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EU, China Join Forces to Dial Down Trade Tensions: Davos Update

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(Bloomberg) — Sign up here to receive the Davos Diary, a special daily newsletter that will run from Jan. 20-24.The rich and powerful are in Davos, Switzerland, for the World Economic Forum’s 50th annual meeting, and the gathering is being closely watched to see how the global elite aims to tackle problems they helped create, above all climate change.The economy is in focus on the final day of the forum, and European Central Bank President Christine Lagarde told Bloomberg TV investors shouldn’t assume that current monetary policy is locked in for the foreseeable future just because officials are reviewing their strategy.Lagarde later takes part in a panel discussion on the global outlook with U.S. Treasury Secretary Steven Mnuchin, Bank of Japan Governor Haruhiko Kuroda and German Finance Minister Olaf Scholz. Swedish climate activist Greta Thunberg, meanwhile, has called a climate strike for Friday at 11 a.m. local time near the forum.To get all the highlights delivered to your inbox, sign up for the Davos Diary newsletter. Here’s the latest (time-stamps are local time in Davos):Centeno Sees Germany Stepping Up Spending (10:10 a.m.)To spur economic activity, euro-area countries that can spend more need to, and Germany is showing signs that it is ready to play its part, according to Eurogroup President Mario Centeno.“We know that some countries have more space than others to act,” Centeno said in a Bloomberg TV interview. “Germany is one of those countries that can act, and actually we see some action from the German side.”Recent investment in the rail sector “goes precisely in that direction,” Centeno added. “It’s public investment, connected with climate action. I expect more of those actions to be taken in the course of 2020, so that 2020 can finally see this acceleration of the global economy, and Europe can also play a role in that.”EU, China, Brazil Form Trade-Dispute Alliance (10 a.m.)The European Union and a group of 16 nations that includes China and Brazil are forming an alliance to settle trade disputes among themselves using an interim appeal-arbitration mechanism at the World Trade Organization.“We will work towards putting in place contingency measures that would allow for appeals of WTO panel reports in disputes among ourselves,” according to a copy of a joint declaration obtained by Bloomberg.The development marks an advance of the EU’s backup plan for settling international trade disputes now that the WTO appellate body is paralyzed. WTO delegates meeting in Davos are expected to announce the arrangement later Friday.“We believe that a functioning dispute settlement system of the WTO is of the utmost importance for the rules-based trading system, and that an independent and impartial appeal stage must continue to be one of its essential features,” according to the document.ESM Chief Sees More People Now in Favor of Stronger Euro Role (9:05 a.m.)The international role of the euro is becoming increasingly the focus of debate in Europe, according to European Stability Mechanism Managing Director Klaus Regling.“More people are now in favor of having a stronger role for the euro which is partly the answer to the U.S. current administration withdrawing from multilateralism,” Regling said in a Bloomberg TV interview.”Europe believes in multilateralism, and one way to strengthen European sovereignty is the international role of the euro.”Tech CEOs Dodge Issues by Warning About AI (9 a.m.)Technology’s most influential leaders have a new message: It’s not us you need to worry about — it’s artificial intelligence.Two years ago big tech embarked on a repentance tour to Davos in response to criticism about the companies’ role in issues such as election interference by Russia-backed groups; spreading misinformation; the distribution of extremist content; antitrust violations; and tax avoidance. Uber Technologies Inc.’s new chief even asked to be regulated.These problems haven’t gone away, but this time executives warned that AI that must be regulated, rather than the companies themselves.“AI is one of the most profound things we’re working on as humanity. It’s more profound than fire or electricity,” Alphabet Inc. Chief Executive Officer Sundar Pichai said in an interview. Comparing it to international discussions on climate change, he said, “you can’t get safety by having one country or a set of countries working on it. You need a global framework.”German Health Minister Says China Virus Less of a Threat (8:45 a.m.)China is more transparent and more aggressive in attempting to control the coronavirus outbreak compared with SARS, and that’s helping the international community better prepare to deal with the situation, according to German Health Minister Jens Spahn.“We are prepared and keep on preparing, but at the same time I think we have to put into perspective,” Spahn said in a Bloomberg TV interview. “There’s a big difference to SARS.”Coronavirus the ‘New Norm’: Axa’s Buberl (8:30 a.m.)Axa SA Chief Executive Officer Thomas Buberl said outbreaks like the coronavirus are the “new norm” and there will be more viruses popping up due to climate change.“We always learn in these emergency situations and then forget again when it’s gone,” Buberl told Bloomberg TV.“We need to remind ourselves that the environment is changing, it is getting warmer everywhere and therefore new viruses will pop up,” he added. “Going forward, the implication of climate on health is something that we need to study more and need to understand better.”VW’s Diess Upbeat on Battle With Tesla (8:10 a.m.)Volkswagen AG Chief Executive Officer Herbert Diess said he’s optimistic the German car giant can keep pace with Tesla Inc. in the electric-car market and even overtake Elon Musk’s company at some point.