Trade commission rejects tariffs
Group votes 4-1 against imposing antidumping steel duties
THE WALL STREET JOURNAL
WASHINGTON— The U.S.
International Trade Commission voted four to one Tuesday against imposing
antidumping import duties on cold-rolled steel from five countries, dealing
a blow to domestic steelmakers.
THE COMMISSION’S VOTE halts antidumping duties that the Commerce Department
proposed in May on Australia, India, Japan, Sweden and Thailand, alleging
that some steel producers in those countries were
selling certain cold-rolled products in the U.S. at artificially low prices
to grab market share. U.S. steelmakers claimed they have been injured by
such actions.
The Commerce Department and the ITC have yet to decide on 15
other countries accused of dumping cold-rolled steel, including South Korea,
Russia, Brazil, Belgium and Argentina.
Tuesday’s ruling stems from a case filed in September by U.S. Steel Corp.,
Bethlehem Steel Corp., Nucor Corp. and other
smaller steelmakers.
Domestic steelmakers had hoped to see penalties imposed on foreign makers of
steel in addition to safeguard tariffs on a broad
range of steel imports imposed by President Bush in March. In May, the
Commerce Department ordered U.S. customs officials to require
deposits or bonds for recommended new antidumping tariffs on 20 countries,
ranging from 2% to 154%, pending final decisions by the ITC.
The commission already has ruled against domestic steelmakers in three
antidumping cases brought against foreign makers of tubular goods, steel
beams and steel pipes this year.
In 2000, the U.S. imported 2.76 million tons of cold-rolled sheets and strip
steel out of
36.38 million tons of the country’s total steel imports.
Budget office predicts
deficits through 2006
By JIM ABRAMS
WASHINGTON (AP)
-- Reduced tax collections, higher spending and a weaker
economy all point toward federal budget deficits persisting for the next few
years, congressional experts said Monday, a downbeat assessment likely to
resonate in the campaign for control of Congress.
Senior lawmakers from both parties quickly seized on the numbers, issued 10
weeks before the midterm elections, as evidence of the failings of the other.
House Budget Committee Chairman Jim Nussle, R-Iowa, said the new numbers,
while not surprising, backed up GOP assertions that Democratic spending
plans would "send us down a path to much deeper deficits."
His Senate counterpart, Democrat Kent Conrad of North Dakota, said the
president's proposals for spending and tax cuts had "driven us right back
into the swamp of deficit and debt as far as the eye can see."
The government will spend more than it collects in each of the next four
years and will only move substantially back into the black if tax cuts
enacted last year expire in 2010 as scheduled and there is no significant
increase in spending, the Congressional Budget Office said.
Three months before the election, Republicans and the Bush administration
said the numbers point to a need to restrain spending. Democrats said they
reflect the long-term costs of the large tax cuts that President Bush pushed
through Congress last year and are evidence that they should not be made
permanent.
"Without the tax cuts, the budget would not invade the Social Security trust
fund surplus over the 10-year period," said Rep. John Spratt of South
Carolina, top Democrat on the House Budget Committee.
The CBO projected that this fiscal year's budget deficit will hit $157
billion, the result of "a sharp decline in tax revenues coupled with double
digit growth in spending." It said the outlook for fiscal 2003, starting
Oct. 1, was a budget shortfall of $145 billion, and that the federal ledger
will only return to the plus side with a $15 billion surplus in 2006.
The White House last month put this year's deficit at around $165 billion.
The return of deficit spending this year, the first since 1997 and after a
$127 billion surplus in fiscal 2001, is generally attributed to the fragile
economy, the shaky stock market and the government's response to the Sept.
11 terrorist attacks. Democrats also blame the 10-year, $1.35 trillion tax
cut that President Bush pushed through last year.
Mitch Daniels, director of the White House Office of Management and Budget,
said the CBO report confirmed that the recession, the weak stock market and
the war against terrorism caused the deficit. But he added that "it does
show a turn back toward balanced budgets with the right choices," including
President Bush's efforts to revive the economy, fight terrorism and restrain
spending.
The budget numbers are likely to become a factor in the upcoming elections,
with the parties blaming each other for frittering away a budget surplus
that only 18 months ago was estimated at $5.6 trillion through 2011 if
Social Security money is included. It now appears inevitable that the
government will have to dip into Social Security surpluses to pay for other
programs, an action both parties have pledged to avoid doing.
