SEOUL — The signals are confusing. One day, North Korea is raising hopes for dialogue with South Korea, and the next, it is firing missiles or showing off the latest weaponry in its nuclear arsenal.
In the past week alone, North suggested the possibility of inter-Korean summit talks and said it would reopen communication hotlines with its neighbor. It also fired long-range cruise missiles, trotted out what it called its first hypersonic missile and, on Thursday, tested a new antiaircraft missile. Earlier in September, it launched ballistic missiles from a train rolled out of a mountain tunnel, on the same day that it called the South’s president, Moon Jae-in, “stupid.”
Once again, North Korea is turning to a well-honed, two-pronged strategy, designed to let it flex its military muscles without risking retaliation or nixing the chances for dialogue.
In the absence of talks with Washington, the missile tests reminded the world that North Korea is developing increasingly sophisticated weaponry capable of delivering nuclear warheads. But individually, these short-range or still-under-development missiles don’t amount to a direct threat to the United States.
met with then-President Donald J. Trump three times between 2018 and 2019, becoming the first North Korean leader to hold a summit with a sitting American president. But his diplomatic efforts failed to lift crippling sanctions the United Nations imposed on his impoverished country after its nuclear and I.C.B.M. tests. Soon the pandemic hit, further hamstringing the North’s economy.
American and South Korean officials had hoped that the North’s deepening economic troubles, caused by the double whammy of sanctions and the pandemic, would make North Korea more amenable to dialogue.
So far, Mr. Kim has proved them wrong.
Since his talks with Mr. Trump collapsed in early 2019, he has vowed to slog through the economic difficulties while expanding his nuclear arsenal, his country’s single best diplomatic leverage and deterrent against what it considers American threats to topple its government.By demonstrating his country’s growing military capabilities, Mr. Kim has also sought to legitimize his rule at a time when he has been able to deliver little on the economic front to his long-suffering people.
The antiaircraft missile test on Thursday indicated that the North is building a weapon similar to Russia’s S-400, one of the most potent air-defense systems in the world, according to Kim Dong-yub, an expert on North Korean weapons at the University of North Korean Studies.
The Biden administration has repeatedly urged North Korea to return to talks without preconditions. But Mr. Kim said he would not restart negotiations until he was convinced that Washington was ready to ease sanctions and its “hostile policy,” including the joint annual military exercises it conducts with South Korea.
an arms race in the region.
Mr. Kim can’t really attempt shocking provocations like the ones he conducted in 2017 — three I.C.B.M. tests and a nuclear test — that brought the Trump administration to the table. Such tests would sharply raise tensions, invite more U.N. sanctions and potentially invoke the ire of China by ruining the mood for the Beijing Winter Olympics in February.
desperate to put his Korean Peninsula peace process, his signature foreign policy, back on track before his single, five-year term ends in May.
“It’s our government’s destiny” to pursue dialogue with the North, Mr. Moon told reporters last week, referring to his efforts to build peace through his three meetings with Mr. Kim in 2018 and his efforts to help arrange the summit meetings between Mr. Kim and Mr. Trump.
This week, Mr. Kim also offered conciliatory words toward South Korea.
“We have neither aim nor reason to provoke South Korea and no idea to harm it,” he said.
North Korea was wooing South Korea while shunning talks with Washington, said Cheong Seong-chang, director of the Center for North Korean Studies at the Sejong Institute in South Korea. Other analysts said North Korea was leaning on South Korea to help bring Washington to dialogue.
On Thursday, Sung Kim, the U.S. special representative for North Korea, met with his counterparts from Japan and South Korea and indicated that Washington would support humanitarian aid to North Korea as an incentive for dialogue.
Analysis doubted that it would be enough.
“I am not sure that the old way of providing humanitarian shipments as an incentive will work this time, given the North’s reluctance to accept outside help during the pandemic,” said Professor Yang of the University of North Korean Studies. “North Korea wants the United States to address more fundamental issues concerning its well-being. It wants clearer commitments from the United States to easing sanctions and guaranteeing its security.”
Ibrahim’s parents fled political turmoil in China for Afghanistan more than 50 years ago. At that time, Mao Zedong had unleashed the Cultural Revolution, and life was upended for many Uyghurs, the mostly Muslim ethnic group in Xinjiang that included Ibrahim’s parents.
Ibrahim was born in Afghanistan. But now he, too, is trying to escape the clutches of Chinese authoritarianism.
He and his family have been afraid to leave their home in Afghanistan since the Taliban, the country’s new rulers, took control last month, venturing outside only to buy essentials. “We are extremely worried and nervous,” said Ibrahim, whose full name is being withheld for his safety. “Our children are worried for our safety, so they have asked us to stay home.”
For years, Chinese officials have issued calls for leaders in Afghanistan to crack down on and deport Uyghur militants they claimed were sheltering in Afghanistan. The officials said the fighters belonged to the East Turkestan Islamic Movement, a separatist organization that Beijing has held responsible for a series of terrorist attacks in China since the late 1990s.
locked up close to a million Uyghurs in camps and subjected those outside to constant surveillance. China says the camps are necessary to weed out extremism and to “re-educate” the Uyghurs.
