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The Secret to Getting More People to Pay Their Taxes

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When people feel that they don’t have a voice in determining what their government does, they often check out of the political process. One result of that: They do what they can to avoid taxes.

But there’s a way to change the way people feel—and increase tax compliance in the process.

Research we conducted with

Jan-Emmanuel De Neve

at the University of Oxford suggests that the key is giving people the sense that they have a voice in how their taxes are spent. In a laboratory experiment designed to mirror the tax system, we gave participants the opportunity to earn extra cash by completing a simple task, but there was a catch. If they agreed to do the task, they would have to pay us a “laboratory tax” of 30%: We would pay them $10 for their work, but they would need to give us back $3. And we told them that if they failed to pay the tax, they might be selected for an audit and have to pay the $3 plus a penalty.

For some people, though, we added a twist. Before they decided whether or not to pay their taxes, they were asked to share their ideas about how their tax money should be distributed to help pay for various “infrastructure improvements” to our laboratory—such as beverages, snacks, and enhanced incentives for future study participants. They were given no guarantee that we would spend according to their ideas, but were assured we would take them into account. Other people weren’t given this voice, and simply had to pay up.

Giving people a voice had a big impact on tax compliance. More than two-thirds of those who were asked to share their ideas paid their taxes in full, compared with just over half of those who weren’t consulted.

Out of the lab

But does this laboratory experiment really have implications for citizens paying their yearly tax bill?

In a separate study, we showed people a version of the Federal Taxpayer Receipt (first created in 2011), which breaks down tax spending by budget category, with more than a dozen categories listed, including national defense, health care, education and job training, natural-disaster response, international affairs and agriculture.

We asked some taxpayers to allocate a percentage of their annual tax payment across budget categories in ways that reflected their priorities. And again, other citizens weren’t given this opportunity. We then asked everyone about their willingness to take a hypothetical tax loophole for which it wasn’t clear they qualified the next time they completed their taxes. About 40% of those people who were given a voice said they would take the loophole, compared with about 65% of those people who weren’t asked their preferences.

Our strategy for transforming taxes from a perennially unpopular rite of citizenship to an opportunity for a voice in government has a few caveats. First, people’s input can’t be limited to helping decide how to distribute tax money among budget categories that are generally unpopular—some popular options have to be included as well. Our research shows that people who are only asked to decide how to allocate money among unpopular budget priorities are more likely to avoid paying taxes.

Second, giving only people who pay taxes a voice in how those taxes are spent would equate participation in government decisions with wealth—people who don’t pay taxes must also be given a voice.

And there is one final risk to opening the door to citizens sharing their ideas: People need to believe that someone is actually listening. Offering people a voice can lead to expectations that government will follow through, providing more funding to those causes that people favor. While this may sound like it could lead to mayhem—what if all citizens decided that all money should go toward one single budget category—our research shows that the preferences of citizens aren’t dramatically different from current budgetary priorities.

On average, citizens tend to lean toward a less lopsided pie, shifting slightly away from military spending toward less well-funded categories. In the aggregate, however, our studies indicate that overall spending allocations would be little changed. Moreover, our research shows that giving citizens a voice in as little as 10% of the total budget is enough to improve their feelings about paying taxes, so the total impact on the budget can be limited that way.

Real-world choice

One example of limited involvement is the Participatory Budgeting program of the city of Cambridge, Mass. The city sets aside a certain amount of money for community-improvement projects, elicits ideas for projects from its citizens and then allows them to vote on which of several projects to fund. Last year, residents chose projects including planting more trees, assisting the homeless and upgrading crosswalk safety.

Programs like these in the U.S. and around the world offer clear evidence that given the opportunity, people are ready and willing to voice their preferences on how tax money should be spent. The potential benefits that our research has documented should encourage more governments to offer them that opportunity.

Dr. Lamberton is an associate professor of marketing at the University of Pittsburgh. Dr. Norton is a professor at Harvard Business School. Email reports@wsj.com.

Appeared in the February 12, 2018, print edition as ‘To Get More People to Pay Taxes, Give Them a Voice.’



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Unilever Threatens to Reduce Ad Spending on Tech Platforms That Don't Combat Divisive Content

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Unilever


UL -0.68%

PLC is threatening to pull back its advertising from popular tech platforms, including YouTube and

Facebook
Inc.,

if they don’t do more to combat the spread of fake news, hate speech and divisive content.

“Unilever will not invest in platforms or environments that do not protect our children or which create division in society, and promote anger or hate,” Unilever Chief Marketing Officer

Keith Weed

is expected to say Monday during the Interactive Advertising Bureau’s annual leadership meeting in Palm Desert, Calif.

“We will prioritize investing only in responsible platforms that are committed to creating a positive impact in society,” he will say, according to prepared remarks.

