Companies welcome US-China trade truce but disputes remain

Villagers work on drying bamboo products in bunches for making chopsticks. (Reuters)
Updated 13 October 2019

Companies welcome US-China trade truce but disputes remain

  • Suspension of planned tariff hike gives space for substantive negotiations, but a final settlement may take years

BEIJING: Companies have welcomed a US-Chinese trade truce as a possible step toward breaking a deadlock in a 15-month-old tariff war, while economists caution there was little progress toward settling core disputes including technology that threaten global growth.

President Donald Trump said Washington will suspend a tariff hike planned for Tuesday on $250 billion of Chinese goods. In exchange, Trump said, China agreed to buy as much as $50 billion of American farm goods. Details of other possible agreements weren’t immediately released.

The bruising battle over China’s trade surplus and technology ambitions has disrupted global trade. Economists warn a final settlement might take years to negotiate. Despite that, financial markets rise ahead of each round of talks and fall back when no progress is reported.

Companies acknowledged Friday’s agreement was a modest step and appealed to both governments to step up efforts to end the fight that is battering manufacturers and farmers.

Washington still is planning a Dec. 15 tariff hike on $160 billion of smartphones and other imports. Before then, Trump and Chinese President Xi Jinping are due to attend an economic conference in Chile in mid-November. That is raising hopes a face-to-face meeting might produce progress.

“Taking tariffs out of the equation for at least the next two months will give space for substantive negotiations,” said Jake Parker, senior vice president of the US-China Business Council (USCBC), an industry group.

Trump said Friday’s deal has yet to be put down on paper but said, “We should be able to get that done over the next four weeks.”

China’s government welcomed “substantial progress” but gave no details of possible agreements.

“I don’t think it’s a victory, but it eases the situation,” said economist Yu Chunhai at Renmin University in Beijing. He said both sides want to restore business and consumer confidence.

There was no word of agreements on the core issues that sparked the dispute. Those include US pressure on Beijing to roll back plans for government-led creation of global competitors in robotics, electric cars and other technologies.

“There remains significant work ahead to address many of the most important US trade and investment priorities,” Myron Brilliant, executive vice president of the US Chamber of Commerce, said in a statement. Still, he called Friday’s announcement a “ray of hope.”

Washington, Europe, Japan and other trading partners say China’s plans violate its market-opening obligations and are based on stealing or pressuring companies to hand over technology. Chinese leaders see those tactics as the surest path to prosperity and global influence.

“With the key structural issues no closer to being resolved, we suspect that a mini deal would, at best, simply delay a breakdown in the negotiations,” said Julian Evans-Pritchard and Martin Lynge Rasmussen of Capital Economics.

Friday’s announcement also made no mention of commitments by Beijing in sensitive areas including subsidies to industry and cybersecurity, or the status of telecom equipment giant Huawei, which faces damaging US sanctions.

Trump imposed curbs in May on sales of American components and technology to Huawei Technologies, China’s first global tech brand. Trump has said he is willing to use Huawei, one of the biggest global makers of smartphones and network switching gear, as a bargaining chip in the trade talks.

“The two sides will now return to a ‘muddle through’ strategy that avoids further tariff escalation but may not substantially reduce tensions,” Michael Hirson and Kelsey Broderick of Eurasia Group wrote in a report. “Both the US and China are likely to continue targeting each other through non-tariff measures, such as investment restrictions and regulatory barriers, which will be highly disruptive.”

Tit-for-tat tariff hikes by both sides have raised costs for producers and consumers. Some companies are shifting production and supply lines out of China to avoid the US tariffs, suggesting they expect the sanctions to stay in place for an extended period.

China’s exports to the US, its biggest foreign market, have plunged, adding to pressure on Xi’s government to shore up cooling economic growth and avoid politically dangerous job losses.

The looming Dec. 15 tariff hike leaves a “black cloud” over Apple and other tech companies with factories or customers in China, said Dan Ives of Wedbush Securities in a report. He said it would be a “gut punch” if it goes ahead.

US complaints about Chinese technology policies, cyber spying and protection of patents and other intellectual property “will be the focus of tech investors,” said Ives.

Another potential stumbling block is how to enforce any agreement.

Talks broke down in May over Beijing’s insistence that Trump’s punitive tariffs had to be lifted once a deal took effect. Washington says some must remain in place to ensure Chinese compliance. Trump and Xi agreed in June to resume negotiations but there have been no breakthroughs.

Despite that, Beijing has gone ahead with other industry-opening initiatives aimed at making China’s economy more competitive and productive. None, however, addresses Trump’s complaints and business groups say they have had little impact on foreign companies.

