Posts Tagged ‘World Trade Organization’

Big Brother Comes for Foreign Firms in China — ‘IT-backed authoritarianism’ — Can The West Do Business in China Safely? — Can the Playing Field Ever Be Level?

May 23, 2017

Beijing’ aims to harness big data to monitor and rate companies; ‘IT-backed authoritarianism’

China is harnessing big data to keep tabs on companies as part of a ‘social-credit’ system to be rolled out in 2020.

China is harnessing big data to keep tabs on companies as part of a ‘social-credit’ system to be rolled out in 2020. PHOTO: OU DONGQU/XINHUA/ZUMA WIRE

May 23, 2017 5:30 a.m. ET

SHANGHAI—The all-seeing eyes of the Chinese state are focusing on businesses.

China is already rolling out an IT-enabled rating system to govern the behavior of individuals. Less attention is being paid to its other application: Big Brother is also harnessing big data to create the world’s most extensive system of corporate surveillance and control.

Think of it as the ultimate tool of Chinese state capitalism.

The Mercator Institute for China Studies, a German think tank, calls it “IT-backed authoritarianism.”

Foreign companies had better get used to the attention, the institute warns in a new report. They are very much part of the Social Credit System intended to produce conformity not just with laws and regulations covering such things as factory emissions and worker safety but the state’s long-range industrial plans.

The backbone of the system will be up and running by 2020. As it becomes more sophisticated, it will generate corporate scorecards from masses of data extracted from cameras, sensors and e-commerce trading platforms. Low scorers might expect higher taxes, or more expensive loans; high scorers lucrative investment opportunities.

The world’s liberal trading order has never faced a challenge quite like it, and foreign investors are just now trying to fathom its implications. “Data ownership helps autocratic systems,” says Jörg Wuttke, the outgoing president of the European Chamber of Commerce in China.

The Trump administration is fixated on traditional threats to trade. Wilbur Ross, the commerce secretary, recently hailed a new U.S.-China trade agreement that opens the Chinese market to U.S. beef, liquefied natural gas and selected financial institutions as “a herculean accomplishment.”

That may be true, though it misses the wider point: The real challenge to foreign businesses in China these days is occurring behind its borders.

Despite China’s pledges to give markets a greater role, President Xi Jinping is leading a retrograde drift toward industrial command-and-control.

Invoking security concerns, authorities are squeezing foreign technology suppliers out of critical infrastructure projects, such as banking networks. A “Made in China 2025” industrial blueprint aims to replace foreign technologies with Chinese ones in areas from artificial intelligence to robotics and semiconductors. A firewall shuts out U.S. media giants.

If Deng Xiaoping’s economic “open door” is indeed clanging shut, behind it lies an increasingly hostile environment for multinationals. They are now on notice to actively support Mr. Xi’s grand statist project to turn China into a “manufacturing superpower.”

The social-credit system of rewards and punishments is the enforcement mechanism.

To view it solely as a kind of Orwellian dystopia, though, would be a mistake. Frauds and fakes plague the Chinese marketplace; better data will boost consumer trust.

Likewise, stronger data collection will help enforce environmental regulation; monitors lurking in chimneys will spot excessive factory emitters, while smart meters will spy on surges in energy usage beyond permitted levels.

Dash cams aboard truck fleets will identify errant drivers. Digital feeds from e-commerce sites will expose glitches in customer service and payment irregularities.

Big data will capture infractions in real time, allowing instant downgrading of rolling credit scores. Yet this self-enforcing regulatory system is at the same time pernicious.

Eventually, predicts Mercator, Chinese and foreign companies watching their credit scores are more likely to fall in line behind state planning objectives, whether or not they make commercial sense. Already, car makers are under pressure to pour investments into clean-energy vehicles under a production-quota arrangement.

The Mercator report, which draws on publicly available Chinese documents, predicts that the social-credit system “could become a powerful, big-data-enabled tool kit for monitoring, rating and steering the behavior of participants into a politically desired direction.”

Of course, the system could end up wrecking the economy. Excessive regulation risks upsetting the delicate balance between government control and commercial disruption that allows innovation to flourish.

Then there are IP concerns. Chinese authorities, openly committed to nurturing state-owned national champions, will wind up with troves of highly sensitive commercial data from foreign competitors. A data breach could be calamitous.

And how will the ratings be compiled? The suspicion of antiforeign bias will be hard to dispel. The National Development and Reform Commission, the main body overseeing the project, declined to comment.

It’s unclear what the West can offer as a defense. The best hope of dealing with state capitalism is the Trans-Pacific Partnership, which the Trump administration has abandoned. The giant free-trade deal is intended to set new regulatory benchmarks in areas like the digital economy and the role of state-owned enterprises—domains not properly covered by the World Trade Organization. (The remaining 11 countries in the pact are struggling to keep TPP alive.)

As it is, foreign players in the world’s fastest-growing technology and consumer markets will shortly find themselves looking over their shoulders at the whizzing numbers on their scorecards. When Big Brother is the regulator, their fortunes will be at the mercy of invisible eyes and mysterious algorithms.

Write to Andrew Browne at




Trade Groups Appeal to Beijing to Postpone Cybersecurity Law — “Law completely contradicts what Xi Jinping said Sunday at Belt and Road forum.”

May 15, 2017

BEIJING — A coalition of 54 global business groups appealed to Chinese authorities Monday to postpone enforcing a cybersecurity law they warned violates Beijing’s free-trade pledges and might harm information security.

The appeal by groups from the United States, Japan, Britain and other countries adds to complaints Beijing is improperly limiting access to its markets for technology products, possibly to support its own fledgling suppliers.