Unilever, one of the world’s largest advertisers, is leveraging its spending power to push the digital media industry to weed out content that funds terrorism, exploits children, spreads false news or supports racist and sexist views. The consumer-products giant spent more than $9 billion marketing its brands such as Lipton, Dove and Knorr last year, according to the company’s annual report.

In the wake of the 2016 election, YouTube, Facebook and other tech companies have come under scrutiny for allowing the spread of misinformation—criticism partly fueled by evidence that Russian actors used their platforms to disseminate information designed to manipulate U.S. voters.

Meanwhile, YouTube, which is owned by

Alphabet
Inc.’s

Google, has taken plenty of heat for running ads alongside extremist, racist and hateful videos, forcing brands to suspend advertising on the site. Most recently, brands were discovered to be appearing next to videos that seemed to attract pedophile viewers.

A spokeswoman for Google declined to comment, while the other firms didn’t immediately respond to requests for comment.

This is about “having a positive impact on society and whether we as a company want to engage with companies that are not committed to making a positive impact,” Mr. Weed said in an interview.

Unilever has been among the more outspoken advertisers pushing for the online ad industry to clean up the ad fraud that exists on the web and offer up stronger measurement standards to ensure that advertisers are buying ads that can be seen by real people.

While the company continues to push for those initiatives, Mr. Weed said that consumers don’t care about online advertising measurement issues. They do care about “fake news” and “Russians influencing the U.S. election,” he added.

Rather than issue a public list of demands, Mr. Weed said he wants to work privately with the tech companies to come up with solutions. Unilever said it has already held discussions with companies such as Facebook, Google, Twitter Inc.,

Snap
Inc.

and

Amazon.com
Inc.

to share ideas about what each can do to improve.

The tech companies had already been trying to rectify some of their problems. Facebook recently announced major changes to its algorithm intended to address concerns over the quality of the content on its site and its effect on the world.

Meanwhile, YouTube has made improvements to the technology it uses to screen videos, added more human reviewers and given marketers more control over where their ads appear.

Mr. Weed said he is encouraged by the recent moves, which he described as “meaningful,” but said more work is needed. For example, he said YouTube hasn’t done enough to protect children.

Last month, YouTube said that it would have humans review every second of video that is included in its Google Preferred program, which is a subset of YouTube videos that is among the most popular and for which marketers pay a premium to advertise alongside.

“I believe they should still go further and human screen all videos with children that are monetized,” he said during the interview.

In regards to Facebook, Mr. Weed said the company has taken some positive steps at trying to alleviate the fake news issue, but there is “more to do.”

Mr. Weed said that advertisers need to be outspoken about issues on tech platforms, since they are almost entirely supported by billions of ad dollars.

“One can start by not putting ads on content we do not want to encourage,” he said.

The annual conference for the IAB, an online advertising trade body, has become a platform for big-name advertisers to publicly push for change.

During last year’s conference,

Procter & Gamble
,

the world’s largest advertiser, issued an ultimatum to digital giants to clean up online advertising.

P&G’s chief brand officer,

Marc Pritchard,

laid out a list of demands that included the sector adopt one viewability standard and allow an independent measurement watchdog to audit some platforms’ ad metrics. He later also demanded that tech companies such as YouTube come up with greater controls around their content to avoid having ads appear near controversial content such as ISIS videos.

A year after “the gauntlet was thrown, the progress has been impressive,” said Mr. Pritchard in a recent interview. He said 90% of his demands have been met and the company is just waiting for the Media Rating Council to finish auditing some of the ad metrics of Google and Facebook.

Write to Suzanne Vranica at suzanne.vranica@wsj.com

Appeared in the February 12, 2018, print edition as ‘Unilever Threatens to Pull Ads.’



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Deal Talks to Sell Weinstein Co. Collapse After New York Attorney General Files Lawsuit

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A proposed deal to sell troubled Weinstein Co. fell apart Sunday after the New York attorney general filed a lawsuit against the independent movie studio and its co-founders, Bob and Harvey Weinstein.

A group led by businesswoman Maria Contreras-Sweet was “about to consummate” a purchase of Weinstein Co. for close to $500 million, including the assumption of debt, when the attorney general filed the suit Sunday, said a person close to the transaction.

Though the attorney general didn’t seek a restraining order halting the sale, the lawsuit introduced too much uncertainty for the deal to go ahead, people close to the talks said.

“The board’s whole purpose here was to try to keep this a going concern, save jobs—there’s over 100 people’s jobs at stake—and we were taking no equity,” Bob Weinstein said. “I hope that this deal does not go away for these people’s jobs’ because then there will be nobody monitoring anything.”

The lawsuit, filed in New York County Supreme Court, caps a four-month investigation by Attorney General Eric Schneiderman’s office into the company behind “The King’s Speech” and “Django Unchained” that included interviews with employees and executives as well as a review of records. It alleges longstanding sexual harassment and other civil-rights violations.

