Coca-Cola is hoping for a caffeine-fueled boost with the acquisition of British coffee chain Costa.

Costa is Britain’s biggest coffee company, with over 2,400 coffee shops in the U.K. and another 1,400 in more than 30 countries, including around 460 in China, its second-biggest market. Coca-Cola said Friday it will buy the Costa brand from Whitbread for 3.9 billion pounds ($5.1 billion) in cash.

The deal, expected to close in the first half of 2019, comes on the heels of Coca-Cola’s announcement earlier in August that it was buying a minority ownership stake in sports drink maker BodyArmor for an undisclosed amount. Coca-Cola’s other investments in recent years have included milk that is strained to have more protein and a push into sparkling water.

The move is Coca-Cola’s latest diversification as health-conscious consumers, at least in America, move away from traditional soda.

Rival PepsiCo, meanwhile, recently bought carbonated drink maker SodaStream, which produces machines that allow people to make fizzy drinks in their own homes.

Coca-Cola already owns the Georgia and Gold Peak coffee brands, which make bottled and canned drinks, but the purchase of Costa could allow it to compete with brands like Starbucks.

Coffee is growing by 6 percent a year, making it one of the fastest-growing beverage categories in the world, said James Quincey, Coca-Cola president & CEO.

“Hot beverages is one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand,” he said.

Coca-Cola has over 500 brands in its stable including Fanta, innocent smoothies and Powerade sports drinks. In 2017, it generated operating income of $9.7 billion on revenues of $35.4 billion.

Without being specific about expansion plans, Quincey said in a video posted on Coca-Cola’s website that the company would “over time” look to take Costa “to more people in more places.”

Costa doesn’t currently have a presence in North or South America, but Quincey indicated that one potential early expansion route would be to use Costa’s vending operation and grow the company’s ready-to-drink products. In addition to its shops, Costa has self-serve coffee machines in grocery stores and gas stations.

Whitbread bought Costa for 19 million pounds in 1995, when it had just 39 shops. In recent years, Whitbread has invested heavily in Costa’s expansion overseas, but had been looking to siphon off the business to generate funds for the expansion and for its other business, the budget hotel chain Premier Inn.

Then Coca-Cola got in touch with what Whitbread said was a “highly compelling” offer. The Whitbread board unanimously backed the deal.

Whitbread will use a “significant majority” of the net cash proceeds — around 3.8 billion pounds after taking into account such things as transaction costs — returning cash to shareholders. Some will be used to pay down debt and to make a contribution to the pension fund.

Doing so, Whitbread said, would “provide headroom” to further expand the Premier Inn budget hotel chain in Britain and Germany.

Whitbread’s share price soared 17 percent in early afternoon trading in London.

Nicholas Hyett, equity analyst at London-based stockbrokers Hargreaves Lansdown, said Costa will get “lots of care and attention” from Coca-Cola.

“Its global reach should turbo-charge growth in the years to come, and hot drinks are one of the few areas of the wider beverages sector where the soft drinks giant doesn’t have a killer brand,” he said.
…

Ports and ground terminals in nearly every state handle goods that are now or will likely soon be covered by import tariffs. Port executives worry that this could mean a slowdown in shipping that would have ripple effects on truckers and others whose jobs depend on trade.

The Associated Press analyzed government data and found that from the West Coast to the Great Lakes and the Gulf of Mexico, at least 10 percent of imports at many ports could face new tariffs if President Donald Trump’s proposals take full effect.

Since March, the U.S. has applied new tariffs of up to 25 percent on nearly $85 billion worth of steel and aluminum and various Chinese products, mostly goods used in manufacturing.

Trump said in a recent tweet, “Tariffs are working big time.” He has argued that the tariffs will help protect American workers and force U.S. trading partners to change rules that the president insists are unfair to the United States.

In New Orleans, port officials say a tariff-related drop in shipments is real, not merely a forecast. Steel imports there have declined more than 25 percent from a year ago, according to the port’s chief commercial officer, Robert Landry.

The port is scouting for other commodities it can import. But expectations appear to be low.

“In our business, steel is the ideal commodity,” Landry said. “It’s big, it’s heavy, we charge by the ton so it pays well. You never find anything that pays as well as steel does.”

The port of Milwaukee imports steel from Europe and ships out agricultural products from the Midwest. Steel imports haven’t dropped yet because they are under long-term contracts, said the port director, Adam Schlicht. But there has been “an almost immediate halt” in outbound shipments of corn because of retaliatory duties imposed by the European Union on American products.

Much of the corn, he said, “is just staying in silos. They are filled to the brim.”

Many other ports have been humming along and even enjoyed an unexpected bump in imports during June and July as U.S. businesses moved up orders to ship before the new tariffs took effect. That started with manufacturing goods and is now spreading to retail items for back-to-school and Christmas.

“Some of my retail customers are forward-shipping the best they can to offset proposed tariffs,” says Peter Schneider, executive vice president of T.G.S. Transportation, a trucking company in Fresno, California.

Port officials were encouraged by this week’s announcement that the United States and Mexico had reached a preliminary agreement to replace the North American Free Trade Agreement, hoping it might lead to reduced trade barriers. Canada’s participation in any new deal to replace NAFTA, though, remains a major question mark.

The port officials continue to worry, though, that Trump will make good on a plan to expand tariffs to an additional $200 billion in Chinese imports — a list that includes fish and other foods, furniture, carpets, tires, rain jackets and hundreds of additional items. Tariffs would make those items costlier in the United States. And if Americans buy fewer of those goods, it would likely lead to fewer container ships steaming into U.S. ports.

The impact will be felt keenly at West Coast ports like Los Angeles and Long Beach.

Los Angeles Mayor Eric Garcetti, relying on information from his port officials, said his port — the biggest in the United States — could suffer a 20 percent drop in volume if the additional $200 billion in tariffs are imposed against Chinese goods.

Jock O’Connell, an economist in California who studies trade, said he doubts a downturn would be so severe — that would match the slump that accompanied the global recession of 2008 — “but we will see a definite impact.”

Here are some of the key findings from the AP analysis:

–  U.S. tariffs will cover goods that are imported at more than 250 seaports, airports and ground terminals in 48 states.

• At 18 of 43 customs districts — including those representing ports around Los Angeles, San Francisco, New Orleans and Houston — at least 10 percent of their total import value could be covered by new tariffs if all Trump’s proposals take effect.

• Retaliatory duties by China and other countries cover $27 billion in U.S. exports.

Eugene Seroka, executive director of the Los Angeles port, worries that “if tariffs make it too expensive to import, there will be an impact on jobs.”

Seroka and others don’t expect layoffs on the docks. Union longshoremen — whose average pay last year on the West Coast was $163,000, according to the Pacific Maritime Association, which negotiates for the ports — often have contract provisions ensuring that they are paid even if there’s no work. And there are fewer of them than there were a few decades ago because the advent of shipping containers has reduced the need for people on the docks.

Dwayne Boudreaux, an International Longshoremen’s Association official in Louisiana, said, though, that his stevedores are handling about 10 percent less steel from Japan because of the new tariffs.

“We don’t think it’s going to [get] worse,” he said. But, he added, “who knows — that could change from the next press conference.”

The impact might be greater on truck drivers and warehouse workers. Fewer will be needed, according to O’Connell.