In a letter to Chinese regulators and the ruling Communist Party’s cybersecurity committee, the groups said the Cybersecurity Law due to take effect June 1 might violate Beijing’s trade commitments and make theft of information easier. It would limit use of foreign security technology and require data about Chinese citizens to be stored within the country.

Signers included the Business Software Alliance, the U.S. Chamber of Commerce and trade groups for insurers, technology suppliers and manufacturers from Britain, Japan, Australia, Mexico and South Korea.

Many of them were among 46 groups that made a similar appeal in 2016 for changes in the cybersecurity law, which weren’t made.

“We are deeply concerned that current and pending security-related rules will effectively erect trade barriers,” said the letter. “China’s current course risks compromising its legitimate security objectives (and may even weaken security) while burdening industry and undermining the foundation of China’s relations with its commercial partners.”

The groups appealed to Beijing to postpone enforcing the law until it can be made consistent with Chinese market-opening commitments and World Trade Organization rules.

The complaint coincided with a trade forum in Beijing that began Sunday at which Chinese President Xi Jinping appealed to foreign leaders from two dozen countries in Asia, Africa and Europe to resist political pressure to limit trade.

Xi’s government has promoted itself as a champion of free trade in response to calls in the United States and Europe to limit imports. Despite that, China’s trading partners complain it is the most-closed major economy and business groups say Beijing is further reducing access to markets for technology and other products in which it is trying to develop its own suppliers.

Communist leaders say China needs the data controls to prevent terrorism and anti-government activity. But officials of Chinese industry groups quoted in the state press have said previous restrictions on use of foreign security technology also were intended to shield the country’s fledgling providers from competition.

Trade groups have previously said planned Chinese data storage rules do nothing to improve security and create market barriers for foreign providers.

They say the requirement for foreign e-commerce and other companies to store data about Chinese customers within the country would add to the cost and difficulty of doing business by requiring them to set up duplicate storage operations.

Restrictions on use of security technology in an earlier Chinese anti-terrorism law and rules for banks prompted a similar outcry from business groups that said they would prevent most use of foreign products.


Xi Jinping Positions China at Center of New Economic Order

BEIJING — President Xi Jinping of China delivered a sweeping vision of a new economic global order on Sunday, positioning his country as an alternative to an inward-looking United States under President Trump.

Mr. Xi, surrounded by autocratic leaders from Russia and Central Asia at a forum in Beijing, pledged more than $100 billion for development banks in China that he said would spearhead vast spending on infrastructure across Asia, Europe and Africa. Noticeably absent from the gathering were leaders of major Western democracies.

Sparing no modesty for the plan, Mr. Xi called the initiative, known as “One Belt, One Road,” “this project of the century.” The program, based on Chinese-led investment in bridges, rails, ports and energy in over 60 countries, form the backbone of China’s economic and geopolitical agenda.

In a new twist for China, which has generally been skeptical of social programs by the World Bank, Mr. Xi said the initiative would tackle poverty in recipient countries. He promised to deliver emergency food aid and said China would begin “100 poverty projects,” though he stopped short of providing details.

He portrayed the plan as “economic globalization that is open, inclusive, balanced and beneficial to all.” China would invite the World Bank and other international institutions to join it in meeting the needs of developing — and developed — countries, he said, in a suggestion that he is seeking to forge new markets and export China’s model of state-led expansion.

Mr. Xi stressed the differences between the United States system of alliances and his notion of commerce under China.

“We have no intention to form a small group that would dismantle stability but we hope to create a big family of harmonious coexistence,” he said, with the Russian president, Vladimir V. Putin, in the front row of the convention center where he spoke.

So far, China has spent only $50 billion on the initiative that Mr. Xi announced four years ago, a relatively small amount compared with the vast domestic investment program.

But Mr. Xi told the audience — made up of more than two dozen national leaders, envoys from more than 100 countries and officials from various financial institutions and businesses — that he was increasing the amounts available to China’s main policy banks.


Read the rest:

U.S. fails to reassure Europe, Japan over ‘Trumponomics’

May 14, 2017


Sat May 13, 2017 | 2:23pm EDT

By David Lawder and William Schomberg | BARI, ITALY

The United States said on Saturday the world’s other rich economies were getting used to the policy plans of President Donald Trump, but Europe and Japan showed they remained worried about Washington’s shift.

Officials from the Group of Seven nations met in southern Italy hoping to hear more about Trump’s plans which they fear will revive protectionism and set back the global approach to issues such as banking reform and climate change.

U.S. Treasury Secretary Steven Mnuchin said the United States reserved the right to be protectionist if it thought trade was not free or fair.

“We do not want to be protectionist but we reserve our right to be protectionist to the extent that we believe trade is not free and fair… Our approach is for more balanced trade, and people have heard that,” Mnuchin told reporters at the end of the two-day meeting.

U.S. Secretary of the Treasury Steven Mnuchin attends a news conference during a G7 for Financial ministers, in the southern Italian city of Bari, Italy May 13, 2017. REUTERS/Alessandro Bianchi

“And as I say, people are more comfortable today, now that they’ve had the opportunity to spend time with me and listen to the president and hear our economic message.”

Other ministers from the G7 countries made it clear they did not share his view.

“All the six others … said explicitly, and sometimes very directly, to the representatives of the U.S. administration that it is absolutely necessary to continue with the same spirit of international cooperation,” French Finance Minister Michel Sapin told reporters.

Bank of France Governor Francois Villeroy de Galhau said there was a “light breeze” of optimism within the G7 about the recovering global economy after years of sluggish growth following the financial crisis that began nearly a decade ago.

Image may contain: one or more people

But he said the continued uncertainty about the direction of U.S. policy represented a risk, echoing comments made on Friday by Japanese Finance Minister Taro Aso.

“We must not backpedal on free trade as it has contributed to economic prosperity,” Aso said.