In the lawsuit, the attorney general’s office said it filed Sunday due in part to “the possible imminent sale” of Weinstein Co., which it said “could leave survivors of Respondents’ unlawful conduct without adequate redress [and] enable perpetrators or enablers of misconduct to obtain unwarranted financial benefits.”

The suit alleged that assistants were required to facilitate Harvey Weinstein’s sex life and were sometimes harassed or intimidated into sexual relationships with him. Harvey Weinstein threatened his employees with violence or dismissal from their jobs if they didn’t acquiesce to his demands, the suit said.

Harvey Weinstein’s attorney said in a statement, “We believe that a fair investigation by Mr. Schneiderman will demonstrate that many of the allegations against Harvey Weinstein are without merit. While Mr. Weinstein’s behavior was not without fault, there certainly was no criminality.”

Harvey Weinstein was fired from Weinstein Co. on Oct. 8 following allegations of sexual misconduct and assault.

Mr. Schneiderman’s office said repeated reports of such behavior were given to the human resources department and that the department “variously claimed there was ‘nothing’ that could be done to address the misconduct; immediately informed [Harvey Weinstein] of the complaint, thereby facilitating retaliation by [him] against the complainant; or helped facilitate swift departure of the complainant from the company in connection with a settlement.”

The lawsuit stated Bob Weinstein, in his role as co-chairman, failed to investigate and root out the harassment. Bob Weinstein referred questions about allegations against him in the lawsuit to his attorney, who didn’t immediately respond to a request for comment.

Ms. Contreras-Sweet previously said that she planned to establish a settlement fund for victims of Harvey Weinstein’s alleged misconduct to back up the studio’s insurance policy.

Ron Burkle’s Yucaipa Capital and investment firm Lantern Capital were backing her offer to buy the company.

The lawsuit and the canceled sale are just the latest chaos to envelop Weinstein Co. since allegations of sexual misconduct by Harvey Weinstein first emerged in October. The studio has been unable to engage in much business, including releasing new movies, as it has sought a new owner while facing lawsuits and government investigations.

Sunday’s development make it likely Weinstein Co., saddled with about $250 million of debt, will enter bankruptcy reorganization, said people close to the company.

Last Tuesday, Mr. Schneiderman’s office proposed terms for a settlement that included a monitor approved by the attorney general for the company following a sale and “payment of penalty and appropriate admission of responsibility by TWC for acts and omissions by former leadership/corporation.” An e-mail with the proposed terms was viewed by The Wall Street Journal.

The settlement talks didn’t progress far, however. Ms. Contreras-Sweet met with the attorney general’s office for the first time Saturday and had proposed to meet again Monday after consulting with her attorneys, a person with knowledge of the discussion said.

In its lawsuit, the attorney general objected to Ms. Contreras-Sweet’s plan to make Weinstein Co. chief operating officer David Glasser head of the studio following her purchase.

The suit expressed concern that Weinstein Co. employees “would be reporting to some of the same managers (including TWC’s Chief Operating Officer (‘COO’)) who failed to investigate [Harvey Weinstein’s] ongoing misconduct or adequately protect female employees from” him.

Mr. Glasser declined to comment on the allegation.

Write to Ben Fritz at ben.fritz@wsj.com, Keach Hagey at keach.hagey@wsj.com and Mike Vilensky at mike.vilensky@dowjones.com

Appeared in the February 12, 2018, print edition as ‘Deal for Weinstein Co. Falls Apart After Suit.’



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NATO to Try 'Kitchen Table' to Soothe U.S.-Turkey Dispute

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BRUSSELS—Western diplomats hope to use a high-level gathering of the North Atlantic Treaty Organization this week to keep members U.S. and Turkey from going to battle against each other in Syria.

They have already come close to direct conflict. Turkey, angered by U.S. support for Syrian Kurdish militants whom Ankara considers terrorists, has been fighting Kurds in one Syrian town and threatened to go after them in another—where several hundred U.S. Special Forces are deployed.



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New, Old Headaches to Greet Tillerson on Middle East Trip

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WASHINGTON—A rare confrontation between Israel and Syria’s Iran-backed military added unexpected new complications to plans by Secretary of State

Rex Tillerson

for a five-city trip through the Middle East, where he already was set to confront strains.

Hours before leaving on Saturday, Mr. Tillerson spoke with Israeli Prime Minister

Benjamin Netanyahu,

assuring him that the U.S. supports Israel’s right to defend itself, Undersecretary of State Steve Goldstein said. The call took place after an Israeli plane was downed following an air skirmish, triggering a larger Israeli assault on Syrian antiaircraft batteries.