Wang Yi, China’s foreign minister, standing side by side with leaders of the Taliban in July. Earlier this month, Mr. Wang pledged $30 million in food and other aid to the new government, as well as three million coronavirus vaccine doses; on Thursday, he said Afghanistan’s overseas assets “should not be unreasonably frozen or used as a bargaining chip to exert pressure,” obliquely referencing American control of billions of dollars belonging to the Afghan central bank.
Since the late 1990s, Beijing has succeeded in pressuring several countries to deport Uyghurs. The Uyghur Human Rights Project, an advocacy group based in Washington, has counted 395 cases of Uyghurs being sent to China since 1997. The group said in an August report that journalists and human rights organizations have documented 40 cases of detentions or renditions from Afghanistan to China, though it has verified only one of them.
cash shortages. People have been unable to withdraw money from banks. Grocery prices have shot up. The Taliban have also looked to China for help avoiding a possible economic collapse.
their origin story and their record as rulers.
Who are the Taliban leaders? These are the top leaders of the Taliban, men who have spent years on the run, in hiding, in jail and dodging American drones. Little is known about them or how they plan to govern, including whether they will be as tolerant as they claim to be. One spokesman told The Times that the group wanted to forget its past, but that there would be some restrictions.
“The lines are blurred on China’s part between who constitutes a terrorist and who constitutes someone who has simply been politically active,” Mr. Small said. “Individuals who are politically and economically connected with any activities they find problematic” are likely to be targeted, he said.
The uncertain future of Uyghurs in Afghanistan has caught the attention of Abdul Aziz Naseri, a Uyghur activist who was born in Afghanistan and now lives in Turkey. Mr. Abdul Aziz said he had compiled a list of roughly 500 Afghan Uyghurs who want to leave the country.
“They say to me: ‘Please save our future, please save our children,’” he said.
He shared the names and photographs of these people with The New York Times, but asked that their information be kept private. At least 73 people on the list appeared to be under the age of 5.
Shabnam, a 32-year-old Uyghur, her mother and two sisters managed to get out of Afghanistan last month. The women rushed to the airport in Kabul during the frenzied United States evacuation. Her sisters boarded one flight, her mother another. Shabnam said she was the last to leave.
In an interview, she described being separated from her husband while getting through the chaotic security lines at the airport. She was holding his passport and begged the security guards to deliver it to him. No one helped, she said.
Shabnam waited for her husband for four days, while the people around her at the airport encouraged her to leave.
She finally did — boarding a U.S. military plane with hundreds of other Afghans late last month. Her trip took her to Qatar, Germany and finally the United States, where she landed on Aug. 26. She is now in New Jersey and still trying to get her husband out of Afghanistan.
“I was happy that I got out of there, thank God,” Shabnam said. “I like it here. It’s safe and secure.”
PARIS — President Biden’s announcement of a deal to help Australia deploy nuclear-powered submarines has strained the Western alliance, infuriating France and foreshadowing how the conflicting American and European responses to confrontation with China may redraw the global strategic map.
In announcing the deal on Wednesday, Mr. Biden said it was meant to reinforce alliances and update them as strategic priorities shift. But in drawing a Pacific ally closer to meet the China challenge, he appears to have alienated an important European one and aggravated already tense relations with Beijing.
France on Thursday reacted with outrage to the announcements that the United States and Britain would help Australia develop submarines, and that Australia was withdrawing from a $66 billion deal to buy French-built submarines. At its heart, the diplomatic storm is also a business matter — a loss of revenue for France’s military industry, and a gain for American companies.
Jean-Yves Le Drian, France’s foreign minister, told Franceinfo radio that the submarine deal was a “unilateral, brutal, unpredictable decision” by the United States, and he compared the American move to the rash and sudden policy shifts common during the Trump administration.
“America-is-back” foreign-policy message, had promised to revive the country’s alliances, which were particularly undermined by Mr. Trump’s dismissiveness of NATO and the European Union. Hopes ran high from Madrid to Berlin. But a brief honeymoon quickly gave way to renewed tensions.
The French were disappointed that Secretary of State Antony J. Blinken did not make Paris, where he lived for many years, one of his first destinations in Europe. And they were angered when Mr. Biden made his decision on the American withdrawal from Afghanistan with scant if any consultation of European allies who had contributed to the war effort.
“Not even a phone call,” Ms. Bacharan said of the Afghan decision.
In his comments on Wednesday, Mr. Biden called France a key ally with an important presence in the Indo-Pacific. But the president’s decision, at least in French eyes, appeared to make a mockery of that observation.
The French statement on Thursday said that France was “the only European nation present in the Indo-Pacific region, with nearly two million citizens and more than 7,000 military personnel” in overseas territories like French Polynesia and New Caledonia in the Pacific and Reunion in the Indian Ocean.
Next week, Mr. Biden will meet at the White House with leaders of “the Quad” — an informal partnership of Australia, India, Japan and the United States — in what amounts to a statement of shared resolve in relations with Beijing. He will also meet with Mr. Johnson, apparently before the Quad gathering.
Given the Australian deal, these meetings will again suggest to France that in the China-focused 21st century, old allies in continental Europe matter less.
For Britain, joining the security alliance was further evidence of Mr. Johnson’s determination to align his country closely with the United States in the post-Brexit era. Mr. Johnson has sought to portray himself as loyal partner to Mr. Biden on issues like China and climate change.