“I think it’s an open race” to define the car of the future, Diess told Bloomberg TV. “I would take Tesla more seriously than Google and there are also from our peers some very competitive companies like Toyota.”This year will be “very difficult” for automakers, with global demand “basically flat” and tighter emissions regulations coming into force in Europe, Diess said. “We’re basically optimistic, but it will be a very demanding year for the industry,” he added.Lagarde: ECB Policy Not Necessarily on Autopilot (7:30 a.m.)Lagarde said that market observers should not assume that the ECB’s monetary policy will be on “autopilot” for the next two years.“To those who think that it’s autopilot, I think that’s ridiculous,” Lagarde said in an interview with Bloomberg TV’s Francine Lacqua. “There is a forward guidance, which is strong, which is setting a very clear timetable that is fact dependent. But let’s look at the facts. Let’s look at how the economy evolves.”Lagarde added that if markets are interested in what happens over the next 12 months, “they should not pay too much attention” to the ECB’s strategy review.“To those who say it’s going to be completely static and stable for 12 months I say watch out, because things change and we might have different signals and we might reconsider,” she said. She conceded that the goal of completing the review by the end of this year is “ambitious.”Carrie Lam Courts Elite With Dim Sum (5:39 a.m.)Carrie Lam hosted 200 business and political leaders for dim sum and cocktails at a Swiss ski resort to reassure them that Hong Kong’s future is bright.The city’s leader said that Hong Kong is still open for business, despite paralyzing protests and an economy in recession. She also said that officials back home are working to contain the coronavirus that’s killed more than two dozen people in China and infected hundreds of others. Hong Kong has identified two cases.In a room decorated with gold candles and red Chinese lanterns for Lunar New Year, Lam said her government “will safeguard Hong Kong’s fundamentals, including the rule of law.” She was also “fully confident of the city’s future,” according to a readout from her office.Singapore Leader Says Rebound Depends on Calm (1:57 a.m.)Singapore Prime Minister Lee Hsien Loong said the city state’s economy could improve in 2020 only if any number of global risks don’t materialize, particularly emanating from the U.S.Lee said that he’s “relieved” that Singapore’s economy escaped recession in 2019. The government’s growth forecast for this year — anywhere from 0.5%-2.5% — indicates “we really don’t know” how things will pan out, he said in an interview with Bloomberg’s Editor-in-Chief John Micklethwait.“That’s the range of what our economy is capable of, but whether we realize that capability, that potential, depends on international conditions,” Lee said. “If there’s a blowout between China and America, or if there’s something happening in the Middle East, either with Iran or with Syria, then all bets are off.”Soros: Facebook Conspiring to Re-Elect Trump (00:18 a.m.)Billionaire George Soros said that nothing is keeping Facebook Inc. from spreading disinformation and the company may be in cahoots with U.S. President Donald Trump to get him re-elected.“I think there is a kind of informal mutual assistance operation or agreement developing between Trump and Facebook,” Soros, 89, said Thursday. “Facebook will work together to re-elect Trump, and Trump will work to protect Facebook so that this situation cannot be changed and it makes me very concerned about the outcome for 2020.”Soros didn’t offer any evidence for his claim. “This is just plain wrong,” Facebook spokesman Andy Stone said in response.Friday Highlights10:30 a.m. | Central banking panel with ECB Governing Council members Francois Villeroy De Galhau and Klaas Knot10:30 a.m. | QuickTake panel: How can the world break free from single-use plastics? Join us for a discussion and DM us questions: @QuickTake11:30 a.m. | Global Economic Outlook panel with ECB President Lagarde, BOJ Governor Kuroda, IMF’s Georgieva, U.S. Treasury Secretary Mnuchin, German Finance Minister Scholz11:30 a.m. | Austrian Chancellor Sebastian Kurz gives special addressBe on the lookout for Bloomberg Television’s interviews withVolkswagen CEO DiessBank of France Governor Villeroy de GalhauAustrian Chancellor KurzThursday Catchup‘Matter of survival’ | Germany’s Angela Merkel called on world leaders to work together to fight global warming and take the views of concerned young people seriously, saying time is running out to protect the planet. Meanwhile, the head of Merkel’s party said Germany needs to speed up the process of spending government funds.Back to school | U.S. Treasury Secretary Mnuchin questioned whether Swedish activist Greta Thunberg is qualified to talk about economic issues linked to climate change and told 17-year-old to go and study the subject in college.Trade flare-up | The U.S. and Europe looked set for a renewed clash over everything from car tariffs to digital taxes in a sign that a new American focus may be emerging following Trump’s trade truce with China.Waste-free economy | When British yachtswoman Ellen MacArthur was promoting the idea of the circular economy on the sidelines of Davos in 2012, the big attraction was curiosity about what she was up to after her sailing career. Eight years on, MacArthur’s vision is taking hold at the WEF, and firms such as Adidas, Unilever and BlackRock are embracing it.Davos laggards | The global 1% once again have ascended the Swiss Alps to breathe the rarefied air in Davos, but in the stock market they’re anything but elite.Speed reads | Turkey says central bank as independent as the Fed | Standard Chartered says few have left Hong Kong | Formula One says overhaul deal talks in final stages | Facebook says Bezos hack highlights vulnerabilities\–With assistance from Shelly Banjo, Dandan Li, Michelle Jamrisko, Katia Porzecanski, Sarah Frier, Francine Lacqua, Geraldine Amiel, Haslinda Amin, Viktoria Dendrinou, Giles Turner, Bryce Baschuk and Joao Lima.To contact the reporters on this story: Chris Reiter in Berlin at creiter2@bloomberg.net;Iain Rogers in Berlin at irogers11@bloomberg.netTo contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net;Simon Kennedy at skennedy4@bloomberg.netFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.