On Friday, regulators announced a timetable for an initiative announced in 2017 to abolish limits on foreign ownership of some financial businesses. That starts with futures traders Jan. 1 and extends to securities firms and mutual fund managers later in the year.

“Even if it is not a new liberalization or something that hasn’t been announced before, it is still positive to have a date on the horizon for when companies can apply,” said Parker of the USCBC.

Escalating violence ups pressure for Myanmar sanctions

Updated 07 March 2021

Escalating violence ups pressure for Myanmar sanctions

  • The UN special envoy urged the Security Council to act to quell junta violence that this week killed about 50 demonstrators
BANGKOK: The escalation of violence in Myanmar as authorities crack down on protests against the Feb. 1 coup is raising pressure for more sanctions against the junta, even as countries struggle over how to best sway military leaders inured to global condemnation.
The challenge is made doubly difficult by fears of harming ordinary citizens who were already suffering from an economic slump worsened by the pandemic but are braving risks of arrest and injury to voice outrage over the military takeover. Still, activists and experts say there are ways to ramp up pressure on the regime, especially by cutting off sources of funding and access to the tools of repression.
The UN special envoy on Friday urged the Security Council to act to quell junta violence that this week killed about 50 demonstrators and injured scores more.
“There is an urgency for collective action,” Christine Schraner Burgener told the meeting. “How much more can we allow the Myanmar military to get away with?“
Coordinated UN action is difficult, however, since permanent Security Council members China and Russia would almost certainly veto it. Myanmar’s neighbors, its biggest trading partners and sources of investment, are likewise reluctant to resort to sanctions.
Some piecemeal actions have already been taken. The US, Britain and Canada have tightened various restrictions on Myanmar’s army, their family members and other top leaders of the junta. The US blocked an attempt by the military to access more than $1 billion in Myanmar central bank funds being held in the US, the State Department confirmed Friday.
But most economic interests of the military remain “largely unchallenged,” Thomas Andrews, the UN special rapporteur on the rights situation in Myanmar, said in a report issued last week. Some governments have halted aid and the World Bank said it suspended funding and was reviewing its programs.
Its unclear whether the sanctions imposed so far, although symbolically important, will have much ímpact. Schraner Burgener told UN correspondents that the army shrugged off a warning of possible “huge strong measures” against the coup with the reply that, “‘We are used to sanctions and we survived those sanctions in the past.’”
Andrews and other experts and human rights activists are calling for a ban on dealings with the many Myanmar companies associated with the military and an embargo on arms and technology, products and services that can be used by the authorities for surveillance and violence.
The activist group Justice for Myanmar issued a list of dozens of foreign companies that it says have supplied such potential tools of repression to the government, which is now entirely under military control.
It cited budget documents for the Ministry of Home Affairs and Ministry of Transport and Communications that show purchases of forensic data, tracking, password recovery, drones and other equipment from the US, Israel, EU, Japan and other countries. Such technologies can have benign or even beneficial uses, such as fighting human trafficking. But they also are being used to track down protesters, both online and offline.
Restricting dealings with military-dominated conglomerates including Myanmar Economic Corp., Myanmar Economic Holdings Ltd. and Myanmar Oil and Gas Enterprise might also pack more punch, with a minimal impact on small, private companies and individuals.
One idea gaining support is to prevent the junta from accessing vital oil and gas revenues paid into and held in banks outside the country, Chris Sidoti, a former member of the UN Independent International Fact-Finding Mission on Myanmar, said in a news conference on Thursday.
Oil and gas are Myanmar’s biggest exports and a crucial source of foreign exchange needed to pay for imports. The country’s $1.4 billion oil and gas and mining industries account for more than a third of exports and a large share of tax revenue.
“The money supply has to be cut off. That’s the most urgent priority and the most direct step that can be taken,” said Sidoti, one of the founding members of a newly established international group called the Special Advisory Council for Myanmar.
Unfortunately, such measures can take commitment and time, and “time is not on the side of the people of Myanmar at a time when these atrocities are being committed,” he said.
Myanmar’s economy languished in isolation after a coup in 1962. Many of the sanctions imposed by Western governments in the decades that followed were lifted after the country began its troubled transition toward democracy in 2011. Some of those restrictions were restored after the army’s brutal operations in 2017 against the Rohingya Muslim minority in Myanmar’s northwest Rakhine state.
The European Union has said it is reviewing its policies and stands ready to adopt restrictive measures against those directly responsible for the coup. Japan, likewise, has said it is considering what to do.
The Association of Southeast Asian Nations, or ASEAN, convened a virtual meeting on March 2 to discuss Myanmar. Its chairman later issued a statement calling for an end to violence and for talks to try to reach a peaceful settlement.
But ASEAN admitted Myanmar as a member in 1997, long before the military, known as the Tatmadaw, initiated reforms that helped elect a quasi-civilian government led by Aung San Suu Kyi. Most ASEAN governments have authoritarian leaders or one-party rule. By tradition, they are committed to consensus and non interference in each others’ internal affairs.
While they lack an appetite for sanctions, some ASEAN governments have vehemently condemned the coup and the ensuing arrests and killings.
Marzuki Darusman, an Indonesian lawyer and former chair of the Fact-Finding Mission that Sidoti joined, said he believes the spiraling, brutal violence against protesters has shaken ASEAN’s stance that the crisis is purely an internal matter.
“ASEAN considers it imperative that it play a role in resolving the crisis in Myanmar,” Darusman said.
Thailand, with a 2,400 kilometer (1,500-mile)-long border with Myanmar and more than 2 million Myanmar migrant workers, does not want more to flee into its territory, especially at a time when it is still battling the pandemic.
Kavi Chongkittavorn, a senior fellow at Chulalongkorn University’s Institute of Security and International Studies, also believes ASEAN wants to see a return to a civilian government in Myanmar and would be best off adopting a “carrot and stick” approach.
But the greatest hope, he said, is with the protesters.
On Saturday, some protesters expressed their disdain by pouring Myanmar Beer, a local brand made by a military-linked company whose Japanese partner Kirin Holdings is withdrawing from, on people’s feet — considered a grave insult in some parts of Asia.
“The Myanmar people are very brave. This is the No. 1 pressure on the country,” Chongkittavorn said in a seminar held by the East-West Center in Hawaii. “It’s very clear the junta also knows what they need to do to move ahead, otherwise sanctions will be much more severe.”