European G7 officials complain that no-one knows what the United States understands by “fair trade” and that the only way to establish fairness was by sticking to the rules of the World Trade Organization – a multilateral framework.

They also say the U.S. demand to balance trade bilaterally was not economically sound, because trade deficits and surpluses could only be analyzed in a global context.

A senior Japanese finance ministry official said on Saturday uncertainties remained over how quickly the U.S. Federal Reserve would raise interest rates, but the biggest question mark was over possible U.S. tax cuts that could fire up an already recovering U.S. economy.

Trump has proposed slashing the U.S. corporate income tax rate and offer multinational businesses a steep tax break on overseas profits brought back home.

He dropped, however, a controversial proposal of a “border-adjustment” tax on imports as a way to offset revenue losses resulting from tax cuts.

The tax reform plans were also questioned by some European officials. “I am not so sure that with an economy already at full employment and working at full speed a fiscal stimulus would add a lot,” European Commissioner for Economic and Financial Affairs Pierre Moscovici told reporters.

“(But) we avoided some discussions which would have been more damaging, like the border adjustment tax, which is no longer on the table at this moment,” he said.

(Writing by Jan Strupczewski)



U.S. Treasury Stops Short of Calling China a Currency Manipulator

April 15, 2017

Department’s report does sharply criticize Chinese exchange-rate policies

Chinese 100-yuan notes being counted in Hong Kong. The U.S. Treasury Department said China would remain on a ‘monitoring list’ of trade partners with policies deemed to be a risk to the U.S. economy.

Chinese 100-yuan notes being counted in Hong Kong. The U.S. Treasury Department said China would remain on a ‘monitoring list’ of trade partners with policies deemed to be a risk to the U.S. economy. PHOTO: XAUME OLLEROS/BLOOMBERG NEWS

WASHINGTON—The U.S. Treasury sharply criticized China’s exchange-rate policies on Friday, though it stopped short of labeling the Asian trade giant a currency manipulator, as President Donald Trump said he would do while running for office.

“China has a long track record of engaging in persistent, large-scale, one-way foreign-exchange intervention,” the Treasury Department said in its semiannual report on foreign exchange policies of major U.S. trade partners. Although Beijing has allowed the yuan to slowly appreciate in recent years and actively fought depreciation recently, its past interventions “imposed significant and long-lasting hardship on American workers and companies,” the Treasury said.

The report followed an apparent warming of relations between the U.S. and China following a visit to Washington and Mr. Trump’s Mar-a-Lago resort by Chinese leader Xi Jinping last week. Mr. Trump is counting on Mr. Xi for support in a confrontation with North Korea. After the visit, Mr. Trump told The Wall Street Journal he wouldn’t name China a currency manipulator, a label that may have led to a deepening trade confrontation.

Still, the administration sought to stick to some of the tough themes Mr. Trump laid out as a candidate and as president on trade and currency.

“Treasury will be scrutinizing China’s trade and currency practices very closely, especially in light of the extremely sizable bilateral trade surplus that China has with the United States,” the Treasury report said.

The report has traditionally been used as a diplomatic tool to prod other countries whose currency policies were deemed a threat to U.S. industries. The latest report’s censure of China and other countries, including South Korea and Germany, could be used in the future as a pretext for new tariffs.

“Treasury is committed to aggressively and vigilantly monitoring and combating unfair currency practices,” the report said.

Preserving a two-decade precedent, no country was named a currency manipulator.

Along with Friday’s about-face was an acknowledgment by Mr. Trump and his team that Beijing has been propping the yuan up over the last two years, instead of pushing it down as the president had previously alleged. Building debt problems and a slowing economy has put downward pressure on the yuan, forcing the central bank to burn through $1 trillion, or a quarter of its foreign-exchange reserves, to keep the currency from falling.

“The administration clearly realized this was not the right time to have a fight with China over currency,” said Brad Setser, a senior fellow at the Council on Foreign Relations and a former senior U.S. Treasury official in the Obama administration.

Still, “there’s a clear suggestion that China needs to do more to open up its markets to U.S. goods and services,” Mr. Setser said. “The challenge will be getting real changes that have a real impact on the size of U.S. exports to China.”

Most Western economists agree Chinese authorities in the past used an undervalued exchange rate to help fuel its rise to being the No. 2 economy in the world. A cheaper currency makes products less expensive to produce and more attractive to buyers overseas. That was an essential factor in making China the world’s biggest manufacturing base, but it cost the U.S. and other countries millions of jobs.

During his campaign, Mr. Trump tapped into anger at China that was pent up in major manufacturing states, saying he would label the country a currency manipulator and slap fresh tariffs on its imports.

Amid rising concerns about an increasingly belligerent North Korea sparking a dangerous conflict with U.S. allies Asia, Mr. Trump earlier this week said he decided to treat Beijing with more leniency on trade and currency in exchange for Beijing’s help in reining in Pyongyang.

China was not alone in being targeted in Treasury’s latest report.

Repeating criticisms made under the Obama administration, the Treasury Department also kept China, Japan, South Korea, Taiwan, Germany and Switzerland on a special “monitoring list” that flags trade partners with currency and other economic policies deemed to be a risk to the U.S. economy.

The name-and-shame list can trigger sanctions against offending trade partners if the countries can be shown to intervene in foreign-exchange markets and maintain large trade surpluses with the U.S. and rest of the world. None of the countries met all of the criteria.

Japan and South Korea, two major U.S. trade partners, have long been on Treasury’s radar in part because they have pushed down the value of their currencies in the past. And even though Germany doesn’t control the value of the euro because it is only one member of the European currency union, the country has been targeted because its economic policies and a relatively weak euro have helped the country to achieve the world’s largest trade surplus.