Mr. Tillerson will visit Egypt, Kuwait, Jordan, Lebanon and Turkey—some of them places where administration policies on Palestinians and Syria already have aroused concern. In Cairo, Mr. Tillerson will meet with leaders of a government that Washington wants as a counterterrorism partner. But the government of Egyptian President

Abdel Fattah Al Sisi

also faces international criticism over its crackdown on civil liberties and political opponents.

In Kuwait, Mr. Tillerson will participate in a meeting of foreign ministers about the fight against Islamic State and attend part of a conference aimed at Iraq’s reconstruction.

The U.S. government won’t be making any pledges at the conference. But the Export-Import Bank of the United States is expected to sign a memorandum of understanding with the Iraqi government at the conference, agreeing to facilitate aid financing, administration officials said. The officials declined to specify the amount, but it is expected to be in the neighborhood of $2 billion to $3 billion.

State Department officials said about 2,300 private-sector representatives will attend the conference, including more than 100 from U.S. companies.

In Jordan, Mr. Tillerson will sign a memorandum of understanding with the country that is meant to boost economic, defensive and security cooperation.

Jordanian officials are particularly concerned about the Trump administration’s moves to declare Jerusalem the capital of Israel and begin to relocate the American embassy there, as well as its slashing funds to the United Nations’ Palestinian refugee agency formally known as the United Nations Relief and Works Agency, or Unrwa.

Jordan and Lebanon both receive funds from Unrwa to provide services to Palestinian refugees in both countries.

The U.S. is also considering a decision to cut much of the $251 million it gives to the Palestinians each year, officials said.

Mr. Tillerson’s last stop, in Ankara, could be the toughest of the trip, as tensions have heightened between the U.S. and Turkey over Turkey’s offensive against a Syrian Kurdish force in northwest Syria. The Kurds in the area around the city of Afrin have ties to Kurdish forces allied with the U.S. in Syria.

American officials are concerned that Turkey will launch another offensive in Manbij, a Syrian town in an area where U.S. troops are operating. A U.S.-backed ground force led by Syrian Kurds took control of the northern Syrian city of Manbij from Islamic State more than a year ago.

In Saturday’s military clash between Syria, Iran and Israel, the U.S. blamed Iran, saying it was escalating threats in region. The exchange took place as the Trump administration was preparing for the conflict’s diplomatic phase following success in a campaign against Islamic State.

The State Department has been looking to appoint an envoy for the Syrian conflict and is expected to announce one in the coming weeks.

Write to Felicia Schwartz at Felicia.Schwartz@wsj.com



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Sizing Up the Trumponomics Gamble on Deficit Spending and Inflation

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Sizing Up the Trumponomics Gamble on Deficit Spending and Inflation – WSJ







































































The president’s fiscal policy risks upward pressure on consumer prices and interest rates that could boomerang—or fuel long-term growth

Two of the biggest legislative deals in

Donald Trump’s

presidency—a $1.5 trillion tax cut and a $300 billion spending package—illustrate an emerging feature of Trumponomics: a willingness to tolerate larger budget deficits deep into an economic expansion.

Deficits normally swell during downturns, when tax receipts fall and spending rises on unemployment insurance and other safety net programs, and they shrink when the economy grows. The last two years are unusual because deficits have edged higher even as the expansion advanced.

Now they’re set to go higher still.

The budget deficit fell to 2.4% of gross domestic product in 2015 before rising to 3.4% last year. Economists at J.P. Morgan expect the tax cuts and spending deal will boost the deficit to 5.4% of GDP next year, or $1.2 trillion.

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By adding to deficits, Mr. Trump has undertaken a fiscal policy experiment with little precedent for a peacetime U.S. economy, and one with risks. Fiscal largess risks putting added upward pressure on inflation and interest rates that could boomerang and undercut the growth the Trump administration has set out to achieve, hurting stock and real-estate values in the process.

A related risk for Mr. Trump’s experiment: It could be for naught if it prompts the Federal Reserve to raise short-term interest rates even faster because officials worry the economy will overheat. The Fed is already raising rates and gradually winding down a large portfolio of Treasury and mortgage bonds to prevent overheating. It could act more aggressively if officials fear fiscal stimulus goes too far.

The unemployment rate is at 4.1%, a 17-year low, and economists at J.P. Morgan project it will fall to 3.2% next year, a level not seen since the Korean War. Such a low unemployment rate is likely to make the Fed nervous about unsustainable price pressures or financial markets overheating.

During the recession, there was a large gap between the economy’s output and its potential given available workers and productivity. The Congressional Budget Office estimates that gap has now closed and the economy is expanding at a pace that exceeds its potential. That’s a combination that could cause overheating.

“It is a mistake to add on tremendous stimulus when the output gap has already closed,” said

David Rosenberg,

chief economist at Gluskin Sheff + Associates in Toronto. He estimates around three quarters of the fiscal stimulus could be offset by the higher interest rates corporate and government borrowers may have to pay and lost wealth from resulting stock market declines.

