Monthly: May 2018

Oregon’s Marijuana Story a Cautionary Tale for California

When Oregon lawmakers created the state’s legal marijuana program, they had one goal in mind above all else: to persuade illicit pot growers to leave the black market.

That meant low barriers to entry that also targeted long-standing medical marijuana growers, whose product is not taxed. As a result, weed production boomed — with a bitter consequence.

Now, marijuana prices here are in free fall, and the craft cannabis farmers who put Oregon on the map decades before broad legalization say they are in peril of losing their now-legal businesses as the market adjusts.

Oregon regulators on Wednesday announced they will stop processing new applications for marijuana licenses in two weeks to address a severe backlog and ask state lawmakers to take up the issue next year.

​California takes heed

Experts say the dizzying evolution of Oregon’s marijuana industry may well be a cautionary tale for California, where a similar regulatory structure could mean an oversupply on a much larger scale.

“For the way the program is set up, the state just wants to get as many people in as possible, and they make no bones about it,” Hilary Bricken, a Los Angeles-based attorney specializing in marijuana business law, said of California. “Most of these companies will fail as a result of oversaturation.”

A staggering inventory

Oregon has nearly 1 million pounds (453,600 kilograms) of marijuana flower, commonly called bud, in its inventory, a staggering amount for a state with about 4 million people. Producers told The Associated Press wholesale prices fell more than 50 percent in the past year; a study by the state’s Office of Economic Analysis found the retail cost of a gram of marijuana fell from $14 in 2015 to $7 in 2017.

The oversupply can be traced largely to state lawmakers’ and regulators’ earliest decisions to shape the industry.

They were acutely aware of Oregon’s entrenched history of providing top-drawer pot to the black market nationwide, as well as a concentration of small farmers who had years of cultivation experience in the legal, but largely unregulated, medical pot program.

Getting those growers into the system was critical if a legitimate industry was to flourish, said Sen. Ginny Burdick, a Portland Democrat who co-chaired a committee created to implement the voter-approved legalization measure.

Lawmakers decided not to cap licenses; to allow businesses to apply for multiple licenses; and to implement relatively inexpensive licensing fees.

The Oregon Liquor Control Commission, which issues licenses, announced Wednesday it will put aside applications for new licenses received after June 15 until a backlog of pending applications is cleared out. The decision comes after U.S. Attorney Billy Williams challenged state officials to address Oregon’s oversupply problem.

“In my view, and frankly in the view of those in the industry that I’ve heard from, it’s a failing of the state for not stepping back and taking a look at where this industry is at following legalization,” Williams told the AP in a phone interview.

But those in the industry supported the initial decisions that led to the oversupply, Burdick said.

“We really tried to focus on policies that would rein in the medical industry and snuff out the black market as much as possible,” Burdick said.

​Consolidation

Lawmakers also quickly backtracked on a rule requiring marijuana businesses have a majority ownership by someone with Oregon residency after entrepreneurs complained it was hard to secure startup money. That change opened the door to out-of-state companies with deep pockets that could begin consolidating the industry.

The state has granted 1,001 producer licenses and has another 950 in process as of last week. State officials worry if they cut off licensing entirely or turn away those already in the application process, they’ll get sued or encourage illegal trade.

Some of the same parameters are taking shape in California, equally known for black-market pot from its Emerald Triangle region.

The rules now in effect there place caps only on certain, medium-sized growing licenses. In some cases, companies have acquired dozens of growing licenses, which can be operated on the same or adjoining parcels. The growers association is suing to block those rules, fearing they will open the way for vast farms that will drive out smaller cultivators.

Beau Whitney, senior economist at national cannabis analytics firm New Frontier Data, said he’s seeing California prices fall.

In contrast, Washington knew oversupply could draw federal attention and was more conservative about licensing. As the market matured, its regulators eased growing limits, but the state never experienced an oversupply crisis.

Colorado has no caps on licenses, but strict rules designed to limit oversupply allow the state to curtail a growers’ farm size based on past crop yields, existing inventory, sales deals and other factors.

Chain stores

In Oregon, cannabis retail chains are emerging to take advantage of the shake-up.

A company called Nectar has 13 stores around the state, with three more on tap, and says on its website it is buying up for-sale dispensaries too. Canada-based Golden Leaf Holdings bought the successful Oregon startup Chalice and has six stores around Portland, with another slated to open.

