Brexit: The Possibilities

Francisco A. Laguna & Amy Turner

 This week, we conclude our Brexit series with an examination of the possibilities of how the withdrawal process may take shape. Since the 23 June 2016 Brexit vote, several questions have arisen. Within Europe, a dispute has started about whether the decision to invoke Article 50 is the prerogative of the UK government, or if it requires Parliamentary assent. Government lawyers advised that invoking Article 50 is a government prerogative. However, the repeal of the European Communities Act by Parliament is a prerequisite, which automatically involves the UK parliament.

Another question is the extent to which the Northern Ireland Executive, Scottish Government and Welsh Government will have to be involved in the process. In this regard, Scottish Prime Minister Nicola Sturgeon has stated that legislative assent to act to implement withdrawal from the EU would be given by the Scottish Parliament.

According to Article 50, the negotiations concerning changes over budgets, voting allocations and policies due to the withdrawal of member states are the responsibility of the remaining members of the EU. However, as we discussed last week, since Article 50 has not been official invoked, official negotiations the UK, the other states and the European Commission cannot yet begin.

The decision was made to forgo any discussions until the UK formally invokes Article 50 during a meeting of Heads of States. Indeed, President of the European Commission Jean-Claude Juncker took a strong stance and ordered that EU members not engage with UK parties regarding Brexit. This lead to Donald Tusk, the president of the European Council, to state that access to the European Single Market would not be given to the UK until they accept its “four freedoms of goods, capital, services, and people”.

The changing relationship with the UK and the remaining EU members could evolve several ways. For example, the UK could remain in the European Economic Area (EEA) as a European Free Trade Association (EFTA) member (alongside Iceland, Liechtenstein, Norway and Switzerland). The UK could attempt to join the EEA as an EFTA member. Under this plan the UK would be required to follow EU internal market legislation without being able to participate in its development or vote on its content. However, the EU is required to conduct extensive consultations with non-EU members beforehand via its many committees and cooperative bodies.

Under the EEA Agreement, certain policy areas are not apply to EFTA members such as: Common Agriculture and Fisheries Policies; Customs Union; Common Trade Policy; Common Foreign and Security Policy; direct and indirect taxation; and Police and Judicial Co-operation in Criminal Matters. This allows the EFTA members to set their own policies in those areas. Common Agriculture and Fisheries Policies, Customs Union, Common Trade Policy, Common Foreign and Security Policy, direct and indirect taxation, and Police and Judicial Co-operation in Criminal Matters. In order to access the internal market, EFTA countries must contribute to the EU budget.

Another option could be that the UK would use the Swiss model and seek to negotiate bilateral terms via a series of interdependent sectoral agreements. The Swiss agreements contain free movement for EU citizens. Interestingly, the Swiss immigration referendum of February 2014 voted narrowly in favor of an end to the “free movement” agreement by February 2017. If this path is chosen, Britain must keep in mind that the bilateral treaties between Switzerland and the European Union are all co-dependent. This means that if one is terminated, then all are terminated. Barring a compromise, Switzerland’s unilateral choice to end the “free movement” agreement by Switzerland could cause all EU and Swiss agreements to become invalid.

Despite the fact that many politicians had weighed in on how they think a plan should work, no real plan has been established.  However, it is very clear that membership rights require input from every individual member, and many few the Brexit vote as a snub and the UK’s failure to invoke Article 50 as a means of continuing to benefit from its membership in the EU for as long as possible.

Contact TransLegal with your questions concerning Brexit and how it may impact your business.

Brexit Generates New Business Opportunities in 3 Major European Capitals

Francisco A. Laguna & Wojciech Kornacki

After our August break, today, we begin a series on Brexit.  This post focuses on potential opportunities in Europe resulting from Brexit.

Following the shocking and unexpected United Kingdom vote to exit the European Union, London is no longer considered the gateway to the European Union, and its future role in the European financial and technology markets is uncertain.  Many tech companies and international banks have begun exploring the possibility of moving to a capital on the continent to continue to enjoy the benefits of the Common European Market. This creates new business opportunities for companies seeking to re-establish certainty, cut costs and relocate to a European capital. Berlin, Warsaw and Paris each possess different qualities that make them attractive to these companies and institutions which are presently located in the UK.

Post-Brexit Aftershocks

 Right now, the UK has approximately 2 years to complete its negotiations to leave the European Union. Negotiations are expected to be very difficult, and the European Union has already made clear that it will not allow the UK to “cherry pick” only the best that the European Union has to offer. The UK’s financial sector, labor, farming and other sectors could be seriously affected by the negotiations. In order to avoid the uncertainty, some businesses have begun implementing the contingency plans to relocate to other European capitals.

Berlin

With its modern offices, low prices, and positive investment climate, Berlin seeks to replace London as the official gateway for tech companies to the European Union. Courtesy of http:// http://en.wikipedia.org

With its modern offices, low prices, and positive investment climate, Berlin seeks to replace London as the official gateway for tech companies to the European Union. Courtesy of http:// http://en.wikipedia.org

Berlin is actively seeking to replace London as a global center for financial technology. Berlin touts that it offers outstanding infrastructure and transportation capabilities, positive investment climate, substantial talent pool and office space that is cheaper than London’s. In addition, the Berlin-Brandenburg Metropolitan area alone has approximately 6 million residents from 180 nations, making it a perfect location for any international company.