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President Trump Signs Bill Approving Sanctions on China Over Hong Kong Crackdown

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WASHINGTON — President Donald Trump on Tuesday signed legislation and an executive order that he said will hold China accountable for its oppressive actions against the people of Hong Kong, then quickly shifted his speech in the Rose Garden into a campaign rally-style broadside against Democratic rival Joe Biden.

The legislation and order are part of the Trump administration’s offensive against China for what he calls unfair treatment by the rising Asian superpower, which hid details about the human-to-human transition of the cornoavirus. The almost daily administration broadsides against China come as Trump is defending his response to the virus, despite a surge in COVID-19 cases, in the United States and as he works to portray Biden, his expected presidential challenger, as weak on China.

“So Joe Biden and President Obama freely allowed China to pillage our factories, plunder our communities and steal our most precious secrets,” Trump said, adding, “I’ve stopped it largely.”

Trump added: “As vice president, Biden was a leading advocate of the Paris Climate accord, which was unbelievably expensive to our country. It would have crushed American manufacturers while allowing China to pollute the atmosphere with impunity, yet one more gift from Biden to the Chinese Communist Party.”

Trump didn’t limit his criticism of Biden to China. He delivered broadside after broadside against Biden on issues from energy to the economy, education to immigration. Aides have pushed the president to go more negative on Biden, whom Trump has largely spared from attacks — save for the “Sleepy Joe” nickname. Trump has gone after Biden far less aggressively than he did against his 2016 opponent, Hillary Clinton.

Trump, once more, talked up his own tough approach to Beijing, though he spent the early weeks of the pandemic praising Chinese President Xi Jinping, in hopes of securing a new trade deal. But since the two nations signed phase one of a deal, the talks have stalled with virtually no hope of restarting before the November election.

The legislation Trump signed into law targets police units that have cracked down on Hong Kong protesters as well as Chinese Communist Party officials responsible for imposing a new, strict national security law widely seen as chipping away at Hong Kong’s autonomy. The mandatory sanctions are also required to be imposed on banks that conduct business with the officials.

Lawmakers from both parties have urged Trump to take strong action in response to China’s new national security law that erodes the “one country, two systems” framework under which Britain handed Hong Kong over to China in 1997. Hong Kong is considered a special administrative region within China and has its own governing and economic systems.

“This law gives my administration powerful new tools to hold responsible the individuals and the entities involved in extinguishing Hong Kong’s freedom,” Trump said. “Their freedom has been taken away. Their rights have been taken away, and with it goes Hong Kong in my opinion because it will no longer be able to compete with free markets. A lot of people will be leaving Hong Kong, I suspect.”

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Associated Press writers Matthew Lee and Jonathan Lemire contributed to this report.





