NEWS,24.07.2013

US bill threatens government shutdown

The US senate on Tuesday advanced a $54bn measure that increases funding for transportation and housing projects, setting up a spending clash with Republicans in the House of Representatives that threatens a government shutdown on October 1.
The senate voted 73-26 to clear a procedural hurdle that allows for consideration of amendments and a simple majority vote on the funding bill, drawing the support of 19 Republican senators.
The funding measure for basic infrastructure projects, block grants for cities and public housing draws a sharp contrast between the spending paths laid out by Senate Democrats and House Republicans, who are considering a $44bn measure.
The House Republicans are passing their 12 appropriations bills for the new fiscal year under a discretionary spending cap of $967bn in an effort to keep savings from the automatic "sequester" spending cuts in place.
They want to divert a larger share of that reduced spending pie to defence and security agencies, subjecting domestic programmes to bigger cuts.
Senate Democrats, meanwhile, assume that the sequester cuts will be replaced by tax hikes and savings elsewhere and are applying a $1.058trn cap to their bills - $91bn more than the House.
There is little chance of that difference being resolved as the September 30 fiscal year-end approaches, so Congress would need to pass a stop-gap funding measure to avoid a government shutdown on October 1.
The senate measure would mark an increase of $2.3bn in spending on transportation and housing  mostly urban  over the 2013 level. The House measure would cut it by $7.7bn.
Democrats argued that delaying needed work on airports, roads and public housing will simply cost more in the future, and say such projects help the economy.
"Steel rusts, asphalt wears out, buildings need to be repaired and maintained," said Senate Appropriations Committee Chairperson Barbara Mikulski, a Maryland Democrat. "It's not politics, it's physics. We have to make investments today so that our nation can grow."
Both Tuesday's procedural vote and an Appropriations Committee vote drew significant Republican support, indicating that the party's appetite for continuing the deep spending cuts may be waning in the Senate.
But top senate Republican Mitch McConnell said any spending deal must maintain savings from the sequester about $1.2trn over 10 years  which were set in motion by a budget deal two years ago. He dismissed Democratic demands for additional revenue.
"I have no interest in reopening the subject of additional taxes. The government in my view doesn't need more revenue," McConnell told reporters after the senate procedural vote.

US opens probe into steel pipe imports

The US commerce department on Tuesday launched one of its biggest trade investigations in years into charges that manufacturers in South Korea, India and seven other countries are selling steel pipe used by oil and natural gas producers at unfairly low prices in the United States.
Imports of oil country tubular goods (OCTG) from the nine countries totalled nearly $1.8bn in 2012, more than double their total in 2010, as rising US oil and natural gas production have increased demand for the pipe.
In 2010, the United States slapped duties on imports of OCTG from China after they hit about $2.8bn in 2008. The duties slapped on imports from China created an opening for the other foreign suppliers.
The latest case targets South Korea, which exported about $831m worth of the pipe to the United States last year, as well as India, Vietnam, the Philippines, Saudi Arabia, Taiwan, Thailand, Turkey and Ukraine.
US producers are asking for anti-dumping duties as high as 240% on India, 158%t on South Korea, 118% on Thailand and 111% on Vietnam to offset what they say is below market pricing, and lesser but still hefty duties on the other five countries.
For two countries, Turkey and India, US producers are seeking additional countervailing duties to offset alleged government subsidies.

