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TradeInFocus   Our compilation of news to keep you in focus on key trade matters

Potential Macroeconomic Implications of the Trans-Pacific Partnership
World Bank ? 19 January 2016
On October 4, 2015, 12 Pacific Rim countries concluded negotiations on the Trans-Pacific Partnership. If ratified by all, the agreement could raise GDP in member countries by an average of 1.1 percent by 2030. It could also increase member countries? trade by 11 percent by 2030, and represent a boost to regional trade growth, which had slowed to about 5 percent, on average, during 2010-14 from about 10 percent during 1990-07. To the extent that the benefits of reforms have positive spillovers for the rest of the world, the detrimental effects of the agreement due to trade diversion and preference erosion on non-members, would be limited. -eglobal significance of the agreement depends on whether it gains broader international traction.

How do new generation trade agreements differ from traditional FTAs? Rule-making in the world trading system has shifted from global to bilateral, regional, and sectoral agreements. The Uruguay Round of multilateral trade negotiations, which culminated in the establishment of the World Trade Organization (WTO) in 1994, produced a comprehensive agreement to reduce tariffs on manufactured goods. It also expanded into areas such as agriculture, trade in services, and intellectual property.

However, complex trade policy issues, including regulatory barriers, modern services trade and cross-border investment (covered in the General Agreement on Trade in Services, GATS) and the knowledge economy (key aspects covered under the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS) have been challenging to address at a multilateral level. Hence, cooperation on these issues has recently taken place through bilateral and/or regional agreements. While there were only a few of these before 2000, their number ballooned to 266 by 2014.

At the same time, the concept of deep and comprehensive FTAs has taken hold. These FTAs offer expanded market access, even for products that have previously aroused domestic sensitivities. Provisions can go well beyond WTO standards. Specific measures include the following:
* A negative-list approach for liberalizing trade in services, which covers all sectors except those explicitly listed (as opposed to the positive list of sectors under GATS);

* New rules for internet and digital commerce;

* Across-the-board national treatment for foreign investors, both pre- and post-establishment;

* Streamlined regulations through standardized principles;

* enhanced intellectual property protection, with more comprehensive rules and greater enforcement obligations than in the TRIPS agreement;

* Government procurement commitments (covered under the plurilateral Government Procurement Agreement in the WTO);

* Competitive neutrality for state-owned enterprises;

* Labor and environment codes; and

* Improved dispute resolution for many issues covered in the agreement.

Regional and mega-regional trade agreements In the 1990s, before the surge in bilateral and smaller regional agreements of the 2000s, two large Regional Trade Agreements (RTAs) emerged: the European Union (EU) Single Market (established 1993) and the North American Free Trade Agreement between Canada, Mexico, and the United States (NAFTA, established 1994). These agreements had evolved from two earlier agreements?the European Economic Community, established in 1957 with six member countries, and the Canada-US Free
Trade Agreement in 1987.

EU Pushing for TTIP Talks' Completion, Hefty Trade Agenda in 2016
Bridges - 21 January 2016
The upcoming year is expected to be a busy one for EU trade negotiations, with the 28-nation bloc aiming to conclude talks for a trade and investment deal with the US before the end of the Obama presidency, while setting in motion various other processes with countries around the globe - all amid an uncertain economic and political landscape.

During a speech in Berlin late last week, EU Trade Commissioner Cecilia Malmstrom outlined plans to advance the bloc's existing and new trade agenda, stressing that one of the key areas for making progress would be the Transatlantic Trade and Investment Partnership (TTIP) negotiations with Washington. "The EU is ready to finish this agreement under the Obama Administration. We have the political and human resources to do that. However, the US must also be prepared to commit if we are to get a result," said Malmstrom.

Washington and Brussels have held eleven negotiating rounds to date since the talks first began in 2013. Following the latest round in October 2015, US officials also confirmed their interest in finishing the negotiations before US President Barack Obama leaves office. Obama?s term is slated to end in January 2017. Elections for his successor will be held in early November 2016, with the primaries to determine the respective party nominees set to begin in less than two weeks? time and run through the summer.

To date, the two trading partners have exchanged initial and revised services offers, as well as initial and revised goods offers. They have also made progress on regulatory discussions, and are planning to exchange initial public procurement offers early this year. ?The Transatlantic Trade and Investment Partnership or TTIP negotiations are essential. Almost five million jobs in the European Union depend on our exports to the United States,? Malmstr?m said.

Malmstr?m also outlined various other priorities for the bloc?s trade agenda in 2016, such as finishing the ?fine tuning? on the EU-Canada trade pact signed in 2014 ? including on the controversial provisions in the pact involving investor protections. Another key goal for the 28-nation bloc is advancing negotiations with Japan for a trade agreement, which is one of the EU?s largest trading partners in Asia, surpassed only by China. Those negotiations have been underway since 2013.