Many drivers who deliver shipping containers from the dock to warehouses are independents contracted by trucking companies, and they don’t get paid if there is nothing to haul. Some might leave the profession, said Weston LaBar, CEO of the Harbor Trucking Association in Long Beach, California.

“It’s hard to retain drivers,” he said. “If we don’t have work for those drivers, we’re worried they will leave for some other segment of the trucking business or go into another business, like construction.”

Less shipping means less revenue for the ports — something that could limit their ability to pay for expansion and improvement projects, according to Kurt Nagle, president of the American Association of Port Authorities. He said U.S. ports are in the midst of a planned $155 billion in infrastructure spending from 2016 through 2020.

The current trade war was foreshadowed in January by steep U.S. tariffs on imported solar panels and washing machines. It exploded with the U.S. tariffs of 25 percent on imported steel and 10 percent on aluminum. Then came two rounds of duties targeting about $50 billion in imports from China — punishment against that country for pressuring U.S. companies to transfer technology and intellectual property to Chinese companies.

Along the way, China, the European Union, Turkey, Canada and Mexico imposed retaliatory duties on U.S. goods including farm products and Harley-Davidson motorcycles.

This week, the U.S. Trade Representative’s office finished six days of hearings on a plan to hit another $200 billion in Chinese imports with 10 percent duties. Trump has said that if China continues to retaliate he could eventually add tariffs on $450 billion in Chinese goods, nearly 90 percent of that country’s 2017 exports to the U.S.

Trade wars are usually temporary. President George W. Bush abandoned his steel tariffs after less than two years.

Milwaukee’s port director worries, however, that damage from the current trade dispute could linger. Canada is increasing corn exports to Europe, and Brazil is trying to pick up the slack in soybean exports to China.

“Others are already picking up that business,” Schlicht said.
…

Top NAFTA negotiators from Canada and the United States increased the pace of their negotiations Thursday to resolve final differences to meet a Friday deadline, with their Mexican counterpart on standby to rejoin the talks soon.

Despite some contentious issues still on the table, the increasingly positive tone contrasted with U.S. President Donald Trump’s harsh criticism of Canada in recent weeks, raising hopes that the year-long talks on the North American Free Trade Agreement will conclude soon with a trilateral deal.

“Canada’s going to make a deal at some point. It may be by Friday or it may be within a period of time,” U.S. President Donald Trump told Bloomberg Television. “I think we’re close to a deal.”

Trilateral talks were already underway at the technical level and Mexican Economy Minister Ildefonso Guajardo was expected to soon rejoin talks with U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland, possibly later on Thursday, people familiar with the process said.

Trump said in a Bloomberg interview: “Canada’s going to make a deal at some point. It may be by Friday or it may be within a period of time,” Trump said. “I think we’re close to a deal.”

Negotiations entered a crucial phase this week after the United States and Mexico announced a bilateral deal on Monday, paving the way for Canada to rejoin talks to modernize the 24-year-old accord that underpins over $1 trillion in annual trade.

The NAFTA deal that is taking shape would likely strengthen North America as a manufacturing base by making it more costly for automakers to import a large share of vehicle parts from outside the region. The automotive content provisions, the most contentious topic, could accelerate a shift of parts-making away from China.

A new chapter governing the digital economy, along with stronger intellectual property, labor and environmental standards could also work to the benefit of U.S. companies, helping Trump to fulfill his campaign promise of creating more American jobs.

Trump has set a Friday deadline for the three countries to reach an agreement, which would allow Mexican President Enrique Pena Nieto to sign it before he leaves office at the end of November. Under U.S. law, Trump must wait 90 days before signing the pact.

The U.S. president has warned he could try to proceed with a deal with Mexico alone and levy tariffs on Canadian-made cars if Ottawa does not come on board, although U.S. lawmakers have said ratifying a bilateral deal would not be easy.

Dairy, dispute settlement

One sticking point for Canada is the U.S. effort to dump the Chapter 19 dispute-resolution mechanism that hinders the United States from pursuing anti-dumping and anti-subsidy cases. Lighthizer said on Monday that Mexico had agreed to eliminate the mechanism.

Trump also wants a NAFTA deal that eliminates dairy tariffs of up to 300 percent that he argues are hurting U.S. farmers, an important political base for Republicans.

But any concessions to Washington by Ottawa is likely to upset Canadian dairy farmers, who have an outsized influence in Canadian politics, with their concentration in the provinces of Ontario and Quebec.

 “Ultimately, we’ve got huge issues that are still to be resolved,” said Jerry Dias, head of Canada’s influential Unifor labor union. “Either we’re going to be trading partners or we’re going to fight.”
…

Nearly all of the currency removed from circulation in a surprise 2016 attempt to root out illegal hoards of cash came back into the financial system, India’s reserve bank has announced, indicating the move did little to slow the underground economy.

Prime Minister Narendra Modi’s currency decree, which was designed to destroy the value of billions of dollars in untaxed cash stockpiles, caused an economic slowdown and months of financial chaos for tens of millions of people.

Modi announced in a November 2016 TV address that all 500-rupee and 1,000-rupee notes, then worth about $7.50 and $15, would be withdrawn immediately from circulation. The banned notes could be deposited into bank accounts but the government also said it would investigate deposits over 250,000 rupees, or about $3,700. The government eventually released new currency notes worth 500 and 2,000 rupees.

In theory, the decree meant corrupt politicians and businesspeople would suddenly find themselves sitting on billions of dollars in worthless currency, known here as “black money.”

“A few people are spreading corruption for their own benefit,” Modi said in the surprise nighttime speech announcement of the order. “There is a time when you realize that you have to bring some change in society, and this is our time.”

But even as the decree caused turmoil for those in India who have always depended on cash — the poor and middle class, and millions of small traders — the rich found ways around the currency switch. In the months after the decree, businesspeople said that even large amounts of banned currency notes could be traded on the black market, though middlemen charged heavy fees.

The reserve bank report said in its Wednesday report that 99.3 percent of the $217 billion in notes withdrawn from circulation had come back into the economy. Some officials had originally predicted that number could be as low as 60 percent.

“Frankly, I think demonetization was a mistake,” said Gurcharan Das, a writer and the former head of Proctor & Gamble in India. He said that while it did broaden the country’s tax base, it was a nightmare for the immense, cash-dependent informal economy.

“You can’t overnight change that in a country which is poor and illiterate. Therefore, for me it’s not only an economic failure but a moral failure as well,” Das said.

 
…

U.S. President Donald Trump has signed proclamations permitting targeted relief from steel and aluminum quotas from some countries, the U.S. Commerce Department said on Wednesday.

Trump, who put in place tariffs on steel and aluminum imports in March, signed proclamations allowing relief from the quotas on steel from South Korea, Brazil and Argentina and on aluminum from Argentina, the department said in a statement.

“Companies can apply for product exclusions based on insufficient quantity or quality available from U.S. steel or aluminum producers,” the statement said. “In such cases, an exclusion from the quota may be granted and no tariff would be owed.”

Trump, citing national security concerns, placed tariffs of 25 percent on steel imports and 10 percent on aluminum imports.

The tariffs on steel and aluminum imports from the European Union, Canada and Mexico took effect June 1, and Commerce Secretary Wilbur Ross said May 31 that arrangements had been made with some countries to have non-tariff limits on their exports of the two metals to the United States.

