Economy Live

US, in policy shift, imposes trade sanctions on China

admin — Fri, 18 May 2012 13:36:00 +0000

The Bush administration, confronting intense pressure to tackle soaring trade deficits, has decided to impose economic sanctions against China to protect American paper producers from unfair Chinese government subsidies. The U.S. Commerce Department, overturning more than two decades of practice, decided to charge new duties on imports from China to compensate for Chinese subsidies to exporters. The decision has marked a major shift in US policy, which had been in intense discussion the action. The new duty applies initially to imports of coated paper from China. However, it will also open the avenue for steel companies, textile producers and other manufacturers facing competition from China to apply for the same protection. US Commerce Secretary Carlos Gutierrez announced on Friday that it was slapping duties of 10.9 percent to 20.35 percent on imports of coated paper from China. The extra duties will be imposed immediately on a preliminary basis pending for further review in coming months to set the final penalty margin. The case, which was brought by NewPage of Dayton, Ohio, is being closely observed by a number of other U.S. industries from steel to furniture. The U.S. trade deficit with China that hit a record $233 billion last year, has encouraged demands for a tougher answer to Chinese government subsidies, which many U.S. lawmakers believe fuel that country’s exports. And the counter action required the Commerce Department to reverse, so far just for China, its policy that originated during the Cold War against applying countervailing duties on subsidized goods from non-market economies. China is the second-largest U.S. trading partner after Canada and holds more than $400 billion of U.S. debt. Reacting to the development Beijing has demanded on that the United States reverse its decision to slap anti-subsidy duties on imports of glossy paper from China. In an official statement from the Chinese commerce department said, ‘The Chinese side strongly demands the United States to reconsider this decision and correct it as soon as possible. This action by the US side goes against the consensus reached between leaders of the two countries to resolve contradictions through dialogue’. The statement further outlined that China would closely watch developments and reserve the right to protect its legitimate interests and rights. Following these developments U.S. stocks fell on Friday, the final day of a turbulent quarter, amid rising concerns that Beijing may retaliate and the dispute could hurt U.S. exporters. The US market are now concentrating on China to see their reaction, and then deciding their future course accordingly. However, a business dispute with China would hurt U.S. exports by making them cost more in foreign markets, while imports to the U.S. would be more expensive, adding to inflationary pressures.

Spending, incomes show larger gains in US economy

admin — Fri, 18 May 2012 13:35:00 +0000

Confronting Wall Street’s expectations, consumer spending spiked in February as income levels rose, revealed a report. According to the figures consumers’ spending and income showed bigger-than-expected gains in February, and construction showed the first increase in nearly a year, fueling hopes that the recent data is a sign that the economic slowdown will not worsen further. The Commerce Department reported yesterday that consumer spending, bolstered by strong income gains, was up 0.6 percent last month, at the same time consumer income rose on a similar pace by 0.6 percent. However, the most interesting part of the report is that construction spending also defied projections for a decline. There was somewhat encouraging gains in nonresidential building overcame slump in home and federal construction. In the meanwhile, a Chicago purchasing manager’s report showed a huge pick-up in Midwest manufacturing; bring about bond traders to speculate against a near-term Federal Reserve rate cut. Moreover, increased wages and employment have provided consumers money that helped them to offset rising gasoline prices and deteriorating home values. At the same time, the higher-than-expected price report has given Fed Chairman Ben S. Bernanke very less room to maneuver to reduce interest rates. Despite encouraging data experts have warned that they still believe the economy has decelerated further in the January-March period marking a continuation of a yearlong trend of monotonous growth as the country was battered first by soaring energy prices, followed by a slumping home market and troubles in auto manufacturing.

US, South Korea reach pioneering free trade deal

admin — Fri, 18 May 2012 13:35:00 +0000

South Korea and the United States have finally concluded a landmark bilateral free trade deal on Monday that could increase their annual $72 billion trade by more than $20 billion. The agreement was reached just minutes before the final deadline at 1pm on Monday, underscoring the complexities of building consensus over sensitive sectors such as rice, beef, autos and pharmaceuticals. The deal, which has not yet been formally announced, was inked after 10 months of intense negotiations. The negotiations have been obstructed many times by disagreement over various trading sectors, especially those of vehicles and agriculture. The details and the terms and conditions of the deal were not right away available on Monday afternoon. Speaking over the issue, Kim Hyun-chong, Korea’s trade minister, said, that the deal is the most important event between the two nations since the signing of the military alliance in 1953, reported Yonhap news agency. And for the US the agreement is the biggest trade deal after it signed the North American Free Trade Agreement in 1992. The agreement will mark the opening up the highly protected South Korean market. The negotiations for the free trade agreement were long and prolonged, and had already missed two US-imposed deadlines. However, it was just concluded before time ran out for the White House to use legislation allowing it to present a deal to Congress that can be rejected or accepted, but not changed. The negotiators were hard pressed to reach agreement as they are racing against the time to submit the deal in Washington on Sunday so they can take advantage of President George W. Bush’s authority to clear fast-track deals through the US Congress. However, the prevalent notion suggests that the deal will not be passed through the congress if it opened for debate and amendments. In addition to it, now that the U.S. and South Korea have inked the landmark free-trade agreement, it faces the next challenge of receiving approval from politicians, economists and business leaders in both countries. The deal still requires legislative approval in both the countries. The agreement was crucial for the US strategically as Korea’s military alliance with the US has started to grow weaker and this would provide them a new economic relationship and it would push up US investment. In addition to it, the accord will provide Washington an economic bridgehead in the region, which would probably help immensely in triggering trade talks with Tokyo. On the other hand, the deal would put Korea in advantageous position when it starts negotiating with other major economies such as the European Union and China.