The CBO said that if the tax cuts expire in 2010, the budget will return to
substantial surpluses in the years 2010 through 2012 and that the government
will be $1 trillion in the black over the 2003-2012 period.
Over that 10-year period, the CBO said, the general budget will record a
$1.5 trillion deficit, compensated for by a $2.5 trillion surplus in the
Social Security fund.
The Bush administration and congressional Republicans are pushing hard to
make the tax cuts, which affect estate taxes and taxes on married couples,
permanent.
The White House's Office of Management and Budget last month estimated the
2003 deficit at $109 billion, but said the government will return to a
surplus of $53 billion in fiscal 2005 and record a cumulative surplus of
$827 billion in the 2003-2012 period.
Those numbers are based on assumptions about future legislation, including
more money for defense and making tax cuts permanent. Without those changes,
the OMB sees the budget edging $1 billion into the black in 2004 and
accumulating a $2.3 trillion surplus over 10 years, $1.3 trillion more than
the CBO prediction.
The CBO projections assume current rates of spending, and do not include
ambitious plans by the Bush administration to further increase defense
spending or efforts by both parties to give seniors a prescription drug
benefit.
The surplus projected over the next decade is nearly $1.4 trillion smaller
than CBO estimated last March. The office said reductions in revenue
estimates and hikes in spending were equally responsible for that change.
And
the Next Big Thing Is ... the Third World?
Four reasons that stocks from developing countries may be a better bet
than our own.
By Clint Willis, August 2002 Issue
Technology isn't the only sector in recent memory to seduce investors with
stupendous gains, only to collapse soon afterward. Just ask those who sank
money into funds that invest in companies in
developing economies. Research firm Morningstar tracks 52 such funds, and
only 3 of them made profit for their investors during the five years
through 2001.
Like technology, emerging markets continue to offer an enticing vision of
growth, despite a discouraging recent history. Unlike technology, they are
once again on investment strategists' radar screens. "Almost every equity
investor should have some exposure to emerging markets," says Tom Connelly,
chief investment officer at financial planning firm Keats Connelly &
Associates in Phoenix. "These markets represent
the greatest macro growth opportunities in the world."
The market, too, is acting as if it believes in the stocks again. The
benchmark Morgan Stanley Capital International Emerging Markets Free Index
rose 32 percent during the nine months through late June, compared with a
2.4 percent gain for the S&P 500.
Years of mediocre-to-rotten results have left many investors skeptical.
But here are four reasons it could make sense to set those doubts aside.
Emerging markets are the most direct play on a global economic recovery.
Most economists figure that the U.S. and other developed economies will
rebound during the coming year.
That's good news for developing economies, which provide an estimated 65
percent of the world's commodities. "Emerging markets offer a terrific way
to bet on a cyclical recovery," says Christopher Smart, co-manager of the
Pioneer Emerging Markets Fund.
Moreover, emerging markets historically have been direct beneficiaries of
falling interest rates in the developed nations they borrow from, says Jay
Pelosky, global strategist for Morgan Stanley.
Such rates are hovering at a 30-year low.
The competition stinks. Emerging markets remain fairly illiquid, meaning
that even modest cash inflows can fuel big gains. Such inflows are likely to
come from the many investors unimpressed by the current outlook for U.S.
stocks and bonds. "Investors are no longer thrilled with the prospects for
returns in the U.S. and other developed markets," Smart says.
"That makes emerging markets more attractive to them."
This represents a giant shift from the late '90s, when risk capital was
siphoned out of emerging markets to domestic technology stocks. "Investors
back then saw no reason to head into emerging economies when the returns at
home were so huge," says Todd Edwards, Latin American strategist with BBVA.
"Who needed Argentina when there was Amazon.com?"
Smart notes that emerging markets performed well during the late '70s, late
'80s, and early '90s, when developed markets were relatively poor performers.
He figures we could be heading for a similar period now.
Nestle Eyes KitKat Regardless of Hershey
August 29, 2002
By Jon Cox
ZURICH (Reuters) - Nestle
believes it will walk away with lucrative U.S. rights to its KitKat brand
whether or not it wins a takeover battle for American chocolate icon Hershey
because of a deal dating back to 1970.