As of 2015, Berlin surpassed London in venture capital investments.  It is ready to assume London’s role and be the next gateway to the European Union for tech companies and international banks. Berlin reported that it has already received numerous inquiries from many companies currently located in London.

Paris

Paris offers the largest business district in Europe that is only 3 hours away from Brussels. With its highly trained workforce and high quality life, many businesses seriously consider relocating to Paris. Courtesy of http:// http://en.wikipedia.org

Paris offers the largest business district in Europe that is only 3 hours away from Brussels. With its highly trained workforce and high quality life, many businesses seriously consider relocating to Paris. Courtesy of http:// http://en.wikipedia.org

Paris is located in the heart of the European Union and it is one of the top business destinations for some of the world’s largest international companies, offering some of the best research and development tax credits in Europe. The city also provides highly skilled professionals and a superior quality life right in the center of the European Union. Paris has already been running marketing campaigns to attract many companies currently located in the UK.

Warsaw

Many international companies that have already opened their branch offices in Warsaw are now considering whether they should establish their headquarters there. Warsaw offers an investor friendly environment with premium business locations at highly competitive prices, and with highly trained professionals. Courtesy of http:// http://en.wikipedia.org

Many international companies that have already opened their branch offices in Warsaw are now considering whether they should establish their headquarters there. Warsaw offers an investor friendly environment with premium business locations at highly competitive prices, and with highly trained professionals. Courtesy of http:// http://en.wikipedia.org

Warsaw is one of the fastest growing cities in the European Union. It already hosts many international banks and companies including the Google Campus Warsaw, opened in 2015. Warsaw’s scientific and information technology pool of professionals and innovators is well recognized around the world.

Warsaw is superbly positioned to attract many tech companies because of its business-friendly posture, low-cost modern office space and infrastructure and dynamic stock exchange. In addition to being well-positioned within the European Union, Warsaw also offers the potential to be the gateway to many countries bordering the European Union.

 

Next week, we continue our discussion of Brexit, talking about possible repercussions of the UK’s vote.

If you are interested in learning more about the Brexit, what it means for your business and the rest of the European Union, contact TransLegal or call 703-566-9427.

The Trans-Pacific Partnership Series: What about the TTIP?

Part 5

Francisco A. Laguna & Amy Turner

Today, we conclude our series on the Trans-Pacific Partnership (TPP), focusing on the views expressed by the international community on the Transatlantic Trade and Investment Partnership (TTIP).

Everyone who has been paying attention to international relations over the past few years has been inundated by the trade agreements between the U.S and Asia (TPP) and US and Europe (TTIP). With all that has happened over the past year, international trade has been thrust into the spotlight. Since being put on the main stage TPP and TTIP, appear to be meeting with serious resistance.

By Alexrk2 - This file was derived from Europe blank laea location map.svg:, CC BY-SA 3.0

By Alexrk2 – This file was derived from Europe blank laea location map.svg:, CC BY-SA 3.0

The problems for TTIP and TPP started with the actual premise for their passage. If you talk to TTIP proponents in Germany, Britain and the United States, they usually state that its passage is intertwined with the future success of the West.  In the early going, proponents claimed it would generate growth and jobs on both sides of the Atlantic. Indeed, some have called the TTIP “an Economic NATO”, implying that the TTIP will guarantee economic security to its members.  Since then, several think tanks conducted independent research and concluded, not surprisingly, that the effects would be lower than the initially forecast. The studies discovered that it would increase the European economy by a rather modest 0.1 to 0.5 percent of GDP over a 10 year period.

Opponents of the TTIP say that it has just as much ability to cause transatlantic controversy as it does to create transatlantic unity. Opponents point to the European media coverage of the leak by Greenpeace of papers from the treaty negotiations. In Germany, there is “Stop TTIP” movement.  Some 70 percent of Germans are estimated to oppose it. According to critics, the leaked TTIP papers confirm their worst fears about lowering standards of consumer protection for genetically modified food, among other issues: The papers showed Europeans being pressed by US negotiators to loosen restrictions on genetically modified food in exchange for a loosening of export barriers for European cars.

Opponents on both sides of the pond claim that TTIP could increase animosity between Europe and the United States. Europeans would probably hold Americans accountable for any lowering of consumer, health and environmental standards, particularly in sensitive areas such as food safety. The probability is high that the Americans would point to Europeans for any job losses in the automotive sector, and others, as a result of increased competition from Europe.

UK politicians are making statements like TTIP “may need another year or two”, which is bureaucratic speak for “no agreement has been reached as yet”. In Germany, the Minister of Agriculture, Christian Schmidt, made a very strong statement that “access to sell German cars on the US market isn’t worth the price of giving up the ability to ban harmful chemicals in food.” German support is essential to the success of the TTIP.