3G lack hampers West Bank smartphones

Like many young Palestinians, Amir was excited to get his first smartphone, despite the heavy price tag. But he did not keep it long after realising the lack of 3G network meant its applications were largely unusable.
"I sold my iPhone because I just couldn't use it when I was out and about," said the internet cafe worker, who asked to be given a pseudonym.
"It's expensive to buy a smartphone, so without the full benefits there's no point having one," he added.
With the latest Samsung Galaxy or iPhone costing $400 (€300) it is a considerable investment, but for those keeping pace with developments on Twitter and Facebook, a smartphone has become the tool of choice.
As telecom companies in the Middle East prepare to launch the next generation of high-speed mobile phone internet services, commonly known as 4G, the Palestinian territories still have no access to 3G, meaning they are unable to fully use their smartphones on the go.
As a result, most mobile phone owners simply do not use 3G. And many feel the cost of a smartphone is hardly worthwhile.
"I can't get 3G with a Palestinian provider, so I have to have two contracts, one Palestinian and one Israeli, which is cumbersome and expensive," said 27-year-old Jeryes, who runs a bookshop in Ramallah.
Israel's refusal to give Palestinian mobile companies access to the necessary frequencies for 3G means West Bank residents must sign up with an Israeli company to get mobile internet, but calling rates are more expensive in the territories.
Palestinian mobile operators do not include the price of a phone in their monthly packages, adding to the expense.
Sabri Saidam, telecommunications adviser to Palestinian president Mahmud Abbas, said Israel had repeatedly refused to grant 3G access to Palestinian phone companies for "security" reasons.
"Over the past few years several requests have been made and have been denied" to import the technology and get access to the frequencies needed for 3G, he said.
"Israel persistently refuses the application for 3G on the basis of security," Saidam told AFP.
"This is even though there are Israeli companies illegally operating in the Palestinian territories providing 3G for their customers," he said, referring to the more than 500 000 Israeli settlers living in the West Bank and annexed east Jerusalem.
'If you're disconnected you're half dead'
But despite being a nuisance for those who want to use 3G, the issue for most Palestinians is primarily political.
Mobile phone shop worker Alaa Qawasmi, 27, said he was more angry about what the Israeli stranglehold on 3G represented.
"The main reason we don't have 3G is because of the occupation," he said. "Meanwhile, the technology Israeli phone users have is far better, and there are so many services we can't use."
But the obstacle can be overcome, thanks to wireless technology.
"It doesn't affect me much," said Omar, an IT worker in hospitals who did not wish to give his real name.
"Almost everywhere has wireless internet."
Mobile users can sit in cafes or at home, using connections there to have full access to their smartphone features - though some such as digital maps are not updated for West Bank residents, meaning the usefulness of the smartphone is limited, said Omar.
3G "would be nice to have, but we have more important problems here", he said.
A campaign launched by an IT expert during a visit by US President Barack Obama in March to draw attention to the lack of 3G in Ramallah was dismissed by some commentators as potentially overshadowing more crucial political issues.
Ruba Abu Roqqti, visiting her local phone shop, said what was more important was having internet access at all, let alone on the move.
"If you're disconnected from the Web it means you're half dead," she jested - before asking what 3G actually was.
"If it were available, that would be good," she said, "but it's not a big problem, I hadn't even heard of it."
Hamdi Awad, a teenage student, said it could be "good for flirting with girls" in real time.
"You could add them on Facebook and go from there," he laughed.
Though the 3G issue looks far from being sorted, the Palestinians did celebrate a more significant Web-based victory in May, as internet giant Google recognised their upgraded United Nations status, placing the name "Palestine" on its search engine instead of "Palestinian Territories".
Posters on the way into Ramallah from the Israeli-controlled Qalandia checkpoint in the West Bank urged internet users to "log on" to Google.ps and support the Palestinian cause of achieving full independent statehood.

FDA tightening rules on menthol smokes

Shares of US tobacco companies fell on Tuesday after the US Food and Drug Administration (FDA) said it is considering tightening regulations on menthol cigarettes following a scientific review that showed the products are likely to be more addictive than regular cigarettes.
Shares of Lorillard, which makes the Newport brand of menthol cigarettes, fell as much as much as 5% while shares of Altria Group, which makes a menthol version of its Marlboro brand, fell as much as 3%.
The FDA published preliminary results from a study it conducted that suggest "menthol cigarettes pose a public health risk above that seen with non-menthol cigarettes."
The report found that while menthol cigarettes are no more or less toxic than regular cigarettes, menthol's cooling and anesthetic properties can reduce the harshness of cigarette smoke, increasing their appeal to new smokers.
Still, at least some tobacco company analysts see the tone of the report as positive for the industry in so far as it did not recommend an outright ban.
"We believe it's unlikely that menthol will be banned," said Bonnie Herzog, an analyst at Wells Fargo Securities, in a research report.
"We see this as a buying opportunity as we expect the stock to recover as investors digest this report," she said, referring to Lorillard shares.
The FDA's move comes during a trade dispute in which Indonesia charges that the United States illegally allowed menthol cigarettes to remain on the market while banning the import of clove-flavored cigarettes from Indonesia.
In 2012, the World Trade Organization ruled that the United States should either end its ban on Indonesia's imports or impose a ban on US menthol cigarettes. So far the United States has stopped short of a ban.
"The United States has been clear that it would comply with the WTO findings in a way that is appropriate for the public health," said a statement from Andrea Mead, a spokesperson for the Office of the United States Trade Representative, which negotiates with foreign governments to create trade agreements and resolve disputes.
The FDA is seeking public comment on whether a limit could be set on the amount of menthol in cigarettes. It is also seeking information on how menthol cigarettes are marketed to the young and minority communities.
Lorillard Chief Executive Murray Kessler said in a statement that the company is "encouraged" by the FDA's "science-based approach."
"It is Lorillard's long-held belief that the best available science demonstrates that menthol cigarettes have the same health effects as non-menthol cigarettes and should be treated no differently," he said.
A spokesman for Altria, David Sylvia, said the company had only just received the FDA's report and was reviewing the information.
Lorillard's shares were trading down 4.2% at $44.23 in afternoon trading on the New York Stock Exchange. Earlier they fell as low as $43.77. Altria's shares were down 2.5% to $35.94, after dropping as low as $35.73.