London’s relations with Washington were ruffled by the Biden administration’s lack of consultation on Afghanistan. But the partnership on the nuclear submarine deal suggests that in sensitive areas of security, intelligence sharing and military technology, Britain remains a preferred partner over France.
Reporting was contributed by Helene Cooper and Eric Schmitt in Washington; Aurelien Breeden in Paris; Mark Landler in London; and Elian Peltier in Brussels.
On the second full day with no U.S. troops on Afghan soil, the Taliban moved Wednesday to form a new Islamic government, preparing to appoint the movement’s leading religious figure, Sheikh Haibatullah Akhundzada, as the nation’s supreme authority, Taliban officials said.
The Taliban face a daunting challenge, pivoting from insurgence to governance after two decades as insurgents who battled international and Afghan forces, planted roadside bombs and plotted mass casualty bombings in densely packed urban centers.
Now, with the Taliban’s rule fully restored 20 years after it was toppled by the U.S.-led invasion in 2001, the group is confronted with the responsibility of running a country of some 40 million people devastated by more than 40 years of war.
There are hundreds of thousands of displaced people in the country and much of the population lives in crushing poverty, all amid a punishing drought and a Covid-19 pandemic. Food stocks distributed by the United Nations will likely run out for much of Afghanistan by the end of September, said Ramiz Alakbarov, the U.N.’s humanitarian coordinator for Afghanistan.
$9.4 billion in Afghan currency reserves in the United States, part of a cash pipeline that had long sustained a fragile U.S.-backed government dependent on foreign aid. Funds have also been cut off by international lenders, including the International Monetary Fund, sending inflation soaring and undermining the weak national currency, the afghani.
Electricity service, spotty and unreliable in the best of times, is failing, residents say. Fear is keeping many people at home instead of out working and shopping. Shortages of food and other daily necessities have been reported in a country that imports much of its food, fuel and electrical power. A third of Afghans were already coping with what the United Nations has called crisis levels of food insecurity.
suicide bomber, and at age 23 blew himself up in an attack in Helmand Province, the Taliban say.
Mr. Baradar filled a similar role during the Taliban’s first years in exile, directing the movement’s operations until his arrest by Pakistan in 2010.
After three years in a Pakistani prison and several more under house arrest, Mr. Baradar was released in 2019, and then led the Taliban delegation negotiating the troop withdrawal deal reached with the Trump administration in February 2020.
Other key positions in the government are expected to go to Sirajuddin Haqqani, another deputy and an influential operations leader within the movement, and Mawlawi Muhammad Yaqoub, who is the son of the Taliban’s founder, Mullah Muhammad Omar, who led the group until his death in 2013.
Mr. Haqqani, 48, who helped direct Taliban military operations, is also a leader of the brutal Haqqani Network, a mafia-like wing of the Taliban largely based in Pakistan’s lawless tribal areas along the Afghanistan border. The network was responsible for hostage-taking, attacks on U.S. forces, complex suicide attacks and targeted assassinations.
The political developments Wednesday injected a jolt of reality into the Taliban, whose members celebrated with gunfire and fireworks after the final planeload of U.S. troops and equipment soared away from the Kabul airport just before midnight Monday. On Tuesday, top Taliban leaders led journalists on a triumphant tour of the ransacked airport just hours after it had been occupied by U.S. troops.
100 to 200 Americans remain in the country, President Biden said Tuesday. Some have stayed by choice. Others were unable to reach the Kabul airport.
Tens of thousands of Afghans who assisted the United States or its international partners also remain stranded, according to estimates by U.S. officials. Many are permanent United States residents who were traveling in Afghanistan when the government and military collapsed with stunning speed and the Taliban seized control on Aug. 15.
Understand the Taliban Takeover in Afghanistan
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Who are the Taliban? The Taliban arose in 1994 amid the turmoil that came after the withdrawal of Soviet forces from Afghanistan in 1989. They used brutal public punishments, including floggings, amputations and mass executions, to enforce their rules. Here’s more on their origin story and their record as rulers.
Who are the Taliban leaders? These are the top leaders of the Taliban, men who have spent years on the run, in hiding, in jail and dodging American drones. Little is known about them or how they plan to govern, including whether they will be as tolerant as they claim to be. One spokesman told The Times that the group wanted to forget its past, but that there would be some restrictions.
Taliban officials have made repeated public assurances that Afghans with proper passports and visas would be permitted to leave the country, regardless of their role during the 20-year American mission in Afghanistan.
About 6,000 Americans, the vast majority of them dual U.S.-Afghan citizens, were evacuated after Aug. 14, Secretary of State Antony J. Blinken said Tuesday. Early this spring, the American Embassy in Kabul began issuing warnings to Americans to leave Afghanistan as soon as possible, citing a rapidly deteriorating security situation.
Mr. Blinken described “extraordinary efforts to give Americans every opportunity to depart the country.” He said diplomats made 55,000 calls and sent 33,000 emails to U.S. citizens in Afghanistan, and in some cases, walked them into the Kabul airport.
Mr. Biden said Tuesday that the U.S. government had alerted Americans 19 times since March to leave Afghanistan.
