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.

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Brexit: Article 50 of the Treaty on European Union

Francisco A. Laguna & Amy Turner

This week, we continue our series on Brexit looking at the withdrawal provisions of the Treaty on European Union.  Article 50 controls the process for the exit of countries from the EU. Withdrawal under Article 50 is an untested procedure, and the UK’s decision has caused a debate throughout Europe as to how it should be invoked.

European Parliament in Brussels by Zinneke - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=4421689

European Parliament in Brussels by Zinneke – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=4421689

Article 50 states:

  1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
  2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.
  3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

Notice of withdrawal under Article 50 is a formal, proactive act the British government should undertake. The Brexit vote on June 23, 2016 does not constitute Article 50 notice. On June 26, 2016, three days after the UK vote, the EU issued a statement regretting but respecting Britain’s decision and asking it to proceed quickly in accordance with Article 50, stating “We stand ready to launch negotiations swiftly with the United Kingdom regarding the terms and conditions of its withdrawal from the European Union.” On 28 June 2016, the EU Parliament passed a motion calling for the “immediate” triggering of Article 50.  In contrast, in the UK, the growing consensus is that Article 50 notice should be given at, or near the end of, the end of the maximum two-year. Despite the pressure, however, the reality is that there is no mechanism to compel a state to withdraw from the European Union.

uk_parliamentNewly appointed PM Theresa May has stated that negotiations with the EU required a “UK-wide approach”. “I have already said that I won’t be triggering article 50 until I think that we have a UK approach and objectives for negotiations – I think it is important that we establish that before we trigger article 50.” She has also stated “All of us will need time to prepare for these negotiations and the United Kingdom will not invoke article 50 until our objectives are clear.”

Although there are many questions that will need to be addressed, timing is the most important. Presently the European Commission is operating under the assumption that Article 50 notification may not be made before September 2017, a sign suggesting that the government of the UK may be regretting the vote. Next in the series, we will discuss the possible plans for withdraw.

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

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 Goals and Benefits of the Trans-Pacific Partnership & Transatlantic Trade & Investment Partnership

Francisco A. Laguna & Amy Turner

Today, we continue with our series on the Trans-Pacific Partnership (TPP) and Transatlantic Trade & Investment Partnership (TTIP) by discussing the goals of the partnerships and whether the trade agreements will truly benefit US businesses.

The Goals of the TPP and TTIP

Singapore Cargo Terminal © CEphoto, Uwe Aranas / , via Wikimedia Commons

Singapore Cargo Terminal
© CEphoto, Uwe Aranas / , via Wikimedia Commons

The principal goals of the TPP are to promote and grow trade and investment among the partner countries, to stimulate innovation, general economic growth and development, and to encourage job creation and training programs. Although the actual text of the treaty is classified, general outlines and summaries of the agreement have been provided. The United States Trade Representative (USTR) informs that the TPP seeks to address issues that promote: 1) regulatory coherence; 2) competitiveness and business facilitation; 3) Small and Medium-Sized Enterprises (SMEs); and 4) Development.  The TPP seeks to achieve these goals through comprehensive market access by eliminating barriers to goods, services, trade and investment.  Such access would create new opportunities for workers and businesses in the member states and immediately benefit consumers. In addition to tariff elimination, the TPP would adopt common guidelines and standards for intellectual property, enforcement of labor and environmental laws the establishment of an investor-state dispute settlement mechanism.

Port of Hamburg By Franzfoto (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Port of Hamburg
By Franzfoto (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)%5D, via Wikimedia Commons

The Obama Administration considers the TTIP a companion agreement to the TPP.   According to the USTR, the TTIP is intended to be an ambitious and comprehensive trade agreement that significantly expands trade and investment between the United States and the EU, increases economic growth, jobs, and international competitiveness and addresses global issues of common concern.  The European Commission categorizes the topics under discussion into three broad areas: market access; specific regulations; and broader rules and principles, and modes of co-operation.  The TTIP goal is to liberalize 1/3 of global trade”, which, proponents argue, will create millions of new paid jobs. The true economic gains from the TTIP, however, will depend on how the US and EU contend with their oftentimes duplicative and conflicting rules related trade and other regulatory issues.  TransLegal routinely assists companies comply with regulatory requirements overseas.  Uniform regulations greatly help expand trade among nations simply by making it easier for businesses to understand their obligations.

The Bottom-Line Issue: Will the TPP and TTIP benefit American Businesses?

Wish we could answer that one!  Not surprisingly, and as in all things economic and political, the experts disagree how the TPP and TTIP will affect American businesses.

With regard to the TPP, estimates predict that it would generate $5 billion in economic benefits to the US in 2015, and $14 billion in 2025. Proponents state that if the impact of investment liberalization were taken into consideration, the economic benefits would likely be larger.

Port of Miami, Florida

Port of Miami, Florida
“Port of Miami Florida”. Licensed under Public Domain via Wikimedia Commons

Proponents also argue that small businesses may actually benefit from the trade liberalization because they are less likely than large businesses to establish overseas subsidiaries to overcome existing trade and non-trade barriers.  Critics, however, state that the winners of the TPP agreement would be larger US businesses in the agriculture, insurance, manufacturing, pharmaceutical, technology sectors that can be poised to expand exports as nations ratify the treaty.

