Business

WASHINGTON — US Treasury Secretary Steven Mnuchin said on Saturday a US-China trade agreement would go “way beyond” previous efforts to open China’s markets to US companies and hoped that the two sides were “close to the final round” of negotiations.

Speaking to reporters on the sidelines of the International Monetary Fund and World Bank spring meetings, Mnuchin said that he and US Trade Representative Robert Lighthizer would hold two calls next week with Chinese Vice Premier Liu He. The officials also were discussing whether more in-person meetings were necessary to conclude an agreement.

“I think we’re hopeful that we’re getting close to the final round of concluding issues,” Mnuchin said.

Beijing and Washington are seeking a deal to end a bitter trade war marked by tit-for-tat tariffs that have cost the world’s two largest economies billions of dollars, disrupted supply chains and rattled financial markets.

The United States is seeking sweeping changes to China’s economic and trade policies, including new protections for US intellectual property, an end to forced technology transfers and cyber-theft of trade secrets. Washington also wants Beijing to curb industrial subsidies, open its economy wider to US companies and increase purchases of American farm, energy and manufactured goods to shrink a $419 billion US trade deficit with China. 

Asked whether market openings in the agreement would go beyond what was contemplated in the 2016 Bilateral Investment Treaty negotiations, he replied: “we are making progress, I want to be careful. This is not a public negotiation... this is a very, very detailed agreement covering issues that have never been dealt with before,” Mnuchin said. “This is way beyond anything that looked like a bilateral investment treaty.”

The BIT talks, pursued by former President Barack Obama’s administration, stalled as China refused to satisfy US demands to open significant sectors of its economy to foreign investment. The talks were not taken up by the Trump administration, which pursued tariffs on Chinese goods instead, leading to the current talks.

Mnuchin said the two sides are negotiating an agreement with seven chapters that would be “the most significant change in the trading relationship in 40 years”.

He said the deal would have “real enforcement on both sides”, adding that the United States was open to being subjected to penalties if it failed to keep its commitments in the deal.

“I would expect that the enforcement mechanism works in both directions, that we expect to honour our commitments, and if we don’t, there should be certain repercussions, and the same way in the other direction,” said the Treasury chief, who is playing a key role in the negotiations with China.

CHICAGO — Normally US airlines compete to sell tickets and fill seats during the peak summer travel season. But operators of the grounded Boeing 737 MAX are facing a different problem: scarce planes and booming demand.

The grounding of Boeing Co.’s fuel-efficient, single-aisle workhorse after two fatal crashes is biting into US airlines’ Northern Hemisphere spring and summer schedules, threatening to disarm them in their seasonal war for profit.

“The revenue is right in front of them. They can see it, but they can’t meet it,” said Mike Trevino, spokesman for Southwest Airlines Pilots Association and an aviation industry veteran.

Southwest Airlines Co., the world’s largest MAX operator, and American Airlines Group Inc. with 34 and 24 MAX jetliners respectively, have removed the aircraft from their flying schedules into August.

Southwest’s decision will lead to 160 cancellations of some 4,200 daily flights between June 8 and August 5, while American’s removal through August 19 means about 115 daily cancellations, or 1.5 per cent of its summer flying schedule each day.

Low-cost carrier Southwest, which unlike its rivals only flies Boeing 737s, had estimated $150 million in lost revenue between February 20 and March 31 alone due to MAX cancellations and other factors.

So far, airlines have said it is too soon to estimate the impact of the MAX grounding beyond the first quarter, but the extended cancellations signal that they do not expect a quick return of Boeing’s fast-selling jetliner. The 737 MAX was grounded worldwide in March following a fatal Ethiopian Airlines crash just five months after a Lion Air crash in Indonesia. All on board both planes were killed.

Boeing is under pressure to deliver an upgrade on software that is under scrutiny in both crashes and convince global regulators that the plane is safe to fly again, a process expected to take at least 90 days.

The timing of a prolonged grounding could not be worse for Northern Hemisphere carriers. Planes run fullest during June, July and August, when airlines earn the most revenue per available seat kilometre, according to US Bureau of Transportation Statistics.

In a letter to employees and customers on Sunday, American Airlines’ top executives said they believed the MAX would be recertified “soon” but wanted to provide their customers reliability and confidence during “the busiest travel period of the year”.