United Nations refugee agency recently warned that as many as half a million Afghans could flee by the end of the year, and urged countries in the region to keep their borders open for those seeking refuge.
Filippo Grandi, the U.N. High Commissioner for refugees, has estimated that about 3.5 million people have been displaced by violence within Afghanistan — half a million just since May. The majority of them are women and children.
On the Afghanistan side of the Pakistan border at Torkham, about 140 miles east of Kabul, some families in recent days have been huddling with their belongings, determined to flee the Taliban’s rule. There are also laborers from neighboring Afghan provinces who want to cross to earn a livelihood amid spiraling cash and food shortages.
Pakistan has said that it will not accept any more refugees from Afghanistan. Border officials are reportedly only allowing crossing by Pakistani citizens and the few Afghans who have visas.
While Afghan refugees living in Pakistan shuttled back and forth for decades without being asked questions, in recent years, Pakistan has made access more difficult, and built up a border fence 1,600 miles long.
BERLIN — Chancellor Angela Merkel on Sunday met with survivors and thanked volunteers as she made her way through a village wrecked by the extraordinary floods that have killed at least 183 people in Germany and Belgium, calling the level of destruction “surreal and eerie.”
As rescue teams continued searching for victims amid the wreckage and debris, heavy rains in the southern German region of Bavaria caused still more flooding on Sunday. The authorities said they expected the number victims to rise, as many hundreds of people remained unaccounted for, though it was unclear how many were simply unreachable by friends or family amid the chaos of the calamity and lost communications.
Helicopters buzzed overhead as Ms. Merkel arrived in Schuld, a formerly quaint village of half-timbered homes and cobbled streets on the banks of the Ahr River, rendered an unrecognizable tangle of debris covered in sticky brown mud by gushing waters last week. German meteorologists called the flooding the worst in 500 years, if not a millennium.
“The German language has no words, I think, for the devastation,” Ms. Merkel told reporters after touring the village. She pledged that her government would organize aid, immediately and in the midterm, as well as help to rebuild infrastructure.
was in Washington when the worst of the flooding struck on Thursday. She held video conferences with the leaders of the worst-affected regions after she returned on Friday. Saturday was her 67th birthday.
Despite her relative absence, Ms. Merkel has been shielded from public criticism by the sudden timing of the floods, the significance of her trip to Washington — considered an important step to restoring ties with the United States after the tumultuous Trump administration — her formidable political stature well into her fourth term as chancellor, and now her status as a lame duck.
Instead, most of the German news media have focused on how the candidates to replace her in September’s election have responded to the tragedy. All three of the main candidates in the race visited the stricken areas last week.
Still, after 16 years of guiding Europe’s largest and most powerful country through one calamity after the other — including the global economic downturn in 2008, the European debt crisis that followed, the arrival of more than one million migrants six years ago and, most recently, the coronavirus pandemic — Germans have become accustomed to her approach of analyzing and contemplating a situation before deciding to act.
Ms. Merkel’s finance minister, Olaf Scholz, said the government was working to organize several hundred million euros, or dollars, of immediate relief for those who lost their homes and their livelihoods in the floods.
Flooding in Western Europe
On Saturday, President Frank-Walter Steinmeier of Germany visited the city of Erftstadt, where the raging waters washed away several homes and triggered a landslide; at least 16 residents there remain unaccounted for. He was accompanied by Armin Laschet, 60, the head of the conservative Christian Democratic Union and the leading contender for the chancellery, who is the governor of North Rhine-Westphalia state.
in a message on Twitter.
“The fate of those affected, which we heard about in many conversations, is important to us,” he wrote, and he thanked Mr. Steinmeier for his visit. “So I regret all the more the impression that arose from a conversational situation. That was inappropriate and I am sorry.”
Even as the country struggled to come to terms with the extent of the damage to the states of Rhineland-Palatinate, where Schuld is, heavy rains caused more flooding in Germany’s east and south, killing at least one person, in addition to the 112 people pronounced dead in Rhineland-Palatinate.
In North-Rhine Westphalia, where the interior minister said 45 people had died, more storms ripped through the south of the country.
Flooding in Belgium killed at least 27 people, local news media reported the authorities as saying. Dozens remained missing there, and rescue workers spent much of the day going door to door looking for anyone who had not been able to escape the rising waters in time.
That the authorities still lacked clarity on Sunday over how many people were missing four days after the floods struck reflected the severity of the damage caused to local infrastructure in Rhineland-Palatinate, said Malu Dreyer, the state’s governor.
“The water was still flowing up until a couple of days ago, we have mud and debris,” Ms. Dreyer said. “Now we have the police, soldiers and firefighters who are systematically combing through the whole region searching for the missing.”
Ms. Merkel said that in addition to the financial support from the government, the German Army and other emergency assistance organizations would remain in the area as long as needed.
“Everything we have is being put to use,” she said, “and still it is unbelievably painful for those who have lost loved ones, for those who still don’t know what has happened and for those facing the destruction of their livelihoods.”
“I think first, this is an economic surrender that other countries are glad to go along with, as long as America is making itself that uncompetitive,” Mr. Brady said. “And secondly, I think there are too many competing interests here for them to finalize a deal that would be agreeable to Congress.”