Another worrisome element is the Investor-State dispute Settle Mechanism (ISDS). ISDS is one of the most controversial parts of TTIP in Europe. ISDS allows corporations to take precedence over parliaments. Citizens worry that the tribunals lack transparency and forces governments to make concessions to corporations. Opponents claim that a system of tribunals to adjudicate disputes between companies and states is not needed to protect US companies from expropriation in Europe as might be the case in Asia.

Another problem with TTIP is that it may not have synergy with TPP. Although TTIP can theoretically live its own life, it’s really intended to be used together with TPP.  Proponents insist it will allow the West to set the rules for the 21st century.  At a time when power is shifting from west to east, it is not clear that the TPP will adhere to the rules set by TTIP instead of the rules in TPP. Proponents say that TPP will increase the democratic and market-based development of Asian economies.  TTIP members are already democracies with market economies. So TPP rules should not be applied to TTIP countries.  In a speech before the Economic, Social and Environmental Council in Paris on October 28, 2015, EU Commission President Jean-Claude Juncker was characteristically blunt about the stakes at hand. “If we cannot reconcile the viewpoints of Americans and our own in a balanced and symmetric way, we will be the losers in the construction of tomorrow’s global trading system. If tomorrow, we want the rules and norms of trade to be set by the United States and our Asian friends, we should abstain. But, if we want to maintain our influence on the big questions that are at the heart of the world’s future, then, we must act. Opponents are concerned that their high standards will be lowered by TTIP.

A major blow was dealt to TTIP just a few days ago. The United Kingdom voted to leave the E.U. Now that TTIP has a question mark hanging over it, the TPP appears to be going on the rails also.  How Brexit may affect TTIP and possibly TPP will be discussed in a forthcoming series. Stay informed with this TransLegal blog.

Call TransLegal with your questions concerning the TPP, the TTIP or trade agreements in general.

The Trans-Pacific Partnership Series: Donald J. Trump

Part 4

Francisco A. Laguna & Amy Turner

Today, we continue our series on the Trans-Pacific Partnership (TPP), focusing on the views expressed by Donald J. Trump, the presumptive Republican nominee for President.

The GOP has been historically pro-trade agreements.  The party’s platform says, “A Republican President will complete negotiations for a Trans-Pacific Partnership to open rapidly developing Asian markets to U.S. products.” However, Donald Trump surprised many last year when he broke with his party’s position and called TPP a “bad deal” that will “send jobs overseas.” Trump does not have a political record; therefore, we cannot examine past votes or actions, so let us examine his words.

In May 2015, a month before officially becoming a candidate for President, Trump was already taking a stance on TPP. Trump said, “Yet again, the politicians are allowing our president to reinforce the lack of respect countries like China and Japan now have for the United States. They will devalue their currency, exploit our trade agreements, continue to destroy our economy and put Americans out of work. Politicians are all talk and no action. Instead of fast tracking TPP, Congress should pass legislation that holds China and Japan accountable for currency manipulation. This would send a message to the world that there are consequences for cheating the United States.”

Trump continued to define his position when, on October 5, 2015, he asked, “Why are we striking trade agreements with countries we already have agreements with? Why is there no effort to make sure we have fair trade instead of ‘free’ trade that isn’t free to Americans? Why do we not have accompanying legislation that will punish countries that manipulate their currencies to seek unfair advantage in trade arrangements? Why has the Congress not addressed prohibitive corporate tax rates and trade agreements that continue to drain dollars and jobs from America’s shores?”

On November 10, 2015, he was asked about trade at the Fox Business Republican Debate. Trump laid out his stance, stating he is a “free trader;” however; he does not support the TPP. “The TPP is a horrible deal. It is a deal that is going to lead to nothing but trouble. It’s a deal that was designed for China to come in, as they always do, through the back door and totally take advantage of everyone. It’s 5,600 pages long. So complex that nobody reads it……  They passed it; nobody read it. And look at the mess we have right now. And it will be repealed. But this is one of the worst trade deals. And I would, yes, rather not have it. With all of these countries, and all of the bad ones getting advantage and taking advantage of what the good ones would normally get, I’d rather make individual deals with individual countries. We will do much better. We lose a fortune on trade. The United States loses with everybody. We’re losing now over $500 billion in terms of imbalance with China, $75 billion a year imbalance with Japan.

 

Donald Trump New Hampshire Town Hall, August 19, 2015, Pinkerton Academy, Derry, NH, by Michael Vadon - Own work, CC BY-SA 4.0

Donald Trump New Hampshire Town Hall, August 19, 2015, Pinkerton Academy, Derry, NH, by Michael Vadon – Own work, CC BY-SA 4.0

When given a follow up question concerning whether parts of the deal were “badly negotiated,” Trump further hardened his position, “Yes. Well, the currency manipulation they don’t discuss in the agreement, which is a disaster. If you look at the way China and India and almost everybody takes advantage of the United States, China in particular, because they’re so good. It’s the number-one abuser of this country. And if you look at the way they take advantage, it’s through currency manipulation. It’s not even discussed in the almost 6,000-page agreement…… you understand very well from the Wall Street Journal, currency manipulation is the single great weapon people have. They don’t even discuss it in this agreement. So I say, it’s a very bad deal, should not be approved. If it is approved, it will just be more bad trade deals, more loss of jobs for our country. We are losing jobs like nobody’s ever lost jobs before. I want to bring jobs back into this country.”