Ross said the arrangement with South Korea was for a quota of 70 percent of average steel exports to the United States in the years 2015 to 2017.

The Brazilian government said at the time the U.S. quotas and tariffs on Brazil’s steel and aluminum exports were unjustified but that it remained open to negotiate a solution.

Brazilian semi-finished steel exports to the United States are subject to quotas based on the average for the three years from 2015-2017, while finished steel products will be limited to a quota of 70 percent of the average for those years.
…

The leaders of the United States and Canada expressed optimism on Wednesday that they could reach new NAFTA deal by a Friday deadline as negotiators prepared to talk through the night, although Canada warned that a number of tricky issues remained.

Under pressure, Canada rejoined the talks to modernize the 24-year-old North American Free Trade Agreement after Mexico and the United States announced a bilateral deal on Monday. Canadian Foreign Minister Chrystia Freeland said late on Wednesday that talks were at “a very intense moment” but said there was “a lot of good will” between Canadian and U.S. negotiators.

“Our officials are meeting now and will be meeting until very late tonight. Possibly they’ll be meeting all night long,” Freeland said. She and U.S. Trade Representative Robert Lighthizer had agreed to review progress early on Thursday.

U.S. President Donald Trump has set a Friday deadline for the three countries to reach an in-principle agreement, which would allow Mexican President Enrique Pena Nieto to sign it before he leaves office at the end of November. Under U.S. law, Trump must wait 90 days before signing the pact.

Trump has warned he could try to proceed with a deal with Mexico alone and levy tariffs on Canadian-made cars if Ottawa does not come on board, although U.S. lawmakers have said ratifying a bilateral deal would not be easy.

“They (Canada) want to be part of the deal, and we gave until Friday and I think we’re probably on track. We’ll see what happens, but in any event, things are working out very well.” Trump told reporters at the White House.

The upbeat tone contrasted with Trump’s harsh criticism of Canada in recent weeks, railing on Twitter against Canada’s high dairy tariffs that he said were “killing our Agriculture!”

Canadian Prime Minister Justin Trudeau said he thought the Friday deadline could be met.

“We recognize that there is a possibility of getting there by Friday, but it is only a possibility, because it will hinge on whether or not there is ultimately a good deal for Canada,” he said at a news conference in northern Ontario on Wednesday.

“No NAFTA deal is better than a bad NAFTA deal.”

 Freeland, who is Canada’s lead negotiator, was sidelined from the talks for more than two months, and will be under pressure to accept the terms the United States and Mexico worked out.

She declined comment on the issues still in play, but said on Tuesday that Mexico’s concessions on auto rules of origin and labor rights had been a breakthrough.

Ottawa is also ready to make concessions on Canada’s protected dairy market in a bid to save a dispute-settlement system, The Globe and Mail reported late on Tuesday.

Sticking points

One of the issues for Canada in the revised deal is the U.S. effort to dump the Chapter 19 dispute resolution mechanism that hinders the United States from pursuing anti-dumping and anti-subsidy cases. U.S. Trade Representative Robert Lighthizer said on Monday that Mexico had agreed to eliminate the mechanism.

To save that mechanism, Ottawa plans to change one rule that effectively blocked American farmers from exporting ultra-filtered milk, an ingredient in cheesemaking, to Canada, the Globe and Mail reported, citing sources.

Trudeau repeated on Wednesday that he will defend Canada’s dairy industry.

Earlier on Wednesday, the Trump administration’s own anti-dumping duties on Canadian paper, used in books and newsprint, were thrown out by the U.S. International Trade Commission.

The independent panel ruled that about $1.21 billion in such paper imports from Canada were not harming U.S. producers.

Other hurdles to a NAFTA deal include intellectual property rights and extensions of copyright protections to 75 years from 50, a higher threshold than Canada has previously supported.

Some see the tight time-frame as a challenge.

“There’s nothing here that is not doable for Canada,” said Brian Kingston, vice president for international affairs at The Business Council of Canada.

“We’ve got the best negotiators in the world, but they can only stay awake so many hours of every day.”
…

The U.S. economy expanded at a 4.2 percent annual rate in April, May and June. 

The second-quarter growth figure is one-tenth of a percent higher than initial estimates.

“The economy is in good shape,” according to PNC Bank Chief Economist Gus Faucher. He writes that this is the best “year-over-year increase in three years.”

But Faucher also says growth above four percent is “unsustainable” and the economy is “set to slow somewhat in the second half of 2018,” and hit 3.4 percent for the whole year. He predicts U.S. economic growth will slow further in 2019 and 2020 as the “stimulus from tax cuts and spending increases fades.”

Wednesday’s report from the Commerce Department is a routine revision made as more complete data becomes available.

Growth figures were boosted by a decline in imports, particularly petroleum, and by some temporary factors.

One of those factors is a surge in soybean exports, which were rushed at a faster-than-usual pace to beat tariffs imposed by China in retaliation for new tariffs imposed by the Trump administration on Chinese goods.

The new second-quarter figures are nearly double the performance in January, February and March.
…

British officials have been turning to Japan for tips on how to dodge American sanctions on Iran, according to local media.

Britain is already seeking from Washington exemptions from some U.S. sanctions, which are being re-imposed by President Donald Trump because of the U.S. withdrawal earlier this year from a controversial 2015 nuclear deal with Tehran. The British are especially keen to maintain banking links with Iran and to import Iranian oil.

According to local media, U.K. officials have been asking their Japanese counterparts how they managed in the past to sidestep some aspects of the pre-2015 sanctions regime, which allowed Tokyo to sign oil deals with Iran as well as insurance contracts without incurring U.S. penalties.

Re-imposed U.S. sanctions penalize any foreign companies that deal with Iran by barring them from doing business in America. That threat has already persuaded more than 50 Western firms to shutter their operations in Iran, including French automakers Renault and Peugeot and the French oil giant Total as well as Germany’s Deutsche Bahn railway company and Deutsche Telekom.

Seeking waivers

British ministers have publicly announced that they are hoping to secure waivers from sanctions for oil imports, tanker insurance and banking. There is particular concern, say British officials, about the position of a gas field 240 miles from Aberdeen which is jointly owned by BP and a subsidiary of Iran’s state-controlled oil company.

According to The Times newspaper, British diplomats and Treasury officials have discussed with their Japanese counterparts what options they may have of evading penalties, if British firms continue to trade with Iran. Britain’s Foreign Office hasn’t commented on the specific claims in report. But in a general statement it says: “We are working with European and other partners, to ensure Iran continues to benefit from sanctions relief through legitimate business, for as long as Iran continues to meet its nuclear commitments under the deal.”

Faltering Iranian economy

On Tuesday, Iranian president Hassan Rouhani was grilled by the country’s lawmakers, who for the first time in his five-year tenure called him before parliament to answer questions about the country’s faltering economy amid the tightening U.S. sanctions.

They asked him about high unemployment, rising food prices and the collapsing value of the Iranian currency. Rouhani, who overcame the opposition of hardliners in the first place to sign the 2015 nuclear deal with the U.S. and other world powers, insisted Iran would overcome the “the anti-Iranian officials in the White House.”