The European Commission says that the TTIP has the potential of increasing overall trade between the two parties as much as 50%.  It also claims that the TTIP would contribute €120 billion to the EU economy, €90 billion to the US economy and €100 billion to the economies of other countries.  If the TTIP were only to focus on tariffs, it is estimated that the partnership would result in an annual EU GDP growth of €24 billion by 2027 and annual growth of €9 billion in the United States. If shared equally among the affected people, the Commission notes that the most optimistic GDP growth estimates would translate into additional annual disposable income for a family of four of €545 euros in the EU and €655 euros in the US.

Critics on this side of the pond note that long–standing membership in the World Trade Organization, work by the Transatlantic Economic Council and other trade agreements like U.S. Open Skies Agreement have already resulted in low trade barriers between the US and the EU. Therefore, the deal should focus on non-conventional barriers such as overriding national regulations regarding fracking, GMOs, finance and copyright.  This may prove a challenge especially in those areas of agriculture, food and environmental law where the the parties are particularly far apart.

We will continue this series in mid-Autumn. TransLegal assists US and EU companies understand and comply with regulatory laws and regulations through our network of 51 correspondent offices in 51 countries.  Contact us with your questions concerning regulatory requirements in the country that interests you.

Trans-Pacific Partnership & Transatlantic Trade & Investment Partnership

To Deal or Not to Deal?

Francisco A. Laguna & Amy Turner

Among the many points of disagreement between the political parties are the benefits of trade agreements.  Currently, the two possible deals discussed most often are the Trans-Pacific Partnership (TTP) and the Transatlantic Trade and Investment Partnership (TTIP). In very basic terms, the TPP is a trade agreement with Asia, while the TTIP is a trade agreement with European Union.  These agreements will have enormous impact on the United States. Furthermore, timing will make it more interesting: finalization of each is expected in 2016, during an election cycle.

Trans-Pacific Partnership (TTP)

Dark Green:  Currently in negotiations    Light Green: Announced interest in joining Light Blue: Potential future members 2013 "TPP enlargement" by en:User:Japinderum, en:User:Phospheros, en:User:Orser67 - en:File:TPP enlargement.png (based on File:World map model.png). Licensed under CC BY-SA 3.0 via Wikimedia Commons

Dark Green: Currently in negotiations
Light Green: Announced interest in joining
Light Blue: Potential future members
2013 “TPP enlargement” by en:User:Japinderum, en:User:Phospheros, en:User:Orser67 – en:File:TPP enlargement.png (based on File:World map model.png). Licensed under CC BY-SA 3.0 via Wikimedia Commons

The TPP began as the Trans-Pacific Strategic Economic Partnership Agreement. TPP negotiations have been ongoing since 2005, and the US joined the negotiations in March 2008.  Twelve countries are currently participating: Australia; Brunei; Canada; Chile; Japan; Malaysia; Mexico; New Zealand; Peru; Singapore; US; and Vietnam. The combined total GDP of these 12 nations is 40 % of global GDP and represents 1/3 of world trade – ~ US$27.7 trillion. The global benefits of the TTP have been placed at as much as US$295 billion annually.

Transatlantic Trade and Investment Partnership (TTIP)

Since the 1990s, there has been a Transatlantic Free Trade Area.  By that time, the Cold War had ended, and the world was no longer divided into conflicting blocs. The European Community (12 countries) and the US decided to sign a “Transatlantic Declaration”. The Declaration outlined yearly summits, biennial meetings among state ministers and more frequent meetings of political figures and senior officials.

"Transatlantic Trade and Investment Partnership (8570621071)" by Foreign and Commonwealth Office - Flickr. Licensed under OGL via Wikimedia Commons

“Transatlantic Trade and Investment Partnership (8570621071)” by Foreign and Commonwealth Office – Flickr. Licensed under OGL via Wikimedia Commons

One of the early initiatives was the 1995 creation of the Transatlantic Business Dialogue (TABD), a pressure group of business people on both sides of the Atlantic.  Since 1998, a series of advisory committees have been established: the Transatlantic Economic Partnership (1998); the Transatlantic Economic Council (2007); and a group of high level experts created in 2011.

The experts ultimately recommended that talks should begin for a wide-ranging free-trade agreement.  In 2012, President Obama used his annual State of the Union address to call for finalization of that agreement.

Together, the United States and European Union represent 60 % of global GDP (33 % of world trade in goods and 42 % of world trade in services).  TTIP would cover 46 % of world GDP, giving it the potential to be the largest regional free-trade agreement in history. The European Commission claims that passage of TTIP could boost trade between the US and EU by up to 50 %.

Next time, we will discuss what the agreements include, how they will affect US businesses.  Whether we should deal or not deal.

TransLegal has 51 affiliate offices worldwide.  We assist our clients navigate the intricacies of global trade.  Contact us with your questions.