American was cancelling about 90 flights per day through early June, but runs more flights and has less fleet flexibility in the peak summer travel months. 

“We’re not denying that it’s going to be a challenge for us,” American spokesman Ross Feinstein said. “That is why if we have to extend cancellations based on aircraft availability we will do so as far in advance as possible.”

A decline in seat capacity could mean higher last-minute summer fares, particularly for business class travelers, aviation consultants and analysts said.

United Airlines, with 14 MAX jets, has largely avoided cancellations by servicing MAX routes with larger 777 or 787 aircraft, but the airline president, Scott Kirby, warned last week that the strategy was costing it money and could not go on forever.

Overall the MAX represents just 5 per cent of Southwest’s total fleet and even less for American and United, but the strain on fleets increases as additional MAX deliveries remain frozen.

Southwest has 41 MAX jets pending delivery for 2019, while American has 16 and United 14.

To compensate, global MAX operators have added a flight or two to other aircrafts’ daily schedules and deferred some non-essential maintenance work. Some airlines are also weighing extending aircraft leases and bringing back idled planes, but with unclear MAX timing, no option is clear-cut or cheap, consultants said.

United is due to publish first-quarter results on April 16, followed by Southwest on April 25 and American on April 26.

MERIDA, Mexico — Mexican and US business leaders on Friday pushed back against President Donald Trump's threats to close the US-Mexico border and urged him to drop steel tariffs that have hindered the ratification of a trade deal brokered last year.

At a meeting in the eastern Mexican city of Merida attended by government officials from both countries, business lobbies united to call on Trump to drop his threats to disrupt border trade after days of hold-ups on the frontier.

Describing the US-Mexico relationship as a top priority, US Chamber of Commerce head Tom Donohue told a news conference the United States should exempt Mexico and Canada from steel and aluminum tariffs imposed by Trump last June before its Congress approves the deal struck to replace the North American Free Trade Agreement.

"That is why we are the first out of the gate to warn against the disastrous consequences of closing the US-Mexican border," Donohue said, sitting next to Mexican President Andres Manuel Lopez Obrador, who warmly applauded his speech.

Mexico is the United States' second biggest export market, and third biggest trading partner. US-Mexico trade is worth about half-a-trillion dollars a year.

Mexico and Canada want Trump to drop the metals tariffs before their lawmakers approve the deal agreed in September known as the United States-Mexico-Canada Agreement (USMCA).

Tensions over the border are further hindering the process.

Following a surge in asylum seekers who mostly travelled through Mexico from Central American countries, Trump last month threatened to close the border if Mexico did not immediately halt illegal immigration. His government then redeployed border agents to police the frontier, sparking delays which have cost businesses on both sides millions of dollars. 

After Donohue spoke, Carlos Salazar, president of Mexico's powerful CCE business lobby, weighed in to say he hoped the US government understood the need to keep the border open.

"And let's not confuse migration problems with trade problems and industry problems," Salazar said, seated on the other side of Lopez Obrador, who again applauded the speech.

Lopez Obrador himself, as he has for months, avoided any implicit or explicit criticism of Trump, instead offering thanks to the American president for "being open to deal with our commercial, migratory and security matters with respect".

Trump's Commerce Secretary Wilbur Ross looked on, seated next to Salazar, but did not address the news conference.

The event was part of the latest iteration of a recurring business forum known as the US-Mexico CEO Dialogue.

On the sidelines, Mexican Economy Minister Graciela Marquez met Ross and again urged the United States to end the metals tariffs for Mexico, part of a set of national security measures Trump had ordered under the so-called "Section 232" mechanism.

In addition, the minister asked that Ross push forward talks aimed at reaching a quick deal in a stop-start tomato dispute between Mexican and US producers.

Marquez was able to tout a workers' rights bill that Mexico's lower house of Congress approved late on Thursday, legislation that US House of Representatives Speaker Nancy Pelosi has called for to win Democratic support for USMCA.

US Deputy Energy Secretary Dan Brouillette met Mexico's Energy Minister Rocio Nahle and later said she had indicated to him that her government did not plan to roll back an energy overhaul passed by the previous administration.

