US President Trump’s tariffs set to dominate final day of NAFTA talks

Above, group of workers, disguised as US President Donald Trump and Mexican President Enrique Pena Nieto, protest against Trump’s economic policies and the North American Free Trade Agreement in Mexico City. (AFP)
Updated 05 March 2018
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US President Trump’s tariffs set to dominate final day of NAFTA talks

MEXICO CITY: Ministers from the US, Canada and Mexico meet on Monday to wrap up the latest round of NAFTA talks under the shadow of US President Donald Trump’s proposed steep tariffs on steel and aluminum imports.
Trump is expected to finalize the tariffs — 25 percent on steel and 10 percent on aluminum — later in the week, posing a tough challenge for US Trade Representative Robert Lighthizer, Canada’s Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo.
The Mexican and Canadian ministers are likely to press Trump’s trade envoy on whether their countries will be excluded from the blanket tariffs.
“I expect it to be front and center” at the meeting, said Kevin Brady, the Republican chairman of the US House of Representatives Ways and Means Committee, which oversees US trade policy.
Officials have so far been evasive when asked how the three nations can continue trying to update the North American Free Trade Agreement at a time when the US president is about to take a highly protectionist measure.
Brady led a delegation of US lawmakers to Mexico City to press officials on the need to conclude the talks, which have unnerved financial markets worried about the possibility that the North American supply chain could be disrupted.
Speaking on Sunday, Brady said all fairly-traded steel should be excluded from the tariffs. US stocks fell sharply on Thursday on fears of a looming trade war after Trump, a Republican, announced the planned tariffs.
The NAFTA talks are going slowly and the Mexico City round — the seventh of eight planned sets of negotiations — produced little of substance.
Eight days of talks in Mexico’s capital failed to make headway on new rules governing the content of products made in North America, which has been one of the most contentious issues in the talks.
The US negotiator charged with overseeing the so-called rules of origin unexpectedly returned to Washington for consultations early on and did not return. Talks on the matter will be rescheduled before the expected next proper NAFTA round in Washington in early April.
Still, Brady said he was impressed with the progress made during the week, emphasizing it was important to finish negotiating a modern, pro-growth agreement that would boost manufacturing and jobs.
US Representative Roger Marshall, a Republican who traveled with Brady to Mexico, said meetings during the week had closed chapters related to chemicals, communications and anti-corruption efforts.
“I am very optimistic,” Marshall told reporters after briefings from US trade officials.
Canada’s chief negotiator Steve Verheul said: “For the week we do have successes we can point (to), but we still have got a bit more to do.”
Dave Solverson, a former president of the Canadian Cattlemen’s Association, said the NAFTA region could not afford a trade war, especially when attempting to renegotiate the 24-year-old trade deal.


Gulf of Oman tanker attacks jolt oil-import dependent Asia

Updated 15 June 2019
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Gulf of Oman tanker attacks jolt oil-import dependent Asia

  • Iranian threats to close the Strait of Hormuz have alarmed Japan, China and South Korea
  • Japan’s conservative prime minister, Shinzo Abe, was in Tehran when the attack happened

SEOUL: The blasts detonated far from the bustling megacities of Asia, but the attack this week on two tankers in the strategic Strait of Hormuz hits at the heart of the region’s oil import-dependent economies.

While the violence only directly jolted two countries in the region — one of the targeted ships was operated by a Tokyo-based company, a nearby South Korean-operated vessel helped rescue sailors — it will unnerve major economies throughout Asia.

Officials, analysts and media commentators on Friday hammered home the importance of the Strait of Hormuz for Asia, calling it a crucial lifeline, and there was deep interest in more details about the still-sketchy attack and what the US and Iran would do in the aftermath.

In the end, whether Asia shrugs it off, as some analysts predict, or its economies shudder as a result, the attack highlights the widespread worries over an extreme reliance on a single strip of water for the oil that fuels much of the region’s shared progress.

Here is a look at how Asia is handling rising tensions in a faraway but economically crucial area, compiled by AP reporters from around the world:

WHY ASIA WORRIES

The oil, of course.

Japan, South Korea and China don’t have enough of it; the Middle East does, and much of it flows through the narrow Strait of Hormuz, which is the passage between the Arabian Gulf and the Gulf of Oman.