Future reports could step up the criticism, given Treasury’s latitude under the original laws guiding the report to Congress.

China could again allow the yuan to fall, triggering fresh criticism from U.S. manufacturers and renewed political pressure on the administration to label them a manipulator. There are costs to keeping the yuan stable beyond selling exchange-rate reserves. It also makes it harder for the government to meet its growth targets.

Also, the Commerce Department is preparing a study of why the U.S. has such large trade deficits with other nations, and some analysts believe that could lay the foundation for applying countervailing duties against countries that manipulate their currencies. The exchange-rate undervaluation, under a proposal the Commerce Department is considering, would be considered a subsidy.

While some trade experts question whether that plan would be compliant with current World Trade Organization rules, the administration could still use it as a pretense for levying across-the-board tariffs on imports from a currency-manipulating country.

Although many of the findings in the report repeated the basic assessments made under the Obama administration, the report still carried a distinct Trump administration tone. For example, it used sharper language in its warning trade partners against exchange-rate offenses.

“Though there has been a trend in the last two years towards reduced currency intervention by key trading partners, it is critical that this not represent merely an opportunistic response to shifting global macroeconomic conditions…but a durable policy shift away from foreign-exchange policies that facilitate unfair competitive advantage,” the report said.

“The United States cannot and will not bear the burden of an international trading system that unfairly disadvantages our exports and unfairly advantages the exports of our trading partners through artificially distorted exchange rates,” it added.

Write to Ian Talley at


Chinese Aluminum Giant Faces Credit Crunch

April 14, 2017

China Hongqiao says fraud allegations threaten its financial stability

The China Hongqiao factory in Zouping, China

The China Hongqiao factory in Zouping, China PHOTO: BRENT LEWIN/BLOOMBERG

The world’s biggest aluminum producer is in trouble, locked in a feud with its accountant over fraud allegations that have forced it to suspend trading of its shares and seek help from the central government in Beijing.

China Hongqiao Group Ltd., has drawn the attention of the global aluminum market and U.S. trade officials as it soared to the pinnacle of the industry in the past few years, leapfrogging the production of giant competitors like Alcoa in the U.S. and United Co. Rusal 0486 -2.79% PLC in Russia.

Its rise coincided with American allegations that Chinese companies—helped by government subsidies—flooded the world with cheap aluminum, coal and steel, depressed prices and decimated U.S. industries. U.S.-Chinese trade issues were a focus of a two-day summit last week between President Donald Trump and President Xi Jinping of China.

Now China Hongqiao, a Hong Kong-listed company that employs nearly 60,000 people, is facing fraud allegations from two short sellers that the firm says threaten its financial stability.

Trouble for Hongqiao could upend the aluminum industry in China and present an opportunity for American producers who say the company has been using unfair tactics to dominate the industry. It could also reinforce the broader concerns over what many view as questionable business practices by China’s big industrial giants, many of which are increasingly active on the global stage.

China Hongqiao declined to comment for this article.

In a March 4 letter reviewed by The Wall Street Journal, China Hongqiao sought assistance from a trade group, the Chinese Non-Ferrous Metals Industry Association, or CNIA, saying the short sellers’ claims of inflated profits were forcing the company’s accountant, Ernst & Young, “to adopt an extremely conservative and careful attitude.”

Then, on March 6, Ernst & Young notified the company it had suspended its audit of its 2016 financial results, according to a March 31 statement by China Hongqiao. Ernst & Young asked the company to commission an independent investigation into the short sellers’ claims, delaying the release of the company’s annual financial results, China Hongqiao said.

Without audited results, China Hongqiao said in its letter to CNIA, the company risks an investigation from Hong Kong securities regulators and a credit crunch. The company has about $10 billion in debt, according to securities filings. It could be in default on a $700 million loan unless it gets waivers from creditors, says Standard & Poor’s Global Ratings. S&P, citing the move by Ernst & Young, has downgraded China Hongqiao’s bonds a notch deeper into junk territory to B-plus.

In its March 31 statement, China Hongqiao denied the short sellers’ fraud allegations, calling them “untrue and unfounded.” Ernst & Young declined to comment.

China Hongqiao asked the CNIA and the Chinese government to come to its aid, warning in its March 4 letter of “serious effects” if nothing is done, including “regional systemic financial risks” and “dramatic social unrest.”

It isn’t clear whether the government or regulators will step in. The CNIA, the Hong Kong Securities and Futures Commission, and China’s Ministry of Industry and Information Technology, which oversees China’s industrial policies, didn’t respond to requests for comment.

The events are “very embarrassing for the Chinese and for Hongqiao,” said Paul Adkins, managing director of AZ China Ltd., a Hong Kong consultancy that tracks the Chinese aluminum industry.

The dispute shines a light on the underpinning of a Chinese aluminum boom that has roiled trade relations with the U.S.

China Hongqiao’s production capacity has almost quadrupled to 6.7 million metric tons since 2011, according to commodity researcher CRU Group. Rusal can produce 4.1 million tons of aluminum a year, Alcoa up to 3.4 million tons of aluminum a year, CRU says.

China’s aluminum output reached an estimated 31 million tons in 2016, according to the U.S. Geological Survey, more than half of global output and up 60% since 2011. That is the year China Hongqiao went public, raising $817 million. China Hongqiao’s founder, Zhang Shiping, holds an 81% stake in the company worth $5.3 billion, according to FactSet.

The U.S. government in January launched a formal complaint against the Chinese government with the World Trade Organization, accusing China of funneling artificially cheap loans from state-run banks to aluminum producers including China Hongqiao. China provides China Hongqiao with access to cheap coal, aluminum and electricity, according to the WTO complaint.

China’s Ministry of Commerce denied the subsidies alleged by the WTO are provided to the industry.

