Friday 05 October 2018
FT
C002D5556
BUSINESS DAY
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ANALYSIS North Korea lashes out at US ahead of Pompeo summit Pyongyang reverts to tough talk despite Kim Jong Un’s effusive public attitude BRYAN HARRIS
Midterm elections: ‘Trump effect’ weighs on US economic boom Business in Minnesota is thriving but Republicans fear their president is a polarising influence in the state as poll nears SAM FLEMING
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t may dismay relatives in his native Belgium, not to mention his wife’s family in Mexico, but Laurent Deconinck counts himself an enthusiast for the policies of Donald Trump. The benefits, he says, walking across his factory floor in a northern suburb of Minneapolis-Saint Paul, are all around him. Mr Trump’s tariffs on imports of steel and aluminium may be pushing up metals costs, but Mr Deconinck is passing that on to customers — clearly itemised in his invoices. Meanwhile investment write-offs encouraged by the Republicans’ tax cuts have freed up cash for spending on new kit to make metal components, he says, gesturing at a $300,000 machine he bought as a result. And last year the prospect of a trade war with Beijing prompted a customer who sells knee braces for hobbled pets to ditch a Chinese supplier and shift the work to Mr Deconinck’s Minnesota factory. “A lot of people don’t want to be associated with Trump because they don’t support the bad language and nastiness of what he is saying, but they do like the action,” he says, raising his voice over the din of the production floor of his company Machining Technology. Mr Trump is “trying something new”. Americans go to the polls on November 6 in midterm elections that have the potential to make or break the Trump presidency. Facing the threat of losing one or even both houses of Congress, which could open up a torrent of investigations into the Trump White House, the Republicans are counting on a booming economy to give them an edge with voters in places like Minneapolis. Unemployment in the metropolis is 2.6 per cent, lower than in any other US urban area with a population of at least 1m people, and a far cry from the 8 per cent joblessness rate blighting the region during the financial crisis. Yet as the president prepared to hold a rally in Minnesota on Thursday to galvanise his party, Republicans in the state were looking at the elections with anxiety. Two incumbent Republican congressmen in the Minneapolis-Saint Paul suburbs are under threat. Republican gubernatorial candidate Jeff Johnson, who has enthusiastically embraced Mr Trump, trailed in a recent opinion poll behind Tim Walz of the Democratic-Farmer-Labor party — the Democrats’ Minnesota affiliate. And Democrats are looking to make
inroads into the Republicans’ lead in the state legislature. Simply put, the president’s message of economic resurgence may be resonating with business owners such as Mr Deconinck, but it is being drowned out in many parts of the state by the polarising influence of Mr Trump as well as highly charged issues including healthcare and the nomination of Brett Kavanaugh to the Supreme Court. According to Real Clear Politics, the Democrats are 7.4 per cent ahead of the Republicans in the polls for the November Congressional election. Recent polling from the Pew Research Center showed that, while interest in the midterms was strong among both parties, 67 per cent of Democratic voters across the US were more enthusiastic than usual about voting, outweighing the 59 per cent of Republicans. This is adding to the Democrats’ hopes of winning at least one of the two chambers of Congress. “Let’s just say there are a lot of Democrats who would walk over a lot of hot coals to vote right now,” says RT Rybak, the former Democratic mayor of Minneapolis. For many Republican candidates, the economy, surging stock markets and December’s tax cuts are the cornerstone of their bid to retain power in Washington and state capitals. Congressman Jason Lewis, for instance, who faces a tight battle for suburban voters against Angie Craig, a former healthcare technology executive, has been hammering home the bounty he says was unlocked by the tax-cutting package. Mr Trump in June told a rally in the city of Duluth, near Minnesota’s Iron Range mining region, that wages were rising for the first time in 20 years and that no one had ever seen the kind of growth he was presiding over. Leaving aside the inaccuracies in his statements, the president had plenty of reason to tout the US expansion. Annualised growth across the country was at its quickest pace in four years in the second quarter, clocking in at 4 per cent, and the Federal Reserve forecasts that joblessness is set to plunge to a near-record low of 3.5 per cent next year. While some manufacturers are being hurt by the president’s tariffs, Fed chairman Jay Powell said no damage is yet visible in the aggregate data. Indeed, manufacturing, a key sector for Minnesota, has added more than 7,400 jobs in the past year, and headcounts in construction are up by more than 6,800. Job vacancies, up 16 per cent year on year, have hit records. Less qualified workers are beginning to feel more benefits. Hourly
