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The head of the U.S. central bank says the financial system is safer now than it was before the recession, and urges Washington to make some adjustments in financial regulations, rather than trash them.

Federal Reserve Chair Janet Yellen says the recession of 2008 cost nine million American jobs and meant millions of people lost their homes. She says financial reform regulations were intended to make it less likely that big institutions would fail in the future and to provide an orderly way to resolve the debts of big financial companies that do fail without government bailouts.

She says financial firms, particularly very large ones that could hurt the entire economy if they fail, are now required to keep larger reserves. That way if one loan goes bad, the firm is less likely to have to hastily sell off other assets at bad prices to cover the losses. Low reserve levels prompted a downward spiral when many fragile firms ran into trouble all at once, all of them trying to sell assets and no one willing to buy them.

Yellen acknowledges that over-regulation could hamper the lending and risk-taking needed for economic growth, but she says some research shows the current level of regulation hurts lending, while other research shows it helps.

In a Friday speech to a gathering of top economic officials from around the world at a resort in Wyoming, she said Fed officials are looking at ways to simplify regulations for small banks that would not cause problems for the national economy if they failed.

Small banks complain the cost of complying with complex regulations makes it hard to make loans. Small banks are important because they are often the source of capital for small companies, and such small, growing firms are the source of most new jobs.

Yellen’s closely-watched speech at the annual gathering of economists at a resort in Jackson Hole, Wyoming, comes after criticism from Republicans and others that stricter regulation is hurting lending and economic growth.

President Donald Trump has called for repealing a key part of the regulations called “Dodd-Frank” named after the legislators who crafted the law.
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South Korea this week pushed back against the United States’ demand to renegotiate the free trade agreement (FTA) between the close allies. 

U.S. President Donald Trump has repeatedly criticized the five-year-old Korea-U.S. (KORUS) FTA as a horrible deal that created a $27 billion U.S. trade deficit with South Korea last year, and has said his administration would either renegotiate or terminate it.

Agree to disagree

At Washington’s urging, an initial special session was held on Tuesday by video conference between South Korean Trade Minister Kim Hyun-chong and his American counterpart, U.S. Trade Representative (USTR) Robert Lighthizer, to negotiate amendments to the trade pact.

Afterwards the South Korea trade minister said the two sides disagreed on the need to amend the trade deal.

“We have found that the two sides have different views on the effects of the U.S. and South Korea Free Trade Agreement, the reason behind the trade deficit, and necessity for an amendment to the U.S. and South Korea FTA,” said Trade Minister Kim Hyun-chong.

South Korean officials maintain the bilateral trade deficit is not the result of the FTA, but of the underperforming South Korean economy, where demand for imports have declined, contrasted with the more robust U.S. economy.

“For the last 10 years, South Korea’s market economy was not good, so the U.S. did not get opportunities to sell its products (to South Korea). If South Korea’s economy gets better and the U.S. economy gets worse, we may face the opposite situation,” said Chung Sye-kyun, the speaker of the South Korean National Assembly on Thursday at an event organized by the American Chamber of Commerce in Korea.

KORUS supporters in Seoul also argue the FTA benefits the U.S. economy and American workers. Last year, Korean companies like the electronics giant Samsung and the automaker Hyundai, employed 45,000 Americans and contributed $138 billion to the U.S. economy, according to the American Chamber of Commerce in Korea.

‘Korea unique standards’

The USTR released a statement Wednesday saying it will continue bilateral talks to amend or modify the agreement and specifically identified the “burdensome regulations which often exclude U.S. firms or artificially set prices for American intellectual property” as a major issue of contention.

The auto industry accounts for nearly 80 percent of the bilateral trade deficit, as American car sales in South Korea have been slow, while Korean automobile sales in the United States have soared. The American business community has long blamed the deficit in part on non-tariff related “Korea unique standards,” often linked to environmental regulations or certification procedures that they say are imposed to protect the domestic market. Foreign companies are then forced to spend an inordinate amount of time and money to deal with these regulations that are often introduced without notice or clear explanations.

