At the end of the American International Group’s annual meeting last month, a shareholder approached the microphone with a question for Robert Benmosche, the insurer’s chief executive.
“I’d like to know, what does A.I.G. plan to do with Goldman Sachs?” he asked. “Are you going to get — recoup — some of our money that was given to them?”
Mr. Benmosche, steward of an insurer brought to its knees two years ago after making too many risky, outsize financial bets and paying billions of dollars in claims to Goldman and other banks, said he would continue evaluating his legal options. But, in reality, A.I.G. has precious few.
When the government began rescuing it from collapse in the fall of 2008 with what has become a $182 billion lifeline, A.I.G. was required to forfeit its right to sue several banks — including Goldman, Société Générale, Deutsche Bank and Merrill Lynch — over any irregularities with most of the mortgage securities it insured in the precrisis years.
But after the Securities and Exchange Commission’s civil fraud suit filed in April against Goldman for possibly misrepresenting a mortgage deal to investors, A.I.G. executives and shareholders are asking whether A.I.G. may have been misled by Goldman into insuring mortgage deals that the bank and others may have known were flawed.
This month, an Australian hedge fund sued Goldman on similar grounds. Goldman is contesting the suit and denies any wrongdoing. A spokesman for A.I.G. declined to comment about any plans to sue Goldman or any other banks with which it worked. A Goldman spokesman said that his firm believed that “all aspects of our relationship with A.I.G. were appropriate.”
Unknown outside of a few Wall Street legal departments, the A.I.G. waiver was released last month by the House Committee on Oversight and Government Reform amid 250,000 pages of largely undisclosed documents. The documents, reviewed by The New York Times, provide the most comprehensive public record of how the Federal Reserve Bank of New York and the Treasury Department orchestrated one of the biggest corporate bailouts in history.
The documents also indicate that regulators ignored recommendations from their own advisers to force the banks to accept losses on their A.I.G. deals and instead paid the banks in full for the contracts. That decision, say critics of the A.I.G. bailout, has cost taxpayers billions of extra dollars in payments to the banks. It also contrasts with the hard line the White House took in 2008 when it forced Chrysler’s lenders to take losses when the government bailed out the auto giant.
As a Congressional commission convenes hearings Wednesday exploring the A.I.G. bailout and Goldman’s relationship with the insurer, analysts say that the documents suggest that regulators were overly punitive toward A.I.G. and overly forgiving of banks during the bailout — signified, they say, by the fact that the legal waiver undermined A.I.G. and its shareholders’ ability to recover damages.
“Even if it turns out that it would be a hard suit to win, just the gesture of requiring A.I.G. to scrap its ability to sue is outrageous,” said David Skeel, a law professor at the University of Pennsylvania. “The defense may be that the banking system was in trouble, and we couldn’t afford to destabilize it anymore, but that just strikes me as really going overboard.”
“This really suggests they had myopia and they were looking at it entirely through the perspective of the banks,” Mr. Skeel said.
Regulators at the New York Fed declined to comment on the legal waiver but disagreed with that viewpoint.
“This was not about the banks,” said Sarah J. Dahlgren, a senior vice president for the New York Fed who oversees A.I.G. “This was about stabilizing the system by preventing the disorderly collapse of A.I.G. and the potentially devastating consequences of that event for the U.S. and global economies.”
This month, the Congressional Oversight Panel, a body charged with reviewing the state of financial markets and the regulators that monitor them, published a 337-page report on the A.I.G. bailout. It concluded that the Federal Reserve Bank of New York did not give enough consideration to alternatives before sinking more and more taxpayer money into A.I.G. “It is hard to escape the conclusion that F.R.B.N.Y. was just ‘going through the motions,’ ” the report said.
About $46 billion of the taxpayer money in the A.I.G. bailout was used to pay to mortgage trading partners like Goldman and Société Générale, a French bank, to make good on their claims. The banks are not expected to return any of that money, leading the Congressional Research Service to say in March that much of the taxpayer money ultimately bailed out the banks, not A.I.G.
A Goldman spokesman said that he did not agree with that report’s assertion, noting that his firm considered itself to be insulated from possible losses on its A.I.G. deals.
Even with the financial reform legislation that Congress introduced last week, David A. Moss, a Harvard Business School professor, said he was concerned that the government had not developed a blueprint for stabilizing markets when huge companies like A.I.G. run aground and, for that reason, regulators’ actions during the financial crisis need continued scrutiny. “We have to vet these things now because otherwise, if we face a similar crisis again, federal officials are likely to follow precedents set this time around,” he said.
Under the new legislation, the Federal Deposit Insurance Corporation will have the power to untangle the financial affairs of troubled entities, but bailed-out companies will pay most of their trading partners 100 cents on the dollar for outstanding contracts. (In some cases, the government will be able to recoup some of those payments later on, which the Treasury Department says will protect taxpayers’ interest. )
Sheila C. Bair, the chairwoman of the F.D.I.C., has said that trading partners should be forced to accept discounts in the middle of a bailout.
Regardless of the financial parameters of bailouts, analysts also say that real financial reform should require regulators to demonstrate much more independence from the firms they monitor.
Tuesday, June 29, 2010
Violence erupts in Indian Kashmir
Violence in India’s troubled Kashmir valley escalated on Tuesday, with three local youths, including a 13-year-old boy, shot dead by paramilitary police during widening protests against the heavy military presence in the region.
The deaths brought to 11 the number of men and boys killed by police in Kashmir over the past two weeks in violent clashes between stone-pelting youths and heavily armed members of Central Reserve Police Force.