William Simpson, Chalice’s founder and Golden Leaf Holdings CEO, is expanding into Northern California, Nevada and Canada. Simpson welcomes criticism that he’s dumbing down cannabis the same way Starbucks brought coffee to a mass market.

“If you take Chalice like Starbucks, it’s a known quantity, it’s a brand that people know and trust,” he said.

Amy Margolis, executive director of the Oregon Cannabis Association, says that capping licenses would only spur even more consolidation in the long-term. The state is currently working on a study that should provide data and more insight into what lies ahead.

“I don’t think that everything in this state is motivated by struggle and failure,” she said. “I’m very interested to see … how this market settles itself and (in) being able to do that from a little less of a reactionary place.”

​Craft growers

For now, Oregon’s smaller marijuana businesses are trying to stay afloat.

A newly formed group will launch an ad campaign this fall to tell Oregonians why they should pay more for mom-and-pop cannabis. Adam Smith, who founded the Oregon Craft Cannabis Alliance, believes 70 percent of Oregon’s small growers and retailers will go out of business if consumers don’t respond.

“We could turn around in three to four years and realize that 10 to 12 major companies own a majority of the Oregon industry and that none of it is really based here anymore,” he said. “The Oregon brand is really all about authenticity. It’s about people with their hands in the dirt, making something they love as well as they can. How do we save that?”
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Trump Planning Tariffs on European Steel, Aluminum

President Donald Trump’s administration is planning to impose tariffs on European steel and aluminum imports after failing to win concessions from the European Union, a move that could provoke retaliatory tariffs and inflame trans-Atlantic trade tensions.

The tariffs are likely to go into effect on the EU with an announcement by Friday’s deadline, according to two people familiar with the discussions. The administration’s plans could change if the two sides are able to reach a last-minute agreement, said the people, who spoke on condition of anonymity to discuss internal deliberations.

Trump announced in March the United States would slap a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum, citing national security interests. But he granted an exemption to the EU and other U.S. allies; that reprieve expires Friday.

​Europe bracing

Europe has been bracing for the U.S. to place the restrictions even as top European officials have held last-ditch talks in Paris with American trade officials to try to avert the tariffs.

“Realistically, I do not think we can hope” to avoid either U.S. tariffs or quotas on steel and aluminum, said Cecilia Malmstrom, the European Union’s trade commissioner. Even if the U.S. were to agree to waive the tariffs on imported steel and aluminum, Malmstrom said, “I expect them nonetheless to want to impose some sort of cap on EU exports.”

European officials said they expected the U.S. to announce its final decision Thursday. The people familiar with the talks said Trump could make an announcement as early as Thursday.

U.S. Commerce Secretary Wilbur Ross attended meetings at the Organization for Economic Cooperation and Development in Paris on Wednesday, and U.S. Trade Representative Robert Lighthizer joins discussions in Paris on Thursday.

The U.S. plan has raised the threat of retaliation from Europe and fears of a global trade war — a prospect that is weighing on investor confidence and could hinder the global economic upturn.

​

If the U.S. moves forward with its tariffs, the EU has threatened to impose retaliatory tariffs on U.S. orange juice, peanut butter and other goods in return. French Finance Minister Bruno Le Maire pledged that the European response would be “united and firm.”

Limits on cars

Besides the U.S. steel and aluminum tariffs, the Trump administration is also investigating possible limits on foreign cars in the name of national security.

“Unilateral responses and threats over trade war will solve nothing of the serious imbalances in the world trade. Nothing,” French President Emmanuel Macron said in an impassioned speech at the Organization for Economic Cooperation and Development in Paris.

In a clear reference to Trump, Macron added: “These solutions might bring symbolic satisfaction in the short term. … One can think about making voters happy by saying, ‘I have a victory, I’ll change the rules, you’ll see.’”

But Macron said those “who waged bilateral trade wars … saw an increase in prices and an increase in unemployment.”

Tariffs on steel imports to the U.S. can help local producers of the metal by making foreign products more expensive. But they can also increase costs more broadly for U.S. manufacturers who cannot source all their steel locally and need to import the raw material. That hurts the companies and can lead to more expensive consumer prices, economists say.