This could make Asia vulnerable to supply disruptions from US-Iran tensions or violence in the strait.

The attack comes months after Iran threatened to shut down the Strait of Hormuz to retaliate against US economic sanctions, which tightened in April when  the Trump administration decided to end sanctions exemptions for the five biggest importers of Iranian oil, which included China and US allies South Korea and Japan.

Japan is the world’s fourth-largest consumer of oil — after the US, China and India — and relies on the Middle East for 80 per cent of its crude oil supply. The 2011 Fukushima nuclear disaster led to a dramatic reduction in Japanese nuclear power generation and increased imports of natural gas, crude oil, fuel oil and coal.

In an effort to comply with Washington, Japan says it no longer imports oil from Iran. Officials also say Japanese oil companies are abiding by the embargo because they don’t want to be sanctioned. But Japan still gets oil from other Middle East nations using the Strait of Hormuz for transport.

South Korea, the world’s fifth largest importer of crude oil, also depends on the Middle East for the vast majority of its supplies.

Last month, South Korea halted its Iranian oil imports as its waivers from US sanctions on Teheran expired, and it has reportedly tried to increase oil imports from other countries.

China, the world’s largest importer of Iranian oil, “understands its growth model is vulnerable to a lack of energy sovereignty,” according to market analyst Kyle Rodda of IG, an online trading provider, and has been working over the last several years to diversify its suppliers. That includes looking to Southeast Asia and, increasingly, some oil-producing nations in Africa.

THE GEOGRAPHY AND THE POLITICS

Asia and the Middle East are linked by a flow of oil, much of it coming by sea and dependent on the Strait of Hormuz.

Iran threatened to close the strait in April. It also appears poised to break a 2015 nuclear deal with world powers, an accord that US President Donald Trump withdrew from last year. Under the deal saw Tehran agree to limit its enrichment of uranium in exchange for the lifting of crippling sanctions.

For both Japan and South Korea, there is extreme political unease to go along with the economic worries stirred by the violence in the strait.

Both nations want to nurture their relationship with Washington, a major trading partner and military protector. But they also need to keep their economies humming, which requires an easing of tension between Washington and Tehran.

Japan’s conservative prime minister, Shinzo Abe, was in Tehran, looking to do just that when the attack happened.

His limitations in settling the simmering animosity, however, were highlighted by both the timing of the attack and a comment by Iranian Supreme Leader Ayatollah Ali Khamenei, who told Abe that he had nothing to say to Trump.

In Japan, the world’s third largest economy, the tanker attack was front-page news.

The Nikkei newspaper, Japan’s major business daily, said that if mines are planted in the Strait of Hormuz, “oil trade will be paralyzed.” The Tokyo Shimbun newspaper called the Strait of Hormuz Japan’s “lifeline.”

Although the Japanese economy and industry minister has said there will be no immediate effect on stable energy supplies, the Tokyo Shimbun noted “a possibility that Japanese people’s lives will be affected.”

South Korea, worried about Middle East instability, has worked to diversify its crude sources since the energy crises of the 1970s and 1980s.

THE FUTURE

Analysts said it’s highly unlikely that Iran would follow through on its threat to close the strait. That’s because a closure could also disrupt Iran’s exports to China, which has been working with Russia to build pipelines and other infrastructure that would transport oil and gas into China.

For Japan, the attack in the Strait of Hormuz does not represent an imminent threat to Tokyo’s oil supply, said Paul Sheldon, chief geopolitical adviser at S&P Global Platts Analytics.

“Our sense is that it’s not a crisis yet,” he said of the tensions.

Seoul, meanwhile, will likely be able to withstand a modest jump in oil prices unless there’s a full-blown military confrontation, Seo Sang-young, an analyst from Seoul-based Kiwoom Securities, said.

“The rise in crude prices could hurt areas like the airlines, chemicals and shipping, but it could also actually benefit some businesses, such as energy companies (including refineries) that produce and export fuel products like gasoline,” said Seo, pointing to the diversity of South Korea’s industrial lineup. South Korea’s shipbuilding industry could also benefit as the rise in oil prices could further boost the growing demand for liquefied natural gas, or LNG, which means more orders for giant tankers that transport such gas.