KitKat, made in the United States under license by Hershey, is seen as a
crown jewel in a potential merger deal that
analysts say could fetch some $12 billion in all.
Industry sources say Nestle, the world's largest food group, has a
relatively weak third position in the big U.S. chocolate market and wants to
gobble up market leader Hershey, which was put on the sale block last month.
Kraft Foods, the world number two, also is eyeing what could turn into a
bidding war, but a Kraft purchase may come without KitKat, the fifth-biggest
selling chocolate confection in the United States and a top global brand.
Any change in voting control of the famed maker of Hershey's Kisses is
expected to trigger a clause that lets the Swiss-based food group regain
KitKat sales estimated at some $300 million.
"On our side (there is) a conviction that any change of control -- and I do
believe that a management buyout qualifies as such -- triggers the clause,"
Nestle spokesman Francois Perroud told Reuters.
He said it was "a key consideration" that the U.S. KitKat brand reverts back
to Nestle, but declined to reveal any financial terms.
"Since KitKat is one of Hershey Foods' five most important brands
contributing some $300 million or seven percent to Hershey's sales, Nestle
is clearly out front of Kraft," said Bank Vontobel analyst Rene Weber in a
note.
Nestle inherited both KitKat and the licensing deal with Hershey when it
bought British confectioner Rowntree in 1988. Rowntree gave Hershey U.S. Kit
Kat distribution rights in 1970 and similar rights in 1971 for its Rolo
brand, which also would revert to Nestle in the event of a Hershey sale.
KitKat, the U.K.'s top-selling chocolate bar, was launched in 1935 as
Rowntree's Chocolate Crisp. It was renamed KitKat in 1937 after an 18th
century literary club.
LUCRATIVE CHOCOLATE
Jaine Mehring, analyst with Salomon Smith Barney, estimates KitKat
contributes six to seven percent of Hershey's operating (EBIT) income, which
was $118 million in the second quarter.
"As we understand the agreement, Nestle pays nothing to take the business
back," Mehring said in a recent note, although Nestle was unlikely to be
able to start producing KitKat instantly in its own U.S. facilities.
But other analysts are not so sure. Goldman Sachs analyst Romitha Mally said
in a recent research note that a loophole in the licensing agreement could
allow Hershey's business to change hands without a transfer of voting rights.
"We believe there are ways to structure a deal without technically
triggering a change of control such as a direct merger, reverse merger or
possible joint venture structure with the Hershey Trust," Mally wrote.
Goldman's investment banking arm is advising Britain's Cadbury Schweppes in
the Hershey bidding, sources close to the situation said.
A Hershey spokesman declined to discuss the KitKat licensing agreement.
Nestle has long expressed an interest in acquiring Hershey, which analysts
say has better profit margins than its own chocolate business, although
Nestle won't comment officially.
"It is fantasy to say they are not seriously interested," said BNP Paribas
analyst John Keele, saying Nestle would gain potential synergy savings and a
boost to its margins.
"In the short term, the market fears that Nestle will pay too much but from
a long-term perspective, the world's largest food company is not going to
allow that to get in the way of a business they have wanted for many, many
years," he added.
HERSHEY OPPOSITION
The battle for control of Hershey has also moved from the boardroom to the
courtroom as the decision by the Milton Hershey School Trust, which owns 77
percent of Hershey's voting rights, to sell the firm has aroused local
political opposition.
A Pennsylvania judge on September 3 will hear arguments on a proposed
restraining order to bar a Hershey sale. There are fears that a new owner
would close plants and lay off workers in the town that derives its name and
identity from the company.
But analysts say Nestle, given its weak U.S. position, may integrate its
operations into Hershey's rather than the other way around, which would
actually strengthen Hershey's role.
Nestle's shares have lost around 10 percent of their value in a little over
a week on fears that the firm will overpay and on concerns that any deal
would be drawn out because of political opposition and anti-trust issues.
Buying Hershey would vault Nestle to the top U.S. market position over M&Ms
maker Mars Inc, but the combined entity would have more than half of the U.S.
chocolate confectionery market, raising regulatory concerns, according to
Vontobel's Weber.
Credit rating agencies Moody's and Standard and Poor's said on Wednesday
that Nestle would lose its top debt rating in the event of another big debt-financed
acquisition. The firm has been swallowing companies in the fast
consolidating food sector.
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