Authorities imposed a curfew and deployed thousands of troops in Kashmir’s main towns in an effort to restore order in the volatile Muslim-majority province, which is at the centre of a decades-old sovereignty dispute between India and neighbouring Pakistan.
In the town of Anantnag – where thousands of Hindus are gathering to begin an annual pilgrimage to a Himalayan cave – angry youths defied the curfew and confronted paramilitary police, who allegedly opened fire, killing three and injuring others.
On Tuesday evening, Omar Abdullah, the 40-year-old chief minister, of Jammu and Kashmir, said the violent clashes were being deliberately instigated by Kashmiri separatists, who he accused of exploiting “emotional and vulnerable youth”.
He warned that security forces would strictly enforce a curfew across the Kashmir valley, and appealed to Kashmiri parents to keep their children at home and prevent more confrontations with the security forces.
“This cycle of violence has to stop, and the best way to stop this cycle of violence is to stop protesting for the time being,” Mr Abdullah said.
“This is not a simple law and order matter. It’s a battle of wits ...
“It’s a battle of ideologies in which various antinational forces and vested interests have come together to create trouble.”
In the 1990s, Kashmir was wracked by a Pakistan-based armed separatist insurgency, a conflict that lead to the deaths of an estimated 70,000 people, but militant violence has declined sharply in recent years.
However, India maintains nearly 500,000 troops and paramilitary police in the restive region – a intrusive presence that generates tremendous friction, and resentment, among local people.
Elected just 18 months ago, Mr Abduhallah had pledged to reduce the military’s heavy presence in the valley, and end soldiers’ immunity from prosecution for human rights abuses in Kashmir, but he ran into resistance from the armed forces.
Over the weekend, Ali Mohammad Sagar, Kashmir’s law minister, accused the CRPF forces in the state of being “out of control”.
The current cycle of violence started two weeks ago, when a Srinagar teenager was killed by a stray rubber bullet, sparking angry clashes with police that led to more fatalities.
The deaths brought to 11 the number of men and boys killed by police in Kashmir over the past two weeks in violent clashes between stone-pelting youths and heavily armed members of Central Reserve Police Force.
Authorities imposed a curfew and deployed thousands of troops in Kashmir’s main towns in an effort to restore order in the volatile Muslim-majority province, which is at the centre of a decades-old sovereignty dispute between India and neighbouring Pakistan.
In the town of Anantnag – where thousands of Hindus are gathering to begin an annual pilgrimage to a Himalayan cave – angry youths defied the curfew and confronted paramilitary police, who allegedly opened fire, killing three and injuring others.
On Tuesday evening, Omar Abdullah, the 40-year-old chief minister, of Jammu and Kashmir, said the violent clashes were being deliberately instigated by Kashmiri separatists, who he accused of exploiting “emotional and vulnerable youth”.
He warned that security forces would strictly enforce a curfew across the Kashmir valley, and appealed to Kashmiri parents to keep their children at home and prevent more confrontations with the security forces.
“This cycle of violence has to stop, and the best way to stop this cycle of violence is to stop protesting for the time being,” Mr Abdullah said.
“This is not a simple law and order matter. It’s a battle of wits ...
“It’s a battle of ideologies in which various antinational forces and vested interests have come together to create trouble.”
In the 1990s, Kashmir was wracked by a Pakistan-based armed separatist insurgency, a conflict that lead to the deaths of an estimated 70,000 people, but militant violence has declined sharply in recent years.
However, India maintains nearly 500,000 troops and paramilitary police in the restive region – a intrusive presence that generates tremendous friction, and resentment, among local people.
Elected just 18 months ago, Mr Abduhallah had pledged to reduce the military’s heavy presence in the valley, and end soldiers’ immunity from prosecution for human rights abuses in Kashmir, but he ran into resistance from the armed forces.
Over the weekend, Ali Mohammad Sagar, Kashmir’s law minister, accused the CRPF forces in the state of being “out of control”.
The current cycle of violence started two weeks ago, when a Srinagar teenager was killed by a stray rubber bullet, sparking angry clashes with police that led to more fatalities.
Monday, June 28, 2010
Asian Stocks Fall to Two-Week Low on Chinese Growth Concerns
June 29 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index to a two-week low, as concerns over Chinese economic growth overshadowed stock buybacks in Japan and Taiwan.
China Minsheng Banking Corp. and Angang Steel Co. sank at least 2 percent in Shanghai and Shenzhen respectively after the Conference Board corrected its April gauge for the outlook of China’s economy to indicate slower growth. Citigroup Inc. said the country’s exports face “strong headwinds.” Asustek Computer Inc. gained 1 percent in Taipei and Tokio Marine Holdings Inc. advanced 0.9 percent in Tokyo on plans to repurchase stock.
The MSCI Asia Pacific Index lost 0.6 percent to 114.97 as of 12:49 p.m. in Tokyo, set for its lowest close since June 15. The gauge has slumped 11 percent from its high this year on April 15 on concern Europe’s debt crisis and Chinese steps to curb property prices will hurt global growth.
“The market is pausing to digest the implications of the macro overhang of the last couple of weeks,” said Jason Teh, who helps manage $3 billion at Investors Mutual in Sydney. “Markets are maybe realizing the growth trajectory may be slower because there is still too much leverage in the system. Today there is more of a focus on stocks specific news.”
China’s Shanghai Composite Index slumped 1.8 percent and Hong Kong’s Hang Seng Index lost 1.1 percent. South Korea’s Kospi dropped 0.6 percent, while Australia’s S&P/ASX 200 Index lost 0.2 percent. Japan’s Nikkei 225 Stock Average sank 0.5 percent.
China Stocks Fall
Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The index fell 0.2 percent yesterday, dragging the gauge lower for the fifth time in six days, as oil and metal prices dropped.