Ross criticized the EU for its tough negotiating position.

“There can be negotiations with or without tariffs in place. There are plenty of tariffs the EU has on us. It’s not that we can’t talk just because there’s tariffs,” he said. He noted that “China has not used that as an excuse not to negotiate.”

But German Economy Minister Peter Altmaier insisted the Europeans were being “constructive” and were ready to negotiate special trade arrangements, notably for liquefied natural gas and industrial goods, including cars.

WTO reforms

Macron also proposed to start negotiations between the U.S., the EU, China and Japan to reshape the World Trade Organization to better regulate trade. Discussions could then be expanded to include other countries to agree on changes by the end of the year.

Ross expressed concern that the Geneva-based World Trade Organization and other organizations are too rigid and slow to adapt to changes in global business.

“We would operate within (multilateral) frameworks if we were convinced that people would move quickly,” he said.

Ross and Lighthizer seemed like the odd men out at this week’s gathering at the OECD, an international economic agency that includes the U.S. as a prominent member.

The agency issued a report Wednesday saying “the threat of trade restrictions has begun to adversely affect confidence” and tariffs “would negatively influence investment and jobs.”
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Union: Strike Could Cost Vegas Casinos $10M a Day

The two largest resort operators in Las Vegas would lose more than $10 million a day combined if housekeepers, cooks and others go on strike, a possibility starting Friday, the union representing thousands of casino workers said Wednesday.

The Culinary Union detailed how it thinks a one-month strike would impact MGM Resorts International and Caesars Entertainment, which operate more than half the properties that would be affected if 50,000 workers walk off the job. Workers last week voted to authorize a strike as disputes over workplace training, wages and other issues have kept the union and casino operators from agreeing on new contracts.

The union conceded that it is difficult to estimate how the strike at more than 30 casino-hotels would affect Las Vegas overall because the last citywide strike took place in 1984, when the city had 90,000 fewer hotel rooms and only about 12.8 million annual visitors. Last year, more than 42.2 million people visited.

Contract expires midnight Thursday

But it says MGM and Caesars would see a 10 percent reduction in revenue because of the loss of group and independent travelers. A strike also could happen as fans head to Las Vegas for the Stanley Cup Final.

“Furthermore, one might assume a 10 percent worsening of operating margins due to the use of less experienced and less skilled replacements … to keep the doors open, rooms cleaned, food cooked, and cocktails served, not to mention other factors such as the disruptions to management staff’s regular work,” the union wrote.

Using the companies’ earnings reports for the first three months of the year, the union’s estimates show a one-month strike could reduce MGM’s earnings before interest, taxes and other items by more than $206 million and Caesars’ by over $113 million.

Contracts expire at midnight Thursday for bartenders, housekeepers, cocktail and food servers, porters, bellmen, cooks and other kitchen workers at properties on the Las Vegas Strip and downtown Las Vegas, including Caesars Palace, Bellagio, Stratosphere, Treasure Island, The D and El Cortez.

Dealers are not part of the Culinary Union. Casino-resorts that would not be affected by the strike include Wynn Las Vegas, Encore, The Venetian and Palazzo.

More talks scheduled

MGM, which employees 24,000 of the workers, said it met with union negotiators Monday and has more talks scheduled this week. The company says it remains confident that it “can resolve the outstanding contract issues and come to an agreement that works for all sides.”

Caesars said it “expects to agree to a new 5-year contract with the Culinary Union on or about June 1 when the current contract expires.” About 12,000 of its workers are part of the negotiations for new five-year contracts.

The union said it is asking for training on new skills and job opportunities as the companies adopt technology that can displace workers. It also wants an independent study to analyze the workload of housekeepers and contract language that would protect workers if properties are sold.

“What is going to happen to my position?” said Fernando Fernandez, a guest runner at Caesars Palace. “I think they are going to be disappearing it, because robots are going to be available to deliver everything.”

He said he wants training to fix or program the robots that he believes could eventually replace him.

The union says it has asked MGM for average annual wage increases of 4 percent for each of the five years. A document says the company has countered with an approximate 2.7 percent increase.

Caesars workers are asking for an increase of 4.2 percent effective Friday, and annual increases of about 4 percent thereafter. Another document shows the company has offered an approximate 2.8 percent increase for each of the five years.

