Monthly Archives: June 2017

Trump’s Anti-Nafta Stance Is on a Collision Course with Natural Gas

HOUSTON — Of all the industries thrown into question by President Trump’s promise to upend free trade with Mexico, natural gas is easily one of the most important.

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More than a quarter of Mexico’s electricity is powered by American natural gas, leaving it especially vulnerable to any upheavals from a trade battle with the United States.

But selling natural gas to Mexico is also a godsend for the American energy industry, which is lobbying the White House to emphasize just how crucial the relationship with Mexico is.

With billions of dollars at stake and zigzagging administration stances on trade, American energy companies are taking no chances. They are also setting their sights on an old friend in a unique position to help: Rick Perry, the former governor of Texas, who recently served on the board of a pipeline company that ships natural gas to Mexico and who is now Mr. Trump’s energy secretary.

“What we will do is reach out to our own Texan, Energy Secretary Rick Perry, and bend his ear,” said Steven H. Pruett, chief executive of Elevation Resources, a Texas oil and gas company. “And say, ‘Please, please get the Trump administration to back off of the Nafta cancellation rhetoric and enable us to continue to have the economic boom that natural gas has created for Texas.’”

Under the North American Free Trade Agreement, which Mr. Trump has threatened to terminate unless he can get a “fair deal” for the United States, the authorization of natural gas exports is virtually automatic.

But if the United States pulls out of the agreement, it will be up to the Energy Department to approve future gas exports considered to be in the national interest.

That places Mr. Perry in a pivotal role at a tense time, and there is good reason to consider him a friend of the industry. As governor of Texas, he defended contentious practices like fracking to promote his state’s oil production and natural gas exports. Under his watch, production of natural gas in the state soared 50 percent.

After he left office, Mr. Perry joined the board of Energy Transfer Partners, a company that has completed four gas pipelines to Mexico in the last two years.

And when he ran for president in 2016, the company’s chief executive became the single biggest contributor to Mr. Perry’s ill-fated campaign.

Kelcy Warren, Energy Transfer’s chief executive, donated more than $6 million of the $16.7 million raised by the 2016 Perry presidential campaign, according to Federal Election Commission data compiled by the Center for Responsive Politics. Most of the money was then returned to Mr. Warren when Mr. Perry dropped out of the race.

“Rick Perry is a really good friend of mine and he is a bright guy,” Mr. Warren said. “He understands the energy business quite well, and it gives me great comfort that he is in that position.”

Last month, the Trump administration gave Congress official notice that it planned to renegotiate Nafta, a pact that the president has called “the worst trade deal ever.”

Then this month, the American Petroleum Institute, one of the strongest lobbies in Washington, made its position unmistakably clear in an open letter to the administration stating that “the current Nafta agreement works for the oil and gas industry.”

Continue reading the full story on the NY Times

Future of Coffee Depends on Adequate Income for Farmers, New Research Finds

A pilot study by Fairtrade International and True Price shows that despite sustainability pledges in the coffee sector, many coffee farmers struggle to make ends meet. Fairtrade calls for a government and industry-wide response so that coffee farmers can earn a decent income and support their families.

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The report is one of the most detailed studies into coffee farmer income to date. Covering farmers in Rwanda, Tanzania, Uganda, Kenya, India, Indonesia and Vietnam, the research sheds light on how much coffee farmers actually earn and Fairtrade’s potential impact on their household income. A highly competitive coffee market, speculation on futures markets and low Fairtrade sales for farmers are key contributing factors. Low income from coffee, in turn, leads to a lack of investment at the farm level and even lower yields, perpetuating a cycle of poverty.

Coffee’s contribution to household income varies widely across countries

The study reveals that for many farmers, coffee is just one source of income and their dependence on it varies greatly. On average about 50 percent of household income results from coffee production. However results differed between countries: Farmers in Indonesia rely heavily on income from coffee for example, whereas Kenyan farmers mainly earn a living from sales of other farm goods or other employment away from the farm.

Indonesian and Vietnamese farmers have the highest farmer household incomes, mainly due to high income from coffee in these countries. Furthermore, only Indonesian farmers currently earn a living household income from coffee production alone.