Recently, Trump doubled down on his view of the TPP. He penned an op-ed on March 16, 2016 stating, “The number of jobs and amount of wealth and income the United States have given [a]way in so short a time is staggering, likely unprecedented. And the situation is about to get drastically worse if the TPP is not stopped. One of the first casualties of the TPP will be America’s auto industry, and among the worst victims of this pact will be the people of Ohio. The TPP will send America’s remaining auto jobs to Japan.”

Like Senator Sanders and Secretary Clinton, Mr. Trump opposes the TPP, each based on different reasons.  Now that Senator Sanders has dropped out of the race, either Clinton or Trump (barring what may happen at the Democratic Convention in Philadelphia or the Republican Convention in Cleveland) will bring his / her own distinct view on trade and the TPP to the Oval office. What happens with the TPP and TTIP will very much be determined by what happens with the election. So stay tuned……………

Next week, we turn to the international perspective on the TPP.

Call TransLegal with your questions concerning the TPP or trade agreements in general.

The Trans-Pacific Partnership Series: Secretary of State Hillary Clinton

Part 3

Francisco A. Laguna & Amy Turner

Today, we continue our series on the Trans-Pacific Partnership (TPP), focusing on the views expressed by former Secretary of State and presumptive Democratic nominee for President, Hillary Clinton.

No other candidate has more of a history with the TPP than Hillary Clinton. Clinton’s position on the treaty has evolved over the years.  During her tenure as Secretary of State, she promoted it on many occasions. However, in the early days of her run for the presidency, Clinton stated that she was reserving her views on the TPP until the deal was finalized, which it was on October 5, 2015. Two days later, Clinton criticized the deal as not being strong enough on job creation, wage increases and advancement of national security, stating that “As of today, I am not in favor of what I have learned about it.  I don’t believe it’s going to meet the high bar I have set.”

Philadelphia, April 20, 2016, by Zachary Moskow - Zachary Moskow, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=48290905

Philadelphia, April 20, 2016, by Zachary Moskow – Zachary Moskow, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=48290905

Pressed to explain her position, during the Democratic debate on October 13, 2015, Clinton said, “I did say, when I was Secretary of State, three years ago, that I hoped it would be the gold standard. It was just finally negotiated last week, and in looking at it, it didn’t meet my standards. My standards for more new, good jobs for Americans, for raising wages for Americans. And I want to make sure that I can look into the eyes of any middle-class American and say, ‘this will help raise your wages.’ And I concluded I could not.”

Below are other quotes from Secretary Clinton that express her evolving thoughts on the TPP, from her tenure in the Obama Administration until now.  It is important to note that Clinton was not involved in negotiating the final terms of the treaty.

Sept. 8, 2010: “We want to realize the benefits from greater economic integration. In order to do that, we have to be willing to play. To this end … we’re pursuing a regional agreement with the nations of the Trans-Pacific Partnership, and we know that that will help create new jobs and opportunities here at home.”

March 9, 2011:  “The United States is also making important progress on the Trans-Pacific Partnership, which will bring together nine APEC economies in a cutting-edge, next generation trade deal, one that aims to eliminate all trade tariffs by 2015 while improving supply change, saving energy, enhancing business practices both through information technology and green technologies.”

July 8, 2012:  “The United States welcomes Japan’s interest in the Trans-Pacific Partnership, which we think will connect economies throughout the region, making trade and investment easier, spurring exports, and creating jobs.”

Nov. 5, 2012: “This TPP sets the gold standard in trade agreements to open free, transparent, fair trade, the kind of environment that has the rule of law and a level playing field. And when negotiated, this agreement will cover 40 percent of the world’s total trade and build in strong protections for workers and the environment.”

Brown & Black Presidential Forum at Sheslow Auditorium at Drake University in Des Moines, Iowa, 11 January 2016, by Gage Skidmore from Peoria, AZ, United States of America - Hillary Clinton, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=46849052

Brown & Black Presidential Forum at Sheslow Auditorium at Drake University in Des Moines, Iowa, January 11, 2016, by Gage Skidmore from Peoria, AZ, United States of America – Hillary Clinton, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=46849052

May 22, 2015: “I’ve been for trade agreements, I’ve been against trade agreements, voted for some, voted against others, so I want to judge this when I see exactly what exactly is in it and whether or not I think it meets my standards.”

October 13, 2015:  “I did say, when I was Secretary of State, three years ago, that I hoped it would be the gold standard. It was just finally negotiated last week, and in looking at it, it didn’t meet my standards. My standards for more new, good jobs for Americans, for raising wages for Americans. And I want to make sure that I can look into the eyes of any middle-class American and say, ‘this will help raise your wages.’ And I concluded I could not.”