“The biggest risk is the bond market revolts, sort of like it did in the early 1990s,” said Jim Millstein, a financier who led the Obama administration’s recapitalization of

American International Group

after the financial crisis.

Another risk: Larger deficits give the federal government less flexibility in the future to cut taxes or boost spending should the economy sink and need stimulus in the next downturn.

But not everyone is as concerned. Mr. Trump’s focus on stronger growth follows a decade that shows what happens without it: Trust in institutions suffers, inequality rises and central banks face enormous pressures, said

Mohamed El-Erian,

chief economic adviser at Allianz SE, the German insurance giant. Mr. El-Erian has been considered for a Fed post by White House officials.

While fiscal stimulus “would have been better timed a few years ago,” he said, the U.S. is still better off with it than without it.

Mr. El-Erian said he sees little sign of a so-called return of bond vigilantes who will demand higher yields to compensate for risks of fiscal profligacy. U.S. and German bonds have been moving in sync lately, which suggests U.S. yields aren’t rising because of U.S.-specific deficits concerns, he said.

Even though the economy doesn’t need fiscal stimulus right now, there’s a strong case for both cutting corporate taxes to make the U.S. more competitive and boosting military spending, said Andy Laperriere, a policy analyst at Cornerstone Macro.

“We are making military spending more consistent with the reality of what we’re asking the military to do,” he said.

The problem, Mr. Laperriere said, is that no one has been willing to address deficits by tackling the biggest driver of spending growth: programs such as Social Security and Medicare. “Our long-term budget problems are no longer in the future. They’re here now,” he said.

Whether Trumponomics is a boon or a bust will depend largely on how fiscal policy interacts with the economy.

In theory, tax cuts and government spending could boost the economy in two ways. They give businesses and consumers money to spend on equipment, homes and other goods. That’s called demand-side stimulus, and tends to be short-lived. Certain policies also encourage people to work more and businesses to invest more, raising productivity. That’s called supply-side stimulus, and in theory has long-lasting benefits that produce growth without inflation.

The Trump administration is betting it is delivering the latter. In addition to tax cuts, a deregulatory agenda and infrastructure spending are designed to make the economy more efficient. “The big growth effect…is supply-side stimulus,” said

Kevin Hassett,

chairman of the White House Council of Economic Advisers.

If he’s right, the Fed won’t have to push against fiscal policy and the bond market won’t rebel, leaving the economy and markets on a higher path. If he’s wrong, Trumponomics could lead to trouble after a brief economic burst.

Write to Nick Timiraos at nick.timiraos@wsj.com



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There's a Global Race to Control Batteries—and China Is Winning

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There’s a Global Race to Control Batteries—and China Is Winning – WSJ









































































Chinese companies dominate the lithium-ion battery production process, which starts in Congo and ends up in a phone or electric car

KOLWEZI, Democratic Republic of Congo—Miners push bicycles piled high with bags of a grayish-blue ore along a dusty road to a makeshift market. There, they line up at wholesalers with nicknames such as Crazy Jack and Boss Lee.

Most of the buyers are Chinese. Those buyers then sell to Chinese companies that ship the bags, filled with cobalt, to China for processing into rechargeable, lithium-ion batteries that power laptops and smartphones and electric cars.

There is a world-wide race to lock up the supply chain for cobalt, which will likely be in even greater demand as electric-car production rises. So far, China is way ahead.

China is by far the biggest consumer of cobalt from Congo, the world’s biggest producer. Chinese refiners import about 94% of their cobalt from the West African nation, according to Darton Commodities.

“We’re realizing that the Congo is to [electric vehicles] what Saudi Arabia is to the internal combustion engine,” says

Trent Mell,

chief executive of exploration company

First Cobalt
Corp.

, based in Toronto. Chinese firms are keenly aware of Congo’s importance to electric vehicles, he says, and “trying to control the whole ecosystem…from cobalt mining to battery production.”

Germany

9%

China

6%

U.S.

14%

Other

20%

Other

40%

Congo

54%

China

80%

China

56%

Other

14%

Sweden

9%

Much of Congo’s cobalt winds up in processed cobalt sulfate.

Lithium-ion battery production is concentrated in four countries.

Congo produces more than half of the global supply of cobalt.

Percentage of world-wide cobalt sulfate production

Percentage of raw cobalt production, by country

Percentage of global production capacity*

Germany

9%

China

6%

U.S.

14%

Other

20%

Other

40%

Congo

54%

China

56%

China

80%

Other

14%

Sweden

9%

Lithium-ion battery production is concentrated in four countries.

Much of Congo’s cobalt winds up in processed cobalt sulfate.

Congo produces more than half of the global supply of cobalt.