Minsheng Banking, the nation’s first privately owned bank, dropped 2.1 percent to 6.22 yuan. Angang Steel lost 2 percent to 7.49 yuan.
The Conference Board said its index of leading Chinese economic indicators rose 0.3 percent in April, less than the 1.7 percent gain reported on June 15. The New York-based research firm said in an e-mailed statement the previous release contained a “calculation error.”
Asustek gained 1 percent to NT$244.5 in Taipei. The maker of the Eee PC low-cost notebook said its board approved plans to buy back and cancel up to 10 million shares, or 1.57 percent of its outstanding stock.
Tokio Marine, a Japanese casualty insurer, gained 0.9 percent to 2,378 yen after announcing plans to buy back as many as 16 million shares, or 2 percent of its stock, for as much as 25 billion yen.
Nippon Telegraph
Nippon Telegraph & Telephone Co. climbed 1.2 percent to 3,670 yen. The company’s NTT Finance Corp. unit may post its first operating profit in three years, Nikkei English News reported, without saying where it got the information.
Government reports today showed that Japan’s industrial production and household spending slipped in May and the unemployment rate unexpectedly increased, in signs that the recovery of the world’s second-largest economy may slow.
“People in the market are wondering how to respond to two opposite trends, the risk of a global economic double dip and robust growth in emerging countries,” said Ayako Sera, a strategist in Tokyo at Sumitomo Trust & Banking Co., which manages about $310 billion.
China Minsheng Banking Corp. and Angang Steel Co. sank at least 2 percent in Shanghai and Shenzhen respectively after the Conference Board corrected its April gauge for the outlook of China’s economy to indicate slower growth. Citigroup Inc. said the country’s exports face “strong headwinds.” Asustek Computer Inc. gained 1 percent in Taipei and Tokio Marine Holdings Inc. advanced 0.9 percent in Tokyo on plans to repurchase stock.
The MSCI Asia Pacific Index lost 0.6 percent to 114.97 as of 12:49 p.m. in Tokyo, set for its lowest close since June 15. The gauge has slumped 11 percent from its high this year on April 15 on concern Europe’s debt crisis and Chinese steps to curb property prices will hurt global growth.
“The market is pausing to digest the implications of the macro overhang of the last couple of weeks,” said Jason Teh, who helps manage $3 billion at Investors Mutual in Sydney. “Markets are maybe realizing the growth trajectory may be slower because there is still too much leverage in the system. Today there is more of a focus on stocks specific news.”
China’s Shanghai Composite Index slumped 1.8 percent and Hong Kong’s Hang Seng Index lost 1.1 percent. South Korea’s Kospi dropped 0.6 percent, while Australia’s S&P/ASX 200 Index lost 0.2 percent. Japan’s Nikkei 225 Stock Average sank 0.5 percent.
China Stocks Fall
Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The index fell 0.2 percent yesterday, dragging the gauge lower for the fifth time in six days, as oil and metal prices dropped.
Minsheng Banking, the nation’s first privately owned bank, dropped 2.1 percent to 6.22 yuan. Angang Steel lost 2 percent to 7.49 yuan.
The Conference Board said its index of leading Chinese economic indicators rose 0.3 percent in April, less than the 1.7 percent gain reported on June 15. The New York-based research firm said in an e-mailed statement the previous release contained a “calculation error.”
Asustek gained 1 percent to NT$244.5 in Taipei. The maker of the Eee PC low-cost notebook said its board approved plans to buy back and cancel up to 10 million shares, or 1.57 percent of its outstanding stock.
Tokio Marine, a Japanese casualty insurer, gained 0.9 percent to 2,378 yen after announcing plans to buy back as many as 16 million shares, or 2 percent of its stock, for as much as 25 billion yen.
Nippon Telegraph
Nippon Telegraph & Telephone Co. climbed 1.2 percent to 3,670 yen. The company’s NTT Finance Corp. unit may post its first operating profit in three years, Nikkei English News reported, without saying where it got the information.
Government reports today showed that Japan’s industrial production and household spending slipped in May and the unemployment rate unexpectedly increased, in signs that the recovery of the world’s second-largest economy may slow.
“People in the market are wondering how to respond to two opposite trends, the risk of a global economic double dip and robust growth in emerging countries,” said Ayako Sera, a strategist in Tokyo at Sumitomo Trust & Banking Co., which manages about $310 billion.
In Ireland, a Picture of the High Cost of Austerity
DUBLIN — As Europe’s major economies focus on belt-tightening, they are following the path of Ireland. But the once thriving nation is struggling, with no sign of a rapid turnaround in sight.
Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.
“When our public finance situation blew wide open, the dominant consideration was ensuring that there was international investor confidence in Ireland so we could continue to borrow,” said Alan Barrett, chief economist at the Economic and Social Research Institute of Ireland. “A lot of the argument was, ‘Let’s get this over with quickly.’ ”
Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.
Joblessness in this country of 4.5 million is above 13 percent, and the ranks of the long-term unemployed — those out of work for a year or more — have more than doubled, to 5.3 percent.
Now, the Irish are being warned of more pain to come.
“The facts are that there is no easy way to cut deficits,” Prime Minister Brian Cowen said in an interview. “Those who claim there’s an easier way or a soft option — that’s not the real world.”
Despite its strenuous efforts, Ireland has been thrust into the same ignominious category as Portugal, Italy, Greece and Spain. It now pays a hefty three percentage points more than Germany on its benchmark bonds, in part because investors fear that the austerity program, by retarding growth and so far failing to reduce borrowing, will make it harder for Dublin to pay its bills rather than easier.