March 12, 2016: “We cannot let rules of origin allow China — or anyone else, but principally China — to go around trade agreements. It’s one of the reasons why I oppose the Trans-Pacific Partnership because when I saw what was in it, it was clear to me there were too many loopholes, too many opportunities for folks to be taken advantage of.”

Like Senator Sanders, Secretary Clinton opposes the TPP.  Next week, we turn to Donald Trump, the presumptive Republican nominee for the Presidency.

Call TransLegal with your questions concerning the TPP or trade agreements in general.

The Trans-Pacific Partnership Series: Senator Bernie Sanders

Part 2

Francisco A. Laguna & Amy Turner

The Trans Pacific Partnership (TPP) faces significant opposition from the remaining Democratic and Republican 2016 presidential candidates. The TPP has increasingly become a talking point in the presidential campaign. Hillary Clinton, Bernie Sanders and Donald Trump all oppose the deal. This week, we continue our series on the TPP, focusing on the comments of presidential candidate, Bernie Sanders, on whether the trade agreement benefits the United States.  The information provided in the post is not meant to be political in nature, or an endorsement or critique of the position of Senator Sanders.

By Jonathunder - Own work, GFDL 1.2, https://commons.wikimedia.org/w/index.php?curid=47215151

By Jonathunder – Own work, GFDL 1.2, https://commons.wikimedia.org/w/index.php?curid=47215151

According to Senator Sanders’s website, the TPP is a “disastrous trade agreement designed to protect the interests of the largest multi-national corporations at the expense of workers, consumers, the environment and the foundations of American democracy.”  Sanders asserts that under existing free trade treaties, American workers have been forced to compete against low-wage labor from around the world. This has resulted in the closing of thousands of factories and massive job losses in the United States.  Sanders claims that TPP is “part of a global race to the bottom to boost the profits of large corporations and Wall Street by outsourcing jobs; undercutting worker rights; dismantling labor, environmental, health, food safety and financial laws; and allowing corporations to challenge our laws in international tribunals rather than our own court system.”

Sanders states that the TPP “has been written behind closed doors by the corporate world.” He claims that Wall Street, the pharmaceutical industry and major media companies have full knowledge as to what is in the treaty, but the American people and members of Congress do not.

Sanders has outlined 10 Ways the TPP would hurt working families

1. TPP will allow corporations to outsource even more jobs overseas

The US will lose more than 130,000 jobs to Vietnam and Japan, based on an assessment by the Economic Policy Institute.   Service sector jobs will be affected.  Corporations have already outsourced over 3 million service sector jobs from the US. The TPP allows corporations to more easily outsource call centers, computer programming, engineering, accounting and medical diagnostic jobs. In addition, manufacturing jobs will be lost. The TPP reduces the risks associated with operating in low-wage countries.

2. Sovereignty will be undermined by giving corporations the right to challenge our laws before international tribunals

The TPP establishes a process that gives corporations the right to challenge domestic laws before the United Nations and World Bank that could adversely impact their “expected future profits”. These could allow corporations to be compensated by taxpayers. This process bypasses laws dealing with labor, health, and environment, therefore weakening American sovereignty.

3. Wages, benefits, and collective bargaining will be threatened

Sanders’s website states:  “The TPP will force American workers to compete with desperate workers in Vietnam where the minimum wage is just 56 cents an hour.”

By United States Congress - http://sanders.senate.gov/, Public Domain, https://commons.wikimedia.org

By United States Congress – http://sanders.senate.gov/, Public Domain, https://commons.wikimedia.org

4. Our ability to protect the environment will be undermined

Under the TPP, corporations are allowed to challenge laws that would “adversely impact their future profits”.  Any nation that becomes a party to the TPP can be sued by corporations.  The TPP bypasses domestic courts by allowing corporations to sue directly any nation that signs the agreement in an international tribunal.

5. Food Safety Standards will be threatened

Only 1-2 percent of food imports is inspected.  The TPP will greatly expand these imports, thereby further overwhelming the system. This would make it easier for countries to export contaminated foods into the US, including fish and seafood.

6. Buy America laws could come to an end

Under the TPP, although there are laws that require the US government agencies to buy goods and services made in America, foreign corporations would be given equal access to compete for government contracts with companies that make products in America.   The US would not be allowed to prevent companies that have bad human rights records from being awarded government contracts paid by US taxpayers.

7. Prescription drug prices will increase, access to life saving drugs will decrease, and the profits of drug companies will go up

Pharmaceutical companies are lobbying to assure that the TPP recognize extensions of their patents (which currently exists 20 years or more).  This would expand the profits of big drug companies.

8. Wall Street would benefit at the expense of everyone else

The TPP would impose restrictions on governments from imposing “capital controls”.  Governments would be barred from creating controls that include financial speculation taxes to curbing massive flows of speculative capital flowing into and out of countries.

9. TPP would reward authoritarian regimes that systematically violate human rights

Authoritarian regimes would be granted duty free access to the U.S. market under the TPP.

10. The TPP has no expiration date, making it virtually impossible to repeal

There is no sunset provision in the TPP.  After it is signed into agreement, a consensus of all member countries is required to amend it.  Other countries, like China, could be allowed to join in the future.