China exports soar to highest level in decades after COVID-19 hit

Updated 07 March 2021

China exports soar to highest level in decades after COVID-19 hit

  • Exports were boosted by electronics and mask shipments

BEIJING: China's export growth jumped to the highest in over two decades, official data showed Sunday, with imports also surging in a sharp bounceback from the coronavirus outbreak that had brought activity to a near halt.
Exports spiked 60.6 percent on-year in the January-February period, above analysts' expectations and boosted by electronics and mask shipments, while imports rose 22.2 percent, official data showed Sunday.

California theme parks, stadiums to reopen soon

Updated 07 March 2021

California theme parks, stadiums to reopen soon

  • Parks initially will be open only to state residents amid safety precautions

LOS ANGELES: California health officials on Friday gave Walt Disney Co.’s Disneyland and other theme parks the go-ahead to reopen at limited capacity from April 1, after a closure of almost a year due to the coronavirus disease (COVID-19) pandemic.

Capacity will be limited to between 15 percent and 35 percent, the California Department of Health said in an update. Masks and other safety measures will be required and the parks initially will be open only to state residents.

Outdoor stadiums and ball parks will also be allowed to reopen at reduced capacity, starting April 1.

Ken Potrock, president of the Disneyland Resort, said in a statement that the decision meant “getting thousands of people back to work and greatly helping neighboring businesses and our entire community.”

“With responsible Disney safety protocols already implemented around the world, we can’t wait to welcome our guests back,” Potrock said.

He did not give a date for the reopening of Disneyland in the southern California city of Anaheim.

Disney shares were trading at $195.10 after hours, after closing at $189.99.

Disney in September said it was furloughing some 28,000 workers, mostly across its US theme parks in California and Florida. Walt Disney World in Florida reopened in July last year, with limited capacity.

Friday’s announcement follows a decline in coronavirus disease (COVID-19) cases in California and the rollout of vaccines. A parking lot at Disneyland is currently being used as a mass vaccination site.

Theme parks like Disneyland, Universal Studios, Legoland and Knott’s Berry Farm protested strongly last October when California health officials ruled out any quick reopening of their attractions.

The California Attractions and Parks Association called Friday’s announcement “encouraging news.”

“Parks now have a framework to safely and responsibly reopen ... putting people safely back to work and reinvigorating local economies,” the association said in a statement.

US economy likely to grow between 5-6% in 2021

Updated 07 March 2021

US economy likely to grow between 5-6% in 2021

  • The US economy could grow between 5 percent and 6 percent this year

ATLANTA: The US economy could grow between 5 percent and 6 percent this year, Atlanta Fed President Raphael Bostic said on Friday.