The 2013-14 reform opened up oil production and exploration to private capital, drawing significant interest from US investors. At the time, Lopez Obrador roundly attacked the reform. However, he has since said he will give private operators time to show that they can increase output.

Lopez Obrador wants to revive state oil company Pemex and plans to build an $8 billion refinery in his home state of Tabasco. A US embassy spokesman said that Mexican officials hoped to help fund the project by reducing tax evasion.

LONDON — British business on Thursday gave a cautious welcome to yet another Brexit extension — but also urged an end to the "chaos" that has plagued the country’s withdrawal from the European Union.

European leaders have agreed with British Prime Minister Theresa May to delay Brexit until October 31 at the latest, saving the continent from a chaotic no-deal departure on Friday.

The Confederation of British Industry (CBI), which is the country's biggest employers' organisation, said that the overnight development avoids a messy no-deal "crisis".

However, the influential lobby group also called for May to end Brexit uncertainty and seek cross-party consensus on the way forward.

"This new extension means imminent economic crisis has been averted, but it needs to mark a fresh start," said CBI director-general, Carolyn Fairbairn.

"For the good of jobs and communities across the country, all political leaders must use the time well. 

"Sincere cross-party collaboration must happen now to end this chaos."

The CBI chief's remarks were echoed by Catherine McGuinness, policy chair at the City of London Corporation, a local government authority for the capital's powerful financial district.

"Day by day, as uncertainty persists, so does the threat of more businesses moving jobs and operations away from the UK," she said.

"It is vital that politicians in the UK and EU come together."

The deal struck during late night talks in Brussels means that, if London remains in the EU after May 22, British voters will have to take part in European elections — or crash out on June 1.

The British premier was given until October 31 to pass her withdrawal deal for leaving the bloc through parliament, having failed three times already to do so.

'Devastating precipice' in October 

UK car industry body the Society of Motor Manufacturers and Traders (SMMT) repeated its call for no-deal to be removed from the picture.

"Government and parliament must use this extension purposefully to take no-deal off the table for good, and guarantee a positive long-term resolution that delivers frictionless trade," said SMMT head Mike Hawes.

"If they fail, we face yet another devastating no-deal precipice on 31 October."

Adam Marshall, director-general of the British Chambers of Commerce which represents thousands of firms, said businesses remain frustrated at the lengthy process — almost three years after Britons voted to leave the EU.

"With less than 48 hours to go, the prospect of a messy and disorderly exit on Friday has again been averted," Marshall said.

"Businesses will be relieved — but their frustration with this seemingly endless political process is palpable."

CBI’s president, John Allan, also sounded a cautious note, saying companies would continue to bear the cost of holding extra stock in case of further turmoil.

"This isn't a definitive extension," Allan told BBC Radio 4.

"The cost of holding all that additional inventory will continue."

Allan called on politicians to start thinking about the national interest and added that a second referendum might be needed if politicians cannot break the impasse.

"My personal view is if the politicians can't get their act together... the only other option is to go back to the people and have a second referendum."

Earlier this month, the CBI joined forces with union leaders in an unusual alliance to warn May that Britain faced a "national emergency" over a no-deal Brexit.

The CBI and union umbrella organisation the Trades Union Congress had urged May to change tack and find a "Plan B" to avert a no-deal departure.

DUBAI/LONDON/MOSCOW — The Organisation of the Petroleum Exporting Countries (OPEC) cartel may raise oil output from July if Venezuelan and Iranian supply drops further and prices keep rallying, because extending production cuts with Russia and other allies could overtighten the market, sources familiar with the matter said.

Venezuelan crude production has dropped below 1 million barrels per day (bpd) due to US sanctions. Iranian supply could fall further after May if, as many expect, Washington tightens its sanctions against Tehran.

The combined supply cuts have helped drive a 32 per cent rally in crude prices this year to nearly $72 a barrel, prompting pressure from US President Donald Trump for OPEC to ease its market-supporting efforts. OPEC has been saying the curbs must remain, but that stance is now softening.

"If there was a big drop in supply and oil went up to $85, that's something we don't want to see so we may have to increase output," one OPEC source said. 

The market outlook remains unclear and much depends on how far Washington tightens the screw on Iran and Venezuela before OPEC's June meeting, the source added.