Is China ripe for unrest?

RECENTLY, it seems no developing country is safe from sudden, unexpected protests.

In Brazil and Turkey, empowered middle classes pushed back against perceived governmental injustice; protests erupted, and leaders’ approval ratings dropped precipitously.

In Egypt, the economic picture was as ugly as the political one, and the military’s ouster of president Mursi has fomented conflict and instability.

China may look like a candidate for the type of protests currently sweeping the developing world. Not only is a newly empowered middle class demanding better services and more accountability from government, growth has also tapered off in recent quarters.

Don’t hold your breath. At least for the time being, China is well-positioned to navigate such challenges far better than its emerging market competitors.

Let’s start with the economy. For years pundits, and many Chinese government officials, thought that if China’s gross domestic product growth rate ever fell below 8%, it would set off an unemployment crisis that would raise the risk of social and political instability in the country.

Well, China’s finance minister was in Washington last week and said that the Chinese economy could handle 7% or even 6.5% growth a lower rate than China has experienced in 23 years.

But unlike many other emerging markets, China views slower growth as a manageable challenge. The government actually recognises that a slowdown is necessary to meet its reform and rebalancing goals, and is working now to score political points among the population by arguing that it’s doing so.

In particular, Beijing hopes that the slowdown will force industrial consolidation and less resource consumption, which could slow environmental degradation which has been a major point of political vulnerability for the government.

Slower growth should also calm the real estate sector, where rising prices have been a major sore point for urban Chinese. China’s new leadership is betting that progress on these fronts will outweigh the downside risks they’ll face as job losses tick up in the face of slower growth.

From a global perspective, there is a strong case to be made that China’s slowing growth rate is actually a good sign.

Bubbles allowed to shrink

The fact that Beijing hasn’t just reflexively pumped capital into the system to keep growth rates up shows that it is willing to begin undertaking modest economic reforms; it is, in effect, letting bubbles shrink rather than grow until they pop.

This approach is characteristic of the new leadership that took charge in March of this year: they are less risk averse and they have a more long-sighted handle on the necessary economic changes that China will have to undertake.

The new president himself is a cause for optimism. Xi Jinping has a more assertive, off-the-cuff style; he is a more spontaneous, charismatic leader than his predecessors, and early reviews in China’s blogosphere suggest a favourable first impression.

Xi is using this boldness to work to consolidate his support within the Communist Party. And the extent to which he is successful will mean even more capacity for even more reform over time.

All of this doesn’t mean that China’s stability should be taken for granted, or that there aren’t looming problems on the horizon. The very fact that China doesn’t face significant near-term instability could lead to complacency and give it wiggle room to delay necessary reforms.

China still needs long-term and significant economic and political transformations to get it from “developing” to “developed.” It has too many changes coming to its demographics, manufacturing costs, and environmental needs to get away with ignoring them in perpetuity. (The US can sympathise.)

While it’s a good sign that the current leadership is allowing lower growth rates in order to implement some economic reform, thus far, all changes are happening inside the system, not to the system itself. Easy growth was the low-hanging fruit for China over the past thirty years.

Now the government is reaching a bit further up the tree. But they still have a very long way to go to get to the upper branches.

China’s other major threat is the stratification that any developing country has to navigate. As I’ve written about in the past, the growth of the Chinese economy has created a new middle class that has different demands from the largely rural population that China is still trying to lift out of poverty.

In the near term the new government’s tolerance for slower growth is actually positive for helping to address some of these concerns. But eventually, Beijing will have to reconcile two increasingly divergent populations.

This, again, is a long-term issue. But as these issues go unaddressed, and as more Chinese become rich enough to prioritise new sorts of rights and privileges, the chances of unrest will rise.

Don’t believe the idea that China is a ripe victim for this wave of developing world protests, or that China’s slowing growth rate is a sign of an imminent hard landing. China’s near-term picture looks surprisingly bright.

But after that, the larger question still looms: can Xi Jinping and his government handle the looming storm clouds while they are still a good way off?