Other European nations, including Britain and Germany, are following Ireland’s lead, arguing that the only way to restore growth is to convince investors and their own people that government borrowing will shrink.
The Group of 20 leaders set that in writing this weekend, vowing to make deficit reduction the top priority despite warnings from President Obama that too much austerity could choke a global recovery and warnings from a few economists about the possibility of a much sharper 1930s style downturn.
“Europe is in a tough bind,” said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund and now a Harvard professor. “If you want to escape default, the Irish path is the only way to go. But the Ireland experience points to the profound challenges that the current strategy implies.”
Politicians here have raised taxes and cut salaries for nurses, professors and other public workers by up to 20 percent. About 30 billion euros ($37 billion) is being poured into zombie banks like Anglo Irish, which was nationalized after lavishing loans on developers.
The budget went from surpluses in 2006 and 2007 to a staggering deficit of 14.3 percent of gross domestic product last year — worse than Greece. It continues to deteriorate. Drained of cash after an American-style housing boom went bust, Ireland has had to borrow billions; its once ultralow debt could rise to 77 percent of G.D.P. this year.
“Everybody’s feeling quite sick at what happened because things were going so well for Ireland,” said Patrick Honohan, the Irish central bank governor. “But we don’t have the flexibility to do a spending stimulus now. There’s no one who is even arguing for it.”
Mr. Honohan predicts growth could revive to a rate of about 3 percent by 2012. But that may be optimistic: Ireland, as one of the 16 nations in Europe that has adopted the euro as its common currency, is trying to shrink the deficit to 3 percent of G.D.P. by 2014, a commitment that could weaken its hopes for recovery.
These troubles sting many Irish, given the head start Ireland has on most members of the euro club. Its labor market is one of Europe’s most open and dynamic. After its last major recession in the 1980s, it lured knowledge-based multinationals like Intel and Microsoft — and now Facebook and Linked-In — with a 12.5 percent tax rate, giving Ireland one of the most export-dependent economies in the world.
Now, the government is pinning nearly all its hopes on an export revival to lift the economy. Falling wage and energy costs, and a weaker euro, have improved competitiveness.
Turning statistics into jobs, however, will be a herculean task. “Exports alone don’t drive a significant number of jobs,” said Paul Duffy, a vice president at Pfizer in Ireland.
Wage cuts were easier to impose here because people remembered that leaders moved too slowly to overcome Ireland’s last recession. This time, Mr. Cowen struck accords swiftly with labor unions, which agreed that protests like those in Greece would only delay a recovery.
But pay cuts have spooked consumers into saving, weighing on the prospects for job creation and economic recovery. And after a decade-long boom that encouraged many from the previous years of diaspora to return, the country is facing a new threat: business leaders say thousands of skilled young Irish are now moving out, raising fears of a brain drain.
Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.
“When our public finance situation blew wide open, the dominant consideration was ensuring that there was international investor confidence in Ireland so we could continue to borrow,” said Alan Barrett, chief economist at the Economic and Social Research Institute of Ireland. “A lot of the argument was, ‘Let’s get this over with quickly.’ ”
Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.
Joblessness in this country of 4.5 million is above 13 percent, and the ranks of the long-term unemployed — those out of work for a year or more — have more than doubled, to 5.3 percent.
Now, the Irish are being warned of more pain to come.
“The facts are that there is no easy way to cut deficits,” Prime Minister Brian Cowen said in an interview. “Those who claim there’s an easier way or a soft option — that’s not the real world.”
Despite its strenuous efforts, Ireland has been thrust into the same ignominious category as Portugal, Italy, Greece and Spain. It now pays a hefty three percentage points more than Germany on its benchmark bonds, in part because investors fear that the austerity program, by retarding growth and so far failing to reduce borrowing, will make it harder for Dublin to pay its bills rather than easier.
Other European nations, including Britain and Germany, are following Ireland’s lead, arguing that the only way to restore growth is to convince investors and their own people that government borrowing will shrink.
The Group of 20 leaders set that in writing this weekend, vowing to make deficit reduction the top priority despite warnings from President Obama that too much austerity could choke a global recovery and warnings from a few economists about the possibility of a much sharper 1930s style downturn.
“Europe is in a tough bind,” said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund and now a Harvard professor. “If you want to escape default, the Irish path is the only way to go. But the Ireland experience points to the profound challenges that the current strategy implies.”
Politicians here have raised taxes and cut salaries for nurses, professors and other public workers by up to 20 percent. About 30 billion euros ($37 billion) is being poured into zombie banks like Anglo Irish, which was nationalized after lavishing loans on developers.
The budget went from surpluses in 2006 and 2007 to a staggering deficit of 14.3 percent of gross domestic product last year — worse than Greece. It continues to deteriorate. Drained of cash after an American-style housing boom went bust, Ireland has had to borrow billions; its once ultralow debt could rise to 77 percent of G.D.P. this year.
“Everybody’s feeling quite sick at what happened because things were going so well for Ireland,” said Patrick Honohan, the Irish central bank governor. “But we don’t have the flexibility to do a spending stimulus now. There’s no one who is even arguing for it.”
Mr. Honohan predicts growth could revive to a rate of about 3 percent by 2012. But that may be optimistic: Ireland, as one of the 16 nations in Europe that has adopted the euro as its common currency, is trying to shrink the deficit to 3 percent of G.D.P. by 2014, a commitment that could weaken its hopes for recovery.
These troubles sting many Irish, given the head start Ireland has on most members of the euro club. Its labor market is one of Europe’s most open and dynamic. After its last major recession in the 1980s, it lured knowledge-based multinationals like Intel and Microsoft — and now Facebook and Linked-In — with a 12.5 percent tax rate, giving Ireland one of the most export-dependent economies in the world.