Senator Sanders is clearly opposed to the TPP.

Call TransLegal with your questions concerning the TPP or trade agreements in general.

The Trans-Pacific Partnership Series

Part 1

Francisco A. Laguna & Amy Turner

The recent passage of the Trans-Pacific Partnership (TPP) has only resulted in additional questions and much political discussion.  What were the negotiations like? What happens now? What does the TPP contain? How does this affect the passage of Transatlantic Trade & Investment Partnership (TTIP)?

This week, TransLegal begins a 5-part series on the TPP that explores what the TPP is (according to the Obama Administration), the approaches each of the presidential candidates to the TPP and trade in general, and the reactions of the international community to the agreement.

On October 4, 2015, negotiations for the TPP came to a successful conclusion.  After five years of negotiations, twelve nations including Australia and the US reached agreement on how trade among the member states would be governed under the Trans-Pacific Partnership. The agreement was signed February 6, 2016.

What benefits does the TPP offer?

According to the United States Trade Representative, the TPP offers:

  1. “Comprehensive market access”. The elimination or reduction of tariffs. This includes goods and services and trade and investment.
  2. “Regional approach to commitments”. The development of production and supply chains, uniform trade, and the opening of domestic markets.
  3. “New trade challenges”. The support for the development of the global economy through the digital sector and state owned businesses.
  4. “Inclusive trade”. The commitment that small and medium businesses should have the understanding and ability to use the opportunities provided by the TTP.
  5. “A regional integration platform”. The intention is to use the TTP as a template and forerunner to design an economic plan for other non-included economies across Asia-Pacific.

What were the negotiations like?

The TPP involved negotiations in five major areas.

  1. The United States agreed to shorter patent terms for biologic drugs. Drug companies now have 5 to 7 years to keep secret their formulas as opposed to the original 12 years.
  2. Every state-owned company is required to adhere to the global trade standards.
  3. The reduction of diary, beef and poultry tariffs for the United States, Canada and Japan.
  4. Lower tariffs for cars and trucks in the United States, Canada and Japan.
  5. The Investor-State Dispute Settlement Mechanism makes it as easy (or difficult) for foreign companies to bring suit as domestic companies. In return, the United States will allow restrictions on tobacco companies who attempt to use arbitration panels in lawsuits on countries that tax cigarette advertising.

Now that the Trans-Pacific Partnership is a done deal, what’s next?

Each country’s legislature must ratify the agreement before it can go into effect. The US Congress had 90 days to review and debate the agreement.  Since Congress gave the President the fast-track trade promotion authority on June 29, 2015, it can only vote “yes or “no”.  No changes can be made to any of the terms of the agreement.

How does the TPP agreement affect the TTIP?

That is a hard question to answer.  Trade deals are political documents and therefore need to be viewed in the context of the election season. Each party has candidates that approach trade differently. The next President will bring his or her own view on where the US stands on trade and how trade agreements are negotiated.  We’ll discuss the views of each of the candidates on trade as part of this series.

Call TransLegal with your questions concerning the TPP or trade in general.

The Challenges Facing Brazil’s Temer Administration

This week, we continue our two-part series on current political situation in Brazil.  Many thanks to our correspondent, Rodrigo Correia da Silva, for contributing these articles.

The current political scenario in Brazil is quite similar to that of 1992, after the resignation of President Fernando Collor de Mello, when then Vice President, Itamar Franco, assumed the leadership position. Some view this as a positive harbinger for the success of Michel Temer’s interim government to overcome the existing political-institutional and economic crisis.

By User:Jurema Oliveira - http://www.fotosedm.hpg.ig.com.br/, Copyrighted free use

By User:Jurema Oliveira – http://www.fotosedm.hpg.ig.com.br/, Copyrighted free use

The Itamar government was faced with an equal crisis, and it was able to lead the country into a period of economic growth and fiscal and social prosperity.  The Temer government must address a domestic and global downturn in the economy; it needs to overhaul the government, grappling with corruption and cronyism; and it needs to implement realistic and effective austerity measures.  Some of these actions, especially the overhaul of the country’s ministries, discussed in our post last week, are likely to wreak short-term havoc, especially for the regulatory sector.  Temer will need both popular support and the support of the 3 major political parties to succeed.  Ordinary Brazilians, many of whom opposed the large expenditures on hosting the 2015 World Cup and the upcoming Olympics, are hopeful that Temer’s reforms will, indeed, alleviate some of the economic issues they have been confronting.

The main similarity between Itamar and the current Temer government is certainly the economic crisis. During Itamar, Brazil was experiencing a troubled period when hyperinflation was at 1,100 % in 1992, reaching 2,708.55 % the following year, not to mention the total stagnation of the GDP. Temer, too, is facing challenges in the economic arena, while having to overhaul the political system.

Favela Vidigal in Rio de Janiero By Jeff Belmonte - Flickr, CC BY 2.0

Favela Vidigal in Rio de Janiero By Jeff Belmonte – Flickr, CC BY 2.0

It is noteworthy that both Franco and Temer are both members of the Brazilian Democratic Movement Party (PMDB), and the impeachment of Presidents Collor and Dilma were motivated or influenced by allegations of corruption and the inability / unwillingness to work with the National Congress.