South Korean authorities have downplayed charges of unfair trade practices, saying most complaints have been resolved through negotiations without the need for amending the FTA.

The South Korean Trade Minister said while this week’s meeting did not reach any agreement on how to proceed, neither side talked about terminating the FTA. 

The Korea Times newspaper in Seoul on Friday published an editorial advising the South Korean government that “a good offense is the best defense” in any upcoming trade negotiations. It recommended Seoul press Washington to loosen its intellectual property rights protections and rules regarding disputes between investors and the state, and to threaten to reduce agriculture and energy imports if the situation becomes overly contentious.

The potential rift over trade comes at a time when Washington and Seoul have been emphasizing their close military alliance and joint support for increasing sanctions on North Korea to pressure the Kim Jong Un government to return to international denuclearization talks.

This week some 17,500 American and 50,000 South Koreans troops are participating in joint strategic military exercises that deal with how to respond to possible North Korean attack scenarios.

Youmi Kim in Seoul contributed to this report
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When Ha Tran of Ho Chi Minh City shops for food, clothes or electronics, she avoids merchandise she can tell comes from Vietnam’s giant neighbor, China. It might not work, she said, and China is no friend of Vietnam anyway.

“China exports many low-quality products to Vietnam, but we know they don’t export products to other countries around the world (that are) that bad, so we try to avoid the products that are made in China,” said Ha, 24, a design company worker in the Vietnamese financial hub city. Vietnamese prefer to buy stuff from Japan or the West. “We’ve tried (Chinese goods) many times in the past but it turns out like they get broken very easily.”

Political ties between Vietnam and China are another “factor” discouraging purchases, she said.

Ha is hardly a shopping renegade. Consumers around Vietnam typically shun “Made-in-China” purchases to protest what they see as poor-quality goods from a country that already has a record of disputes with their country. The two sides dispute, for example, a tract of territory in the South China Sea east of Vietnam. Competing claims sparked naval battles 1974 and 1988. The two also fought a land border war in the 1970s.

Vietnamese feel China has an unfair upper hand in the maritime dispute by using its larger military to control the contested Paracel Islands.

Consumers make up a growing force in Vietnam, as the Boston Consulting Group forecasts more than a third of the country’s nearly 93 million people to be middle class or higher by 2020. Fast growth in export manufacturing has added to Vietnam’s wealth since 2012 by creating jobs.

“If they find a product that might be the same price, and they find out that one product is Chinese and another product is from Japan, Korea or anywhere else, you know which one they’re going to go for,” said Oscar Mussons, senior associate with the Dezan Shira & Associates business consultancy in Ho Chi Minh City. “Vietnamese people see them not as big brothers, but as rivals.

“This is also because of recent problems, like Chinese are hitting national icons like the islands in the South China Sea,” Mussons said. “For Vietnamese, this is something that cannot be accepted in any way, even through you don’t hear much about or the government doesn’t try to make much publicity about it.”

Vietnamese officials have tried to sideline political disputes with China since anti-Chinese riots of 2014 killed more than 20 people and threatened to scare off investors. China’s go-ahead to construct an oil rig in the disputed sea touched off the rioting.

But Vietnam still counts China as its biggest trade partner. Combined imports and exports came to $25.5 billion in the first four months of the year, according to Vietnamese media reports. Export manufacturers in Vietnam rely as well on China for raw materials.

On top of the political issues, Vietnamese consumers widely suspect China sends lower-quality merchandise to its shelves. Giant Chinese firms, often bigger than Vietnamese counterparts, can send over excess merchandise for sale at low prices because of their production run sizes.

“Generally amongst Vietnamese, China-made products are perceived to be of low quality. Some of this is fact, but some of this is also driven by social media posts and ensuing perceptions,” said Jason Moy, principal with the Boston Consulting Group in Singapore. Lower-income, less educated consumers are particularly prone to those perceptions, he added. “Hence, Chinese products are generally selected when they are the last or only option.”