Now, the government is pinning nearly all its hopes on an export revival to lift the economy. Falling wage and energy costs, and a weaker euro, have improved competitiveness.
Turning statistics into jobs, however, will be a herculean task. “Exports alone don’t drive a significant number of jobs,” said Paul Duffy, a vice president at Pfizer in Ireland.
Wage cuts were easier to impose here because people remembered that leaders moved too slowly to overcome Ireland’s last recession. This time, Mr. Cowen struck accords swiftly with labor unions, which agreed that protests like those in Greece would only delay a recovery.
But pay cuts have spooked consumers into saving, weighing on the prospects for job creation and economic recovery. And after a decade-long boom that encouraged many from the previous years of diaspora to return, the country is facing a new threat: business leaders say thousands of skilled young Irish are now moving out, raising fears of a brain drain.
China Trade Pact Draws Taiwan Into Economic Embrace
June 29 (Bloomberg) -- Taiwan is due to sign its first trade treaty with China today, strengthening commercial ties with the fastest-growing major economy and the island’s biggest trading partner and investment destination.
The accord to be signed in the Chinese city of Chongqing, former headquarters of Taiwan’s ruling Kuomintang when they fought the Japanese from 1937 to 1945, shows how much relations with the mainland have warmed since Taiwanese president Ma Ying- jeou took office in May 2008. China has viewed the island as a renegade province since the Kuomintang fled there after losing to Mao Zedong’s Communists in the nation’s civil war in 1949.
“This would not be imaginable two or three years ago,” Carl Chien, senior country officer at JPMorgan Chase & Co. said by telephone in Taipei. “The mere fact that the two governments are signing some kind of treaty is already a record-breaking thing.”
China set aside its claims over Taiwan to negotiate the Economic Cooperation Framework Agreement, betting that ever- tighter economic integration will achieve what six decades of military threats did not. For Taiwan, the deal restores the island’s competitiveness in the world’s third-biggest economy and may pave the way for agreements with other trading partners.
China will cut tariffs on 539 items from Taiwan valued at $13.8 billion, or about 16 percent of the island’s 2009 exports to the mainland, Zheng Lizhong, vice chairman of the Association for Relations Across the Taiwan Straits, said last week. Taiwan will cut tariffs on 267 items from China worth $2.86 billion, or about 10.5 percent of the country’s shipments to Taiwan in 2009.
Chinese Visitors
Since Ma took office, direct air, shipping and postal links have been established. In the first five months of this year, 70,445 Chinese visited Taiwan, 70 percent more than in the corresponding period a year earlier, according to Taiwan Tourism Bureau numbers.
Taiwan’s benchmark stock index gained 17 percent in the past year as Ma pushed for the trade pact with China. That outpaced the 13 percent advance by the MSCI Asia Pacific Index. The Taiex rose 0.7 percent to 7554.78 points as of 9.01 a.m. in Taipei.
Taiwan is keen to reach the trade deal with China in order to secure for its companies the same preferential treatment the mainland now offers 10 Southeast Asian countries.
In January, a separate trade accord took effect between China and the Association of Southeast Asian Nations, lowering tariffs on two-way trade. Similar deals for China with Japan and South Korea are under discussion.
“It’s vital for us economically, it’s a matter of life and death,” said Philip Yang, a professor of political science at National Taiwan University in Taipei. “If we sign we won’t be in a disadvantageous position with Asean and Korea, our major economic rivals in China.”
Omissions
Still, the proposed trade pact doesn’t include items some Taiwanese companies had wanted, such as tariff cuts for polyvinyl chloride, or PVC, one of the island’s top exports, and easing restrictions in the semiconductor industry.
“The detailed items haven’t been disclosed,” Lee Chih- tsuen, chairman of Formosa Plastics Corp, Taiwan’s biggest polyvinyl chloride maker, told shareholders on June 25. “We aren’t satisfied, but it is acceptable.”
Under the pact, China will open up 11 service sectors such as banking, insurance, hospitals and accounting, while Taiwan agreed to offer wider access in seven areas, including banking and movies, the two sides said.
“China is incorporating Taiwan into its supply chain and Taiwan’s economy will become part of China’s economy, and that is the biggest worry for Taiwan people,” Tsai Ing-wen, chairwoman of the opposition Democratic Progressive Party, said at a rally by more than 30,000 people on June 26 to protest the accord.
Trade Booms
Trade with the mainland, Taiwan’s largest export market, rose 68 percent in the first four months of 2010 compared with same period last year, and Taiwan investment rose 44.7 percent, China’s Tang Wei, head of Taiwan, Hong Kong and Macao affairs at China’s Ministry of Commerce said on June 13. China and Hong Kong accounted for 43 percent of Taiwan’s exports, according to data from the island’s Ministry of Finance.
Under the deal, tariff reductions on items including petrochemicals, auto parts, textiles and machinery will be implemented in three stages over two years, by which time tariffs will be brought to zero.
A trade agreement with China is also vital to Taiwan as it seeks similar accords with other regional trading partners.
The agreement will “ease the concerns of most of the countries in the world and start to bring Taiwan back to a normal position in establishing FTA relationships with its important trading partner countries,” J.T. Wang, chairman of Acer Inc., the world’s largest notebook computer supplier, said in an e-mailed reply to questions.
The accord to be signed in the Chinese city of Chongqing, former headquarters of Taiwan’s ruling Kuomintang when they fought the Japanese from 1937 to 1945, shows how much relations with the mainland have warmed since Taiwanese president Ma Ying- jeou took office in May 2008. China has viewed the island as a renegade province since the Kuomintang fled there after losing to Mao Zedong’s Communists in the nation’s civil war in 1949.