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The Business of Drugs: inside the economics of America's longest war

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A half-century into America’s ‘war on drugs’, a new Netflix series uses dollars, cents and economic incentives to ask: is prohibition worth it?As a CIA analyst in Shanghai and Pakistan during America’s “war on terror”, Amaryllis Fox was familiar with drawn-out, intractable conflict. She’d studied the compounding effects of redoubling on failed policies, of redundant good versus evil arguments peddled into a quagmire, costing billions and an incalculable loss of life. But the situation in America’s longest military war, now nearing two decades, paled in comparison to the subject of Fox’s post-CIA project for Netflix: America’s costly, decades-longer engagement known as the “war on drugs”.The Business of Drugs, a six-part series Fox hosts on Netflix, takes a clear-eyed approach to the futility of drug enforcement: what are the incentives, economic and personal, that keeps the market flow of narcotics churning despite a generational trail of violence and waste? Declared in 1971 by Richard Nixon, the “war on drugs” refers broadly to the federal government’s campaign to control psychoactive substances through draconian legislation, expansion of enforcement agencies, and military aid and intervention to other countries. Drug enforcement policies have long served as cudgels against minority groups – the first anti-opium laws, in the 1870s, targeted Chinese immigrants; anti-cannabis measures in the 1910s and 20s aimed for Mexican workers – and the current iteration grows from these roots; from mandatory minimum sentences to no-knock warrants, the “war on drugs” has fueled, in part, the mass incarceration of Americans, especially people of color. Nearly 50 years and $1tn in, the business of drug prohibition has “not only not worked, but the problem is worse than it was when the policy began”, Fox told the Guardian.The Business of Drugs plays like a condensed, updated version of the popular National Geographic series Drugs, Inc (also on Netflix), moving from America’s voracious consumption of illicit substances to the global network of supply evading, or dwarfing, interlocking attempts at enforcement. The series’ six segments are delineated by substance – cocaine, synthetics (such as MDMA, also known as ecstasy), heroin, meth, cannabis and opioids – and explore substances of wildly varying levels of addictiveness, use and geography. Together, the chapters form a loose condemnation of prohibition as both policy and moralistic stance.The series is not a matter of admitting defeat in the “war on drugs”, Fox said. Instead it demands “looking at the policies themselves rather than the fight to enforce them, and asking ourselves if in fact prohibition has any logical hope of working, or whether it’s a residue of a moralistic stance that I think is no longer relevant in our society”.Like its title, The Business of Drugs aims to be straightforward, or as clear as possible on the economics – dollars by gram, price increases by mile of transport – in shadowy systems for which transparency is a risk. Each episode visits a different “hotspot” epitomizing the challenges, market and opportunity for positive change for each substance. For cocaine, Fox traces the bloody trail of the west’s habit from the plant’s cultivation in Colombia (a no-brainer for farmers, given the yield and influence of cartels), through Mexican smuggling routes, over the border to America’s draconian incarceration system for possession. Synthetics presents the therapy potential of MDMA, particularly for PTSD, if declassification from schedule 1, the highest classification for drugs of allegedly no medical benefit, would permit serious research. For heroin, Fox visits the ports of Kenya, where the route for smuggling the drug produced largely from opium poppies in Afghanistan has proliferated into an economic boon for some and devastating addiction epidemic for others.In the installments on heroin (in Kenya) and meth (in Myanmar), Fox meets with government or military officials propagating the line of drugs as good versus evil, themselves firmly aligned with good, despite evidence to the contrary. The cost of prohibition inverts to the cost of unwieldy and haphazard legalization in the case of marijuana in some US states, especially California, where above-board business is cutthroat, onerously regulated, and ripe for consolidation by big business interests. And in an episode on opioids, Fox explores a familiar and devastating story of an American epidemic fueled by big pharmaceutical companies and the inertia of inadequate regulation.According to Fox, everyone from individual coca plant growers in Colombia to worldly United Nations economists agreed that there were two ways to stop the exhaustive and unending war on drugs: end demand, or legalize and regulate with fair competition. Demand, largely from the US and western Europe, won’t be going away, which leaves policy. “We think that we can go in and stop it at the point of supply,” said Fox, “but as long as that demand continues, the reward is high enough that the economic reality is that this is going to continue.”“The reality of those economics” – that for many, the choice to participate in the black market drug economy outweighs the cost of abstaining (if there is a choice to abstain at all) – “is critical in understanding how to bring an end to this war.”Fox and her team, including partner Zero Point Zero Productions, the company behind Anthony Bourdain’s Parts Unknown, worked for over a year in pre-production to establish sources willing to speak about participation in illicit, violent networks. The interviews, often anonymous – a man who swallowed heroin packets in Kenya to cross into Tanzania, the small-batch cocaine dealer following his father’s footsteps in California, the masked dealer who sees a spate of “zombie” overdoses on a bad batch of synthetic marijuana as a business opportunity – were built on both the desire to effect change through lived experience and, said Fox, “the human impulse to share your life, to be meaningful and have the data that you’ve learned and the expertise that you have spent your professional life gathering be relevant. Maybe it’s in a criminal industry, but each of the people we spoke to – from the smallest grower down the line – each of them is a substantive expert in their field.“There is the tendency in the media and in everyday life to think of the drug trade as being driven by the low-level growers and dealers and others who are caught up in it,” Fox said. But these testimonies revealed rational calculations of risk versus economic and social security. “Many of us, if we found ourselves in the same position, would make the same choices for our family and for our own economic wellbeing,” she said.That realization was, to her, hopeful – the continuance of a fight against controlled substances remains frustratingly futile, but an assessment of choices on the ground in favor of drug dealing, growing and trafficking – also known, for many, as economic survival – demonstrated that “it’s not a good versus evil battle that is going to go on forever, it’s actually a matter of economics and policy. If we make changes to those things, we can see a different outcome.“The only way for us to tackle this is to have a very logical, adult conversation as a nation about whether there’s any possibility of demand going away,” Fox said. “And if not, what do we need to do in terms of legalization and regulation to bring an end to the violence and mass incarceration that this policy has created?” * The Business of Drugs is now available on Netflix