Other nations must also determine how to turn their commitments into domestic law.
The mechanics of changing how the largest and most profitable companies are taxed, and of making exceptions for financial services, oil and gas businesses, will be central to the discussions. There are already concerns that carve-outs could lead to new tax loopholes.
Ms. Yellen, who is making her second international trip as Treasury secretary, will be holding bilateral meetings with many of her counterparts, including officials from Saudi Arabia, Japan, Turkey and Argentina. China, which signed on to the global minimum tax framework, is not expected to send officials to the gathering of finance ministers and central bank governors, so there will be no discussions between the world’s two largest economic powers.
Mr. Saint-Amans expressed optimism about the trajectory of the tax negotiations, which were on life support during the final year of the Trump administration, and attributed that largely to the new diplomatic approach from the United States.
“It took a U.S. election, and some work at the O.E.C.D.,” he said.
During the panel discussion on tax and climate change, Ms. Yellen’s counterparts said they appreciated the spirit of cooperation from the United States.
Chrystia Freeland, Canada’s deputy prime minister and finance minister, said having the United States back at the table working to combat climate change was “welcome” and “transformative.” Mr. Le Maire thanked the Biden administration for rejoining the Paris Agreement.
“The U.S. is back,” he said.
Jim Tankersley contributed reporting from Washington, andLiz Alderman from Paris.
SAN FRANCISCO — President Biden and many lawmakers in Washington are worried these days about computer chips and China’s ambitions with the foundational technology.
But a massive machine sold by a Dutch company has emerged as a key lever for policymakers — and illustrates how any country’s hopes of building a completely self-sufficient supply chain in semiconductor technology are unrealistic.
The machine is made by ASML Holding, based in Veldhoven. Its system uses a different kind of light to define ultrasmall circuitry on chips, packing more performance into the small slices of silicon. The tool, which took decades to develop and was introduced for high-volume manufacturing in 2017, costs more than $150 million. Shipping it to customers requires 40 shipping containers, 20 trucks and three Boeing 747s.
The complex machine is widely acknowledged as necessary for making the most advanced chips, an ability with geopolitical implications. The Trump administration successfully lobbied the Dutch government to block shipments of such a machine to China in 2019, and the Biden administration has shown no signs of reversing that stance.
Congress is debating plans to spend more than $50 billion to reduce reliance on foreign chip manufacturers. Many branches of the federal government, particularly the Pentagon, have been worried about the U.S. dependence on Taiwan’s leading chip manufacturer and the island’s proximity to China.
A study this spring by Boston Consulting Group and the Semiconductor Industry Association estimated that creating a self-sufficient chip supply chain would take at least $1 trillion and sharply increase prices for chips and products made with them.
Moore’s Law, named after Gordon Moore, a co-founder of the chip giant Intel.
In 1997, ASML began studying a shift to usingextreme ultraviolet, or EUV, light. Such light has ultrasmall wavelengths that can create much tinier circuitry than is possible with conventional lithography. The company later decided to make machines based on the technology, an effort that has cost $8 billion since the late 1990s.
The development process quickly went global. ASML now assembles the advanced machines using mirrors from Germany and hardware developed in San Diego that generates light by blasting tin droplets with a laser. Key chemicals and components come from Japan.
a final report to Congress and Mr. Biden in March, the National Security Commission on Artificial Intelligence proposed extending export controls to some other advanced ASMLmachines as well. The group, funded by Congress, seeks to limit artificial intelligence advances with military applications.
Mr. Hunt and other policy experts argued that since China was already using those machines, blocking additional sales would hurt ASML without much strategic benefit. So does the company.
“I hope common sense will prevail,” Mr. van den Brink said.
In 2016, toward the end of the Obama administration, the American lumber industry petitioned the government to impose duties on Canadian softwood lumber imports in response to what it contended were unfair trade practices. The proceedings continued under the Trump administration, which in 2017 imposed duties of 20.2 percent for most Canadian producers. The rate was lowered to 9 percent last year.
The status of the long-running dispute took on a new urgency as the price of lumber soared over the past year. The National Association of Home Builders estimated in April that higher lumber costs had added nearly $36,000 to the price of an average newly constructed single-family home. A benchmark for the price of framing lumber set a record high of $1,515 per thousand board feet in May, four times the price at the beginning of 2020, before beginning to plummet. Last week, the price stood at $930, still more than double its level at the start of 2020, according to Fastmarkets Random Lengths, the trade publication that publishes the benchmark.
“As an economist, it is very hard to understand why we’re taxing something we don’t produce enough of,” said Robert Dietz, the chief economist for the National Association of Home Builders.
On the other side of the issue are U.S. lumber producers. The U.S. Lumber Coalition, an industry group, has argued that strong demand, not duties, is driving lumber prices and that the duties make up only a small portion of the total cost of lumber for new homes.
The coalition credits the duties with strengthening the U.S. lumber industry, saying in a statement that American sawmills had expanded capacity in recent years, producing an additional 11 billion board feet of lumber since 2016. “More lumber being manufactured in America to meet domestic demand is a direct result of the trade enforcement, and the U.S. industry strongly urges the administration to continue this enforcement,” the coalition said.