At the end of Franco’s term, Brazil was on a path of economic recovery, which earned the country a deserved spot on the international stage.  Now, it is Temer’s turn to push the reforms required to regain the investment-trust of the international community.

To be successful, Temer will have to work closely with the National Congress as well as the members of his administration and cabinet.  His past political experience bodes well for Temer as does the fact that his choices for ministers are experts in their fields as well as politicians.

TransLegal will keep you updated on how the interim government fares.

 

How Will the Temer Adminstration Affect Brazil

This week, we begin a two-part series on current political situation in Brazil.  Many thanks to our correspondent, Rodrigo Correia da Silva, for contributing these articles.

Brazil’s President Dilma Rousseff attends the opening ceremony of the National Policy Conference for Women in Brasilia, Brazil, May 10, 2016. (Reuters/Ueslei Marcelino)

Brazil’s President Dilma Rousseff attends the opening ceremony of the National Policy Conference for Women in Brasilia, Brazil, May 10, 2016. (Reuters/Ueslei Marcelino)

Brazil has entered a tenuous political reality with the Senate’s impeachment of former President Dilma Rousseff, ending the 13-year rule of the left-wing Worker’s Party (PT).  The Senate’s final decision will be issued in 180 days, but it is highly anticipated that the Senate will uphold its initial impeachment decision.  In the interim, former Vice President Michel Temer will assume the presidency, and expectations are high for his administration. Economic recovery, combatting the Zika virus, maintaining security at the Summer Olympics and restoring “political face” are a few of the challenges confronting the Temer, and indeed, any successor administration.

Michel Temer is a skilled politician who, throughout his political career, has demonstrated an ability to reconcile varying interests, a much needed skill to confront the current political moment. His political dexterity arose from being a three-time President of the House of Representatives combined with the technical and legal knowledge he brings as a preminent Constitutional Law Professor and the fact that he has led Brazil’s largest political party, the Brazilian Democratic Movement Party (PMDB), for the past 15 years.

Brazilian President Michel  Temer (Wikipedia)

Brazilian President Michel Temer (Wikipedia)

The Temer administration will seek solutions to increase domestic and foreign investment to revitalize the stagnant economy, including resuming productive dialogue with the private sector. Concurrently, the new government will attempt to balance the national budget, and implement meaningful reform in such broad categories as taxes, social security, labor and political corruption. Temer will need to demonstrate concrete steps and successes, even limited, to fuel future investments.

The outlook, initially, is positive. Michel Temer, who does not intend to run for reelection in 2018, is likely to promote privatization and public-private partnerships and pave the way for major structural reforms for the country.

Temer will face challenges and on-going investigations alleging wrong-doing and financial improprieties, including Operation Car-Wash (Lava-Jato), operation Zelotes, and the Parliamentary Inquiry Committee investigation of deviations of monies from the National Bank for Economic and Social Development (BNDES) and state pension funds.  In addition, the State Accounts Tribunal is reviewing the management of the accounts of the Rousseff / Temer political campaign.  A negative ruling by the Tribunal could disqualify Temer from office and result in new elections.  On a practical basis, however, it is likely that the court will review the accounts of Rousseff and Temer separately, and a ruling is not expected before the end of Temer’s term.

With regards to foreign policy and international trade, Temer seems to understand that Argentina is back as a player on the world stage.  Argentina’s absence from meaningful participation during the Fernandez de Kirchner administration greatly benefitted Brazil; now, the two countries will be vying for the same foreign direct investments.  To be competitive, Brazil will have to demonstrate that it is capable of making true reforms.

Local elections will be held in October 2016, and it is expected that the Workers Party will lose ground.  This will affect the 2018 presidential elections, and political parties and forces will have to realign. The question is whether Brazil is ready to emerge as a stronger democracy and fight cronyism.

Restructuring Federal Government Ministries

Before assuming the presidency, Temer suggested changes to the structure of the federal government. These changes will now be immediate. Functions will be reassigned among existing ministries, some ministries will be downsized, and others will be combined.  Plans call for scaling down from 32 ministries to 22.

This restructuring will result in changes to the vast system of public employment and the at times overwhelming nature of the Brazilian bureaucracy.  As of yet, it is unclear how top tier and career government officials will be affected.  What is clear is that during the restructuring process, regulatory issues may become quite a nightmare.

By Mario Roberto Duran Ortiz - Own work, Public Domain, https://commons.wikimedia.org/w/index.php?curid=2476577

By Mario Roberto Duran Ortiz – Own work, Public Domain, https://commons.wikimedia.org/w/index.php?curid=2476577

Temer’s restructuring plans purport to prioritize the creation of ministries capable of implementing the changes to reorganize the country.  Temer’s cabinet is composed of experienced politicians with expertise in their fields, who (we hope) will make sound decisions and changes that are not based on political motivations.

