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E-192 - Saturday, August 24, 2019
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RECENT AURAL PLEASURE:
UPDATED: Lawsuit information page for SB 27 (McGuire and Wiener): Primary elections: ballot access: tax returns.
IN TODAY'S NOONER:
TRADE WAR, HUH, YEAH, WHAT IS IT GOOD FOR? Unless you were blissfully away from the news yesterday, you know that the trade war with China escalated yesterday with shots fired from both sides, leading to a 2.59% decline in the S&P 500.
California's agricultural industry has been hit by previous tariff increases by China, which were imposed in retaliation from rounds announced by the United States. Check out this fascinating article from July about an unlikely victim--former NBA star Yao Ming.
"China’s latest round of retaliatory tariffs put the combined tax rate on a bottle of American wine at 93%, pushing prices out of reach for much of the Asian country’s growing middle class. Yao Family Wines, started by the Hall of Famer in 2011, has seen its export business drop by half over the past year, said Tom Hinde, the vineyard’s president and winemaker.
California vintners large and small who have spent years building relationships with China are now seeing their work undone by the tariff dispute. Their travails illustrate the far-reaching effects of President Donald Trump’s trade war, where carefully laid business plans from fishing rod suppliers to soybean farmers can turn on the latest headline, meeting or tweet."
The LAT's Margot Roosevelt looks at the trade war's impact on California's wine industry collectively:
"Since April 2018, in response to U.S. tariffs, China has slapped retaliatory taxes on $110 billion in U.S. imports — products as varied as electronics and soybeans. For wine, taxes and tariffs now amount to a 93% surcharge on every U.S. bottle. That’s double the amount on French wine, long favored by well-to-do Chinese. At the same time, wines from Australia and Chile, which recently signed free trade agreements with the Asian giant, are flooding into China, taxed at just 26%.
Global exporters view China as a barely tapped opportunity, given its exploding middle class and growing appetite for the quality and prestige of imported wine. The U.S. exported $1.46 billion in wine last year, 95% of it from California. China was the fifth-largest destination after the European Union, Canada, Hong Kong and Japan.
“China was our fastest-growing export market,” said Honore Comfort, vice president for international marketing at the Wine Institute, a San Francisco trade group. “We were heavily ramping up our activities there, adding restaurant promotions and cultivating relationships with key retailers.”
But U.S. wine exports to China were down by 33% in the first half of this year compared with the same period in 2017. As the trade conflict drags on, “Chinese importers will buy from a different country,” she predicted. “We’ve worked on building those relationships for two decades. Now all of that time is basically a loss.”
And it may not just be China. Last night before departing for the G7, President Trump threatened a new tariff "like you've never seen" on French wine. Here's his official comment in context:
"So I’m not a big fan of the tech companies, but I don’t want foreign companies and foreign countries — I don’t want them doing anything having to do with taxing unfairly our companies. Those are great American companies. And, frankly, I don’t want France going out and taxing our companies. Very unfair."
POTUS is "not a big fan of the tech companies" but they are "great American companies."
Can we "86" the impromptu press gaggle before Marine One departures?
And if they do that, we’ll be taxing their wine or doing something else. We’ll be taxing their wine like they’ve never seen before. I don’t like it. That’s for us to tax them. It’s not for France to tax them.
Other than that, I have a very good relationship with, as you know, with Macron — as you say. And I think we’re going to have a very good couple of days. I look forward to being in France."
The Wine Institute reports:
"U.S. wine exports, over 90% from California, reached $1.46 billion in winery revenues and 375 million liters (41.7 million cases) in 2018. Total exports were down 4.8% in value and 1.2% in volume because of the strong dollar, retaliatory tariffs, competition from foreign wine producers who are heavily subsidized by their governments and benefiting from free trade agreements in key markets.
The top 10 export markets for California wines are: the European Union’s 28-member countries, $469 million, Canada, $449 million; Hong Kong, $130 million; Japan, $93 million; China, $59 million; Mexico, $27 million; South Korea, $25 million; Nigeria, $15 million; Dominican Republic, $14 million; and Singapore, $14 million.