Dustin Jalbert, a senior economist at Fastmarkets, a price reporting firm, attributed the chaotic lumber market and high prices in large part to effects from the pandemic. At the start of the pandemic, he said, sawmills “assumed the worst” and curbed production, only for the housing market to rebound and for demand to soar.
Mr. Jalbert said the duties stemming from the U.S.-Canada dispute were not a major reason for the high prices. “In terms of the short-term pricing situation, it’s lower down the list in terms of the factors that are driving the record prices that we’ve seen in the market,” he said.
There were two weeks left in the Trump administration when the Treasury Department handed down a set of rules governing an obscure corner of the tax code.
Overseen by a senior Treasury official whose previous job involved helping the wealthy avoid taxes, the new regulations represented a major victory for private equity firms. They ensured that executives in the $4.5 trillion industry, whose leaders often measure their yearly pay in eight or nine figures, could avoid paying hundreds of millions in taxes.
The rules were approved on Jan. 5, the day before the riot at the U.S. Capitol. Hardly anyone noticed.
The Trump administration’s farewell gift to the buyout industry was part of a pattern that has spanned Republican and Democratic presidencies and Congresses: Private equity has conquered the American tax system.
one recent estimate, the United States loses $75 billion a year from investors in partnerships failing to report their income accurately — at least some of which would probably be recovered if the I.R.S. conducted more audits. That’s enough to roughly double annual federal spending on education.
It is also a dramatic understatement of the true cost. It doesn’t include the ever-changing array of maneuvers — often skating the edge of the law — that private equity firms have devised to help their managers avoid income taxes on the roughly $120 billion the industry pays its executives each year.
Private equity’s ability to vanquish the I.R.S., Treasury and Congress goes a long way toward explaining the deep inequities in the U.S. tax system. When it comes to bankrolling the federal government, the richest of America’s rich — many of them hailing from the private equity industry — play by an entirely different set of rules than everyone else.
The result is that men like Blackstone Group’s chief executive, Stephen A. Schwarzman, who earned more than $610 million last year, can pay federal taxes at rates similar to the average American.
Lawmakers have periodically tried to force private equity to pay more, and the Biden administration has proposed a series of reforms, including enlarging the I.R.S.’s enforcement budget and closing loopholes. The push for reform gained new momentum after ProPublica’s recent revelation that some of America’s richest men paid little or no federal taxes.
nearly $600 million in campaign contributions over the last decade, has repeatedly derailed past efforts to increase its tax burden.
Taylor Swift’s back music catalog.
The industry makes money in two main ways. Firms typically charge their investors a management fee of 2 percent of their assets. And they keep 20 percent of future profits that their investments generate.
That slice of future profits is known as “carried interest.” The term dates at least to the Renaissance. Italian ship captains were compensated in part with an interest in whatever profits were realized on the cargo they carried.
The I.R.S. has long allowed the industry to treat the money it makes from carried interests as capital gains, rather than as ordinary income.
article highlighting the inequity of the tax treatment. It prompted lawmakers from both parties to try to close the so-called carried interest loophole. The on-again, off-again campaign has continued ever since.
Whenever legislation gathers momentum, the private equity industry — joined by real estate, venture capital and other sectors that rely on partnerships — has pumped up campaign contributions and dispatched top executives to Capitol Hill. One bill after another has died, generally without a vote.
An Unexpected Email
One day in 2011, Gregg Polsky, then a professor of tax law at the University of North Carolina, received an out-of-the-blue email. It was from a lawyer for a former private equity executive. The executive had filed a whistle-blower claim with the I.R.S. alleging that their old firm was using illegal tactics to avoid taxes.
The whistle-blower wanted Mr. Polsky’s advice.
Mr. Polsky had previously served as the I.R.S.’s “professor in residence,” and in that role he had developed an expertise in how private equity firms’ vast profits were taxed. Back in academia, he had published a research paper detailing a little-known but pervasive industry tax-dodging technique.
$89 billion in private equity assets — as being “abusive” and a “thinly disguised way of paying the management company its quarterly paycheck.”
Apollo said in a statement that the company stopped using fee waivers in 2012 and is “not aware of any I.R.S. inquiries involving the firm’s use of fee waivers.”
floated the idea of cracking down on carried interest.
Private equity firms mobilized. Blackstone’s lobbying spending increased by nearly a third that year, to $8.5 million. (Matt Anderson, a Blackstone spokesman, said the company’s senior executives “are among the largest individual taxpayers in the country.” He wouldn’t disclose Mr. Schwarzman’s tax rate but said the firm never used fee waivers.)
Lawmakers got cold feet. The initiative fizzled.
In 2015, the Obama administration took a more modest approach. The Treasury Department issued regulations that barred certain types of especially aggressive fee waivers.
But by spelling that out, the new rules codified the legitimacy of fee waivers in general, which until that point many experts had viewed as abusive on their face.
So did his predecessor in the Obama administration, Timothy F. Geithner.
Inside the I.R.S. — which lost about one-third of its agents and officers from 2008 to 2018 — many viewed private equity’s webs of interlocking partnerships as designed to befuddle auditors and dodge taxes.