wages for jobs aimed at candidates with a high school qualification are being advertised at a median rate of $14 an hour, up 15 per cent over the past two years, according to state government figures. There are pockets of serious deprivation in the MinneapolisSaint Paul region, but businesses say the biggest constraint on their growth is a lack of candidates to fill vacant positions. Data from the state’s department of employment and economic development show there are two open posts available for every unemployed person in the metro area, leading to a frantic scramble for workers. Jim Johnson, who runs two branches of recruitment agency Express Employment Professionals, says clients are easing back on criminal record checks and drug tests, as well as loosening requirements that candidates upgrade their wardrobes before starting a new post, because they are worried that creating barriers could deter applicants. Lucas Nathan, a 22-year-old welder who recently moved from North Carolina, says he got his first job in the area on the basis of a single phone interview. In September he secured a new job in less than a week, having been offered positions by three of the four companies that interviewed him. Two of them tried to outbid the employer he opted for. “I was very surprised by how easy it was,” he says, sitting in a local coffee outlet in Minneapolis. “Welders are needed everywhere. The economy is going up — a lot of people are building businesses.” Yet Mr Nathan, who says he will probably vote Republican in November, does not appear to link the economic surge with the policies pushed through since Mr Trump’s election. Strikingly, the Pew polling from late September showed the Republicans and Democrats level pegging nationally in terms of voters’ views of the best party to run the economy. While Republicans point to December’s tax reductions as they take credit for an economic rebound that began eight years ago under Barack Obama, some also privately acknowledge the success Democrats have had in branding the tax package as a giveaway to the rich and big companies. Rhonda Sivarajah, the chair of the Board of Commissioners in Anoka County, which stretches north of Minneapolis, worries the strong economic backdrop could induce complacency among Republican voters at the midterms. “If they feel ‘my life is great, the economy is doing great’, they don’t have that same energy level. They take it for granted,” she says.
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orth Korea has lashed out at US sanctions as the regime again reverts to tough talk just days ahead of a crucial summit in Pyongyang. Mike Pompeo, US secretary of state, is on Sunday due to meet North Korean leader Kim Jong Un, in a bid to restart denuclearisation talks, which have made little progress this year despite a series of high-profile summits among the leaders of Pyongyang, Seoul and Washington. The visit to Pyongyang by the top US diplomat comes just
the DMZ Many analysts do not believe Mr Kim is sincere in any of his pledges to denuclearise. They point to the regime’s development of advanced weapons since a landmark summit with the US in June as evidence. “The creation of the peace mood on the Korean peninsula due to Mr Moon’s summits with Mr Kim have neutralised the US’s tough negotiating strategy. North Korea is now moving ahead with denuclearisation talks on their own terms,” said Kim Jin-moo, a professor of international relations at Sook-
Mike Pompeo, US secretary of state, is on Sunday due to meet North Korean leader Kim Jong Un in a bid to restart denuclearisation talks © Reuters
weeks after Mr Kim renewed his commitment to nuclear disarmament and pledged concrete concessions during a summit with South Korean President Moon Jae-in. Since then, however, North Korea has once again returned to rhetorical broadsides, which highlight the gulf between Mr Kim’s effusive public attitude — including gushing letters sent to US President Donald Trump — and the hard line of his official government statements. On Thursday, the North Korean newspaper Rodong Sinmun praised the dictator and slammed the US for its continued enforcement of international sanctions that have left the regime isolated from global trade and finance. “The US is coming up with a thorny stick of maintaining or intensifying sanctions. How senseless and rude they are!” the state-run newspaper said. “Sanctions are a major source of cause for our growing mistrust with the US.” The comments come days after Ri Yong Ho, North Korea’s foreign minister, blamed the US’s “coercive” sanctions policy for the diplomatic deadlock and said the nation would never denuclearise “without trust” in Washington. The remarks are likely to contribute to concerns in the US that North Korea is manipulating Mr Trump by dragging out talks. From flashpoint to peace park: Koreas eye new future for
myung Women’s University. “North Korea seeks nuclear state status just like Pakistan and will drag its feet to exhaust the US.” During his meeting with Mr Moon last month, the North Korean leader doubled down on earlier pledges to denuclearise, vowing to permanently dismantle a key missile testing site and allow the process to be monitored by international inspectors. He also said he would close North Korea’s sprawling Yongbyon nuclear complex if the US took “corresponding measures”. However, he did not specify what those measures could be. In addition to sanctions relief, North Korea has repeatedly demanded the US make a declaration ending the officially unfinished Korean war — a statement that would in theory provide the regime with a form of security guarantee. The tough rhetoric from Pyongyang on Thursday contrasted with the positive overtures struck by Mr Pompeo, who said he was “optimistic” that this weekend’s meeting would result in “better understandings, deeper progress and a plan forward”. He brushed off concerns about North Korea’s tough tone. The summit in Pyongyang would be Mr Pompeo’s first since a diplomatic disaster in July when the regime accused Washington of “robber-like behaviour” in its demands for “unilateral denuclearisation”.