Trade in shoes, toys and daily necessities along the land border particularly leaves cheap but possibly suspect Chinese goods in Vietnam, where lower-income people buy them for their low prices, said Le Hong Hiep, research fellow with ISEAS Yusof Ishak Institute in Singapore. Goods trucked across the border in some cases have “pushed Vietnamese merchandise out of their traditional markets,” Le said.

An organized boycott against Chinese goods after the riots of 2014 gained little traction because poorer people couldn’t afford merchandise from other places, he said.

Although Chinese smartphones are gaining a solid reputation, Ha said she once bought a made-in-China phone for her mother because it was all they could afford. It broke after “several months,” she said, so the family bought another phone.

Only Chinese thong flip-flops are worth the money, she said, because at about $1 per pair you can afford to scrap and replace a pair after a few uses.

“People are conscious of the kind of low standards, low quality of Chinese products,” Le said. “I think one of the reasons is that many of these products are consumer items and small items, and they are imported by border trade, not through official channels which normally have stricter regulations and inspections to ensure the quality.”

Shoppers with more money prefer Japanese products as top quality, especially ever-popular motor scooters and consumer electronics, Moy said.Korean food and consumer electronics are also gaining favor with consumers, he said. 
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Environmentalists are condemning a decree by Brazilian President Michel Temer allowing mining in the heart of the Amazon.

The measure strips protection from a national reserve between the northern states of Para and Amapa and clears the way for the private mining sector to explore the forest.

The gold-rich area is larger than the Netherlands, measuring roughly 18,000 square miles (47,000 square kilometers). It is also home to numerous indigenous tribes.

The Brazilian branch of the World Wide Fund for Nature says Wednesday’s decree will create conflicts between miners, indigenous peoples and conservationists working in the area.

The government says indigenous groups will be protected and the mining will attract foreign investors and create jobs.
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Stonehenge is dry and has been for too long — seven years too long. You can taste the dust well before you cross the cattle grids that cut the only road into town.

More than 1,700 kilometers (1,056 miles) northwest of Sydney, Australia’s Stonehenge could not be more different from its famous namesake, the World Heritage prehistoric monument of Stonehenge in England.

Stonehenge in England averages 10 days a month of rainfall and a maximum temperature of 22 degrees Celsius (72 Fahrenheit).

The town in Australia averages 325 sunny days a year and summer temperature of about 45C (113F), and forget regular rain.

How the town got its name is a mystery.

“In the mid-1800s, dingo [wild dog] trappers built a stone fortress which they used as a shelter, but no one is really sure,” said resident Judy Baldry as she drove along a dusty road on the outskirts of town.

Another possibility is the stony landscape, with rocks ranging in size from marbles to boulders scattered across the plains as far as the eye can see.

The stones lure tourists to an area known as “The Address Book” on the outskirts of town, where people create their names or love messages using stones, such as “Jim loves Kerry” and “Dan 4 Jan.”

Praying for rain

Stonehenge’s remaining 23 residents say they are struggling to survive one of the longest droughts in memory.

“Certainly, this is the worst drought I’ve seen in the last 28 years because of its longevity. It’s just gone on for so long,” said cattle and sheep farmer Tony Jackson.

Jackson’s Hill View Park Station property of more than 150,000 acres (60,000 hectares) is excellent wool country because of the stones. Less dirt means better quality wool.

He manages 800 cattle and about 6,000 sheep on the drought-hit property, but he fears he will have no feed or water if there is no rain by Christmas.

Jackson and his neighbors have spent hundreds of thousands of dollars on feed.

Debt levels for broadacre farms, which include cattle, sheep and crops, is estimated to have increased by 7 percent during 2015-16 to average A$560,500 per farm, the Australian government’s agricultural bureau said.

Other parts of Australia have seen the drought break, and farmers there are looking at a bright future. Cash incomes on cattle farms are estimated to be the highest in more than 20 years, at A$204,000 per farm, because of rising beef prices.

But the drought has a stranglehold on Stonehenge.

For the first time in more than 34 years, the main water supply, the meandering Thomson River, has stopped flowing.