Separately, American aluminum firms have alleged Chinese aluminum magnate Liu Zhongtian has stockpiled aluminum products around the world, sparking a U.S. federal investigation into dumping, or selling products below market prices. Mr. Liu has denied the accusations.

China Hongqiao’s factory in Zouping

China Hongqiao’s factory in Zouping PHOTO: BRENT LEWIN/BLOOMBERG

Questions about China Hongqiao’s finances were raised in November, when an anonymous short seller wrote on a website called Hongqiao Exposed that the company’s profits are “too good to be true.” China Hongqiao in the March 31 statement called the report “untrue and unfounded.”

On Feb. 28, more allegations emerged in a 46-page report by Emerson Analytics, a trading firm that says it focuses on Chinese stock-market fraud.

Emerson accused China Hongqiao of “abnormally high” profits generated by underreporting production costs and disclosing electricity expenses—one of the biggest costs for aluminum producers—as much as 40% below their true cost. Emerson said it investigated Chinese electricity costs, spoke to former China Hongqiao employees and compared the company’s costs and profits with other comparable companies.

China Hongqiao in the March 31 statement denied the Emerson report’s allegations and said it hired an investigative agency to look into the firm and people behind the claims. Emerson declined to comment.

China Hongqiao has been more profitable than some Chinese competitors. For instance, China Hongqiao earned an average operating profit margin of 27% in the past five years, compared with minus-1.7% for state-owned Aluminum Corp. of China , known as Chalco, and 5.9% for Alcoa, according to FactSet.

“People were always skeptical about how they managed to be more profitable than their peers,” said Sandra Chow, a credit analyst at CreditSights.

Write to Scott Patterson at and Brian Spegele at


First warning signs appear for UK’s resilient economy

March 27, 2017


© AFP / by Patrice NOVOTNY | London’s financial centre, The City, will face headwinds if Britain leaves the EU without a negotiated deal
LONDON (AFP) –  Britain’s economy has for months defied the cataclysmic predictions made by campaigners for staying in the EU ahead of last year’s referendum but its smooth run shows signs of hitting the skids.


As Britain begins the delicate process of extracting itself from the European Union, headwinds are expected for the economy even though the forecast financial storm has so far failed to materialise.

The first nine months since the Brexit vote have been deftly handled by Prime Minister Theresa May, aided by the Bank of England’s injections of liquidity into the banking system and unflagging consumer confidence.

The economy grew by a wholly respectable 1.8 percent in 2016 and could expand by 2.0 percent this year, according to the latest forecasts.

But economists say the positive results are due to the fact that nothing concrete has happened on the Brexit front since the referendum on June 23.

The real question is what will happen over the two years of likely fraught negotiations ahead.

– Top of the rollercoaster –

“Right now, it feels like we’re just reaching the top of the Article 50 rollercoaster,” said Paul Drechsler, head of the Confederation of British Industry, the country’s main big business lobby.

“Any minute now… we’ll suddenly drop into the twists and turns of negotiations,” he said.

Drechsler said the worst outcome would be if London and Brussels were to hammer out a divorce without a new trade deal in place that would allow businesses on both sides to prepare for the hefty cost of Britain leaving the European single market.

May, who has said she will take Britain out of the single market in order to be able to reduce immigration, has said she is ready to implement Brexit without a deal if the conditions put forward by EU negotiators are too demanding.

Businesses are warning against such an outcome and say that it would hit two key sectors particularly hard — the powerful financial sector and a car industry that is currently in full bloom.

By way of example, if Britain is forced to fall back on World Trade Organization rules for trading with the EU after it leaves, British car exports would face a 10-percent tariff at the EU border.

Any announcement by carmakers about their activities in Britain is already making the government jumpy, be that investment by Nissan in Sunderland in northeast England, job cuts by Ford in Wales or PSA’s takeover of Vauxhall factories.

British employers have also been pushing hard for EU nationals to be allowed to continue coming in.

The immigrant labour force, particularly from Eastern Europe, has greatly helped the economy in recent years but constituted a key argument for the Brexit campaign and helped explain the vote outcome.

Sectors that depend on low-skilled workers such as retail, catering and construction have already suffered from a slowdown in arrivals seen since the vote, the Chartered Institute of Personnel and Development said in a study published last month.

– ‘Gas in the tank’ –

Businesses are also questioning whether to invest over the next two years, since there will be uncertainty until the end of the negotiations.

“UK demand for funding from both businesses and households has been softening somewhat at the beginning of this year, which we believe is the first sign of the gradual slowing of the economy that we expect for 2017,” said Boris Glass, senior economist at S&P Global Ratings.

Consumers are also beginning to feel the effect of a sharp rise in prices due to more expensive imports — a consequence of the devaluation of the pound on currency markets caused by the Brexit vote.

With Britain facing turbulence, finance minister Philip Hammond presented a cautious budget last week that he hopes will give him enough spending power to act quickly if the economy starts to sputter.

Hammond said that “as we embark on the journey that we will be taking over the next couple of years, we are confident that we have got enough gas in the tank to see us through that journey”.

by Patrice NOVOTNY

Vietnam seeks South Korean support in South China Sea

March 20, 2017


South Korean Foreign Minister Yun Byung-Se is welcomed by Vietnam’s Deputy Prime Minister Pham Binh Minh in Hanoi, Vietnam March 20, 2017. REUTERS/Kham

Vietnam’s Prime Minister sought support for the nation’s stance in the South China Sea when he met South Korea’s foreign minister in Hanoi on Monday.

Vietnam is the country most openly at odds with China over the waterway since the Philippines pulled back from confrontation under President Rodrigo Duterte.