He added: “We are not afraid of America or the economic problems. We will overcome the troubles.” His answers didn’t reassure lawmakers, who voted to reject most of them. Earlier this month the parliament impeached the economy and labor ministers amid growing anger about the economy.

In order to try to keep open financial channels with Tehran and facilitate Iran’s oil exports, the European Union has taken steps to counter renewed U.S. sanctions, including forbidding EU citizens and firms from complying with them.

The European Commission updated a blocking statute on August 7, which bans companies from observing the sanctions — unless expressly authorized by Brussels to do so. It would allow EU firms to recover damages arising from the sanctions. But many companies say they are fearful of losing current or potential business in the U.S.

“Under these conditions it is very difficult,” according to the Director for International Relations at BusinessEurope, a lobby group, Luisa Santos. She says even small and medium-sized businesses which don’t trade with U.S. will face significant challenges because they will need financing from Western banks.

The first round of U.S. nuclear sanctions on Iran officially snapped back into place earlier this month but the more biting sanctions will be re-imposed on November 4 as Washington seeks to pummel the Iranian economy. The first phase U.S. sanctions prohibit any transactions with Iran involving dollars, gold, precious metals, aluminum, steel, commercial passenger aircraft, shipping and Iranian seaports.

Earlier in August, Woody Johnson, the U.S. ambassador to Britain, cautioned there would be trade consequences for Britain, which he described as the closest U.S. ally, unless London breaks with the EU and abides by the re-imposed sanctions on Tehran.

The envoy also delivered a clear ultimatum to British businesses, instructing them to stop trading with Iran or face “serious consequences.”

Trump’s decision in May to withdraw from the 2015 nuclear deal, signed by his predecessor Barack Obama, in which Tehran agreed to nuclear curbs in return for sanctions relief, paved the way for the restoration of unilateral American economic penalties on Iran.

The U.S. administration blames Iran for fomenting instability in the Middle East and encouraging terrorism. Trump has described the 2015 nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA), as a “horrible, one sided” agreement.

U.S. officials say Iran has used the money going into the country after the 2015 deal, when sanctions were eased, not to improve the lives of ordinary Iranians but to increase spending on the military and proxy forces in the Middle East, including Hezbollah in Lebanon and militants in Yemen.
…

Negotiators from Canada and the United States are holding detailed trade negotiations in Washington as they seek to work out a replacement for the North American Free Trade Agreement.

The talks come after the United States and Mexico agreed to a bilateral trade deal this week while leaving the door open for Canada to join and preserve what has been a trilateral trade relationship for more than 20 years.

Canadian Foreign Minister Chrystia Freeland met with U.S. Trade Representative Robert Lighthizer on Tuesday for what she said were “very constructive” initial talks before more specific negotiations between the two sides on Wednesday.

Freeland said some of the details of the U.S.-Mexico agreement, particularly what she called “significant concessions” by Mexico on rules regarding automotive labor and parts origin, have given Canada optimism about the talks in Washington.

“The fact that Mexico was able to do something that I think must have been quite difficult for Mexico and make those concessions does really set the stage for some productive conversations for us here this week.”

It is unclear if the United States and Canada will resolve their long-standing disputes over duties on automobiles and dairy products that have persisted through months of NAFTA negotiations.

Freeland was also due to meet with Mexican trade officials who were still in Washington.

Final details of the U.S.-Mexico deal have yet to be worked out, but Lighthizer said he believes the tentative agreement is a win for both countries that creates more jobs for farmers and other workers.

To escape tariffs, the deal calls for 75 percent of “auto content” – parts and amenities – to be made in either the U.S. or Mexico, up from the current 62.5 percent North American content. In addition, 40 to 45 percent of the auto content must be produced by workers earning $16 or more an hour.

The average hourly pay for U.S. auto workers is more than $22 an hour, but in Mexico it is now less than $3.50 an hour. With the increase in labor costs, it likely will boost the cost of buying a vehicle.

“I think it’s going to modernize the way we do automobile trade, and I think it’s going to set the rules for the future at the highest standards in any agreement yet negotiated by any two nations for things like intellectual property, and digital trade, and financial services trade, and all of the things that we think of as the modernizing, cutting-edge places that our economy is going,” Lighthizer said.

“So this is great for business,” he said. “It’s great for labor. It has terrific labor provisions in it. Stronger and more enforceable labor provisions than have ever been in an agreement by a mile. Not even close.” 

However, lawmakers in both countries still need to approve the pact in the coming months.

Some of the agreement mirrors elements contained in the Trans-Pacific Partnership, the 12-nation Pacific Rim trade pact that Mexico and the U.S. both agreed to, before President Donald Trump withdrew the United States. It requires Mexico to allow more collective bargaining for workers and calls for more stringent air quality and marine life protections.

The accord is set to last for six years, at which point the United States and Mexico will review it, and if both sides agree, they would extend it for 16 more years.

But the agreement does not end steel and aluminum tariffs Trump imposed on Mexico earlier this year, leading to Mexican levies on U.S. imports. 

Trade between the U.S. and Mexico totaled an estimated $615.9 billion in 2017, with the U.S. exporting $63.6 billion more in goods and services than it imported.
…

President Donald Trump’s trade deal with Mexico could struggle to win approval from Congress unless Canada comes on board, lawmakers from both parties said on Tuesday, saying support from Democrats would be needed to pass a purely bilateral deal.

Trump unveiled the Mexico deal on Monday and threatened to slap tariffs on Canadian-made cars if Canada did not join the revamp of the trilateral North American Free Trade Agreement (NAFTA), which Trump has long criticized.

If Trump, a Republican, tries to get the Senate to vote in favor of a bilateral deal as a replacement for NAFTA, he will face an uphill struggle to win passage, lawmakers said. Some lawmakers said only a trilateral pact would be eligible for fast-track, 51-vote Senate approval.

A bilateral deal, on the other hand, would need 60 votes and that would require some support from Democrats, who likely would be reluctant to help Trump, they said. There are now 50 Republican-held seats in the 100-member Senate.

To get fast-track Senate ratification, “the administration must also reach an agreement with Canada,” said Republican Senator Pat Toomey in a statement.

“NAFTA was a tri-party agreement only made operative with legislation enacted by Congress,” said Toomey, a member of the committee that oversees trade policy.

“Any change, such as NAFTA’s termination, would require additional legislation from Congress. Conversion into a bilateral agreement would not qualify for … ‘fast track’ procedures and would therefore require 60 votes in the Senate.”

The White House did not immediately respond to a request for comment about fast track treatment for the Mexico deal. Canada’s top trade negotiator arrived in Washington on Tuesday for talks with her Mexican and U.S. counterparts, in a bid to remain part of the trade pact.

Democratic Senate Leader Chuck Schumer said a bilateral deal would face “serious legal concerns,” while he also questioned a lack of details on the terms of the Mexico pact

“I’m a little worried that this one is like North Korea. They have a nice announcement, but then we don’t see the details,” Schumer told reporters in a Capitol hallway. U.S. stock markets surged on Monday after Trump said he had reached an understanding with Mexico. On Tuesday, stocks had given up some of their early gains by the closing bell.

Senator Ron Wyden, the senior Democrat on the trade committee, said: “We know very few details right now. There are real questions about whether this is even enforceable … We are far from being done on this and the fact is you cannot really move this substantively without the Canadians.”