Farmer Dick Smith says it has been seven years since the last decent rain filled the river.

“This is drought country. No one forced me to live here. We have to expect a drought, but this one’s gone on too long,” he said on the veranda of his home on the Depot Glen property.

Smith usually manages about 1,500 cattle but has destocked to survive and now has just 47 cows and calves.

He said that because of droughts over the past decades, he had “completely destocked three times,” and the potential for a fourth was high.

When the rains do come, the farmers of Stonehenge will struggle to pay for new stock at a time when cattle prices are at record levels because of demand for beef.

Hard on families

The drought has taken its toll on families, with the emotional and financial stress contributing to poor mental health, according to a study by the Australian National University.

The study examined 8,000 people living in drought and found that the more severe the drought, the more severe the impact on the mental health of a farmer and his family.

Sue Smith knows the burden. She runs Depot Glen alone for many months while her husband, Dick, is away driving a grader or fixing fences thousands of kilometers away in the Northern Territory.

“You really have to love your husband to live out here,” said Sue, a champion equestrian when she was young.

“We’re not isolated up here. We have bitumen roads, telephones, internet, but I do miss white sheets,” she said, referring to the groundwater that stains her sheets.

Stonehenge has suffered a huge loss of people because of the drought. The town many years ago boasted three hotels, and until just a decade ago, a population of 106.

Frank Irwin, who used to work on a farm, now runs the Stonehenge Hotel, a tin building with a bar crowned with empty beer bottles and rodeo memorabilia.

Stonehenge, like its English namesake, will survive, he said. “We just batten down the hatches until it does rain.”
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Canada said on Thursday the next few weeks would be critical to determine whether it could resolve a lumber dispute with the United States and threatened again that it would start litigation if no deal were struck.

The U.S. Commerce Department this year slapped anti-dumping duties on imports of Canadian softwood lumber after U.S. producers alleged much of the wood cut in Canada was subsidized.

The two sides had hoped to settle the matter before talks to renegotiate the North American Free Trade Agreement (NAFTA) opened last week but little progress has been made.

“The coming weeks will be critical to determine whether we have a partner in the United States prepared to advance our shared interests,” said a joint statement issued by Canada’s ambassador to the United States and envoys from the major lumber-producing Canadian provinces.

The statement also said “provinces are prepared to proceed with litigation on all fronts if a fair solution cannot be achieved.” Canada’s Liberal government had already made clear it would be prepared if necessary to launch a case against the United States at the World Trade Organization.

The U.S. Commerce Department was not immediately available for comment.

The bilateral dispute is the fifth over lumber in less than 40 years. U.S. firms have long accused Canada of unfairly subsidizing its lumber producers through low fees for timber cut on public lands, a charge Ottawa rejects.
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President Donald Trump’s comments at a Phoenix rally that he will probably end up terminating the North American Free Trade Agreement brought cheers from the crowd but groans from the state’s top business group.

Arizona Chamber of Commerce and Industry President Glenn Hamer posted a video calling any termination a “terrible mistake” within hours of Trump’s remarks Tuesday night. Hamer is in Mexico on a trade mission with a bipartisan delegation of about two dozen state lawmakers.

“It would be a mistake that the administration would feel each and every day,” Hamer said. “And why would that be? The administration has set a noble goal of 3 percent growth. You can’t get there if your start unraveling trade agreements.

“You need good tax policy, you need good regulatory policy and you need good trade policy,” he said.

Trump hints NAFTA is done

Trump said at the campaign-style rally that he believes Mexico and Canada are coming out ahead on the 23-year-old trade agreement. Renegotiations began in recent weeks.

“Personally, I don’t think we can make a deal, because we have been so badly taken advantage of,” Trump said. “I think we’ll end up probably terminating NAFTA at some point, OK? Probably.”

Modernizing agreement

Republican Sens. Jeff Flake and John McCain have called for modernizing an agreement they say has brought huge benefits for Arizonans.