He said the economy is still under “considerable distress” and the Federal Reserve will continue to provide support until the labor market is stronger and average inflation is on track to meet the US central bank’s long-term target.

“We’re ready and able … to support the recovery as long and as strongly as necessary,” Bostic said during a virtual event organized by Stanford University.

The US economy could grow between 5 percent and 6 percent this year, Bostic said. But he cautioned that the labor market could face structural changes as a result of the pandemic that may require some laid-off service-sector workers to train for jobs in new industries.

A decline in business travel and increased use of automation could mean that some of the jobs lost during the pandemic will not return, Bostic said.

“We need to do all we can to minimize the long-term damage from the pandemic crisis and to make sure that the recovery is as broad-based and as inclusive
as possible.”

Asked if he thought the Fed needs to take action to respond to rising bond yields, which could be a sign that investors are raising their inflation expectations, Bostic said high inflation is not a concern right now.

“Inflation has not been a real stress point in terms of the economic performance for quite a long time,” Bostic said, adding that the Fed will continue to monitor for signs of stronger price growth.

How can Saudi firms move on from COVID-19 survival mode?

Updated 06 March 2021

How can Saudi firms move on from COVID-19 survival mode?

  • Alvarez and Marsal has been advising companies in the Kingdom on how best to pivot out of the tough times

JEDDAH: Alvarez and Marsal (A&M) is a New York-headquartered global professional services firm known in the industry as “the turnaround guys.” Legend has it that co-founder Bryan Marsal was one of the first people called when Lehman Brothers looked set to become the first major casualty of the global financial crisis in 2008.

A&M was founded in 1983 and now has representatives in 25 countries, including Dubai, from where it is now attempting to help Middle Eastern clients restructure their businesses after the challenges of 2020. As demand for its services grows, the company is aiming to increase its staff in the Middle East to 150 over the next five years, from 10 in 2015.

According to Paul Gilbert, head of A&M’s Turnaround and Restructuring practice in the Middle East, two of the most important steps management can take to overcome crises are to take total control over cash flow and to put in place a 12-month contingency plan to help the business stay afloat. Gilbert is currently working on the restructuring of Abu Dhabi’s NMC Health and has previously advised on rescue proceedings for South African Airways.

“Continue with cash preservation and cost control. Talk to your suppliers and landlords — those guys are suffering too, but they still want your business to come out of the other end,” Gilbert told Arab News. “These guys want to talk to you because they want to know that you’re going to be around at the end of it to help them rebuild their own businesses.”

According to Dr. Saeeda Jaffar, managing director and head of the Middle East at A&M, the pandemic has impacted companies in three major ways. There were companies that understood what was going on immediately and took “advantage of discontinuity” to find ways to succeed. Those companies already had a digital business model that supported their shift to digital, or had reacted nimbly to acquire a digital solution, so the transition was not as drastic as it has been for others.

The second group went into what Jaffar calls “hibernation mode,” by opting to minimize losses by decreasing costs, conserving cash, restricting loans and balances and generally steering away from bold decisions until the uncertainty passes.

The companies in the third group, Jaffar said, had weak business models and were unattractive to investors, so were bound to face difficulties.

One of the sectors that has suffered most has been retailers, according to Gilbert. “We’ve helped them across Europe with negotiations with landlords, with other creditors and helped them pivot from bricks-and-mortar stores to digital, and concentrated on helping them retain their customer base for when they come out,” he said. “Many of them are coming out of that period with a balance sheet that is either extremely stretched or has been restructured in a way that a number of lenders have now had to take equity back.”

Other sectors, including travel, tourism, aviation and real estate, have suffered tremendous losses during the pandemic as well.

In Saudi Arabia, Jaffar said that domestic tourism numbers exceeded expectations at the end of 2020.

“I think that’s a trend that will continue. That’s very much in line with the Vision 2030. We continuously see that there is a lot of development happening in the Kingdom, new resorts, new places, new developments that help continue to grow the tourism sector,” she said.

Jaffar believes it will take longer for aviation to recover than many industries, perhaps three to four years, she said.

On the other hand, technology — which Jaffar said has been the “backbone” for many other sectors — and healthcare — which has witnessed considerable investment in pharma consumables — have both prospered during the pandemic, a trend that Jaffar expects to continue in the near future.

Both A&M consultants suggest that as companies emerge from the pandemic, many will be looking at potential consolidation. Therefore, they said, mergers and acquisition activity will see a spike in 2021.

“There are a lot of strategic investors from the region that have learned over the last few cycles that investing now, when the valuations are more affordable, is probably a good time in terms of financial attractiveness,” said Jaffar.