Percentage of raw cobalt production, by country

Percentage of global production capacity*

Percentage of world-wide cobalt sulfate production

Germany

9%

China

6%

U.S.

14%

Other

20%

Congo

54%

Other

40%

China

80%

China

56%

Other

14%

Sweden

9%

Congo produces more than half of the global supply of cobalt.

Percentage of raw cobalt production, by country

China

6%

Congo

54%

Other

40%

Much of Congo’s cobalt winds up in processed cobalt sulfate.

Percentage of world-wide cobalt sulfate production

Other

20%

China

80%

Lithium-ion battery production is concentrated in four countries.

Percentage of global production capacity*

U.S.

14%

China

56%

Germany

9%

Other

14%

Sweden

9%

China already is the world’s largest electric-car market. In 2011, Beijing listed electric vehicles as one of seven “strategic emerging industries.” Developing a homegrown battery industry became a vital part of the government-sponsored push. The Chinese government provides subsidies to domestic battery makers, essentially locking out foreign companies.

Companies from China now dominate the first steps in the lithium-ion battery production process. Such firms produce about 77% of refined cobalt chemicals, up from 67% in 2012, according to commodities researcher

CRU Group
.

George Heppel,

a consultant at CRU, says Chinese companies could soon have more than 90% of the market.

About 54% of the global cobalt supply comes from Congo. Chinese companies dominate the network of middlemen who buy cobalt from freelance miners such as those lining up at the market in Kolwezi.

Few commodities have had more dramatic increases in demand than cobalt, primarily a byproduct of copper and nickel mining. Global cobalt production has quadrupled since 2000 to about 123,000 metric tons a year, according to the U.S. Geological Survey.

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…the amount of cobalt used in their batteries is projected to skyrocket.

With the projected rise in electric vehicle sales…

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With the projected rise in electric vehicle sales…

…the amount of cobalt used in their batteries is projected to skyrocket.

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Demand is growing even faster and is expected to reach more than 200,000 tons by 2025, according to researcher Wood Mackenzie. Electric cars are a big reason why. About 1,300 metric tons of cobalt were used in electric vehicles in 2014, Morgan Stanley estimates. The total is expected to rise to 11,320 tons this year and 62,940 tons by 2025.

Such expectations have caused cobalt prices to more than double in the past year in London trading. Cobalt prices are up more than 230% since the end of 2015, according to Thomson Reuters.

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“If our projections for electric vehicles are anywhere near close, there are going to be some serious issues in the cobalt market” after 2020, says Jack Bedder, an analyst who follows cobalt for the London market-intelligence firm Roskill. Tight supply would give China yet another advantage because of its strength in the cobalt supply chain.

Swiss miner

Glencore

PLC is the world’s largest cobalt producer, including 27,400 tons from Congo last year. Glencore expects its output to more than double in the next few years.

Much of the remaining 30,000 tons to 40,000 tons of Congolese cobalt comes from freelancers known as creuseurs, the French word for diggers, or Chinese companies such as China Molybdenum Co. and

Zhejiang Huayou Cobalt
Co.

and small industrial producers, according to traders.

Freelancers unearth cobalt with picks and shovels, earning about roughly $300 per ton of ore, up from $200 a year ago. U.S. and European companies have grown wary of cobalt suppliers who buy from creuseurs, partly because some of the miners are children. They rarely wear masks or other safety equipment. Crippling injuries are common. Industry researcher

Darton Commodities

estimates they produce as much as 14% of the cobalt output in the central African nation.

Tesla
Inc.

said last year its cobalt supplier in Congo is “very reputable,” without identifying the supplier. The auto maker sent a team to the country to make sure its supply chain doesn’t include child labor or cobalt mined by creuseurs. Tesla hasn’t said if it made any changes as a result.

For years, traders who bought cobalt from freelance miners often sold it to Congo DongFang International Mining, a unit of Chinese giant Zhejiang Huayou, according to human-rights group Amnesty International and other people familiar with Congo’s cobalt market.

A Zhejiang Huayou spokesman says it stopped buying last April from wholesalers who cater to creuseurs and is trying to buy more from industrial miners that have greater control over the production process. The company is making the changes with help from a nongovernmental organization called Pact, the Zhejiang Huayou spokesman adds.

China Molybdenum in 2016 agreed to purchase a giant copper and cobalt mine in Congo from U.S. mining giant

Freeport-McMoRan
Inc.

The mine supplies a Freeport facility in Finland that produces about 20% of the processed cobalt sulfate used to make batteries. Analysts say the rest of global cobalt sulfate production is done in China.

“Some of the biggest American car companies are very pleased about how we manage the supply,” says

Kalidas Madhavpeddi,

CEO at CMOC International, the overseas operations of China Molybdenum.