One I.R.S. agent complained that “income is pushed down so many tiers, you are never able to find out where the real problems or duplication of deductions exist,” according to a U.S. Government Accountability Office investigation of partnerships in 2014. Another agent said the purpose of large partnerships seemed to be making “it difficult to identify income sources and tax shelters.”
The Times reviewed 10 years of annual reports filed by the five largest publicly traded private equity firms. They contained no trace of the firms ever having to pay the I.R.S. extra money, and they referred to only minor audits that they said were unlikely to affect their finances.
Current and former I.R.S. officials said in interviews that such audits generally involved issues like firms’ accounting for travel costs, rather than major reckonings over their taxable profits. The officials said they were unaware of any recent significant audits of private equity firms.
No Money Owed
For a while, it looked as if there would be an exception to this general rule: the I.R.S.’s reviews of the fee waivers spurred by the whistle-blower claims. But it soon became clear that the effort lacked teeth.
Kat Gregor, a tax lawyer at the law firm Ropes & Gray, said the I.R.S. had challenged fee waivers used by four of her clients, whom she wouldn’t identify. The auditors struck her as untrained in the thicket of tax laws governing partnerships.
“It’s the equivalent of picking someone who was used to conducting an interview in English and tell them to go do it in Spanish,” Ms. Gregor said.
The audits of her clients wrapped up in late 2019. None owed any money.
The Mnuchin Compromise
As a presidential candidate, Mr. Trump vowed to “eliminate the carried interest deduction, well-known deduction, and other special-interest loopholes that have been so good for Wall Street investors, and for people like me, but unfair to American workers.”
wanted to close the loophole, congressional Republicans resisted. Instead, they embraced a much milder measure: requiring private equity officials to hold their investments for at least three years before reaping preferential tax treatment on their carried interests. Steven Mnuchin, the Treasury secretary, who had previously run an investment partnership, signed off.
McKinsey, typically holds investments for more than five years. The measure, part of a $1.5 trillion package of tax cuts, was projected to generate $1 billion in revenue over a decade.
credited Mr. Mnuchin, hailing him as “an all-star.”
Mr. Fleischer, who a decade earlier had raised alarms about carried interest, said the measure “was structured by industry to appear to do something while affecting as few as possible.”
Months later, Mr. Callas joined the law and lobbying firm Steptoe & Johnson. The private equity giant Carlyle is one of his biggest clients.
‘The Government Caved’
It took the Treasury Department more than two years to propose rules spelling out the fine print of the 2017 law. The Treasury’s suggested language was strict. One proposal would have empowered I.R.S. auditors to more closely examine internal transactions that private equity firms might use to get around the law’s three-year holding period.
The industry, so happy with the tepid 2017 law, was up in arms over the tough rules the Treasury’s staff was now proposing. In a letter in October 2020, the American Investment Council, led by Drew Maloney, a former aide to Mr. Mnuchin, noted how private equity had invested in hundreds of companies during the coronavirus pandemic and said the Treasury’s overzealous approach would harm the industry.
The rules were the responsibility of Treasury’s top tax official, David Kautter. He previously was the national tax director at EY, formerly Ernst & Young, when the firm was marketing illegal tax shelters that led to a federal criminal investigation and a $123 million settlement. (Mr. Kautter has denied being involved with selling the shelters but has expressed regret about not speaking up about them.)
On his watch at Treasury, the rules under development began getting softer, including when it came to the three-year holding period.
Monte Jackel, a former I.R.S. attorney who worked on the original version of the proposed regulations.
Mr. Mnuchin, back in the private sector, is starting an investment fund that could benefit from his department’s weaker rules.
A Charmed March
Even during the pandemic, the charmed march of private equity continued.
The top five publicly traded firms reported net profits last year of $8.6 billion. They paid their executives $8.3 billion. In addition to Mr. Schwarzman’s $610 million, the co-founders of KKR each made about $90 million, and Apollo’s Leon Black received $211 million, according to Equilar, an executive compensation consulting firm.
now advising clients on techniques to circumvent the three-year holding period.
The most popular is known as a “carry waiver.” It enables private equity managers to hold their carried interests for less than three years without paying higher tax rates. The technique is complicated, but it involves temporarily moving money into other investment vehicles. That provides the industry with greater flexibility to buy and sell things whenever it wants, without triggering a higher tax rate.
Private equity firms don’t broadcast this. But there are clues. In a recent presentation to a Pennsylvania retirement system by Hellman & Friedman, the California private equity giant included a string of disclaimers in small font. The last one flagged the firm’s use of carry waivers.
The Biden administration is negotiating its tax overhaul agenda with Republicans, who have aired advertisements attacking the proposal to increase the I.R.S.’s budget. The White House is already backing down from some of its most ambitious proposals.
Even if the agency’s budget were significantly expanded, veterans of the I.R.S. doubt it would make much difference when it comes to scrutinizing complex partnerships.
“If the I.R.S. started staffing up now, it would take them at least a decade to catch up,” Mr. Jackel said. “They don’t have enough I.R.S. agents with enough knowledge to know what they are looking at. They areso grossly overmatched it’s not funny.”
A constellation of 5,400 offshore wind turbines meet a growing portion of Europe’s energy needs. The United States has exactly seven.
With more than 90,000 miles of coastline, the country has plenty of places to plunk down turbines. But legal, environmental and economic obstacles and even vanity have stood in the way.