In the House of Representatives, Democrat Bill Pascrell urged Republicans in a statement to convene a bipartisan House trade council to advise the White House.

 
…

Iraq will send a delegation to the United States seeking an agreement on financial transactions with Iran following Washington’s reimposition of sanctions on Tehran, Prime Minister Haider al-Abadi said Tuesday.

His statement was the first by an Iraqi official since Reuters reported last week that Baghdad was going to ask Washington for exemptions from some of the sanctions because Iraq’s economy is closely linked with neighboring Iran.

“We have requests for the American side, we have presented them and a delegation will go to negotiate within that framework,” Abadi told a weekly news conference.

“We have presented a clear vision of what Iraq really needs. This includes Iranian [natural] gas, which is very important, as well as other trade and the electricity sector.”

U.S. President Donald Trump withdrew the United States in May from world powers’ 2015 nuclear deal with Iran, calling it flawed, and reimposed trade sanctions on the Islamic Republic.

The Trump administration has warned of consequences for countries including European allies that co-signed the nuclear accord, that do not respect the new sanctions. Baghdad is in a difficult position — its two biggest allies are the United States and Iran, themselves arch-adversaries.

“We have had good promises initially, but as you know the American situation is complicated; you do not deal with one person, there are several institutions,” Abadi said.

He called the sanctions “unilateral” and “oppressive,” adding that Iraq would not be “part of a blockade” due to its own painful experience with international sanctions during the era of Saddam Hussein.

Iraqi government and central bank officials said the delegation would travel to Washington to ask for exemptions in applying the sanctions. They did not say when that trip would take place.
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Ethiopia has ousted state-run Metals and Engineering Corporation (METEC) from a $4 billion dam project on the River Nile due to numerous delays in completing the project.

The Grand Renaissance Dam is the centerpiece of Ethiopia’s bid to become Africa’s biggest power exporter.

Prime Minister Abiy Ahmed said at the weekend that the government had cancelled the contract of METEC, which is run by Ethiopia’s military, and would award it to another company.

Italian firm Salini Impregilo remains the main contractor building the dam, while METEC was the contractor for the electromechanical and hydraulic steel structure divisions of the project.

The government has touted the 6,000-megawatt dam project, which is 60 percent finished, as a symbol of its economic reforms.

“It is a project that was supposed to be completed within five years, but seven or eight years later not a single turbine is operational,” Abiy said during a news conference in Addis Ababa on Saturday.

“Salini has even demanded compensation because of the delays. We decided to cancel a contract with METEC and offer companies with experience. Otherwise, it will take even longer,” he said.

Abiy has presided over a series of reforms since coming to power in April, releasing political prisoners, relaxing state control of the economy and dramatically improving relations with Ethiopia’s neighbor Eritrea.

The government had previously said the dam would be completed within two years, but recently Abiy said it may face a lengthy delay.

An official at METEC, who did not wish to be named, said the company first heard of the cancellation on Saturday.

“Even now our workers are on the site,” the official said.
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The trade rift between the U.S. and China is taking on new dimensions with Washington scrutinizing the flow of technology to Chinese industries. Analysts said China might be in for both economic and political problems if the U.S. cuts off the supply of technologies that are essential for the survival of major Chinese companies.

Such a move would affect the performance and industrial competitiveness of Chinese industry, said Scott Kennedy, Deputy Director of the Freeman Chair in China Studies at the Center for Strategic & International Studies. Beijing may be forced to overhaul its industrial policy to meet with the emerging situation.

“It will put a lot of pressure on China to increase domestic consumption and domestic investments to replace the loss of opportunities with the United States and that could put pressure on Xi Jinping,” Kennedy said, referring to the Chinese President.

Washington’s measures, like imposing heavy duties on a wide range of Chinese exports, is already having a serious impact on China’s fixed asset investments (FAI) in areas like infrastructure projects and manufacturing plants. The FAI grew six percent in the first half of the year, down from previous periods. 

Blocking tech flows

The Trump administration has suggested it is trying to block the rampant theft of American technology in China as part of efforts to level the playing field in which China enjoys a big surplus over the U.S. But others see it as an attempt to hurt the Made in China 2025 technology development plan.

Past U.S. administrations focused on dual-use technologies, which are those that have both civilian and military value. But the Trump administration has indicated a willingness to curb the outflow of all kinds of American technology to China because of its ability to quickly adapt them and compete with U.S. companies.

The year 2017 ended with a trade deficit of $375 billion for the U.S.

There are signs Washington is considering a dual track approach regarding China. One of them involves restraining China’s industrial policy including its technology development plan. “And, another goal where they see China as a strategic rival and limit technology flows to China, and isolate it, and move supply chains out of China,” Kennedy said.

“It is unclear, which of these two goals is the dominant position within the Trump administration now,” the CSIS scholar said.

Beijing’s fear

Beijing’s main fear is over its supply of crucial semi-conductor technology from U.S.-based Intel and Qualcomm. China’s massive electronic industry relies heavily on U.S. made semiconductors.

“China still buys a lot of semi-conductors from U.S.,” said Lourdes Casanova, director of the Emerging Markets Institute at Cornell University’s SC Johnson School of Management. However, she explained, “China is investing a lot of money to make its own semi-conductors and be less dependent on Intel.”

China’s traditional strength in manufacturing has been its low labor costs. But new technologies like artificial intelligence, robotics, 3D printing and the “internet of things,” are replacing the need for labor-intensive manufacturing. That has made technology a key part of China’s long-term economic strategy. 

“The issues of technology transfers, intellectual property theft, and China’s industrial upgrading strategy, Made in China 2025, are not going to go away. On the contrary, the U.S. is likely to pump up the pressure even further and may step up efforts to work with European countries to try to isolate China in these areas,” said an editorial in Caixing, China’s prominent business magazine. 

Bad timing

Chinese technology companies have been suffering in recent weeks for unrelated causes, like a major stock market slide. The problem is about timing; bad news coming at a time when Chinese technology companies are exposed to Washington’s pressures. Tencent, world’s eight biggest company by stock valuation, recently lost $45 billion in stock value after it failed to obtain Beijing’s approval for some of its gaming products.

Earlier, the U.S. administration hit out at Chinese telecommunications equipment maker ZTE imposing a hefty fine and restricting its access to the lucrative American market. The decision came after U.S. regulators found the Chinese firm was violating UN sanctions to sell products to North Korea. Though the move is not related to the U.S.-China trade rift, it served as a wake-up call for Chinese companies seeking to expand into the western market.

“China has always pushed for as much independence from the rest of the world as possible, and ZTE was a wake-up call that they are still dependent for basic technological goods,” said John Artman, editor-in-chief of a web-based technology magazine, Technode.
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Mexico’s Economy Minister Ildefonso Guajardo said on Sunday that bilateral negotiations with the United States about the North American Free Trade Agreement (NAFTA) were in the “final hours.”

Speaking as he arrived for talks at the U.S. Trade Representative’s office, Guajardo said the negotiators would need at least a week to work with Canada, the third country in the trilateral trade pact, pushing any possible final deal into at least September.

U.S. President Donald Trump said on Saturday that the United States could reach a “big Trade Agreement” with Mexico soon as incoming Mexican trade negotiators signaled possible solutions to energy rules and a contentious U.S. “sunset clause” demand.

