85-10 for the annual National Defense Authorization Act, or NDAA, which authorizes U.S. military spending but is generally used as a vehicle for a broad range of policy matters.

Before it can become law, the bill must be reconciled with one already passed by the House of Representatives. That compromise measure must then be passed by both chambers and signed into law by Trump.

Considered must-pass legislation, the fiscal 2019 Senate version of the NDAA authorizes $639 billion in base defense spending, for such things as buying weapons, ships and aircraft and paying the troops, with an additional $69 billion to fund ongoing conflicts.

This year, the Senate included an amendment that would kill the Trump administration’s agreement to allow ZTE to resume business with U.S. suppliers, one of the few times the Republican-led Senate has veered from White House policy. That ZTE provision is not included in the House version of the NDAA.

While strongly supported by some of Trump’s fellow Republicans as well as some Democrats, the measure is opposed by the White House and some of its close Republican allies, who control the House as well as the Senate.

It could face a difficult path to being included in the final NDAA, especially if Trump lobbies the Republican-led Congress against it, as he is expected to do.

Republicans and Democrats have expressed national security concerns about ZTE after it broke an agreement to discipline executives who had conspired to evade U.S. sanctions on Iran and North Korea.

The U.S. government placed a ban on ZTE earlier this year, but the Trump administration reached an agreement to lift the ban while it is negotiating broader trade agreements with China and looking to Beijing for support during negotiations to halt North Korea’s nuclear weapons program.

Republicans Tom Cotton and Marco Rubio and Democrats Chuck Schumer and Chris Van Hollen, who led the Senate push for the ZTE provision, said in a joint statement after the vote that they were “heartened” by support, adding: “It is vital that our colleagues in the House keep this bipartisan provision in the bill as it heads toward a conference.”

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But the final NDAA could include only a much less stringent provision, included in the House bill, that would bar the Defense Department from dealing with any entity using telecommunications equipment or services from ZTE or another Chinese company, Huawei Technologies Co Ltd HWT.UL.

FOREIGN INVESTMENT RULES

The Senate version of the NDAA also seeks to strengthen the inter-agency Committee on Foreign Investment in the United States, which assesses deals to ensure they do not compromise national security.

The bill would allow CFIUS to expand the deals that can be reviewed, for example making reviews of many proposed transactions mandatory instead of voluntary and allowing CFIUS to review land purchases near sensitive military sites.

The Senate NDAA also includes an amendment prohibiting sales to Turkey of F-35 Joint Strike Fighter jets made by Lockheed Martin Corp (LMT.N) unless Trump certifies Turkey is not threatening NATO, purchasing defense equipment from Russia or detaining U.S. citizens.

Senators included the legislation because of the imprisonment of U.S. pastor Andrew Brunson and the purchase of the S-400 air defense system from Russia.

The measure also includes an amendment to bar the U.S. military from providing aerial refueling support for the Saudi-led coalition in Yemen unless Secretary of State Mike Pompeo certifies that Saudi Arabia is taking urgent steps to end the civil war in Yemen, ease the humanitarian crisis there and reduce the risk to civilians.

Shipbuilders General Dynamics Corp (GD.N) and Huntington Ingalls Industries Inc (HII.N) could benefit from the bill’s authorization of advance procurement of materials needed for the Virginia class nuclear submarines.

Reporting by Patricia Zengerle an Mike Stone; Additional reporting by Diane Bartz; Editing by Chris Sanders and and Peter Cooney

Reuters

Huawei hits back at Australian security concerns amid tension with China

June 19, 2018
Australia fears sensitive infrastructure will fall into the hands of Beijing if the company is handed major contracts

Chinese telecoms equipment maker Huawei Technologies refuted Australian claims it poses a security risk, calling the criticism “ill-informed” in an open letter on Monday that threatens to inflame already heightened tensions between Canberra and Beijing.

Australia is likely to ban Huawei from participating in a 5G mobile telecommunications roll-out in the nation as it fears the company is de facto controlled by China and sensitive infrastructure will fall into the hands of Beijing, according to Australian media reports.