“The Prime Minister proposed that South Korea continue its support over the position of Vietnam and Southeast Asia on the South China Sea issue and to help the country improve its law enforcement at the sea”, the government said in a statement on its website after the meeting between Prime Minister Nguyen Xuan Phuc and South Korea’s Foreign Minister Yun Byung-se.

The statement did not say whether South Korea backed Vietnam’s position on the South China Sea.

Yun did affirm his country’s willingness to promote ties despite instability in South Korea after the ousting of President Park Geun-hye over a graft scandal.

South Korea is Vietnam’s biggest foreign investor thanks to companies like Samsung.

South Korea and China are currently in dispute over deployment of the U.S. anti-missile defense system. South Korea on Monday has complained to the World Trade Organization about Chinese retaliation against its companies over the deployment.

Last week, Vietnam demanded China stop sending cruise ships to the area in response to one of Beijing’s latest moves to bolster its claims to the strategic waterway.

China claims 90 percent of the potentially energy-rich South China Sea. Brunei, Malaysia, the Philippines, Vietnam and Taiwan lay claim to parts of the route, through which about $5 trillion of trade passes each year.

(Reporting by My Pham; Editing by Julia Glover)




Divisions on Trade Dominate G-20 Global Summit

March 20, 2017

Mnuchin persuades fellow finance chiefs to drop disavowal of protectionism from G-20 communiqué, but concerns remain about conflicts


Updated March 19, 2017 7:58 p.m. ET

BADEN-BADEN, Germany—World finance chiefs struggled during a weekend of tense talks to find common ground on boosting trade in a global economy that is finally showing faint signs of momentum.

U.S. Treasury Secretary Steven Mnuchin, rejecting a concerted effort by rivals here, got finance officials to drop a disavowal of protectionism from a closely watched policy statement issued by the Group of 20 industrialized and developing nations.

For Washington, the watered-down language that emerged in their communiqué ensures the U.S. can still use sanctions or other policy tools to punish trade partners and thwart economic policies the Trump administration believes to be unfair.

Despite the pressure Mr. Mnuchin faced, Washington showed it still holds significant sway as the world’s consumer of last resort: The G-20 adopted a pledge to promote fairness as it pursued economic growth.

G-20 officials warned the U.S. risks starting a tit-for-tat trade war if it acts too aggressively, but Mr. Mnuchin said Washington wants to avoid trade wars while seeking to rebalance off-kilter economic relationships.

German Chancellor Angela Merkel and Japanese Prime Minister Shinzo Abe greeted each other at the opening of the CeBIT trade fair in Hannover, Germany, on March 19.Photo: Peter Steffen/Zuma Press

German Chancellor Angela Merkel, who chairs the G-20 this year, signaled her frustration with global tensions over trade on Sunday, two days after a meeting with U.S. President Donald Trump, which at times appeared strained. Mr. Trump said after that meeting that he supported free and fair trade, but talks on a trans-Atlantic deal between the U.S. and European Union appear stalled.

“In times when we have to fight with many people about free trade, open borders, democratic values, it’s a good sign that Germany and Japan don’t fight,” she said after a meeting with Japanese Prime Minister Shinzo Abe in Hannover, Germany.

Without mentioning the U.S. or Mr. Trump, her remarks seemed to be directed that way. “We want free, open markets.… We don’t want to build up any barriers,” Ms. Merkel said.

Mr. Trump has made trade a centerpiece of his economic agenda—vowing to win better treatment from rivals including Germany, China and Mexico.

“The United States has been treated very, very unfairly by many countries over the years,” Mr. Trump said in Washington on Friday before meeting with Ms. Merkel. “That’s going to stop.”

But the president hasn’t made it clear how hard he will push to win better trade terms or what tactics he will employ, leaving U.S. trade partners uncertain and at times frustrated.

Mr. Trump has vowed to rewrite the North American Free Trade Agreement and has threatened different measures—including tariffs on U.S. imports and punishment for U.S. companies that outsource jobs—to improve the U.S. trade position.

Saturday’s G-20 statement dropped an earlier commitment to “resist all forms of protectionism,” wording that appeared in a similar communiqué forged by finance officials in Chengdu, China, last July.

Most other G-20 officials pressed Mr. Mnuchin at the meeting to preserve that reference, but failed, a senior G-20 official said.

“It was not the best communiqué that was ever produced by the G-20, certainly,” the EU’s economics commissioner, Pierre Moscovici, said in an interview.

Although the G-20’s commitments aren’t binding, the promises made member countries lend the group power through diplomatic peer pressure. Past U.S. administrations believe, for example, the G-20 was effective in prodding China to appreciate its exchange rate and nudging the European Union to build a better financial firewall against sovereign-debt risks.

At a press conference on Saturday, Mr. Mnuchin said earlier language on protectionism “was not necessarily relevant from my standpoint.” He also said some global trade agreements weren’t being enforced, and that the new administration would be aggressive in doing so.

Cross-border trade terms can be beneficial to both the U.S. and other nations, Trump’s economic envoy said. “We can do that in a way that‘s good for the American worker, good for our companies and that’s good for our counterparties,” he said.

German Finance Minister Wolfgang Schäuble, who hosted the Baden-Baden gathering, had hoped Mr. Trump’s top economic envoy would offer a vision of U.S. trade policy that tempered the most aggressive threats by the president and White House officials, including unilateral tariffs and other punitive sanctions against trade partners.

But the G-20 treasury chiefs reached an impasse.

Mr. Schäuble said at a press conference that Mr. Mnuchin appeared to have no mandate to negotiate any new or creative commitments on trade.

“Sometimes you have to limit yourself at such a meeting to not asking too much of one partner. You can’t ask too much of him anyway because he would then simply not agree to it,” Mr. Schäuble said.