 
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John Cronin has never been one to let disability hold him back. The 22-year-old from Long Island, N.Y., was born with Down syndrome, a genetic disorder that causes developmental and intellectual delays. Motivated by his family’s love and encouragement, Cronin teamed up with his father 18 months ago to open a business. But not just any business. John’s Crazy Socks sells, you guessed it, socks. And as Faiza Elmasry reports, it’s a business worth $4 million. Faith Lapidus narrates.
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Tesla Inc. CEO Elon Musk says investors have convinced him that he shouldn’t take the company private, so the firm will remain on the public stock markets.

The eccentric and sometimes erratic CEO said in a statement late Friday that he made the decision based on feedback from shareholders, including institutional investors, who said they have internal rules limiting how much they can sink into a private company.

Musk met with the electric car and solar panel company’s board on Thursday to tell them he wanted to stay public and the board agreed, according to the statement.

In an Aug. 7 post on Twitter, Musk wrote that he was considering taking the company private. He said it would avoid the short-term pressures of reporting quarterly results.
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U.S. Commerce Secretary Wilbur Ross has appointed a former federal prosecutor to monitor China’s ZTE Corp — after people familiar with the matter said he rescinded an offer to a former U.S. official for signing a “Never Trump” letter before the 2016 presidential election.

A new monitor for ZTE is required as part of a June settlement that ended a ban on U.S. companies selling components to China’s No. 2 telecommunications equipment maker. The ban threatened ZTE’s survival and became a source of friction in trade talks between Washington and Beijing.

Roscoe Howard, a former U.S. attorney in Washington, will lead a compliance team designed to help ensure that ZTE does not illegally sell products with American parts to Iran and other sanctioned countries.

Howard, who got his law degree from the University of Virginia in 1977, is a partner in Barnes & Thornburg’s litigation department in Washington, and served as associate independent counsel during the Clinton and George H. W. Bush administrations.

Howard was not the first choice of Commerce Department officials.

Peter Lichtenbaum, a former assistant secretary for export administration at the Commerce Department, received a letter on Aug. 15 offering him the post, sources said.

Ross then learned that Lichtenbaum was among the dozens of former national security officials who signed a letter in August 2016 saying Trump was not qualified to be president and they would never vote for him, the sources said on condition of anonymity.

Last Friday, two days after making the offer, the department withdrew it, the sources said.

“This is the final decision. Period,” a Commerce Department spokesman said about Ross’ decision to rescind the offer to Lichtenbaum and choose Howard.

Trump, a former real estate magnate and reality television star, drew opposition from establishment Republicans who opposed his candidacy during the 2016 presidential campaign. His administration has been known to reject people who opposed him.

Violations by ZTE

ZTE, which relies on American-origin components for its smartphones and computer networking gear, pleaded guilty last year to violating U.S. sanctions by illegally shipping U.S. goods and technology to Iran.

The ban on ZTE was imposed in April after officials said the company made false statements about disciplining 35 employees tied to the wrongdoing.

As part of the 2017 guilty plea, ZTE paid nearly $900 million. To lift this year’s ban, it paid an additional $1 billion penalty, placed $400 million in escrow in case of future violations, and installed a new board and senior management.

Two monitors​

Under the latest agreement, the Commerce Department is selecting a monitor to oversee compliance for ZTE and its worldwide affiliates for 10 years. Howard will have a staff of at least six people funded by ZTE, including at least one expert in export controls, the Commerce spokesman said.

The government monitor has been designated as a “special compliance coordinator” to distinguish from another monitor for ZTE appointed by a U.S. judge in Texas when the company pleaded guilty last year.

That monitor, James Stanton, a lawyer who has handled personal injury cases among others, was picked by U.S. District Judge Ed Kinkeade, sources told Reuters last year. Kinkeade has control over that monitor.

A key reason the Commerce Department sought a second monitor, according to sources, was to have a qualified person police the company and report directly to the department and the company.
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Federal Reserve Chairman Jerome Powell will not lack for urgent topics to address when he gives the keynote speech Friday to an annual gathering of global central bankers in Jackson Hole, Wyoming.

Fed watchers will be listening for anything Powell has to say about financial turmoil in emerging markets, the economic threats posed by the growing trade war launched by President Donald Trump, and Trump’s criticism of the Fed’s recent interest rate hikes.

Investors will especially want to hear whether Powell addresses the central question of whether any of those developments might lead the Fed to alter its plan to raise interest rates two more times this year and to keep raising them next year as well.

If Powell sounds confident that the economy won’t be unduly hurt by the administration’s tariffs on imports and the retaliatory tariffs they have provoked or by a currency crisis in developing markets, Fed watchers will likely conclude that the central bank will maintain a course of gradual rate hikes to reflect a robust economy.

But if Powell strikes a message of concern, it could be read as a sign that the Fed is considering slowing its hikes. A slower pace of rate increases would be intended to encourage continued borrowing and spending by companies and individuals to drive economic growth.

​Political pressure

Amid the grandeur of the Grant Teton Mountains, Powell will be the lead-off speaker at the conference, which has been sponsored for more than three decades by the Federal Reserve Bank of Kansas City.

It will be Powell’s first chance to respond publicly to Trump’s recent criticism, which critics say amounted to an intrusion on the Fed’s longstanding independence from political influence. Two top Fed officials made clear Thursday that Trump’s criticism won’t affect their decisions on whether to continue raising rates. The Fed is widely expected to resume doing so at its next policy meeting late next month.

“Our job at the Fed is to make decisions on monetary policy and supervision without regard to political considerations, and I’m confident we’ll continue to do that,” Robert Kaplan, head of the Fed’s Dallas regional bank, said in an interview with CNBC. Kaplan said he foresees three to four more rate hikes over the next nine to 12 months.

Similarly, Esther George, head of the Kansas City Fed, said she expects the central bank to raise rates twice more this year, with more next year.

“Expressions of angst about higher interest rates are not unique to this administration,” she said in a separate interview with CNBC.

This week, Trump complained in an interview with Reuters that he was “not thrilled” with Powell’s Fed for raising rates. It marked the second time this summer that Trump had publicly criticized the policymaking of the Fed.

That broke a tradition that the White House should refrain from attacks on the Fed because such criticism can shake the confidence of financial markets and that the Fed is committed to keeping inflation under control without regard to political considerations.

Seven interest rate hikes

The Fed has raised its key policy rate seven times since late 2015 after seven years of keeping the rate at a record low near zero to help the economy recovery from the Great Recession. Five of those rate hikes, including two this year, have occurred with Trump in the White House. In June, the Fed boosted its projection for expected hikes this year from three to four.

The Fed’s policy rate stands in a range of 1.75 percent to 2 percent. The rate hikes are intended to prevent the economy from overheating and inflation from accelerating. But higher rates make borrowing costlier and can depress stock prices. Trump has complained that the Fed’s efforts are hampering his attempts to boost growth with his $1.5 trillion tax cut, deregulation and tougher enforcement of trade agreements.
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Federal Reserve Chairman Jerome Powell signaled Friday that he expects the Fed to continue gradually raising interest rates if the U.S. economic expansion remains strong.

Powell added that while annual inflation has risen to near the Fed’s 2 percent target rate, it doesn’t seem likely to accelerate above that point. That suggests that he doesn’t foresee a need for the Fed to step up its rate hikes. Late next month, the Fed is widely expected to resume raising rates.