OPEC, Russia and other producers, an alliance known as OPEC+, are reducing output by 1.2 million bpd from January 1 for six months. They meet on June 25-26 to decide whether to extend the pact.

A Russian official indicated this week that Moscow wanted to pump more, in comments that a Russian energy source said were aimed at preparing the market for the end of output curbs.

However, President Vladimir Putin seemingly softened that stance.

A second OPEC source raised the prospect of amending the deal in June while still extending the pact, citing declines in Iranian and Venezuelan production plus volatility in Libyan supply.

"I expect an extension for a further period, but maybe there will be some adjustment," this source said.

In 2018, OPEC+ decided to increase output at its mid-year meeting, only to return to production cuts in 2019.

Output drops 

Output declines in OPEC due to the supply-cutting pact, plus the sanctions on Venezuela and Iran, have exceeded expectations.

Venezuela pumped 960,000 bpd in March, down almost 500,000 bpd from February, OPEC said in a report on Wednesday. The report pointed to a slightly under-supplied market in 2019 if OPEC kept pumping at March's level.

The International Energy Agency on Thursday reported an even lower figure for Venezuelan output in March and said the country's production would likely fall further this month.

Adding to the impact of the involuntary declines, top exporter Saudi Arabia has cut production by more than it agreed under the global pact.

A third OPEC source said there were talks about ideas such as whether OPEC should continue with the cuts alone, a deal extension of only three months to keep Russia on board, or pumping more if prices rise further.

"An increase is on the table, yes, if prices went to $80 and higher," this OPEC source said. "It all depends on where prices are by the end of May and June."

Saudi Arabia can add more oil to the market without adjusting production quotas since the kingdom's output in March was some 500,000 bpd below its OPEC target, this source added.

Russia is also ready to boost supplies. 

"Russia has started talks about an oil production rise as it can hardly follow the OPEC+ deal," said another Russian energy source. "The companies are struggling to curb production." 

LONDON — Britons have carried on spending despite their “Brexit fatigue”, Tesco said on Wednesday, as a forecast-beating rise in profit confirmed a turnaround at Britain’s biggest retailer.

Celebrating its 100th year, Tesco is deep into a recovery plan under Chief Executive Dave Lewis after a 2014 accounting scandal capped a dramatic downturn in its fortunes.

“After four years we have met or are about to meet the vast majority of our turnaround goals,” the former Unilever executive said. “I’m very confident that we will finish the job this year.” 

The 2018-19 results reflected revamped relationships with suppliers, lower prices versus major competitors, simplified and better quality product ranges and improved store standards.

Lewis said customers had responded well to the company’s “Exclusively at Tesco” brands, with 84 per cent of them trying the products.

The improvements have helped Tesco steer a steady course through a period of industry turmoil, as the country prepares to leave the European Union and as Tesco’s two biggest competitors try to merge to become the new industry number one.

Lewis said almost every assumption made when he set recovery targets had been up-ended by events such as Brexit, which has caused the pound to fall and a deepening political crisis. 

Customers were suffering “Brexit fatigue”, Lewis said, but were not changing their shopping habits or stockpiling.

“We’ve not seen any softening [in consumer confidence],” he told reporters. “We’ve not seen any discernable change in buying behaviour through the fourth quarter or indeed into the early part of this year.”

Brexit contingencies 

Shares in Tesco, which have risen by nearly a quarter this year and reached a six-month high on Tuesday, were up 0.8 per cent at 235.87 pence at 09:40 GMT.

Russ Mould, investment director at AJ Bell, said Lewis had “delivered the goods”.

“The core grocery business is ticking along nicely, profitability has improved markedly and the prospective threat from an Asda-Sainsbury combination is receding in the face of regulatory opposition,” he said.

Tesco has a leading 27.4 per cent share of Britain’s grocery market, according to the latest industry data, and looks set to retain that place after the competition regulator said in February it was minded to block Sainsbury’s ($9.6 billion) takeover of Walmart’s Asda.

While Brexit was not impacting customers, the effects were being seen on Tesco’s balance sheet as steps to secure supplies hit working capital.

“We have been proactive where we can in taking some provision if there were to be a difficulty; that impacts on the timing of the working capital in the business,” Lewis said.

“It’s dry, non-perishable items where it’s possible for our ourselves or our suppliers to hold stock.”