Terrorism affect economic growth? No way says Sri Lanka

admin — Thu, 17 May 2012 13:34:00 +0000

Well, terrorism seems to be on the rise in Sri Lanka with the pat few days being full of ‘action’. The LTTE has been launching air strikes against the civilians as well as the Sri Lankan army. However, depsite this growth in violence, the Sri Lankan President Mahinda Rajapakse seems to be very confident that this will not affect the country’s economic growth. He has outlined that the country will keep experiencing an 8 percent growth rate, terrorism or no terrorism. He said If we are to raise the living standards of our people to match those of the developed world even to some extent, it is essential to maintain an average growth rate of eight percent for the next five years For those who are wondering what expertise is he basing this on, he also happens to be the finance minister of Sri Lanka. The statement came after the release of Central Bank figures showing that the economy grew by 7.4 percent in 2006, up from 6.0 percent in 2005. Last year’s performance was the best since 1978 when the economy expanded by 8.2 percent. The leader said he is aware that terrorism has been the major challenge faced by the country. However, he has an optimistic outlook of the scenario and he was quoted as saying During the last year the government’s policy was to fearlessly combat terrorism and develop the economy, without making terrorism an excuse to delay development With a high rate of inflation, touching almost 20.6 percent in January this year, accompanied by other major hurdles such as rising fuel prices, the task set by the President is not an easy one.

US-South Korea free trade deal comes under scanner

admin — Thu, 17 May 2012 13:33:00 +0000

The recently concluded a landmark free trade agreement between the US and South Korea is drawing intense criticism in both countries. U.S. automakers, farmers and lawmakers have expressed dissatisfaction to the trade agreement the Bush administration worked out with South Korea, signaling it may stumble upon a rough road toward congressional approval. In South Korea, labor unions and farmers have opposed the agreement on the ground that it has practically opened rice market and there are strong chances that it would result in growing unemployment. The FTA will abolish some 90 percent of each side’s tariffs on industrial goods immediately, and the remainder will be phased out over three to 15 years. Both the countries would immediately lift tariffs, currently 8 percent in South Korea, 2.5 percent in the US, on auto parts and all cars with engines smaller than 3,000 cc. However, tariffs on larger models will be phased out gradually. According to the agreement, Seoul will change its tax structure on autos based on engine size, which will make US models cheaper in the South Korean market. Focusing on the other crucial bone on contention, South Korea has agreed to eliminate its 40 percent tariff on US beef over 15 years and start importing instantaneously after the World Organization for Animal Health gives report of its final review on the status of the US in combating mad cow disease. In addition to it, at one hand experts are of the view that South Korea has not opened its rice market substantially and it will not benefit US. But in Korea farmers are arguing that the deal has practically opened its rice market to the US. The Seoul- based Korea Rural Economic Institute has said in its report that South Korea`s agricultural production would fall off by as much as the corresponding to 2.1 billion US dollars annually. The report further suggested that the production of beef, chicken and other meat may suffer severely as US imports gain ground. A completely open South Korean market for US beef is expected to be worth around a billion per year. Analysts are also arguing that the free trade agreement could derail South Korea’s universal health care system. The deal prohibits South Korea from buying generic and lower-priced medicines in place of brand name products produced by the pharmaceutical industry in the US. This provision would potentially drive the cost of health care coverage so high the South Korean government may be compelled to cancel it. The South Korean economy, the world’s 11th-largest economy, is immensely dependent on exports. The total volume of its external trade constitutes 70 percent of the country’s gross domestic product. However, the state-run Korea Institute for International Economic Policy has said that South Korea’s exports to the United States will grow as much as 15.1 percent. In the meanwhile, Congressional Democrats have threatened to nullify the Bush administration’s free-trade deal with South Korea unless the Asian tiger does more to open its market to U.S. automobiles and beef. Senator Max Baucus, chairman of the influential Senate Finance Committee, has bluntly threatened to block the deal, saying negotiators failed to ensure sufficient access for US beef exports. Ford Motor Co. and DaimlerChrysler AG’s Chrysler Group have expressed that they will oppose the free trade agreement between the US and South Korea when it goes before the Congress later this year. In addition to it, the US traders are also dissatisfied over the fact that rice segment has been not opened up completely. The US lobby has argued that around half of South Korea’s farmers grow rice, and duties on rice imported into Korea make its price about four times that of the world average. Further, according to a deal, signed as part of trade negotiations in the early 1990s, Korea was allowed to preserve a quota on imports of rice, and the clause will remain in force.