President Biden wants to catch up fast — in fact, his targets for reducing greenhouse gas emissions depend on that happening. Yet problems abound, including a shortage of boats big enough to haul the huge equipment to sea, fishermen worried about their livelihoods and wealthy people who fear that the turbines will mar the pristine views from their waterfront mansions. There’s even a century-old, politically fraught federal law, known as the Jones Act, that blocks wind farm developers from using American ports to launch foreign construction vessels.
Offshore turbines are useful because the wind tends to blow stronger and more steadily at sea than onshore. The turbines can be placed far enough out that they aren’t visible from land but still close enough to cities and suburbs that they do not require hundreds of miles of expensive transmission lines.
approved a project near Martha’s Vineyard that languished during the Trump administration and in May announced support for large wind farms off California’s coast. The $2 trillion infrastructure plan that Mr. Biden proposed in March would also increase incentives for renewable energy.
The cost of offshore wind turbines has fallen about 80 percent over the last two decades, to as low as $50 a megawatt-hour. While more expensive per unit of energy than solar and wind farms on land, offshore turbines often make economic sense because of lower transmission costs.
“Solar in the East is a little bit more challenging than in the desert West,” said Robert M. Blue, the chairman and chief executive of Dominion Energy, a big utility company that is working on a wind farm with nearly 200 turbines off the coast of Virginia. “We’ve set a net-zero goal for our company by 2050. This project is essential to hitting those goals.”
rely on European components, suppliers and ships for years.
Installing giant offshore wind turbines — the largest one, made by General Electric, is 853 feet high — is difficult work. Ships with cranes that can lift more than a thousand tons haul large components out to sea. At their destinations, legs are lowered into the water to raise the ships and make them stationary while they work. Only a few ships can handle the biggest components, and that’s a big problem for the United States.
A 1,600-mile round trip to Canada.
Government Accountability Office report published in December. That is far too small for the giant components that Mr. Eley’s team was working with.
So Dominion hired three European ships and operated them out of the Port of Halifax in Nova Scotia. One of them, the Vole au Vent from Luxembourg, is 459 feet (140 meters) long and can lift 1,654 tons.
Mr. Eley’s crew waited weeks at a time for the European ships to travel more than 800 miles each way to port. The installations took a year. In Europe, it would have been completed in a few weeks. “It was definitely a challenge,” he said.
The U.S. shipping industry has not invested in the vessels needed to carry large wind equipment because there have been so few projects here. The first five offshore turbines were installed in 2016 near Block Island, R.I. Dominion’s two turbines were installed last year.
Had the Jones Act not existed — it was enacted after World War I to ensure that the country had ships and crews to mobilize during war and emergencies — Dominion could have run European vessels out of Virginia’s ports. The law is sacrosanct in Congress, and labor unions and other supporters argue that repealing it would eliminate thousands of jobs at shipyards and on boats, leaving the United States reliant on foreign companies.
Demand for large ships could grow significantly over the next decade because the United States, Europe and China have ambitious offshore wind goals. Just eight ships in the world can transport the largest turbine parts, according to Dominion.
200 more turbines by 2026. Dominion spent $300 million on its first two but hopes the others will cost $40 million each.
Fishermen fear for their livelihoods.
For the last 24 years, Tommy Eskridge, a resident of Tangier Island, has made a living catching conchs and crabs off the Virginia coast.
One area he works is where Dominion plans to place its turbines. Federal regulators have adjusted spacing between turbines to one nautical mile to create wider lanes for fishing and other boats, but Mr. Eskridge, 54, worries that the turbines could hurt his catch.
The area has yielded up to 7,000 pounds of conchs a day, though Mr. Eskridge said a typical day produced about half that amount. A pound can fetch $2 to $3, he said.
Mr. Eskridge said the company and regulators had not done enough to show that installing turbines would not hurt his catch. “We just don’t know what it’s going to do.”
who died in 2009, and William I. Koch, an industrialist.
Neither wanted the turbines marring the views of the coast from their vacation compounds. They also argued that the project would obstruct 16 historical sites, disrupt fishermen and clog up waterways used by humpback, pilot and other whales.
the developer of Cape Wind gave up in 2017. But well before that happened, Cape Wind’s troubles terrified energy executives who were considering offshore wind.
Projects up and down the East Coast are mired in similar fights. Residents of the Hamptons, the wealthy enclave, opposed two wind development areas, and the federal government shelved the project. On the New Jersey shore, some homeowners and businesses are opposing offshore wind because they fear it will raise their electricity rates, disrupt whales and hurt the area’s fluke fishery.
Energy executives want the Biden administration to mediate such conflicts and speed up permit approval.
“It’s been artificially, incrementally slow because of some inefficiencies on the federal permitting side,” said David Hardy, chief executive of Orsted North America.
Renewable-energy supporters said they were hopeful because the country had added lots of wind turbines on land — 66,000 in 41 states. They supplied more than 8 percent of the country’s electricity last year.
Ms. Lefton, the regulator who oversees leasing of federal waters, said future offshore projects would move more quickly because more people appreciated the dangers of climate change.
“We have a climate crisis in front of us,” she said. “We need to transition to clean energy. I think that will be a big motivator.”