Analysts at Bernstein said full-year retail free cash of £906 million fell short of its £1.22 billion target due to the timing of receivables and Brexit-related stock building, but a lot of that would reverse.

Aside from working capital, Tesco beat market forecasts for profit, and was firmly on track to meet its margin goals.

Operating profit jumped 34 per cent to £2.21 billion ($2.89 billion) for the year ended February 23, while the company declared a dividend of 5.77 pence per share, up 92 per cent.

Group sales rose 11.5 per cent to £56.9 billion and Tesco recorded its 13th quarter of like-for-like sales growth in its main UK market with a 1.7 per cent rise in the final quarter.

The operating profit margin was 3.79 per cent in the second half, excluding Tesco’s acquisition of wholesaler Booker, Lewis said, “comfortably within” the 3.5-4 per cent target range set for this financial year.

BRUSSELS — Chinese Premier Li Keqiang and European Union institution leaders met in Brussels on Tuesday for an annual EU-China summit that the EU has seized on to pressure Beijing over trade and investment.

After years of offering free access to its markets, the EU is losing patience with the slow pace of Beijing's own market liberalisation. It is also growing concerned over state-led Chinese companies' dominance of some EU markets and acquisitions of strategic industries.

European Commission President Jean-Claude Juncker said the summit "would not be simple". 

"We will explain that in Europe we are insisting that European firms in China should enjoy the same rights as Chinese firms in Europe," he said in a speech before the meeting.

Li arrived in a black Mercedes bearing two Chinese flags before going into the European Council building with Juncker and Council chief Donald Tusk.

The EU's newly assertive stance has made it difficult to agree a final summit declaration, a staple of such high-level gatherings, which this year the EU sees as way of setting down in writing Chinese promises to open up to European investors.

EU and Chinese negotiators agreed a tentative draft statement on Tuesday morning, four EU diplomats said. But any final communique needs to be signed off by Li, Juncker and Tusk.

Diplomats said a new draft included fresh commitments by Beijing to speed up talks on a decade-long effort to reach an investment pact, as well as text on industrial subsidies and opening China's market more broadly to European companies.

Like the United States, many EU countries want to crack down on industrial subsidies and forced technology transfers, although they prefer dialogue to the trade war Washington has triggered. A new Commission plan described China as a "systemic rival" for the first time last month.

"The old narrative is absolutely obsolete," Commission Vice President Jyrki Katainen told Reuters.

Top trading partners 

One diplomat said an EU leaders' summit in March had helped to forge a more unified European position that was paying off: there was a greater awareness of China's policy of pushing free trade only when it suited its interests.

The EU is China's top trading partner and China is the second-biggest market for EU exports after the United States. The Chinese deny trying to dominate strategic European industries and has repeatedly said it wants a "win-win" relationship of mutual benefit. 

But Beijing is struggling to ease worries about President Xi Jinping's signature Belt and Road Initiative as it readies for a major summit later this month.

Tusk and Juncker are expected to raise concerns about Xi's initiative, namely that the vast infrastructure plan is unsustainable, damaging to the environment, creates financial dependency and is mainly about projecting Chinese power abroad. 

"China aims to have a feel-good summit, whereas we aim to have a meaningful summit, with a meaningful outcome," Peter Berz, acting Asia director at the Commission's trade section, told the European Parliament last week.

China points to a new foreign investment law due to take effect at the start of 2020. It includes provisions to ban forced technology transfers and ensure foreign companies have access to public tenders.

EU officials say the law lacks detail, and question how effective it will really be in protecting foreign firms.

Li wrote in a German newspaper on Monday that China wanted to work with the EU on issues including trade, and denied Beijing was trying to split the bloc by investing in eastern European states.

RIYADH — Saudi Arabia’s energy minister said on Monday it was premature to say whether a consensus existed among members of the Organisation of the Petroleum exporting Countries (OPEC) and its allies to extend oil supply cuts, but a meeting next month would be key.

A joint OPEC and non-OPEC ministerial committee known as the JMMC is due to convene in May. Saudi Arabia and Russia are members of the panel, which includes other major oil producers that took part in a global supply-cutting agreement last year, such as Iraq, the United Arab Emirates, Kuwait, Nigeria and Kazakhstan.