Speaking to an annual conference of central bankers in Jackson Hole, Wyoming, Powell said the Fed recognizes that it needs to strike a careful balance between its mandates of maximizing employment and keeping price increases stable. He said a gradual approach is the best way for the Fed to navigate between the risks of raising rates too fast and “needlessly shortening the expansion” and moving too slowly and risking an overheated economy.

“My colleagues and I,” the Fed chairman said in his speech, “are carefully monitoring incoming data, and we are setting policy to do what monetary policy can do to support continued growth, a strong labor market, and inflation near 2 percent.”

Powell made no mention of the recent public criticism from President Donald Trump, who has said he’s unhappy with the Fed’s rate hikes. The president has complained that the Fed’s tightening of credit could threaten the continued strong growth he aims to achieve through the tax cuts enacted late last year, a pullback of regulations and a rewriting of trade deals to better serve the United States.

Many have seen Trump’s complaints about the Fed’s rate hikes as an intrusion on the central bank’s longstanding independence from political influence. On Thursday, two top Fed officials made clear Thursday that Trump’s criticism won’t affect their decisions on whether to continue raising rates.

Powell also made no mention in his speech of what many economists see as the most serious threat to the economy: The trade war that Trump has launched with America’s main trading partners — a conflict that risks depressing U.S. and global economic growth the longer it goes on.

The Fed chairman focused his remarks in part on the difficulty the Fed faces in setting interest-rate policies at a time when the economy seems to be undergoing changes that challenge long-standing beliefs of how low unemployment can fall before it ignites inflation pressures. He said there is also much uncertainty over the “neutral” rate of inflation —  the point at which the Fed’s policy rate is neither stimulating economic growth or holding it back.

The Fed’s economic projections, compiled from estimates of all Fed officials, estimates the current neutral rate at 2.9 percent. But Powell noted that there’s a wide difference of opinion about it.

After having kept its key policy rate near zero for seven years to help lift the economy out of the Great Recession, the Fed has raised rates seven times, most recently in March and June this year. Most Fed watchers foresee two more hikes this year — next month and then in December.

Powell said the Fed’s incremental approach to raising rates has so far succeeded.

“The economy is strong,” he said. “Inflation is near our 2 percent objective and most people who want a job are finding one. We are setting policy to do what monetary policy can do to support continued growth, a strong labor market and inflation near 2 percent.”
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A new set of tit-for-tat tariffs imposed by the United States and China on each other’s goods took effect Thursday.

The U.S. announced earlier this month that it would impose 25 percent tariffs on $16 billion worth of Chinese goods, on top of the 25-percent tariffs it imposed on $34 billion worth of Chinese products in early July. Beijing has followed suit in each case with an identical percentage of tariffs in retaliation.

China’s commerce ministry issued a statement Thursday criticizing the U.S. tariffs as a violation of World Trade Organization rules, and says it will file a legal challenge under the WTO’s dispute resolution mechanism.

The new round of tariffs took effect the day after delegations from both nations met in Washington for first of two days of talks aimed at resolving the dispute, the first such formal discussions since June.

U.S. President Donald Trump told Reuters in an interview this week he does not expect much progress from the discussions.

When asked about the issue at Wednesday’s news briefing by VOA, White House Press Secretary Sarah Huckabee Sanders said, “As you said, these conversations are continuing. I don’t have any announcements on them. They’re ongoing. Certainly, what we’d like to see is better trade deals for the United States. he president wants to see free, fair, and more reciprocal trade between other countries, particularly with China, and we’re going to continue in those conversations.”

The Trump administration is demanding that Beijing change its practice of heavily subsidizing its technology sector and open its markets to more U.S. goods.

The U.S. Trade Representative’s office on Monday began six days of public hearings on the president’s plans to impose tariffs on a wider array of Chinese imports, affecting an additional $200 billion worth of Chinese goods.

Economists warn that the trade war between the world’s biggest economies would reduce global economic growth by around 0.5 percent through 2020.
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French President Emmanuel Macron will make the tough political choices needed to meet his deficit commitments, his government spokesman said, as he looked to put a bodyguard scandal behind him at his first Cabinet meeting after the summer break.

Macron and his ministers in all likelihood need to find savings in next year’s budget, to be presented to parliament next month, if they are to prevent the deficit from ballooning once again.

The president faced his first crisis in the summer when video surfaced of bodyguard Alexandre Benalla beating a protester. Macron’s own aloof response fanned public discontent.

Now the 40-year-old leader returns to work facing difficult political choices as he embarks on a new wave of reforms to reform the pensions system, overhaul public healthcare and shake-up the highly unionized public sector — tasks complicated by forecasts that economic growth is slower than expected.

“A budget is not only figures, but a strategy, and strong political choices,” Griveaux said, without giving details on the budget negotiations. “There will be [spending] increases and then we will require efforts from other sectors.”

The French economy eked out less growth than expected in the second quarter as strikes and higher taxes hit consumer spending, official data showed in July.

Macron has linked fiscal discipline to restoring France’s credibility in Europe, and while the budget deficit — forecast at 2.3 percent of GDP this year and next — should not surpass the EU-mandated 3 percent limit, it is still expected to be one of the highest in the euro zone.

“The budget equation is becoming more complicated,” Denis Ferrand, economist at COE-Rexecode told Reuters.

The Bank of France has revised 2018 growth down to 1.8 percent from 1.9 percent. Budget rapporteur Joel Giraud in July said that a revision down to 1.7 percent could see the public deficit slip by 0.2 percentage points.

Beyond raising eyebrows in Brussels and Berlin, it would also complicate Macron’s efforts to make transfers towards social policies that might help him dispel the impression among leftist critics that he is a “president of the rich.”

“It would be more difficult to find resources for social spending,” Ferrand said.

Elysee officials acknowledge growth was lower than expected in the first half, and say the housing and subsidized jobs portfolios will see sharp cuts to help finance Macron’s priorities in education, security and the environment.

Some 1 billion euros ($1.14 billion) is expected to be saved by changing rules for widely-enjoyed housing benefits, junior minister Julien Denormandie told BFM TV earlier on Wednesday.

Last year, a cut of five euros ($6) per month to the same allowance contributed to a sharp slump in the president’s popularity, which opinion polls show plumbing lows.
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Saudi Arabia has called off both the domestic and international stock listing of state oil giant Aramco, billed as the biggest such deal in history, four senior industry sources said on Wednesday.

The financial advisors working on the proposed listing have been disbanded, as Saudi Arabia shifts its attention to a proposed acquisition of a “strategic stake” in local petrochemicals maker Saudi Basic Industries Corp., two of the sources said.

“The decision to call off the IPO was taken some time ago, but no-one can disclose this, so statements are gradually going that way — first delay then calling off,” a Saudi source familiar with IPO plans.

Saudi Aramco did not immediately respond to an emailed request for comment. The Saudi Royal Court had no immediate comment.

The proposed listing of the national champion was a central part of Crown Prince Mohammed bin Salman’s reform drive aimed at restructuring the kingdom’s economy and reducing its dependence on oil revenue.

The prince announced the plan to sell about 5 percent of Aramco in 2016 via a local and an international listing, predicting the sale would value the whole company at $2 trillion or more. Several industry experts however questioned whether a valuation that high was realistic, which hindered the process of preparing the IPO for the advisors.