“This would not be imaginable two or three years ago,” Carl Chien, senior country officer at JPMorgan Chase & Co. said by telephone in Taipei. “The mere fact that the two governments are signing some kind of treaty is already a record-breaking thing.”
China set aside its claims over Taiwan to negotiate the Economic Cooperation Framework Agreement, betting that ever- tighter economic integration will achieve what six decades of military threats did not. For Taiwan, the deal restores the island’s competitiveness in the world’s third-biggest economy and may pave the way for agreements with other trading partners.
China will cut tariffs on 539 items from Taiwan valued at $13.8 billion, or about 16 percent of the island’s 2009 exports to the mainland, Zheng Lizhong, vice chairman of the Association for Relations Across the Taiwan Straits, said last week. Taiwan will cut tariffs on 267 items from China worth $2.86 billion, or about 10.5 percent of the country’s shipments to Taiwan in 2009.
Chinese Visitors
Since Ma took office, direct air, shipping and postal links have been established. In the first five months of this year, 70,445 Chinese visited Taiwan, 70 percent more than in the corresponding period a year earlier, according to Taiwan Tourism Bureau numbers.
Taiwan’s benchmark stock index gained 17 percent in the past year as Ma pushed for the trade pact with China. That outpaced the 13 percent advance by the MSCI Asia Pacific Index. The Taiex rose 0.7 percent to 7554.78 points as of 9.01 a.m. in Taipei.
Taiwan is keen to reach the trade deal with China in order to secure for its companies the same preferential treatment the mainland now offers 10 Southeast Asian countries.
In January, a separate trade accord took effect between China and the Association of Southeast Asian Nations, lowering tariffs on two-way trade. Similar deals for China with Japan and South Korea are under discussion.
“It’s vital for us economically, it’s a matter of life and death,” said Philip Yang, a professor of political science at National Taiwan University in Taipei. “If we sign we won’t be in a disadvantageous position with Asean and Korea, our major economic rivals in China.”
Omissions
Still, the proposed trade pact doesn’t include items some Taiwanese companies had wanted, such as tariff cuts for polyvinyl chloride, or PVC, one of the island’s top exports, and easing restrictions in the semiconductor industry.
“The detailed items haven’t been disclosed,” Lee Chih- tsuen, chairman of Formosa Plastics Corp, Taiwan’s biggest polyvinyl chloride maker, told shareholders on June 25. “We aren’t satisfied, but it is acceptable.”
Under the pact, China will open up 11 service sectors such as banking, insurance, hospitals and accounting, while Taiwan agreed to offer wider access in seven areas, including banking and movies, the two sides said.
“China is incorporating Taiwan into its supply chain and Taiwan’s economy will become part of China’s economy, and that is the biggest worry for Taiwan people,” Tsai Ing-wen, chairwoman of the opposition Democratic Progressive Party, said at a rally by more than 30,000 people on June 26 to protest the accord.
Trade Booms
Trade with the mainland, Taiwan’s largest export market, rose 68 percent in the first four months of 2010 compared with same period last year, and Taiwan investment rose 44.7 percent, China’s Tang Wei, head of Taiwan, Hong Kong and Macao affairs at China’s Ministry of Commerce said on June 13. China and Hong Kong accounted for 43 percent of Taiwan’s exports, according to data from the island’s Ministry of Finance.
Under the deal, tariff reductions on items including petrochemicals, auto parts, textiles and machinery will be implemented in three stages over two years, by which time tariffs will be brought to zero.
A trade agreement with China is also vital to Taiwan as it seeks similar accords with other regional trading partners.
The agreement will “ease the concerns of most of the countries in the world and start to bring Taiwan back to a normal position in establishing FTA relationships with its important trading partner countries,” J.T. Wang, chairman of Acer Inc., the world’s largest notebook computer supplier, said in an e-mailed reply to questions.
Petrol stations cautiously eye Indian boost
All along India’s highway network, more than 700 deserted Reliance Industries petrol pumps stand as silent testimony to the ills of the country’s energy sector, distorted by huge subsidies that shield Indian consumers from high global oil prices.
The pumps were shuttered five years ago, when surging global oil prices made it a mug’s game for the three private players – Reliance, Essar, and Royal Dutch Shell – to try to compete with state-owned Hindustan Petroleum, Indian Oil, and Bharat Petroleum, which were selling fuel at highly subsidised, government-mandated prices.
As it grapples with a yawning fiscal deficit, New Delhi has begun chipping away at its huge oil subsidy burden. The Congress-led government last week ended state controls over petrol prices, which promptly rose over 7 per cent. It also pledged to gradually free the price of diesel, which accounts for more than 80 per cent of India’s automotive fuel use, and imposed immediate 5 per cent increases.
Both private and public sector oil companies – and powerful Indian industry groups – have hailed the move as a welcome signal of New Delhi’s ability to undertake tough reforms to the crucial energy sector.
But analysts say that the real test of India’s seriousness will be the pace at which it liberalises more politically sensitive diesel prices – and what happens when global oil prices rise again. S. Sundareshan, the oil secretary, has already said that the government reserved the right to intervene again if prices surged.
“The litmus test for the arrangement is when oil prices do spike, what does the government do?” says Jahangir Aziz, chief economist at JPMorgan.
India, which imports about 70 per cent of its oil, tried to liberalise fuel prices in 2002, with a plan to gradually move to market levels. But when crude prices soared, the Congress-led coalition ordered state-owned oil companies to hold pump prices down.
Though the state-controlled groups were partially compensated for their losses, they still ran into financial difficulties. Private companies received no compensation, however, and could not compete, forcing them to mothball many of their stations.