"JMMC will be a key decision point because we will certainly by then know where the consensus view is and, more importantly, before we ask for consensus, we will know where the fundamentals are pointing," the Saudi minister, Khalid Al-Falih, said.

"I think May is going to be key," he added.

Oil inventories remain higher than average but the market is on its way towards rebalancing, Falih added. 

"I don't think we will need [to do more] ... the market is on its way towards balance. We have done a lot more than others," he said, referring to the possibility of Saudi Arabia cutting output further below its target under the global deal. 

"We are getting to a stage where inventories are starting to stabilise and come down but still significantly above what I would consider a normal level."

Russia, which is cutting oil output in tandem with OPEC, also said production cuts would stay in place at least until June, when Washington's next steps on reducing Iranian and Venezuelan oil exports become clearer.

The United States has been increasing its own oil exports steeply, while US President Donald Trump has been pressing the OPEC cartel to lower the price of the commodity by boosting production.

US policies targeting Iran and Venezuela have introduced a new level of uncertainty for OPEC as the producer group struggles to predict global supply and demand. Washington is also advancing a bill, known as NOPEC, that could expose OPEC members to US antitrust lawsuits.

The NOPEC move prompted Saudi Arabia to threaten to sell its oil in currencies other than the dollar if Washington passes the bill, three sources familiar with Saudi energy policy told Reuters last week. 

However, Falih told reporters at an oil event in Riyadh that there was no change to the kingdom's long-standing policy of trading oil in US dollars.

"Absolutely not. There is no change whatsoever to our long-standing policy," Falih said when asked to comment on the possibility that Saudi Arabia could ditch the dollar.

The United Arab Emirates' energy minister, Suhail bin Mohammed Al-Mazroui, also said on Monday that the use of the dollar as the main oil-trading currency could not be changed overnight.

CAIRO — Egypt is on track to end subsidies on most fuels by June 15 as part of a reform programme led by the International Monetary Fund (IMF), the Washington-based body said on Saturday.

The economy of the Arab world’s most populous country has suffered from political instability and security threats since the 2011 uprising.

Cairo secured a $12 billion, three-year loan package from the IMF in 2016.

Egyptian authorities “remain committed” to ending subsidies granted to limit prices at the pump, the IMF said in a new report.

The prices of liquefied petroleum gas (LPG) and fuels used in bakeries and for electricity generation would not be affected, it added.

Bread is a staple in Egypt and a price hike could spark further discontent in the face of continued economic woes.

The IMF said cutting the subsidies is “critical to encourage more efficient energy use” and to “create fiscal space for high-priority spending on health and education”.

In February, the IMF approved the next $2 billion loan payment to Cairo, citing “substantial progress” made by Egyptian authorities on reforms, which have boosted growth and cut unemployment.

But IMF chief Christine Lagarde at the time also urged Egypt “to press ahead with structural reforms that facilitate private sector-led growth and job creation”.

The latest installment brought the total paid to Egypt to about $10 billion since the loan deal was signed in November 2016.

AMMAN — For the 10th time since the World Economic Forum (WEF) has been held at the Dead Sea, Royal Jordanian(RJ) is named the official carrier for participants in WEF on the Middle East and North Africa, which commenced its activities on Saturday, according to an RJ statement. 

More than 1,000 leaders from government, business and civil society come together at the forum to address challenges facing the region.

The selection, once again, of RJ as an official carrier is further testament to the national carrier’s reputation as a quality-service airline that offers a wide route of network and extends facilities to a large number of participants, and an added seal of approval from the forum organizers, the statement said.

The partnership between the WEF and RJ enables participants to enjoy several benefits and services, in addition to the facilities extended at Queen Alia International Airport. 

Part of the services involves assistance from trained RJ staff members during the days of the meeting, manning sales and reservation offices at the forum, in addition to a check-in counter that is available for the participants.

President/CEO Stefan Pichler, who attended the forum, said: “RJ is pleased to maintain its partnership with the WEF organisers and to make participating delegates' travel to Jordan on board RJ’s aircraft a seamless experience. The national carrier of Jordan endeavors to build bridges of cooperation and trust with different sectors in the country, and to sponsor important events, particularly those that encourage tourism”.