IMF report plays down effects of US slowdown, but threat of spillover remains

admin — Thu, 17 May 2012 13:33:00 +0000

The U.S. economic slowdown will be continued to be driven essentially by a sluggish housing market. However, any spillover into the rest of the world is expected to be limited as European economies are strengthening, says the International Monetary Fund. The IMF in the initial chapters of its semi-annual World Economic Outlook has indicated that if the recession in the U.S. housing market stretches out to consumer spending and business investment, then larger cross-border repercussions can be expected. Few analysts have speculated that the U.S. economic growth will slip below a 2 percent annual rate in the first quarter of 2007 but the economy may pick up in the second quarter. The report underlined that the old saying ‘if the United States sneezes the rest of the world catches a cold’ remains relevant. However, it is of course the notion that has been swelled out of proportion as the estimated spillovers, as measured by the decrease in output growth are generally significantly smaller than the output decline in the U.S. itself. Meaning to say, the US slowdown is less expected to drag down the economies of the rest of the world as so far the US economy does not succumb to full-blown recession. The IMF report suggests that most countries should be in a position to decouple from the US economy and sustain strong growth if the US slowdown remains as moderate as expected. Despite of this fact, IMF warns that the US is still by far the most influential economy in the world and says if it did slide into depression the impression on the rest of the world would be very serious. As a matter of fact, the influence of the US economy on other economies does not appear to have reduced, the IMF noted. Quite the opposite, indications are that the extents of spillovers have increased over time, particularly with respect to other countries in the Latin America. These countries are now far more open to trade than in the past. Therefore, even if their export to the U.S. has declined, the portion of their total output sold to the US has increased rather slowing down. Moreover, financial linkages have become more crucial for growth over time, with greater financial integration between national markets. The report further said, that better monetary policy and more flexible exchange rates outside Asia should also take the edge off the spillovers from the US. The report has laid focus on the significance of exchange rate moves in reducing global imbalances. The report has argued that the US may be more responsive to changes in the external value of the dollar than previously thought. The IMF further suggested in its report that the market led depreciation of the US dollar and an appreciation of the currencies of other countries with constant surpluses would support a wider rebalancing of domestic demand across crucial regions that could assist the untwisting of the imbalances.

US reaches limit for 2008 skilled-worker visa petitions in a single day

admin — Wed, 16 May 2012 13:32:00 +0000

U.S. Citizenship and Immigration Services has announced on Tuesday it has reached its limit for 2008 skilled-worker visa petitions in a single day and will not accept any more. This has certainly shocked technology companies that rely on the visas to hire foreign employees. The US immigration services received some 150,000 applications for 65,000 H1B visas within the first few hours of opening petitions for the specific visas. The US immigration services has said that it will now use computers to randomly pick visa recipients from the applications received. The mover would mark the first time that a lottery system is being used to pick H1B candidates. However, the decision to not to entertain more applications will definitely affect a lot of employers and deserves immediate government attention. The H-1B visa allows a qualified professional to work for a U.S. employer. However, the government has set a limit or cap on the number of these visas available annually. Under prevailing law, some 65,000 visas are accessible for individuals with bachelor’s degrees or more advanced degrees each fiscal year, and another 20,000 for those with master’s-level degrees from a U.S. institution of higher learning. Every year since 2004, when the cap on H-1B visas was slashed from a record high of 195,000 per year to 65,000, H-1B visas are made available to companies wishing to hire foreign workers with specialized skills. However, the limit does not apply to petitions made on behalf of current H-1B holders or from applicants who hold advanced degrees from U.S. academic institutions. The record-breaking speed of visa depletion is expected to only add fuel to several large technologies and IT companies lobbying to raise the current limit. Microsoft Chairman Bill Gates testified before the U.S. Senate Committee on Health, Education, Labor and Pensions last month, urging the committee be friendlier to foreign high-tech talent. Critics of the current US immigration policies have fiercely condemned the U.S. immigration policy for not being more open to the world’s talented workers, arguing that they are taking themselves out of the competitive race.