Stock exchanges in financial centers including London, New York and Hong Kong had been vying to host the international tranche of the share sale.

An army of bankers and lawyers started to fiercely compete to win advisory roles in the IPO, seen as a gateway to a host of other deals they expected to flow from the kingdom’s wide privatization program.

International banks JPMorgan, Morgan Stanley and HSBC, were working as global coordinators, boutique investment banks Moelis & Co and Evercore were chosen as independent advisors and law firm White & Case as legal adviser, sources had previously told Reuters.

More banks were expected to be named but no bookrunners were formally appointed despite banks pitching for the deal.

Lawyers, bankers and auditors are all essential in the drafting the prospectus, a formal document that provides essential details on the company.

“The message we have been given is that the IPO has been called off for the foreseeable future,” said one of the sources, a senior financial advisor.

“Even the local float on the Tadawul Stock Exchange has been shelved,” the source added.

Saudi energy minister and Aramco chairman Khalid al-Falih said in the company’s 2017 annual report, released in August, that Aramco “continued to prepare itself for the listing of its shares, a landmark event the company and its board anticipate with excitement.”

Aramco had a budget which it used to pay advisors until the end of June. This has not been renewed, one of sources said.

“The advisors have been put on standby,” a third source, a senior oil industry official said.

“The IPO has not been officially called off, but the likelihood of it not happening at all is greater than it being on.”

Sources have previously told Reuters that in addition to the valuations, disagreements among Saudi officials and their advisers over which international listing venue to be chosen had slowed down the IPO preparations.
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Disney is offering to pay full tuition for hourly workers who want to earn a college degree or finish a high school diploma.

The Walt Disney Co. said Wednesday it will pay upfront tuition to workers who want to take classes starting in the fall.

Disney initially will invest $50 million into the “Disney Aspire” program and up to $25 million a year after that.

Other large corporations have begun paying tuition for workers in a job market with low unemployment.

In May, Walmart said it will offer workers the chance to get a college degree at three universities with online programs.

Disney is rolling out its program in phases, with the first limited to online classes. It is being administered by Guild Education, the same firm operating Walmart’s program.
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Following Seoul’s announcement that South Korean companies have illegally imported North Korean coal, U.S. experts are worried about North Korean trade that contravenes international sanctions.

The Korea Customs Service (KCS) announced earlier this month that three South Korean companies illegally imported North Korean coal that was transshipped at Russian ports, in violation of United Nations resolutions.

The U.N. Security Council adopted a resolution on August 5, 2017, banning North Korea from exporting coal, iron, lead and other materials. Another resolution later that year, on December 22, called for U.N. members to seize and inspect vessels suspected of transporting prohibited items. 

According to the KCS, in seven shipments between April and October of last year, three South Korean companies imported a total of 35,038 tons of North Korean coal and pig iron with a combined worth of $5.81 million.

North Korean coal on ships registered under a third country set sail either from its ports of Songlim, Wonsan, Chongjin and Daean, and the cargoes were transshipped via the Russian ports of Kholmsk, Vladivostock and Nakhodka before arriving at the South Korean ports of Dangjin, Pohang, Masan, Incheon and Donghae.

Action by Seoul

The South Korean government is now seeking the prosecution of the three companies for the illicit import of the materials and forging customs documents to state the coal and pig iron were of Russian origin. It also banned four ships – the Sky Angel, Rich Glory, Shining Rich and Jin Long – that transported the coal to South Korea from entering its ports. 

Sanctions experts said South Korea’s illegal import of banned North Korean coal is a major violation of U.N. sanctions and that the U.N. panel of experts on North Korea may want to try to further investigate the ships that transported the coal to South Korea. 

“It’s major in the sense that North Korea is very skilled at getting around sanctions,” said Robert Huish, a sanctions expert at Canada’s Dalhousie University in Halifax, Nova Scotia.  “The issue with this is that when sanctions are put in place, they are never simple because the target, which is North Korea, will always have the chance to circumvent them.” 

George Lopez, former member of the U.N. Panel of Experts for monitoring and implementing U.N. sanction on North Korea, said although he does not think the U.S. or U.N. will open a new investigation into the case, the panel of experts “may want to follow their own linkages to other sanctions violations, especially regarding particular ships and their owners and insurers.”

Lopez continued, “Their own connecting of the dots might lead to a critique of the [South Korea] customs service or an encouragement to other nations to follow this case as a model.” 

Joshua Stanton, a Washington-based attorney who helped draft the North Korean Sanctions Enforcement Act for the House Foreign Affairs Committee, thinks the U.S. or U.N. should probe the case further if there is an indication that the South Korean government knowingly committed the illegal acts.

“If the evidence shows South Korea did it willfully or that it stood by after having enough knowledge to know that the coal was North Korean, they should be sanctioned [by the U.S.],” Stanton said. “I think there are things that the U.S. law enforcement and the U.N. panel of experts can investigate and should investigate. And the fact that the South Korean government denies it, is not persuasive to me.” 

Some experts are concerned that South Korea’s illicit import could have a significant impact on the U.S. policy to apply maximum pressure on North Korea. 

“Sanctions leakage does lessen the pressure on Pyongyang,” said Troy Stangarone, senior director at Korea Economic Institute specializing in South Korean trade and North Korea, adding, “North Korea has a long history of working to evade sanctions, and it is unsurprising that some of its efforts are coming to light.”

Length of investigation

The South Korean government faced a criticism that the investigations into this case, which took over 10 months, were overly drawn out, reflecting its reluctance to enforce sanctions. 

In an interview with VOA’s Korean Service last week in Seoul, Cho Hyun, the vice foreign minister of South Korea, said the pace of the investigation reflected nothing other than a desire for accuracy.

“It took time to accurately probe the case, and following the principle of being presumed innocent until guilty, [we] could not inform [the public of the investigation] in the interim period,” he said.

Kim Yung-moon, the commissioner of Korean customs, also told VOA’s Korean Service that it took time to prove the coal was actually from North Korea.

“Because the North Korean coal entered [South Korea] after being transshipped from Russia, taking three months at times, we needed to prove that the coals were, in fact, from North Korea,” he said.

The Trump administration remains cautious about making accusations against the South Korean government for failing to enforce sanctions, stressing the importance of fully implementing U.N. sanctions. 

The U.S. Treasury Department said in an email sent to VOA last week, the “Treasury strictly enforces OFAC (Office of Foreign Asset Control) sanctions and U.N. Security Council Resolutions prohibiting illicit transactions with North Korea and works closely with our South Korean partners to continue to implement existing sanctions.” It further stated that the department does not speculate publicly on possible violations. 

In July, the State Department issued a “North Korea Sanctions and Enforcement Actions Advisory” warning that businesses “should be aware of deceptive practices employed by North Korea,” emphasizing that the OFAC has “authority to impose sanctions on any person determined to … have sold, supplied, transferred, or purchased, directly or indirectly, to or from North Korea or any person acting for or on behalf of the government of North Korea.” The advisory was distributed in five foreign languages, including Korean.

On Tuesday, the U.S. Treasury Department imposed sanctions on two Russian individuals, three companies, and six Russian-flagged ships for doing business with North Korea.

Christy Lee of the VOA Korean Service contributed to this report.
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