Huawei denies the allegations, and, in a move that threatens to draw Australian politicians into a public spat that will further stain relations with China, dismissed Canberra’s security concerns.

“Recent public commentary around China has referenced Huawei and its role in Australia and prompted some observations around security concerns,” Huawei Australia Chairman John Lord and board directors John Brumby and Lance Hockridge wrote in the unprecedented letter.

“Many of these comments are ill-informed and not based on facts.”

Australian Prime Minister Malcolm Turnbull has accused Beijing of meddling in its affairs
Australian Prime Minister Malcolm Turnbull has accused Beijing of meddling in its affairs CREDIT:  GETTY

Huawei, the world’s largest maker of telecommunications network equipment and the No 3 smartphone supplier, has already been virtually shut out from the giant US market because of national security concerns.

Australia has longstanding concerns about Huawei. In 2012 it banned the company from supplying its massive National Broadband Network, and in May Canberra committed millions of dollars to ensure Huawei did not build an internet cable between Australia and the Solomon Islands.

A decision on 5G would come amid a low in Beijing-Canberra relations. Canberra is preparing to pass laws designed to limit Beijing’s influence in domestic affairs following criticism by Australian Prime Minister Malcolm Turnbull late last year that Beijing was meddling in its affairs.

Huawei said in the letter it operates in 170 countries, abiding by national laws and guidelines. Citing 5G investments in Britain, Canada and New Zealand, the company said those governments had taken up its offer to evaluate the company’s technology to make sure it abided by cybersecurity protocols.

Australia’s Attorney-General Christian Porter refused to comment on the specifics of Huawei’s letter but said the letter would be seen in a different light once the country’s Foreign Interference Bill, which will require individuals to declare links with foreign governments, is passed.

“(If) you are acting on behalf of what we would define as a foreign government-related entity, and you’re lobbying government, you are trying to affect an outcome for government decisions or you’re trying to affect an outcome of an Australian democratic process, that’s fine but we simply want it done with full transparency,” Porter told reporters in Canberra.

The Foreign Interference Bill could pass Australia’s Parliament as early as this week.

“It won’t be great for the relationship if Australia bans Huawei but it won’t come as a huge surprise,” said Merriden Virrall, director at Australian think tank the Lowy Institute.

“What is important is how Australia articulates it. Australia can’t make sweeping statements about great foreign powers. That will determine the response from China.”

Alienating China could herald additional trade restrictions from Beijing, analysts said, as six Australian wines, including some produced by Treasury Wine Estates and Pernod Ricard, continue to suffer in shipping supplies to China.

Australia’s wine exports to China were worth A$848 million ($631.17 million) last year and are forecast to top A$1 billion in 2018, government figures show. Some analysts say those figures now look optimistic.

“The bilateral relationship isn’t in a great place, and the government’s announcement will be another major pothole,” said Danielle Cave, a former analyst at an Australian security intelligence agency, the Office of National Assessments.

Erdogan faces biggest challenge in tight Turkey polls

June 19, 2018

President Recep Tayyip Erdogan on Sunday faces the biggest ballot box challenge of his 15-year grip on Turkey, seeking to overcome a revitalized opposition against the background of an increasingly troubled economy.

A self-styled heavyweight champion of campaigning, Erdogan has won successive elections since his Islamic-rooted ruling party came to power in 2002, transforming Turkey with growth-orientated economic policies, religious conservatism and an assertive stance abroad.

Recep Tayyip Erdogan has won successive elections since his ruling party came to power in 2002, transforming Turkey with growth-orientated economic policies, religious conservatism and an assertive stance abroad. (Reuters)

But he appears to have met some kind of match in his main presidential rival Muharrem Ince, a fiery orator from the left of the Republican People’s Party (CHP) who has been unafraid to challenge Erdogan on his own terms.

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Muharrem Ince

The intrigue is deepened by the holding of presidential and parliamentary elections on the same day under controversial constitutional changes spearheaded by Erdogan which will hand the new Turkish president enhanced powers and scrap the office of prime minister.