Congolese state-run mining company

Gécamines
SA

and

China Nonferrous Metal Mining Group
,

known as CNMC, are jointly developing a cobalt- and copper-rich mine that likely will also help China. CNMC will build and operate the mine, owning a 51% stake, while Gécamines will own 49% and got a loan of $870 million from the Chinese company.

China’s State Reserve Bureau has accumulated about 5,000 tons of cobalt, or about 15 days’ global supply, for a reserve stockpile, according to Darton Commodities. In comparison, China has about three days’ global supply of crude oil in its strategic reserve.

“It’s very clear that the Chinese want to be at the center of electric vehicles. There’s no question there’s a laserlike focus,” says

Anthony Milewski,

chief executive of

Cobalt 27 Capital
Corp.

, which is based in Toronto and owns about 3,000 tons of cobalt, one of the world’s largest stockpiles.

The shift to electric vehicles is happening faster than many experts anticipated just a few years ago, due in part to the rapid evolution of a global supply chain for key components in lithium-ion batteries. That has driven down prices and helped battery makers scale up production.

Morgan Stanley

says the price of a lithium-ion battery today is about $200 per kilowatt-hour, down from $1,200 two decades ago. It expects the price to fall to $100 by the early 2020s. Electric vehicles will account for 34% of global vehicle sales by 2030,

Bank of America

analysts forecast.

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Battery production and the supply chain behind it remains fragmented, though, complicating efforts by auto makers to ensure supplies. One company mines the minerals, another refines it, a third makes the cells, a fourth combines the cells into a battery module, and a fifth buys the modules to assemble into a battery. Chinese companies are making major investments in each link of the supply chain.

Some companies and battery experts say technological shifts to make rechargeable batteries with less cobalt—or none at all—could make cobalt less important in battery production.

China is lining up behind nickel manganese cobalt batteries. They have a higher energy density than batteries without cobalt, giving cars greater driving range while taking up less space.

Global battery manufacturing capacity is about 110 gigawatt hours a year, mostly for consumer electronics, electric vehicles and electricity storage. In the past year, China has announced plans to add more than 150 gigawatt hours of production in the next three to four years, tripling current capacity. That dwarfs Tesla’s “gigafactory” in the Nevada desert, which aims to add 35 gigawatt hours by 2020.

“The Chinese manufacturers have targets set by the government,” says

Luis Munuera,

an analyst with the International Energy Agency. “It is not a market response. It is the amount of battery capacity the government wants to have.”

Most Chinese battery production is now focused on low-end, low-density batteries, and many battery makers are relatively small. But the Chinese government has made offers of support contingent on the energy density of the battery. That means more nickel manganese cobalt batteries.

U.S. consumers would benefit if the Chinese cobalt push drives down prices. Lithium-ion batteries “are very quickly becoming a commodity,” says

Sam Wilkinson,

an associate director for solar and energy storage research at IHS Markit.

After the Chinese government helped engineer a big export market in the solar industry, the cost of a residential rooftop solar array has fallen to $16,000 from $41,000 in 2010, according to the National Renewable Energy Laboratory. A large, 100-megawatt solar installation that cost $544 million to build in 2010 can now be built for $111 million.

About 65% of all solar modules are made in China, and seven of the top 10 module manufacturers are Chinese.

That has caused trade friction with the U.S. Last month, President

Donald Trump

imposed new tariffs of up to 30% on solar-panel imports after an independent panel concluded that American manufacturers were being unfairly harmed by Chinese rivals.

Some technology experts worry about what could happen as China gains more competitive muscle in the battery industry. They say too much price-cutting could stifle the innovation of better batteries.

“China controls the majority of global production of solar panels, wind turbines and batteries,” says

Varun Sivaram,

a technology fellow at the Council on Foreign Relations. “Really superior technologies have no chance of breaking in, and that worries me.”

Write to Scott Patterson at scott.patterson@wsj.com and Russell Gold at russell.gold@wsj.com



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White House to Roll Out Trump Infrastructure Plan

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WASHINGTON—President

Donald Trump

is set Monday to unveil a program to transform how the nation’s infrastructure is funded and developed, but the initiative faces an uncertain road in Congress over finding the money to pay for it.

Mr. Trump will propose spending $200 billion over 10 years, most in the form of new, competitive grants designed to encourage states and cities to raise their own money for improving rails, airports, highways and water systems. The proposal also would expand federal loan programs for such projects.

The White House expects the spending to spark hundreds of billions more from local governments and private investors to pay for the upgrades, resulting in $1.5 trillion in new investment.

Where the federal dollars will come from is unclear. The White House says it will raise the $200 billion through spending cuts to be outlined in the annual budget Mr. Trump will send this week to Congress. But that budget already had been rendered largely obsolete after lawmakers last week agreed to a plan to break budget caps and spend $300 billion more than previously planned over the next two years—meaning the White House’s budget relies on outdated figures.