In failing to secure a written agreement from the U.S. that would repeat past G-20 vows to reject protectionism in all its forms, many officials said they were departing confused about where the Trump administration will ultimately land on trade policy.

The Treasury secretary advanced his boss’s view, promoting “free and fair trade.”

Mr. Moscovici, a former French finance minister, described Mr. Mnuchin as “a man who wants constructive engagement,” who came to Europe “in listening mode.” He said the meeting wasn’t confrontational, and that it was a time “to try to identify with the new administration.”

Still, Mr. Moscovici regretted the absence of a clearer mention of fighting protectionism or climate change, and pledged that the EU would push back against measures that undermined open and functioning markets.

At the meeting, Brazil Finance Minister Henrique Meirelles told the G-20 about his country’s own experience with protectionism, as the country has just experienced its worst recession on record.

“We had adopted during the last years some protectionist measures for some sectors of the economy and the net result was not positive,” Mr. Meirelles said in an interview. “At the end of the day, the products became more expensive and Brazil…became less competitive. In Brazil, we are moving toward a more open trade policy.”

China was among the most vocal advocates for preserving the protectionist language, even though the country’s industries, cross-border cash flows and exchange rate are still tightly managed by the Communist Party.

“China is positioning itself as an advocate for a free and open economy,” said former top U.S. Treasury diplomat Nathan Sheets. “But in order for that to be credible, China would have to complement it with true steps to open up and liberalize its economy.”

G-20 officials said they see both a new U.S. administration struggling to get up and running and competing power centers with different views on trade.

“Nobody knows what the endgame is,” a senior G-20 official said. “Either the meeting is several months too early or it’s perfect timing,” giving the G-20 an opportunity to help temper U.S. policy before it is cemented.

Investors are still confused, for example, about the administration’s dollar policy, having been given different signals from Mr. Trump and his lieutenants.

Asked who markets should heed, Mr. Mnuchin said: “They should listen to the president first and listen to me as well.”

Evidence that it may just be too soon for the U.S. to offer the G-20 anything substantive on trade, financial regulation, tax overhauls and other policies, Mr. Mnuchin relied on senior civil servants to conduct much of the detailed negotiations at the meeting. The secretary’s international diplomats have only recently been nominated and still must go through a lengthy confirmation process.

If trade czar Peter Navarro and Steve Bannon, a top Trump adviser and self-described economic nationalist, have their way, many officials fear the White House could trigger a trade war. The administration has advocated applying unilateral actions that eschew a rules-based multilateral order, including submission to the World Trade Organization’s authority.

Others in the administration, including Mr. Mnuchin and Gary Cohn, director of the National Economic Council, hold a more internationalist view of the world. If they prevail in guiding administration policy, many G-20 officials see fiery campaign rhetoric being tamed in the coming months.

Mr. Schäuble said all G-20 delegations had agreed on opposing protectionism, but that it wasn’t always clear what they meant.

Some countries are worried that failure to temper aggressive trade policy could not only trigger a round of retaliatory tariffs and a rise in other trade barriers that would damage global growth, but it also could exacerbate geopolitical tensions.

Last week, for example, U.S. Secretary of State Rex Tillerson raised the option of a pre-emptive strike against North Korea because Pyongyang’s nuclear-missile program poses a growing threat to U.S. ally South Korea.

China traditionally is able to strong-arm Pyongyang into cooling hostilities. But if U.S.-China trade tensions escalate, Beijing may in the future be less cooperative in playing that role, some analysts warn, raising the risk of a dangerous regional conflict.

The U.S. delegation found a rare ally in Japan, which came to Mr. Mnuchin’s defense, saying talks over American protectionism were overblown.

“I feel that many of those talks are exaggerated and made up,” Finance Minister Taro Aso said, adding that a summit meeting held earlier this year between Messrs. Trump and Abe involved “no discussions whatsoever that smacked of protectionism.”

Still, the International Monetary Fund is worried.

“We should collectively avoid self-inflicted injuries,” IMF Managing Director Christine Lagarde warned the group. Global cooperation can boost world growth, she said, but “the wrong ones could stop the new momentum in its tracks.”

—Andrea Thomas, Todd Buell and Takashi Nakamichi
contributed to this article.

Write to Ian Talley at, Tom Fairless at and Andrea Thomas at


Republicans Pose Growing Challenge to Trump’s Trade Agenda

March 12, 2017

GOP lawmakers warn that imposing tariffs may result in stiff retaliation

Following Donald Trump’s warnings that the North American Free Trade Agreement would be renegotiated and Mexico would have to pay for a new border wall, a Mexican lawmaker introduced legislation favoring Latin American products over American-exported corn.

Following Donald Trump’s warnings that the North American Free Trade Agreement would be renegotiated and Mexico would have to pay for a new border wall, a Mexican lawmaker introduced legislation favoring Latin American products over American-exported corn.PHOTO: DANIEL ACKER/BLOOMBERG NEWS

March 12, 2017 12:52 p.m. ET

WASHINGTON—Republican lawmakers are showing increasing resistance to President Donald Trump’s trade agenda, worried that his plans could hurt exports from their states and undermine longstanding U.S. alliances.

The concerns indicate that the biggest threat to Mr. Trump’s trade policy—which emphasizes new bilateral deals and a tougher stance against countries blamed for violating trade rules—is coming from his own party. The opposition from Republicans, who control both chambers of Congress, stands to complicate Mr. Trump’s efforts to overhaul the North American Free Trade Agreement, or Nafta, and tackle alleged trade violations in China.

“We want to support him on all those things; we’re not there yet,” said Sen. Jim Inhofe (R., Okla.), whose state depends on aerospace and agricultural exports.