The vote takes place almost two years after the failed coup aimed at ousting Erdogan from power, a watershed in its modern history which prompted Turkey to launch the biggest purge of recent times under a state of emergency that remains in place.

Some 55,000 people have been arrested in a crackdown whose magnitude has sparked major tensions with Ankara’s Western allies.

“NEW POLITICAL DYNAMIC”

Only a knockout first round victory for Erdogan and a strong parliamentary majority for his ruling Justice and Development Party (AKP) will be seen as an unequivocal victory for the Turkish leader.

And many analysts believe Ince can force a second round on Jul 8, while AKP risks losing its parliamentary majority in the face of an unprecedented alliance between four opposition parties.

“This is not the classical opposition that he has been facing for 15 years and which he more or less succeeded in managing and marginalising,” said Elise Massicard of the French National Centre for Scientific Research.

“It’s a new political dynamic that has grown in magnitude,” she told AFP.

“OPPOSITION FRAMING DEBATE”

The opposition was already boosted by the relatively narrow victory of the “Yes” campaign in the April 2017 referendum on the constitutional changes.

Most opinion polls – to be treated with caution in Turkey – suggest Erdogan will fall short of 50 per cent in the first round.

Erdogan remains by far Turkey’s most popular politician and inspires sometimes near-fanatical support in the Anatolian interior, where he is credited with transforming lives through greater economic prosperity.

“A great Turkey needs a strong leader,” says the slogan on election posters of Erdogan plastered across Turkey.

But the elections come at a time when Turkey is undergoing one of its rockiest recent economic patches despite high growth, with inflation surging to 12.15 per cent and the lira losing 20 per cent against the dollar this year.

Erdogan brought the elections forward from November 2019 in what many analysts saw as a bid to have them over with before the economy nosedived.

The opposition has sought to play on signs of Erdogan fatigue and also echoed Western concerns that freedom of expression has declined drastically under his rule.

For the first time, Erdogan has been forced to react in the election campaign as the opposition set the pace.

He had to deny quickly when Ince accused him of meeting the alleged architect of the 2016 failed coup, Fethullah Gulen. Erdogan promised to lift Turkey’s two-year state of emergency only after the CHP had vowed the same.

“The opposition is able to frame the debate in the election and this is a new thing for Turkish politics,” Asli Aydintasbas, fellow with the European Council on Foreign Relations (ECFR) told AFP,

“A party that has been in power for so long is, in an economic downturn, going to experience a loss (in support) and lose its hegemony over politics,” she added.

“PRESIDENT FOR EVERYONE”

While the CHP sees itself as the guardian of a secular and united Turkey, Ince has also sought to win the support of Turkey’s Kurdish minority who make up around a fifth of the electorate.

image: https://www.channelnewsasia.com/image/10445876/0x0/768/484/ad069617dbfbe3157048d606d2393d8a/bd/composition-of-the-current-turkish-parliament-1529377393880-2.jpg

Composition of the current Turkish parliament

Composition of the current Turkish parliament. (Graphic: AFP)

A rally held by Ince in the Kurdish stronghold of Diyarbakir in the southeast attracted considerable attention. “A president for everyone,” reads his election slogan, over a picture of the affably smiling former physics teacher.

The opposition, which argues that Erdogan has been given a wildly disproportionate amount of media airtime in the campaign, has sometimes resorted to creative and even humorous campaign methods.

The Iyi (Good) Party of Meral Aksener, once seen as a major player but lately eclipsed by Ince, put out humorous messages on Google ads and even devised a computer game where light bulbs – the AKP symbol – get destroyed.

Selahattin Demirtas, the candidate of the pro-Kurdish Peoples Democratic Party (HDP), has campaigned from his prison cell following his jailing in November 2016. He made an election speech on speaker phone through his wife’s mobile but was allowed give a brief election broadcast on state TV, albeit from prison.

Source: AFP/zl — Reuters

Read more at https://www.channelnewsasia.com/news/world/erdogan-faces-biggest-challenge-in-tight-turkey-polls-10445878

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