The average hourly wage of union workers is $23, including benefits such as premium-free health care, a pension and a 401(k) retirement savings plan and $25,000 down-payment assistance for first-time homebuyers.
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Malaysia Moves to Rebalance Relationship With China

Malaysia and China are looking to re-balance ties as the new government of Prime Minister Mahathir Mohammad seeks to renegotiate billions of dollars of Chinese backed infrastructure spending, with the goal of reducing the country’s national debt.

China is Malaysia’s leading foreign direct investor at over $3.38 billion, ahead of the U.S., Japan and Singapore, with major infrastructure deals negotiated during the previous government of Najib Razak.

The main contract is a $14 billion (55 billion ringgit) East Coast Rail Link, as well as manufacturing, real estate and sovereign wealth fund bonds.

Carl Thayer, a professor of politics at Australia’s University of New South Wales, says Malaysia is seeking to move beyond anti-Chinese rhetoric that had been an undercurrent of the May 9 national polls.

Thayer said during the campaign Chinese investment in Malaysia was an issue, amid concerns Malaysia was excessively indebted to China.

“But Prime Minister Mahathir since the election has basically declared that the existing agreements will stand — that’s with any country. But there will be a review of these agreements with China. And the key project there seems to be the east coast rail line which is seen as a ‘white elephant’, costing a lot of money and not really delivering,” he said.

The East Coast Rail line is a key portion of Beijing’s Belt and Road initiative (BRI) infrastructure into South East Asia covering 688 kilometers connecting the South China Sea with the Thai Border.

The new government says the fresh negotiations are a bid to reduce the national debt burden, put at $251.32 billion (one trillion ringgit ) or 80 percent of national output (GDP).

Prime Minister Mahathir sees a need to reassess the projects and the Chinese investment strategy generally, especially depending on imported Chinese labor and technicians.

“We need to find out what benefit there is to us. To find out firstly the train is not going to be viable; secondly, its not benefiting Malaysia as much as we would like to see,” Mahthir told VOA.

“We don’t want to have a huge number of immigrants in Malaysia. Some of the Chinese companies have done that; that is not foreign direct investment,” he said.

WATCH: Mahathir Seeks to Implement Reforms

He said such projects as the rail link need to be scaled back in order to reduce the cost to renegotiate the loans and ensuring greater Malaysian participation.

“I think we will be able to convince [China] that some restructuring of the terms of the borrowing and the projects and all that will have to be done in order to reduce spending, in order to reduce the loans that we took from foreign countries,” Mahathir said.

In media reports Mahathir said he planned to scrap a 350 kilometer bullet train line from Singapore to the Malaysian capital of Kuala Lumpur.

The project, valued at around $20 billion, had attracted bidding interest from China, Japan and South Korea.

But Mahathir said this project “would be dropped” as it was unnecessary” and would “not earn a single cent.”

University of New South Wales’ Thayer expects China will be pragmatic in dealings with the new government.

“It’s got massive investments in Malaysia it would want to protect. China would roll with the punches and take the long view. Eventually that Malaysia — as I indicated — all the fundamentals are there to continue the relationship.”

“Trade is managed in Malaysia’s favor; substantial growing Chinese investment building infrastructure projects, some of which are needed, others maybe excessive, renewing, renegotiating the balance in that relationship, but not lurching to the U.S. camp,” Thayer said.

Both Mahathir and wealthy Malaysian businessman Robert Kouk, who sits on a powerful advisory panel to the Malaysian government, recently met China’s ambassador to Malaysia, Bai Tian. Mahathir later said Malaysia’s “strong ties with China will continue to flourish.”

James Chin, director of the South East Asia Institute at the University of Tasmania, says China’s Malaysian investments are also key to China’s regional strategic goals.

“Part of the reason China is such a big player in Malaysia is due to the geopolitical realities facing China. People do not realize that Malaysia is the only country in South East Asia that surrounds the South China Sea,” Chin said.

China has established disputed claims over much of the South China Sea.

But Bridget Walsh, based at the John Cabot University in Italy, said eventually Malaysia-China ties will return to a steady course.

“China is the regional global power in terms of economic issues, especially in South East Asia, and it is going to play a very big role and Malaysia is looking for new economic drivers,” Walsh said.