Crisil, the Indian rating agency, said the move last Friday to deregulate petrol prices would help state-owned oil marketing companies such as Indian Oil to improve their cash flow and reduce dependence on expensive external borrowings. Shares in state-controlled oil companies, which said the moves would help them revive expansion plans, have bounced.
Meanwhile, both Essar, which says it reopened all of its 1,350 retail fuel outlets as global oil prices fell over the past two years, and Shell’s Indian subsidiary say they expect higher sales as petrol prices at state-pumps and privately retailers levels out.
“The three private players are going to get a big boost from this,” says Vikram Singh Mehta, chairman of Shell India, which runs 70 fuel retail outlets, mostly in urban areas where petrol use is higher. “It levels the playing field.”
Naresh Nayyar, the chief executive of Essar Energy, says he is considering an expansion of its fuel retail network. “As the largest private sector fuel retailer in India, we are well placed to capture additional sales for fuel and non-fuel items.”
Yet analysts say companies will probably remain cautious on any expansion of their retail networks, given New Delhi’s record of interference. Much will also depend on what happens to diesel pricing, as the country’s dominant fuel.
So far, the government has given no details about how or when it might move to full deregulation.
That’s hardly encouraging for Reliance. Its deserted petrol stations are primarily located along the major highways, where diesel – used by India’s huge long-distance trucking fleet – is the main fuel in demand.
The pumps were shuttered five years ago, when surging global oil prices made it a mug’s game for the three private players – Reliance, Essar, and Royal Dutch Shell – to try to compete with state-owned Hindustan Petroleum, Indian Oil, and Bharat Petroleum, which were selling fuel at highly subsidised, government-mandated prices.
As it grapples with a yawning fiscal deficit, New Delhi has begun chipping away at its huge oil subsidy burden. The Congress-led government last week ended state controls over petrol prices, which promptly rose over 7 per cent. It also pledged to gradually free the price of diesel, which accounts for more than 80 per cent of India’s automotive fuel use, and imposed immediate 5 per cent increases.
Both private and public sector oil companies – and powerful Indian industry groups – have hailed the move as a welcome signal of New Delhi’s ability to undertake tough reforms to the crucial energy sector.
But analysts say that the real test of India’s seriousness will be the pace at which it liberalises more politically sensitive diesel prices – and what happens when global oil prices rise again. S. Sundareshan, the oil secretary, has already said that the government reserved the right to intervene again if prices surged.
“The litmus test for the arrangement is when oil prices do spike, what does the government do?” says Jahangir Aziz, chief economist at JPMorgan.
India, which imports about 70 per cent of its oil, tried to liberalise fuel prices in 2002, with a plan to gradually move to market levels. But when crude prices soared, the Congress-led coalition ordered state-owned oil companies to hold pump prices down.
Though the state-controlled groups were partially compensated for their losses, they still ran into financial difficulties. Private companies received no compensation, however, and could not compete, forcing them to mothball many of their stations.
Crisil, the Indian rating agency, said the move last Friday to deregulate petrol prices would help state-owned oil marketing companies such as Indian Oil to improve their cash flow and reduce dependence on expensive external borrowings. Shares in state-controlled oil companies, which said the moves would help them revive expansion plans, have bounced.
Meanwhile, both Essar, which says it reopened all of its 1,350 retail fuel outlets as global oil prices fell over the past two years, and Shell’s Indian subsidiary say they expect higher sales as petrol prices at state-pumps and privately retailers levels out.
“The three private players are going to get a big boost from this,” says Vikram Singh Mehta, chairman of Shell India, which runs 70 fuel retail outlets, mostly in urban areas where petrol use is higher. “It levels the playing field.”
Naresh Nayyar, the chief executive of Essar Energy, says he is considering an expansion of its fuel retail network. “As the largest private sector fuel retailer in India, we are well placed to capture additional sales for fuel and non-fuel items.”
Yet analysts say companies will probably remain cautious on any expansion of their retail networks, given New Delhi’s record of interference. Much will also depend on what happens to diesel pricing, as the country’s dominant fuel.
So far, the government has given no details about how or when it might move to full deregulation.
That’s hardly encouraging for Reliance. Its deserted petrol stations are primarily located along the major highways, where diesel – used by India’s huge long-distance trucking fleet – is the main fuel in demand.
Friday, June 25, 2010
Genetically Altered Salmon Get Closer to the Table
The Food and Drug Administration is seriously considering whether to approve the first genetically engineered animal that people would eat — salmon that can grow at twice the normal rate.
The developer of the salmon has been trying to get approval for a decade. But the company now seems to have submitted most or all of the data the F.D.A. needs to analyze whether the salmon are safe to eat, nutritionally equivalent to other salmon and safe for the environment, according to government and biotechnology industry officials. A public meeting to discuss the salmon may be held as early as this fall.
Some consumer and environmental groups are likely to raise objections to approval. Even within the F.D.A., there has been a debate about whether the salmon should be labeled as genetically engineered (genetically engineered crops are not labeled).
The salmon’s approval would help open a path for companies and academic scientists developing other genetically engineered animals, like cattle resistant to mad cow disease or pigs that could supply healthier bacon. Next in line behind the salmon for possible approval would probably be the “enviropig,” developed at a Canadian university, which has less phosphorus pollution in its manure.
The salmon was developed by a company called AquaBounty Technologies and would be raised in fish farms. It is an Atlantic salmon that contains a growth hormone gene from a Chinook salmon as well as a genetic on-switch from the ocean pout, a distant relative of the salmon.