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France, U.K. Move Toward Requiring Face Coverings in More Public Spaces Amid Reopening

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(LONDON) — Britain and France moved Tuesday to make face coverings compulsory in more places as both countries try to get their economies going while at the same time seeking to prevent further coronavirus outbreaks.

Following days of procrastination and mixed messages, British Health Secretary Matt Hancock said the wearing of face coverings will be mandatory in shops and supermarkets in England from July 24.

On the other side of the English Channel, amid signs of a slight virus resurgence in France, President Emmanuel Macron said he also wants to require masks inside all indoor public spaces by Aug. 1.

Britain and France previously took a more relaxed attitude to face coverings than many other European nations, recommending masks but not requiring them. Germany, Spain, Italy and Greece already require masks to be worn in enclosed spaces.

But with their economies reeling after months-long lockdowns, French and U.K. government leaders were anxious to try to persuade people to spend again — hopefully without spreading the virus. Weeks of indecision made way for new rules that came into view virtually overnight.

Britain’s Hancock told lawmakers in the House of Commons Tuesday that face covers can help workers and shoppers alike.

“In recent weeks, we have reopened retail and footfall is rising,” he said. “We want to give people more confidence to shop safely and enhance protection for those who work in shops.”

People in England already have to wear face coverings on public transport and in hospital settings.

Anyone not wearing a face covering in the additional environments outlined by the government could be fined 100 pounds ($125,) and shops can refuse entry to anyone failing to comply. Children under 11 and those with certain disabilities will be exempt.

The new requirement only applies to England. The other nations of the U.K. — Scotland, Wales and Northern Ireland — can determine their own public health policies, and Scotland already requires masks in shops.

Hancock stressed that wearing a face covering complements other accepted strategies aimed at keeping a lid on the pandemic, such as washing hands and abiding by social distancing rules.

“We cannot let our progress today lead to complacency tomorrow,” he said.

British Prime Minister Boris Johnson, who in April spent a week in the hospital being treated for COVID-19, began wearing a bright blue mask in public last week. The change in policy followed.

In an interview with French television networks marking Bastille Day, France’s Macron said “the best prevention” against the virus is masks, social distancing and hand washing.

Recent rave parties in France and widespread backsliding on social distancing — even within Macron’s presidential palace and other government facilities — have raised concern lately, so the government has been weighing tougher mask guidance.

“We have signs that (the virus) is picking up a bit,” Macron said, noting that France’s virus reproduction rate is inching past 1 again, meaning each infected person is infecting at least one other.

British authorities are hoping the public will comply with the new requirement. London Mayor Sadiq Khan told the BBC he believed that “Londoners by and large will follow the rules,” without too much need for the police.

“The problem is not the issue of enforcement, the problem is the mixed messages and the confused communications,” Khan said.

British Environment Secretary George Eustice also did not rule out the possibility that mandatory face coverings would become compulsory in offices and other workplaces in the future. He told the BBC that the government was taking “one step at a time and we’ve taken the view in this next step that we should make it mandatory in retail environments.”

A growing body of evidence suggests wearing face coverings brings some benefit in preventing the spread of the virus.

“Lack of strong evidence of their effectiveness should not be considered a problem but the evidence is accumulating that they have a part to play in reducing transmission and also in protecting the wearer,” said Keith Neal, an epidemiologist at the University of Nottingham.

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Angela Charlton in Paris contributed to this report.





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