Flake has put on a full court press in recent months, launched an effort in May to highlight what he calls the agreement’s “huge boon to Arizona and the U.S.” He’s put out videos featuring people and businesses that have benefited from the trade pact.

On Wednesday, he said he won’t stop that effort.

“I will continue to speak up for the countless Arizonans whose jobs and businesses rely on the billions of dollars that NAFTA injects into our state’s economy,” Flake said in a statement.

 
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President Donald Trump said Tuesday that he was willing to shut down the government to get funding for a U.S.-Mexico border wall, complicating two must-pass measures Congress will take up in September: a spending package and raising the debt ceiling.

Here is what you need to know about both, and the potential for a shutdown of the U.S. government:

What is a shutdown?

Congress must pass annual spending bills around the end of the federal fiscal year on September 30 to fund much of the U.S. government. When disagreements prevent that, which is frequent, lawmakers often pass a temporary bill extending existing spending levels with no changes for days, weeks or months, while they work on a longer-lasting deal. When they cannot agree on either a new spending plan or a short-term extension, the government shuts down. That has happened many times since the 1970s, usually for a few days, and can rattle markets.

Congress will return from its long summer recess September 5. At that time, it will have only about 12 working days to approve spending measures to keep the government open.

What if Congress fails?

If spending measures are not passed before October 1, portions of the government will begin to shut down and nonessential employees will go without pay until an agreement is reached.

The government most recently shut down for about two weeks in October 2013 over funding for former President Barack Obama’s health care law. There were three shutdowns in the 1990s, the longest lasting 21 days. In the 1970s and 1980s, there were 14 shutdowns, some partial and most lasting only a few days.

What is the debt ceiling?

The debt ceiling is a legislative limit on how much money the federal government can borrow through debt issued by the U.S. Treasury. Once the limit is reached, Congress must raise it or the government cannot continue borrowing money and would default, or be unable to pay its bills.

The Treasury has said it wants Congress to increase the debt ceiling by September 29, although default most likely could be staved off until mid-October, thanks to “extraordinary measures” the Treasury put in place in March to delay a debt reckoning.

Legislation to raise the debt limit will need to be adopted, at the very latest, by early to mid-October.

What if the ceiling is not raised?

If the debt ceiling is not raised, the government would not be able to borrow more money or pay its bills, including payments on its debts, which could hurt the U.S. credit rating.

Political gridlock has never led to the United States reaching its debt ceiling and its bills going unpaid, but there have been close calls. An August 2011 standoff cost the country its top-notch bond rating from the credit rating agency Standard & Poor’s and caused the most jarring two weeks in financial markets since the 2007-09 global financial crisis.

How are the budget and debt ceiling related?

The two move on separate tracks, but are likely to get tangled together, with Republican opponents of a debt ceiling increase most likely demanding federal spending cuts. Some analysts say Congress may try to tackle both issues at the same time.

What are the politics?

Both the spending and debt ceiling bills can pass the Republican-led House of Representatives by a simple majority vote, but will need 60 votes to pass the Senate, where Republicans hold 52 of 100 seats, meaning they will need some Democratic support.

Trump made his U.S.-Mexico border wall a central promise of his 2016 presidential campaign. He also promised that Mexico would pay for the wall, but Mexico has steadfastly refused and Trump has largely stopped talking about that pledge.

Conservative House Republicans agree with the Republican president on the need for a wall and say funding for it should be a priority in any spending legislation. Some of them have already indicated they are willing to shut down the government to get it.

Moderate Republicans have called a shutdown unwise, and Republican leaders are determined to prevent one, fearing it would worsen doubts about the party’s ability to govern.

Democrats are uniformly opposed to Trump’s wall and say the responsibility for a shutdown would rest solely with Republicans.

The Trump administration reversed course earlier this month and said it would back a “clean” raising of the debt ceiling, meaning it would not be tied to other policy measures.