While many Democrats in Congress are interested in working with the Trump administration, Republicans who have long backed free trade—many of them close to business groups—are warning that imposing tariffs could lead to retaliation against U.S. goods. Lawmakers from farm states are upset that Mr. Trump in January pulled out of the unratified Trans-Pacific Partnership, or TPP, the 12-nation trade agreement that Barack Obama negotiated.


“I’m more concerned about what they might do renegotiating existing agreements than what they do bilaterally with countries they don’t have agreements with,” said Sen. Chuck Grassley (R., Iowa), a member of the committee that oversees trade. “We know what we have, and I guess I don’t think it’s as bad as what the president thinks it is,” he said, citing Nafta, which opened markets for farm exports.

Mr. Trump rode a wave of economic discontent to the White House, threatening to undo traditional U.S. trade policy and challenging the orthodoxy of Republican lawmakers who have long backed freer trade.

Since then, few members of the president’s party—or allied big business groups—have challenged him openly on the issue. Many are eager to cooperate with the White House on high-priority goals they share—notably overhauling Mr. Obama’s health-care law, and cutting corporate taxes—and don’t want to offend the new administration during fractious debates over those polices, congressional aides say.

But as the administration’s trade agenda moves forward on several fronts, lawmakers are voicing their reservations. Those concerns are expected to be on display this week as the Senate Finance Committee grills Robert Lighthizer, Mr. Trump’s nominee for U.S. Trade Representative.

“My concern is that they’re making it too difficult to enter into trade agreements,” said Sen. Cory Gardner (R., Colo.). “I’m concerned that when we remove ourselves from the playing field of multilateral opportunities, our trading partners will look elsewhere for leadership—and that leadership can come from countries that don’t follow the same norms and values that we do,” he added, alluding to China’s attempts to fill the void in Asia following the U.S. withdrawal from the TPP.

Mr. Trump recently sent to Congress a trade policy agenda that backs an aggressive reliance on rarely used U.S. law to punish trading partners and questions the authority of the Geneva-based World Trade Organization as an arbitrator of international disputes. House Republicans who oversee trade issues fired back a strong statement backing the WTO and existing U.S. agreements.

Also, House Speaker Paul Ryan (R., Wis.) in December raised objections to legislation that would require the use of American-made steel in U.S. water infrastructure projects.

Mr. Trump’s pledge to renegotiate Nafta is expected to provide an early test of congressional support for his policies. U.S. lawmakers took note when a Mexican lawmaker introduced legislation favoring Latin American products over American-exported corn, a key winner in Nafta. That move followed warnings from Mr. Trump that Nafta would be renegotiated and Mexico would have to pay for a new border wall.

“I have been worried because other countries have pushed back: ‘You want us to build a wall, well we’re not going to take your corn,’” said Sen. Joni Ernst, an Iowa Republican. “If we’re talking about renegotiating Nafta, we actually stand to lose ground in agriculture—so we would really have to work that very, very carefully.”

If Mr. Trump follows through on threats to raise tariffs “it could cause some dire economic consequences,” said Utah Republican Sen. Mike Lee. “I hear about it constantly when I talk to people throughout my state.” Mr. Lee, who has long backed a greater role for Congress, this year introduced a bill that would strip the president of powers to impose tariffs without congressional approval.

Congress has grown more polarized on trade in recent years, with Democrats allied with labor unions critical of Nafta and other deals.

Sen. Sherrod Brown (D., Ohio), who began working with Mr. Trump and his advisers a few days after the November election, says he is concerned congressional Republicans may get in the way.

“I’m worried that it’s going to be an ongoing fight between the president and his promises on the one hand, and Republican leadership, who are usually in the tank with companies,” Mr. Brown said.

Others say they are waiting to see just what measures the Trump trade team will actually implement, and who will prevail among his diverse group of advisers who range from hard-liners advocating a sharp turn, to finance leaders steeped in the advantages of globalization.

“Honestly there has been some inconsistency,” said Sen. John Cornyn (R., Texas), a member of the Senate Republican leadership as well as the committee overseeing trade. “Some of the rhetoric has been a little jarring, but what really counts is what they do.”

Write to William Mauldin at and Jacob M. Schlesinger at


China says trade war will only bring “pain” — Trump administration stepping back from World Trade Organization rules

March 11, 2017


© AFP/File | Containers on a ship in Qingdao, eastern China’s Shandong province
BEIJING (AFP) – China on Saturday warned the US against launching a trade war, saying that both countries would suffer if US President Donald Trump follows through on his threats.

The billionaire politician has repeatedly accused China of using unfair trade policies to steal jobs from the US, threatening to retaliate with massive tariffs unless Beijing changes tack.

“A trade war is not in the interest of the two countries and the two peoples,” China’s Minister of Commerce Zhong Shan told reporters on the sidelines of the country’s annual political gathering in Beijing.

“It’s fair to say trade war will only cause pain without gains.”

He said that US exports to China have increased by an average of about 11 percent per year over the last decade, while Chinese exports have only increased by 6.6 percent over the same period, noting that the Asian giant is also a major importer of American goods like soybeans, cars and Boeing airplanes.

“This clearly shows that China and America are very important to each other,” he added.

On Thursday, Zhong’s American counterpart Wilbur Ross said that the trade conflict with China and other countries has already been on for decades, but the US is just now beginning to fight back.

China is the world’s biggest trader in goods. It accounts for about $350 billion of the US trade deficit, about half the total.

The warning was the second time this week that China has railed against a possible trade war, amid growing indications that the Trump administration is serious about pursuing a protectionist agenda.

Last week the United States Trade Representative sent a letter to Congress saying that Americans are not directly subject to rulings by the World Trade Organization, which Washington joined when it was founded in 1995.

The assertion provoked a warning from China’s commerce ministry that attempts to ignore the organisation?s rules could lead to “a repetition of the trade war of the 1930s.”