A nearly 25% decline in exports to China by value was the largest contributor to the softness, primarily the result of trade issues between the U.S. and China and the increased tariffs on U.S. wines imported into Mainland China."
The wine industry is hoping to make big advances in China, but the fact is that a trade fight with the EU would be far more costly to California.
Today, President Trump tweeted "Just had lunch with French President @EmmanuelMacron. Many good things are happening for both of our countries. Big weekend with other world leaders!"
If you can make sense of the last 24 hours, you're much further advanced than me. I use wine above because it's the easiest to get data on relating to the tariff impact, but California tree nuts, dairy, rice, processed tomatoes, and citrus are also significant international exports (p. 107).
The new tariffs applied to $75 billion in US products announced yesterday do not appear to include additional ones on agriculture, but that doesn't mean they won't further hurt California's industries and economy.
Two areas in particular are concerning--increased tariffs on motor vehicles and electronics, including cellphones and chips. While the largest automotive hit will likely be to BMW, which CNBC reports exported around 85,000 luxury SUVs built in Spartanburg, SC to China in 2018, that doesn't mean California is not hit. First, many components of vehicles manufactured in other states include things like software produced in California. While intellectual property may be strange to think about in the context of a vehicle, think about all those audio and navigation systems designed in California and included in the wholesale import price.
CNBC also reports:
"Tesla, according to LMC, is forecast to double imports from the U.S. to China to nearly 35,000 vehicles in 2019 – the largest increase of any automaker. Ford, on the other hand, is expected to cut imports by 33% this year.
Tesla would avoid some of the tariff hike once it completes construction of its Gigafactory 3 plant in Shanghai. The company broke ground on the $2 billion factory in January. It is expected to be begin production by the end of the year."
The tariffs encourage more factories overseas and likely will further hurt the Fremont factory that leads the Palo Alto-based company's domestic production.
Apple, which features the tagline "Designed by Apple in Cupertino," took a particularly hard drubbing on the trade war escalation, seeing a 4.62% decline compared to a 3% decline in the NASDAQ composite. Because of intellectual property and software, even products almost completely manufactured across Asia and assembled in China, still have components that are "imported" from California--tangible and otherwise. Also hit particularly hard yesterday were Santa Clara graphics chips-maker NVIDIA (-5.27%) and San Diego telecom chips maker Qualcomm (-4.71%).
I don't know how long the trade war will last, but I'm glad that California is far more budget-reseliant than we were ten years ago. A deep recession will still be very painful, but we should be able to sustain a moderate one for a few years without drastic cuts or the budgetary gimmicks we've gotten in before. Sure, we have outstanding pension liabilities, but even those have been paid down with extra payments.
For those that jump to take this as a blast against Trump for political reasons, I understand why you would assume that. But, I'd be arguing the same thing against protectionist policies of those on the left (anti-NAFTA, anti-TPP). Yes, treaties need to have environmental, labor, and social components, but that's why treaties are meant to be negotiated, usually quietly behind the scenes by experts. That does not appear to be happening. No trade agreement has been negotiated over Twitter.
California is perhaps the most internationally-connected state, whether with our contiguous neighbors to the north and south or with those further south or overseas. The MacBook Pro I beat up each day to put words together for you was primarily designed in California, assembled in China, with parts made in Japan, elsewhere in the US, Germany, Italy, South Korea and Taiwan. Each of those component parts likely includes intellectual property or source materials from other countries and, likely, California.
Repeat that with almost every electronic device you will likely interact with today. Californians of all political stripes should recognize that continuing this trade war could very well be crippling to the state's already slowing economy.
DO YOU RECALL? The Californians to Recall Gavin Newsom committee was formed yesterday and reported its first $1,000 contribution. The contribution is from Claire Reiss, a La Jolla resident who owns a realty agency. The principal of the committee is James Veltmeyer, who lost as a Republican running in the CA52 primary last year.
The only active recall effort was filed August 2 by CA36 candidate Erin Cruz (R), an author and speaker from Palm Springs. Cruz earlier this year filed intent to recall for all of the partisan constitutional officers, but the attempts failed.