Analysts also said Friday that the new two-year agreement, which could boost deficits past $1 trillion by next year, reduced the chances Congress would pursue an infrastructure package this year.

The White House is also hoping that its related effort to streamline federal permitting will get states to embrace new projects.

“The current system is fundamentally broken,” a senior administration official told reporters Saturday, criticizing the permitting process as overly cumbersome.

The administration wants to shorten the permitting process to two years or less by tapping a lead agency to engage earlier in large-scale construction projects, with the goal of eliminating late-stage requests for information or further review. Mr. Trump signed an executive order to that effect in August. The new proposal would aim to push that order further through changes to environmental laws.

The official said the broader infrastructure initiative aims to empower states and cities to determine their own infrastructure needs, rather than “Washington picking and choosing what we think priorities ought to be.”

With the plan, the White House official suggested the administration might be open to working with the states of New York and New Jersey on one of the largest proposed infrastructure projects in the country, an Amtrak-backed effort to extend new tunnels under the Hudson River to ease railroad-capacity constraints into New York City. But project sponsors say the project will require a major commitment of direct federal funding, while the administration has said the states would have to come up with the bulk of the money.

The tunnel project is an important objective of Democrats, including

New York Sen. Chuck Schumer,

the Senate minority leader, who has held up some transportation appointments because of the administration’s refusal to commit to paying for half of the project, which is estimated to cost more than $25 billion.

The senior White House official suggested that the project could receive funding from competitive grants, bonds sold to investors, and federal funding for “transformative” projects, though he stopped short of a guarantee the administration would fund the project.

The $200 billion under the White House proposal would include $50 billion for direct grants to rural areas, a move designed in part to bolster the package’s appeal for red-state members of Congress.

In an interview with The Wall Street Journal last month, Mr. Trump said the overall investment from his plan could grow to $1.7 trillion or $1.8 trillion even without greater federal funding, thanks to an influx of foreign investment.

“It could be as much as $1.8 trillion spent,” Mr. Trump said. “We have many, many, wealthy countries, some of whom our country made wealthy, but we have many countries, many people that really want to put up tremendous amounts of money for the infrastructure.”

Ahead of the White House’s unveiling of its proposal, some mayors have been critical of the approach. At the U.S. Conference of Mayors last month, Austin Mayor Steve Adler, a Democrat, expressed concern that cities and states would struggle to raise their own funds. “There’s going to be many jurisdictions across the country that are desperately in need of infrastructure repair and new infrastructure that have difficulty coming up with” the money, he said.

The administration once hoped to move on its infrastructure plan in 2017, but the legislative calendar was chewed up by the failed effort to repeal the Affordable Care Act followed and the successful tax overhaul. The senior administration official said the White House expects bipartisan support, saying there was “remarkable overlap” on the urge to improve infrastructure between Republicans and Democrats—although, the official added, “there’s obviously a disagreement on the best way to get to those objectives.”

Mr. Trump is set to host a bipartisan group of lawmakers Wednesday to discuss the initiative, the official said.

Lawmakers in both parties have expressed skepticism about how the infrastructure package would be funded. “The question is how are you going to pay for it?” said

Sen. John Cornyn

(R., Texas), after Mr. Trump highlighted infrastructure spending last month in his State of the Union address. “You tell me how we can pay for it and I’ll tell you what we can do.”

Once the White House unveils the package, Mr. Trump and cabinet members are expected to travel to promote the initiative, the White House official said. Mr. Trump often has complained about what he has termed the nation’s “crumbling infrastructure,” lamenting in particular the state of roads, highways and guardrails.

Write to Rebecca Ballhaus at Rebecca.Ballhaus@wsj.com and Ted Mann at ted.mann@wsj.com



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'Fifty Shades Freed' Tops Box Office

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LOS ANGELES—Newcomers like “Fifty Shades Freed,” “Peter Rabbit” and “The 15:17 to Paris” breathed some fresh life into a marketplace that has for weeks been dominated by “Jumanji: Welcome to the Jungle,” ‘”The Greatest Showman” and various Oscar contenders. But it’s all just setting the stage for “Black Panther,” which opens next week.

“Fifty Shades Freed” managed to take the top spot on the charts in North American theaters. Universal Pictures estimated Sunday that the final chapter in the Christian Grey and Anastasia Steele…



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ASIAN (B)

Sears Canada Creditors Zero In On Lampert Payments

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Sears Canada Inc. creditors are targeting Eddie Lampert, its former controlling shareholder and the chief executive of its U.S. namesake Sears Holdings Corp., over payments he received before the Canadian business collapsed last year.

A group of unhappy pensioners served court papers Friday in Ontario’s Superior Court of Justice asking for the appointment of a trustee in Sears Canada’s bankruptcy proceeding for the purpose of digging up additional funds for creditors. The proposed trustee would scrutinize nearly $3 billion…



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