Normally, salmon do not make growth hormone in cold weather. But the pout’s on-switch keeps production of the hormone going year round. The result is salmon that can grow to market size in 16 to 18 months instead of three years, though the company says the modified salmon will not end up any bigger than a conventional fish.
“You don’t get salmon the size of the Hindenburg,” said Ronald L. Stotish, the chief executive of AquaBounty. “You can get to those target weights in a shorter time.”
AquaBounty, which is based in Waltham, Mass., and publicly traded in London, said last week that the F.D.A. had signed off on five of the seven sets of data required to demonstrate that the fish was safe for consumption and for the environment. It said it demonstrated, for instance, that the inserted gene did not change through multiple generations and that the genetic engineering did not harm the animals.
“Perhaps in the next few months, we expect to see a final approval,” Mr. Stotish said.
But the company has been overly optimistic before.
He said it would take two or three years after approval for the salmon to reach supermarkets.
The F.D.A. confirmed it was reviewing the salmon but, because of confidentiality rules, would not comment further.
Under a policy announced in 2008, the F.D.A. is regulating genetically engineered animals as if they were veterinary drugs and using the rules for those drugs. And applications for approval of new drugs must be kept confidential by the agency.
Critics say the drug evaluation process does not allow full assessment of the possible environmental impacts of genetically altered animals and also blocks public input.
“There is no opportunity for anyone from the outside to see the data or criticize it,” said Margaret Mellon, director of the food and environment program at the Union of Concerned Scientists. When consumer groups were invited to discuss biotechnology policy with top F.D.A. officials last month, Ms. Mellon said she warned the officials that approval of the salmon would generate “a firestorm of negative response.”
How consumers will react is not entirely clear. Some public opinion surveys have shown that Americans are more wary about genetically engineered animals than about the genetically engineered crops now used in a huge number of foods. But other polls suggest that many Americans would accept the animals if they offered environmental or nutritional benefits.
Mr. Stotish said the benefit of the fast-growing salmon would be to help supply the world’s food needs using fewer resources.
Government officials and industry executives say the F.D.A. is moving cautiously on the salmon. “It’s going to be a P. R. issue,” said one government official, who spoke on the condition of anonymity because he was not authorized to speak about the issue.
Some of these government officials and executives said that F.D.A. officials had discussed internally whether the salmon could be labeled to give consumers the choice of avoiding them.
The developer of the salmon has been trying to get approval for a decade. But the company now seems to have submitted most or all of the data the F.D.A. needs to analyze whether the salmon are safe to eat, nutritionally equivalent to other salmon and safe for the environment, according to government and biotechnology industry officials. A public meeting to discuss the salmon may be held as early as this fall.
Some consumer and environmental groups are likely to raise objections to approval. Even within the F.D.A., there has been a debate about whether the salmon should be labeled as genetically engineered (genetically engineered crops are not labeled).
The salmon’s approval would help open a path for companies and academic scientists developing other genetically engineered animals, like cattle resistant to mad cow disease or pigs that could supply healthier bacon. Next in line behind the salmon for possible approval would probably be the “enviropig,” developed at a Canadian university, which has less phosphorus pollution in its manure.
The salmon was developed by a company called AquaBounty Technologies and would be raised in fish farms. It is an Atlantic salmon that contains a growth hormone gene from a Chinook salmon as well as a genetic on-switch from the ocean pout, a distant relative of the salmon.
Normally, salmon do not make growth hormone in cold weather. But the pout’s on-switch keeps production of the hormone going year round. The result is salmon that can grow to market size in 16 to 18 months instead of three years, though the company says the modified salmon will not end up any bigger than a conventional fish.
“You don’t get salmon the size of the Hindenburg,” said Ronald L. Stotish, the chief executive of AquaBounty. “You can get to those target weights in a shorter time.”
AquaBounty, which is based in Waltham, Mass., and publicly traded in London, said last week that the F.D.A. had signed off on five of the seven sets of data required to demonstrate that the fish was safe for consumption and for the environment. It said it demonstrated, for instance, that the inserted gene did not change through multiple generations and that the genetic engineering did not harm the animals.
“Perhaps in the next few months, we expect to see a final approval,” Mr. Stotish said.
But the company has been overly optimistic before.
He said it would take two or three years after approval for the salmon to reach supermarkets.
The F.D.A. confirmed it was reviewing the salmon but, because of confidentiality rules, would not comment further.
Under a policy announced in 2008, the F.D.A. is regulating genetically engineered animals as if they were veterinary drugs and using the rules for those drugs. And applications for approval of new drugs must be kept confidential by the agency.
Critics say the drug evaluation process does not allow full assessment of the possible environmental impacts of genetically altered animals and also blocks public input.
“There is no opportunity for anyone from the outside to see the data or criticize it,” said Margaret Mellon, director of the food and environment program at the Union of Concerned Scientists. When consumer groups were invited to discuss biotechnology policy with top F.D.A. officials last month, Ms. Mellon said she warned the officials that approval of the salmon would generate “a firestorm of negative response.”
How consumers will react is not entirely clear. Some public opinion surveys have shown that Americans are more wary about genetically engineered animals than about the genetically engineered crops now used in a huge number of foods. But other polls suggest that many Americans would accept the animals if they offered environmental or nutritional benefits.
Mr. Stotish said the benefit of the fast-growing salmon would be to help supply the world’s food needs using fewer resources.
Government officials and industry executives say the F.D.A. is moving cautiously on the salmon. “It’s going to be a P. R. issue,” said one government official, who spoke on the condition of anonymity because he was not authorized to speak about the issue.
Some of these government officials and executives said that F.D.A. officials had discussed internally whether the salmon could be labeled to give consumers the choice of avoiding them.
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