US job growth accelerates, triggering fear of inflation

admin — Wed, 16 May 2012 13:32:00 +0000

The US unemployment rate fell to an historic low last month, according to government figures, prompting a plunge in bond prices during a holiday-shortened trading session on Wall Street. Investors discarded speculations that the Federal Reserve would be forced to cut interest rates after figures showed employers created far more jobs than Wall Street anticipated last month, though the unemployment rate fell to 4.4 per cent to mark the lowest level in almost six years. The Labor Department reported that t he job market showed little sign of losing its vigor last month as wages climbed and job growth rose. However, the recent data has made it abundantly clear that, contrary to the widespread speculations, the overall labor market remains very strong despite weakness in some key sectors. As the job market has failed to cool down it threaten to activate concerns about wage inflation at the Federal Reserve. And these inflation uncertainties, in turn, are expected to lower any probability that the Fed will move to lower interest rates anytime soon. The recent data however, is expected to keep the Fed alert on inflation as the predominant risk. According to the official figures released recently, construction companies, after suffering heavy job losses in February in part following winter weather, bulked up in March. The construction sector has added 56,000 positions last month, the highest in just over a year. Retailers added almost 36,000 jobs last month. Education and health care services expanded employment by 54,000. Leisure and hospitality picked up 21,000 new jobs, whereas the government added 23,000. Analysts have projected that the economy will remain slow-moving in the months ahead. For the recently ended January-to-March quarter, some economist are believing that growth will come at close to 2 percent, which would represent a further slowing from the 2.5-per-cent growth rate reported in the final three months of last year. The fall in unemployment is just an indication that the demand for labor will remain robust. For the meantime, economists have said that the rise in wages should help keep consumer spending on track, a critical element that drives about two-thirds of economic activity.

China investigates into US claims of tainted gluten

admin — Wed, 16 May 2012 13:31:00 +0000

China has said that it has started investigating U.S. claims that a Chinese company exported contaminated wheat gluten implicated in pet deaths in the U.S. A Chinese official has said that sampling and examination of wheat gluten are in progress nationwide and will focus on melamine. The chemical is used to make plastic and as fertilizer in Asia was recognized by the U.S. Food and Drug Administration as the contaminant in wheat gluten imported by a U.S. company and used in pet food that was recalled last month. It is the first recent high-profile incident of a tainted product being exported. The Chinese agency that monitors food exports had earlier said that China has never exported wheat or wheat gluten to the U.S. In the meanwhile, the accused firm, Xuzhou Anying Biologic Technology Development, had earlier maintained that the U.S. was its main overseas customer for wheat gluten and said that it had never shipped gluten directly to the U.S. The government in Beijing launched an inquiry into pet food safety, in particular a claim that contaminated wheat gluten exported to the US was responsible, after the US agency accused that the poison may have originated in China. Government officials in China said they had not found evidence of domestic poisonings so far, but would look into US government claims that the supplier of the tainted product was the company in Xuzhou, eastern China. The firm in question, Anying produces and exports more than 10,000 tons of wheat gluten a year, according to its Web site. However, only 873 tons were linked to tainted U.S. pet food, but it substantially raised the possibility that more of the contaminated product could still be on the market in China, or out of the country. The Asian Development Bank had earlier in January this year warned that China’s agricultural exports could be adversely affected by such cases. Analysts at ADB are of the view that China needs to address the underlying problems that lead to food contamination. They further confirm that the Chinese government is making efforts to address its food safety problems.

Switzerland to enter in free trade talks with China

admin — Tue, 15 May 2012 13:31:00 +0000

Switzerland is looking to start negotiations to clinch a free trade agreement with China, Swiss Economics Minister Doris Leuthard revealed recently. This deal is evidently very crucial for Switzerland especially in a condition when the country is not a member of the European Union, the North-American free trade zone or the Asian community of nations. Switzerland has already in negotiation over a range of trade agreements mostly through European Free Trade Association (EFTA). It has considerably a little number of trade deals outside EFTA, most notably one with the European Union, and is also working on a bilateral deal with Japan. On the other hand, China is already involved in free trade talks with Iceland and expected to set off talks with Norway over free trade agreements. Both countries are members of the four-state EFTA, along with Switzerland and Liechtenstein. China is briskly negotiating a series of free trade agreements, following a craze that is spreading across Asia amid faint possibility for a breakthrough in multilateral free global trade talks under the umbrella of the World Trade Organisation. The Swiss Minister, Doris Leuthard, has recently revealed the information that it is emgaged in free trade talks with china saying, ‘I will lead a large business delegation to China in June, and I will try to give support so that China opens negotiations with Switzerland’. As a matter of fact, the Swiss government wants to increase its trade relationship with new developing countries such as India, Brazil, China and Russia, collectively known as BRIC. Few years back a study conducted by investment banker Goldman Sachs has concluded that the BRIC economies were rapidly developing and would account for half of the world’s industrial production over the next 40 years. The Switzerland land government has given a call for greater liberalization of not only industrial goods and services but agriculture as well.