Democrats and moderate Republicans also support a clean debt-ceiling increase. But conservative Republicans, especially in the House, often use debt-ceiling legislation to insist on changes to spending, making them opposed to a clean bill.
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Just beyond the outskirts of Cairo on a desert road to the Suez Canal, a sprawling industrial zone is coming to life as Egypt’s leather industry leaves behind its ancient tanning quarters for modern workshops of Robiki Leather City.

The new complex is part of a major expansion drive of a sector Egypt considers as one of its most competitive. The trade ministry has set an official target for leather exports to reach over $1 billion a year in 2020, from about $200 million a year currently.

By mid-2018, Robiki should house the entire supply chain, from animal slaughtering to finished leather production, allowing global manufacturers to source materials and export final goods in a single location, said Mohamed El Gohary, chairman of a state firm marketing the site.

“The value added of our exports will increase five times when we reach the stage where we’re exporting final products like shoes and bags,” Gohary said.

Foreign investors can begin purchasing space in Robiki in 2018, and the zone has received strong interest from Italian companies, Gohary said.

Egyptian exports were given a boost when Egypt floated its pound currency last year as part of an International Monetary Fund loan program.

With projects like Robiki, Egypt hopes to pull back capital that fled after its 2011 political uprising. In the fiscal year ending in June, it netted $8.7 billion in foreign direct investment and is targeting above $10 billion this year.

Around 220 tanneries are being relocated to Robiki, said Mohamed Harby, head of a leather tanning industry group.

They are moving under the orders of the government, which is paying for the transfer of machinery, constructing subsidized housing for workers and facilitating low-interest loans for businesses looking to expand.

The tanners’ centuries-old home of Magra Al-Ayoon in Old Islamic Cairo, which runs along the city’s ancient aqueduct, will most likely be developed into a tourist site, though plans have yet to be finalized, said Omar Khorshid, a trade ministry adviser to the Robiki project.

There, workers dye animal hides in small, ramshackle buildings without infrastructure for absorbing hazardous waste byproducts.

“Egypt a long time ago was a leader in leather tanning, and for a period of time everyone wanted to expand, but there was just no space to,” Ahmed Al-Gabbas, managing director of Al-Rowad Tannery, said at his factory in Robiki.

Al-Rowad, one of the country’s three largest tanneries, will complete its relocation over the next month. Gabbas said the company was using the space to scale up and triple exports over the next year.
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Whole Foods shareholders voted Wednesday to bless a $13.7 billion union with Amazon that the organic grocery chain’s CEO had called “love at first sight.”

That approval is one step required to close the deal, which is a bold move into physical stores for Amazon and has the possibility of making big changes to the supermarket industry and online grocery ordering. The deal also needs the go-ahead from government regulators.

By buying Whole Foods, Amazon will get more than 460 stores and potentially very lucrative data about how shoppers behave offline.

Rivals are scrambling to catch up with the e-commerce giant. Walmart, for example, is expanding its grocery delivery service with ride-hailing service Uber and announced Wednesday that it will join forces with Google to let shoppers order goods by voice on Google devices.

The deal may also breathe new life into Whole Foods, which had been under intense shareholder pressure to improve results and retain customers who have more choices about where to get natural foods. As Whole Foods grew, more supermarkets offered similar organic and natural foods, but at cheaper prices.

Amazon and Whole Foods have not given many details about what might change for customers, though Whole Foods CEO John Mackey gave some general clues at a town hall with employees after the deal was announced. He said he thought Amazon would help with efforts on cost-cutting and a loyalty program. He noted Amazon is known for its innovation and said that company could turn Whole Foods from “the class dunce” to “valedictorian.”

Mackey had said the deal came about after a “whirlwind courtship” and that “it was truly love at first sight.”

As part of the deal, Amazon will pay Whole Foods shareholders $42 for each share they own. That was an 18 percent premium from its stock price the day before the tie-up was announced on June 16. Shares of Whole Foods Market Inc. were trading at $41.72 on Wednesday.

Earlier this month, Amazon.com Inc. sold $16 billion of bonds in order to pay for Whole Foods. Seattle-based Amazon has said it expects the deal to close before the end of the year.

 
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