“Although overall household income depends very much on the local context and on factors such as productivity or farm size, a higher coffee price is one key enabler for households to earn a living income. It is important that, besides addressing factors such as productivity or efficiency, stakeholders in the coffee sector put the pricing question high on their agenda,” said Dario Soto-Abril, Fairtrade International’s Global CEO.

A call to action for the entire coffee sector

Fairtrade’s ambition is to see small-scale farmers earning a living income that provides them and their families with a sustainable, dignified livelihood. This pilot study will inform our living income strategy, building on the pioneering work we are already doing on living wages for workers on Fairtrade plantations. The Fairtrade Minimum Price is just one of many ways that Fairtrade supports farmers. Other activities will include market development, supporting diversification into other crops, and improving yields and farm efficiency. We also intend to extend this kind of study to other origins, particularly Latin America, and products in future.

“This pilot is an important first step towards a comprehensive view of coffee farmers´ income and identifying the main constraints and potential enablers to improve it”, said Adrian de Groot Ruiz, True Price’s Executive Director. “Together with Fairtrade’s experience on collection of data and knowledge of farmer reality we were able to develop a robust methodology that can be easily replicated and used for future assessments of farmer household incomes.”

“We are strongly committed to working with Fairtrade’s producer organizations and commercial partners to address the issue of living income for farmers, and decent wages for their workers. However, Fairtrade cannot address this issue alone. Coffee farming is often not the main source of household income and many farmers only sell a fraction of their coffee as Fairtrade. Collaboration and the support of governments, civil society and the entire coffee sector are key to delivering better lives for farmers”, said Dario Soto-Abril.

View a two-page “At a Glance” overview of the key findings and Fairtrade’s response (PDF, 1.7 MB)

Download the executive summary of the report (PDF, 1.6 MB)

 

See the article, and others like it on the Fairtrade website.

In South Carolina, Germany Is Considered A Partner, Not a Trade Rival

President Donald Trump has objected to Germany’s trade surplus with the United States, reportedly singling out its auto industry success for criticism. But in South Carolina, an early primary state that helped propel him to the Republican nomination, the Germans aren’t seen as an overseas rival but as a valued economic partner.

 

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Trump tweeted on May 30 about the U.S. trade deficit with Germany: “Very bad for U.S. This will change.” In meetings during his recent trip to Europe, he criticized Germany’s success in selling automobiles in the United States, according to German media reports that the White House has disputed.

In South Carolina, German manufacturing growth is linked directly to the state’s economic success of the past 25 years. The hard-won 1992 deal that spurred BMW to put its first U.S. plant in South Carolina’s Upstate region is considered a watershed moment for the state’s economy, economic and political observers agree.

With all the success of BMW and other German investments by such companies as Robert Bosch Corp. and ZF Transmissions in South Carolina, it would be a major political mistake for Trump and his allies to endanger that with a trade war, according to Bob McAlister, a Columbia public relations consultant who remains well-connected in GOP circles after serving as chief of staff to Gov. Carroll Campbell, who made the deal that brought BMW to the state.

“It would be a blunder of the first order,” McAlister says. “It would be funny if it were not so serious.”

Trump’s talk on German trade might well just be late-night Twitter bluster or posturing, McAlister says. But if his trade stance hurts what Germany has helped South Carolina build, “he won’t be any more popular here than he is in Massachusetts.”

“This is one of those cases where the president should have gotten his facts first before he went on attack because it’s just wrong,” Ted Pitts, CEO of the South Carolina Chamber of Commerce, recently told CBS News.

First opened in 1994 and since expanded, the BMW plant employs more than 8,000 and has spurred numerous parts suppliers and other German manufacturers to launch operations in South Carolina. The state features more than 160 German companies doing business in more than 200 locations, according to its Commerce Department.

“It’s been a game-changer,” says economist Doug Woodward of the University of South Carolina, who has studied BMW’s economic impact on the state.