Ministers will be selected from the political parties with the greatest number of seats in the National Congress. The PT, PMDB and Brazilian Social Democratic Party (PSDB) are the largest parties, which suggests that the chances of adopting new legislation, especially those that may be unpopular, are significant.

Most ministers are lawyers, economists and company administrators and also have political experience.  It is expected that they will play an important role in bridging the government’s current contentious relationship with many sectors of society and the National Congress, allowing for the construction of a positive agenda for the country.

The States with most ministers are Rio Grande do Sul and Pernambuco, each with 3 ministers, followed by Rio de Janeiro, with two.  Rio de Janeiro, which will host the Olympics in 2016, heads the Ministry of Sport.

Next week, we will compare the proposed agenda of the Temer administration with that of Itamar Franco, who took over after the resignation of President Fernando Collor de Mello.

TransLegal represents companies doing business in Brazil, including the establishment of foreign subsidiaries, the approval of genetically modified organisms for industry and food use and other regulatory issues.  Call us with your questions concerning Brazil and how the Temer administrations planned changes will affect your business.

What is the Importance of Trade Adjustment Assistance?

Francisco A. Laguna & Rolanzo White

After months of an internal Democratic battle, which pit House Minority Leader Nancy Pelosi against President Barack Obama, Congress passed the Trade Promotion Authority bill (“TPA”) which will give the president a “fast track” to negotiate deals with foreign nations. The TPA is characterized as “fast track” authority because it gives the president the ability to negotiate trade deals with foreign states without interference from Congress. Legislators can only vote yes or no when these deals reach the floor.

"A hot June summer afternoon on Capitol Hill. (9136720373)" by USCapitol - A hot June summer afternoon on Capitol Hill.. Licensed under Public Domain via Wikimedia Commons

“A hot June summer afternoon on Capitol Hill. (9136720373)” by US Capitol. Licensed under Public Domain via Wikimedia Commons

For months, the TPA was the center of a debate among Democrats: whether to give the president this authority; or to demand a part in trade negotiations. Republicans supported the bill because they saw it as necessary for promoting the recently agreed-to Trans-Pacific Partnership (“TPP”). Rand Paul believes that the bill actually affords Congress more control over the negotiations and the last word. Even with the divide in the Democratic Party, on June 24, 2015, Senate Republicans gathered the 60 votes needed to pass the TPA with the help of 13 democrats.

The TPA certainly facilitated the negotiation of the TPP, an agreement among Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. All potential member states required the passage of the TPA to ease their fear that Congress would overturn the agreement after a deal was struck. President Obama and proponents of the bill advocate that the TPP will lower the cost of imported goods, open overseas opportunities for America businesses and establish the first American trade agreement with Japan. Those who oppose the TPP, including Massachusetts Senator Elizabeth Warren, fear it will kill jobs in the US and give the president too much unilateral power in trade negotiations.

"US Dept of Labor" by Ed Brown. Licensed under Public Domain via Wikimedia Commons

“US Dept of Labor” by Ed Brown. Licensed under Public Domain via Wikimedia Commons

As a way to protect people that may lose their job as a result of trade agreements, Congress voted to reauthorize the Trade Adjustment Assistance (“TAA”) program through 2020 and renew the program’s 2009-2010 eligibility and benefit levels. Democrats believe that Congress needed pass the TAA to assist those hurt by job loss.

 

The TAA program is a federally funded program that provides necessary assistance for workers, with no cost to employers, whose jobs are lost or threatened due to trade-related circumstances as determined by a Department of Labor investigation. The TAA program provides assistance to eligible workers in the form of reemployment services, training, job search, relocation, and support benefits in the form of Trade Readjustment Allowances (TRA) and / or Alternative/Reemployment Trade Adjustment Assistance (ATAA/RTAA) for older workers. The Department of Labor estimates that since 1975 over two million workers have relied on the TAA program to receive benefits to make ends meet and obtain the training necessary to find new jobs.

"Vincent Thomas Bridge aerial view" by United States Coast Guard, PA3 Louis Hebert - U.S. Coast Guard Visual Information Gallery. Licensed under Public Domain via Wikimedia Commons

“Vincent Thomas Bridge aerial view” by United States Coast Guard, PA3 Louis Hebert – U.S. Coast Guard Visual Information Gallery. Licensed under Public Domain via Wikimedia Commons

In response to the TPA decision, the US Conference of Mayors voiced their support for the bill and urged congress to pass the TAA as well. Newly appointed US Conference of Mayors (USCM) President, Baltimore Mayor Stephanie Rawlings-Blake, issued the following statement: “The nation’s mayors now call on Congress to pass reauthorization of Trade Adjustment Assistance that will provide resources to US workers who may need re-training and employment services due to foreign competition. TAA has helped over 2.2 million workers since its inception and is an important safety net for them.”

As trade agreements like the TPP and the Transatlantic Trade & Investment Partnership are negotiated and implemented, it will be interesting to contrast the number of workers who require TAA assistance with overall trade numbers to determine whether fast track negotiating authority is, indeed, worthwhile.

TransLegal is available to answer questions concerning regional and other trade agreements as well as the availability of benefits under the TAA.