Walsh said outside infrastructure projects, China will look to other economic areas to continue a role in Malaysia’s economy. “And I think there are people in the system that understand that,” she said.

David Boyle contributed to this report.

 
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Greek Workers Join General Strike as End of Bailout Looms

Greece’s largest labor unions are staging a general strike against plans to extend austerity measures, in a 24-hour protest that halted ferry services to the islands, and disrupted flights, public transport and other services.

Wednesday’s strike also closed schools and left public hospitals running on emergency staff.

Government budget austerity measures are due to continue for at least two more years after the international bailout ends in August, starting with another major round of pension cuts next January. Hundreds of protesters gathered in central Athens as several protest marches are planned in the capital and other cities Wednesday.

“The government is continuing disastrous policies for society and the economy, forcing unsustainable measures onto the backs of wage-earners and retired people,” the country’s largest union, the GSEE, said.

“The constant deterioration in the living standards is part of a downward trend that people [in government] chose not to see.”

Greece is currently negotiating the terms of its bailout exit with European creditors, including how its finances will be monitored and the conditions of a promised debt relief package. But the talks, due to be concluded in a few weeks, have been overshadowed by the political crisis in Italy and the resulting financial turmoil.

Eurozone member Greece has relied on money from three consecutive bailouts since losing market access in 2010. The rescue funds have been provided by a eurozone bailout fund and the International Monetary Fund, though the IMF has held off on a cash contribution toward Greece latest program.

A new round of administrative and market reforms demanded by creditors is due to be voted on in parliament on June 14.

 
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Starbucks Closes Stores For Anti-Bias Training

Starbucks closed 8,000 of its stores Tuesday to give 175,000 employees about four hours of anti-bias training.

The sessions were part of the company’s response to the April 12 arrests of two black men at a Starbucks in Philadelphia. 

Rashon Nelson and Donte Robinson had not purchased anything and told a store manager they were waiting for a friend to join them. They were asked to leave and an employee called the police, which led to their arrest. The scene was recorded on cellphones and quickly spread on social media, prompting sharp criticisms of Starbucks along with protests and calls to boycott the coffee chain.

Tuesday’s sessions involved asking employees to discuss with small groups of their colleagues aspects of race and bias and how they can make people feel like they belong.

There were exercises of personal reflection asking people to think about when they have thought about their own race, how it has affected their day-to-day lives and interactions with other people. 

Questions included evaluating how in the case of speaking to someone of the same race, or the case of speaking to someone of a different race, how easy or hard is it to talk about race, feel comfortable using their natural language and gestures, to be respected without having to prove their worth and express dissatisfaction with something without being told they seem angry.

“Without assigning good or bad, do you notice ways you treat people differently?” read one question.

Participants were also shown a series of videos including Starbucks executives discussing bias with experts, a company-funded documentary about the history of how African-Americans have been denied access in public places in the United States and employees describing instances in which they made assumptions about customers based on appearances.

Starbucks President and CEO Kevin Johnson acknowledged what he called the “disheartening situation that unfolded in Philadelphia” in one video and said the company’s mission is to be a “place where everyone feels welcome.” He said the focus of the training was not to be “color blind” by pretending race does not exist, but rather to be “color brave” and discuss race directly.

The training was developed with the NAACP Legal Defense and Education Fund, the Perception Institute and other social advocacy organizations, and included contributions by the rap music artist Common.

Similar unconscious bias training has been used by police departments, companies and other organizations to help address racism in the workplace and encourage workers to open up about implicit biases.

In one video, Common told employees that while people usually seek similarities with others, there are great advantages to learning to love what makes you different from other people.

“It’s a life skill to make someone else in your presence feel welcome. You do that by not only loving what makes them the same as you, but by appreciating what makes them different from you,” he said.

Starbucks has announced policy changes following the Philadelphia incident, mainly that it will no longer require people to buy anything in order to be welcome in the company’s stores. It also promised to give employees more training in the coming year, and to provide each store with a list of local resources for mental health and substance abuse services, housing shelters and protocols for calling authorities.

“Today was a starting point. We have much to do,” said Rosalind Brewer, chief operating officer and group president.