Woodward’s 2014 study put the plant’s share of the gross state product at $2.8 billion and said the company supported 30,777 jobs in the state, directly or indirectly. He currently is updating his study at the behest of BMW and says that the economic impact of the company has grown since the earlier version was published.

In 2014, BMW announced a further $1 billion investment and 800 additional jobs at the plant, which is where BMW makes its X series of sport utility vehicles. About 70 percent of the SUVs made at the plant in Greer, South Carolina, are exported from the U.S., with many headed to Germany itself or to emerging markets such as China.

How integral has BMW become to the South Carolina economy? The state’s Commerce secretary previously served as a top executive at the BMW plant. “South Carolina works hard to provide industries, from every corner of the globe like BMW – which was also the single biggest exporter of vehicles from the U.S., producing more than 400,000 vehicles in its South Carolina plant – with the resources they need to succeed,” Robert M. Hitt III said in a statement.

An auto manufacturing plant such as BMW, with a campus of 5 million square feet, is huge enough. But such plants also attract parts suppliers to locate nearby so their goods can be available quickly. Forty BMW suppliers also operate in the state, adding to the economic impact.

When the company was persuaded to come to South Carolina in the mid-1990s, other industries such as textiles were retrenching and laying off workers, Woodward says. That made BMW vital to keeping the state’s economy afloat, and it has continued to do that with hardly a hiccup even during the Great Recession, Woodward says. Its wages are about 40 percent above the state’s average for manufacturing, amplifying its economic impact, he estimates.

BMW’s investment has helped the state build its own version of an auto industry in South Carolina, with other companies also locating plants here. In the past five years, other German investments in the state include $500 million projects by Mercedes-Benz and Continental Tire, according to the South Carolina Commerce Department.

“It really is the architect of our automotive cluster,” Woodward says about BMW.

The growth of the Germany-South Carolina link continues. From 2011 to 2016, direct German investment of $4.6 billion created more than 10,000 new jobs in the state, according to the state’s Commerce Department. More than 25,000 South Carolinians work at jobs created by German-owned companies, according to the Representative of German Industry and Trade group.

Read the whole article on US News.

 

Sugar Talks May Hint at Trump Approach to U.S.-Mexico Trade

MEXICO CITY — The sugar barons of Florida, Alfonso and José Fanjul, have been equal-opportunity political donors for decades, showering largess on the campaigns of Democrats and Republicans alike to ensure that lawmakers will protect the American sugar industry.

05sugar1-superJumboWhen Donald J. Trump was preparing to take office as president, the Fanjul brothers wrote another check. Among the contributors to Mr. Trump’s inaugural festivities in January was Florida Crystals, a Fanjul-owned company that contributed half a million dollars.

The brothers most likely had more on their mind than a sumptuous ball. Led by the Fanjuls, large American sugar producers and refiners were eager for the new administration to tackle some business left unfinished by the Obama administration: an agreement to control imports of Mexican sugar.

Now, with a Monday deadline for the United States and Mexico to settle on an accord, businesses on both sides of the border are watching to gauge what the sugar negotiations signal about Washington’s approach to renegotiating the North American Free Trade Agreement.

“In Mexico everybody is looking at the sugar agreement because it’s a thermometer of how things are going to be managed,” said Juan Cortina Gallardo, the president of Mexico’s sugar chamber, which represents refiners. “It’s a politically sensitive and charged issue.”

The sugar industry has been at the center of the most contentious trade issues between Mexico and the United States since Nafta was first negotiated in the early 1990s.

Even then, the protracted tussle over just one product raises questions about how quickly Nafta’s renegotiation could bog down if the Trump administration decides to open multiple fronts in rewriting the accord. Talks with Mexico and Canada could begin as early as August, and the administration has offered very little detail about what it hopes to accomplish.

Whatever the American sugar industry wrests from the negotiations will have effects that spread far beyond the cane fields of Florida and southeastern Mexico. The strands of the sugar story suggest just how intricate the weave of international trade can be.

It is up to Commerce Secretary Wilbur L. Ross to find a compromise that Mexican negotiators will accept; otherwise, he risks a trade war.

Continue reading the main story from the NY Times.