Veltmeyer previously announced a recall effort but the Secretary of State does not reflect an active filing. The Times of San Diego reports that Veltmeyer's group says they are not affiliated with Cruz's.
CANNABIS: For CapRadio, Bill Chappell reports that, while increasing, Q2 collections of the legal cannabis excise tax still fell short of expectations. Here's the state report by the state Department of Tax and Fee Administration.
BEJUULED: In the Chron, Catherine Ho reports the JUUL-backed campaign committee supporting a local November ballot measure in San Francisco to overturn the city and county's e-cigarette ban asked a superior court judge yesterday to rewrite the "objective analysis" of its Measure C on the November ballot.
BLACK GOLD: Ted Goldberg reports for KQED on the oil spill near McKittrick in Kern County: "While the massive release of crude petroleum from a Chevron oil well near the town of McKittrick seems to have ended, the timeline for hauling away soil contaminated by the spill is unclear."
DEVIN NUNES: Yesterday, in a Virginia state court, an attorney on behalf of Representative Devin Nunes (R-Tulare) argued against motions by Twitter to either dismiss or relocate to California the $250 million defamation suit filed by the congressman against the Mountain View company arguing that it is allowing fake accounts critical of him that cause injury. Nunes was not present and the judge listened to arguments and did not rule yesterday.
I love this opening graf of this story by Brad Kutner for Courthouse News:
"Congressman Devin Nunes resisted an attempt to throw out his defamation case against Twitter, arguing through his lawyer Friday that pervasive parody accounts about Nunes are like a fire next door that is seeping smoke into your house and choking a newborn baby. "
I'm not sure I get the metaphor "like a fire next door that is seeping smoke into your house and choking a newborn baby." I get the fire next door are the fake accounts, but does that mean that Nunes's attorney argued that the nine-term congressman is a "choking...newborn baby"?
Solely for news reference and not to encourage you to take any entertainment away from the fake accounts, the accounts cited include:
Beyond the dispute over jurisdiction, Twitter argues that under the safe harbor provision of the Communications Decency Act, it is not liable for possible defamatory actions of third-party users.
MAYES AND GOP: For the Press-Enterprise, Jeff Horseman writes that the resolution proposed by Chad Mayes (R-Yucaipa) for a statement by the California Republican Party against racism is facing blowback.
DO AS I SAY, NOT AS I DO: In the LAT, Colleen Shelby reports:
"A K-9 with the Long Beach Police Department died after being left in his handler’s department-issued vehicle, authorities said Friday.
The police dog, named Ozzy, and the officer were off-duty when the dog was found dead last week. The officer, whom the Police Department is not identifying, reported the dog’s death and an investigation is underway.
Ozzy’s handler found the 6-year-old dog dead in the vehicle at roughly 3:40 p.m. Aug. 14.
“A veterinarian examination of Ozzy and the preliminary results determined the cause of death to be heat-related,” Long Beach police public information officer Arantxa Chavarria said in a statement. “Our K-9 vehicles are outfitted with fail-safe equipment that is meant to generate an alert. At this time, we believe this alert may not have been working.”
"Equipment not working." I've heard that somewhere before--oh, yes, body cams.
The officer and dog were off-duty, so let's look at how a citizen is treated under the circumstance.
California Penal Code §597.7:
"If the animal suffers great bodily injury, a violation of this section is punishable by a fine not exceeding five hundred dollars ($500), imprisonment in a county jail not exceeding six months, or by both a fine and imprisonment."
There are lots of references in the section about peace officers, but it's to provide immunity for officers (and citizens) who break windows to rescue an animal in distress. I don't know if there is an exception for microwaving K-9 dogs elsewhere, but this sad situation raises more questions than are answered by the equipment working.
It's going to be a hot weekend, Noonerites, stay keep yourself and your furry friends cool.
CAKEDAY and CLASSIFIEDS after the jump...
CAKEDAY: Happy birthday to Brandon Harami, Angela Lai, Adrian Lopez, Jesse Switzer!