Nelson and Robinson reached an agreement with Starbucks for an undisclosed amount of money and offers of a free education. They also accepted from the city of Philadelphia a symbolic $1 each and a promise to launch a $200,000 program for young entrepreneurs.
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Analysis: N. Korea Sees US Economic Handouts As Threat

The U.S.-North Korea summit appears to be back on track, but Pyongyang is showing increased impatience at comments coming out of Washington that what leader Kim Jong Un really wants, even more than his nuclear security blanket, is American-style prosperity.

It’s a core issue for Kim and a message President Donald Trump shouldn’t ignore as they work to nail down their summit next month in Singapore.

Kim is as enthusiastic as Trump to see the summit happen as soon as possible, but the claim that his sudden switch to diplomacy over the past several months shows he is aching for U.S. economic aid and private-sector know-how presents a major problem for the North Korean leader, who can’t be seen as going into the summit with his hat in his hand.

The claim is also quite possibly off target. 

North Korea is far more interested in improving trade with China, its economic lifeline, and with South Korea, which it sees as a potential gold mine for tourism and large-scale joint projects. Getting the U.S. to back off sanctions so he can pursue those goals, along with the boost to his legitimacy and whatever security guarantees he can take home, is more likely foremost on Kim’s mind. 

Even so, the North’s perceived thirst for U.S. economic aid has consistently been the message coming from Trump and his senior officials. All Kim needs to do, they suggest, is commit to denuclearization and American entrepreneurs will be ready to unleash their miracles on the country’s sad-sack economy.

“I truly believe North Korea has brilliant potential and will be a great economic and financial nation one day,” Trump tweeted Sunday. “Kim Jong Un agrees with me on this.” 

Secretary of State Mike Pompeo has laid Washington’s road map out in more detail.

“We can create conditions for real economic prosperity for the North Korean people that will rival that of the South,” he said earlier this month in a televised interview. “It won’t be U.S. taxpayers. It will be American know-how, knowledge, entrepreneurs and risk-takers working alongside the North Korean people to create a robust economy for their people.” 

Pompeo suggested that Americans help build out the North’s energy grid, develop its infrastructure and deliver the finest agricultural equipment and technology “so they can eat meat and have healthy lives.”

Kim has emphatically not agreed to any of that. 

Under Trump’s “maximum pressure” policy, international sanctions on North Korea are stronger than ever. Sanctions relief would open the door for more trade with China, South Korea and possibly Russia – partners North Korea trusts more than it trusts Washington – and potentially unlock access to global financial institutions. 

The last thing Kim wants is to give up his nuclear weapons only to have his country overrun with American businessmen and entrepreneurs.

To Pyongyang’s ears, that scenario is less an offer than a threat. 

Despite its very real need for foreign investment, Kim’s regime has good reason to be wary of economic aid in general. Opening up to aid inevitably involves some degree of increased contact with potentially disruptive outsiders, calls for change, loosening of controls and restrictions – all of which could be seen as a threat to Kim’s near absolute authority.

North Korea’s message on that has been clear. 

Almost as soon as Pompeo started talking about his plan to rebuild North Korea’s economy, Kim Kye Gwan, the North’s first vice foreign minister, shot back that Pyongyang has no interest in that kind of help, saying, “We have never had any expectation of U.S. support in carrying out our economic construction and will not at all make such a deal in future, too.” 

State media unleashed another attack on the idea Sunday, calling Fox News, CBS and CNN “hack media on the payroll of power” for airing programs that featured U.S. officials talking about how large-scale, nongovernmental economic aid awaits North Korea if it moves toward verifiable and irreversible denuclearization.

The North’s media have been careful not to criticize Trump directly. 

But the issue is sensitive enough that the North has also stepped up its response in ideological terms, stressing the superiority of the socialist system and the value of independence, while warning against the underhanded scheming of the “imperialists,” which in North Korea speak is interchangeable with “Americans.”

“It is the calculation of the imperialists that they can attain their aims without firing a single shot if they make the people degenerate and disintegrate ideologically and foment social disorder,” said an editorial Sunday in the ruling party’s newspaper.

The commentary went on to call the capitalist way of life “ideological and cultural poisoning” and concluded, “Unless such poisoning is prevented, it would be impossible to defend independence and socialism and achieve the independent development of each country and nation.”
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