?We will continue to make progress this year,? Malmstr?m noted, without specifying whether this would mean reaching a completed deal in that timeframe. A program document issued separately by the Netherlands? Presidency of the Council of the European Union has indicated that it is ?possible? that the EU-Japan trade talks could be completed sometime during the six-month Dutch presidency, which is now underway and will last from 1 January to 30 June 2016. China will also be in focus for the EU this year, both due to the ongoing debate over its market economy status as well as the continued negotiations over a bilateral investment deal, which have been underway for over two years.

The day following Malmstr?m?s speech, negotiators from the EU and China confirmed that they had agreed upon the scope of the planned investment deal, which they say would establish a ?genuine right to invest? and also provide a guarantee against discrimination. Other areas that the proposed pact would address include regulatory challenges involving transparency and licensing and authorization procedures, as well as rules involving environment and labor, an EU press statement said.

"The negotiations for an EU China investment agreement would improve conditions for EU investors on the ground and can be a support to China's domestic reform efforts," said Malmstrom. "We will also continue to pass the message that, in light of China?s continuing economic uncertainty, those reforms are more necessary than ever." According to EU statistics, only 2-3 percent of European investments overseas are based in China, with the Chinese investor presence in the EU even lesser, despite some recent gains.

New trade negotiations with Australia, New Zealand, the Philippines, and potentially Indonesia are also set to be on the horizon, the EU trade chief said, noting also the goal of updating the bloc's deal with South Korea and possibly begin investment talks with Hong Kong and Taiwan. These processes would begin, she said, "when conditions are right." The EU is already beginning preparations for launching talks with Australia and New Zealand. The Commission had noted last year that such negotiations will aim to take "into account EU agricultural sensitivities."

Overall, the EU as a bloc is also facing a host of challenges as 2016 gets underway, ranging from migration issues to questions over rule of law in Poland, with European Commission President Jean-Claude Juncker conceding last week that the Union is living "in difficult times." Indeed, one of the major questions looming over the European Union this year is whether the United Kingdom will choose to remain one of the bloc's 28 member states - and what the implications would be of a "Brexit" if it does not.

UK Prime Minister David Cameron has committed to holding an in-out referendum domestically by the end of 2017, following a renegotiation of the UK's EU membership terms. In that context, Cameron outlined last year a series of proposed reforms to his country's relationship with the EU, specifically relating to the areas of economic governance, competitiveness, sovereignty, and immigration. The UK premier also has noted, with relation to competitiveness, that he backs the European Commission's new trade and investment strategy that was released late last year.

Speaking to reporters last Friday, Juncker said that an upcoming February summit is very like to lead to an agreement with Cameron. "I am quite sure we will have a deal - not a compromise, a solution, a permanent solution - in February," said the Commission chief. Whether the deal will indeed be enough to avert a "Brexit" - which some officials from major trading partners, such as the US, have warned could be damaging to the UK's trading relationships- remains up for debate. Cameron, for his part, has said that leaving the bloc would not be "the right answer" for his country, though if the vote is in favor of leaving his government will find a way to "make it work."

Obama Highlights Trade Opportunities in State of Union
American Shipper - January 13, 2016
The Trans-Pacific Partnership and normalizing trade relations with Cuba are two accomplishments that President Obama said he wants to reach their final conclusion. President Obama urged Congress during his final State of the Union message last night to ratify the Trans-Pacific Partnership free trade agreement and lift the trade embargo on Cuba, saying both policies would enhance American leadership in Asia and the Latin America.

Obama used the speech to defend his economic and foreign policy decisions, saying the United States has the strongest economy in the world in part because of actions his administration took to rescue the auto industry and stabilize the financial system in the wake of the great recession. He said the ability to partner with other nations and build global coalitions to address problems is as much a sign of US strength as its military power.

According to Obama, the TPP "cuts 18,000 taxes on products Made in America, and supports more good jobs."
With TPP, China doesn't set the rules in that region, we do," he said. He also said that restoring diplomatic relations with Cuba is the right thing to do after 50 of isolation have done little to promote democracy in the Communist nation. "Recognize that the Cold War is over. Lift the embargo," Obama told lawmakers assembled in the Capitol building.

The president acknowledged that Americans might not feel as wealthy as they would like despite the economic recovery, saying the slow progress is due to forces such as globalization, that result in competition for jobs with people in low-wage countries, and the proliferation of technology. Business groups continued to voice strong support for TPP and the opening to Cuba, which could lead to export opportunities. The TPP would give U.S. companies much easier access to 11 Pacific Rim countries, including Japan.

"This landmark agreement will enhance American competitiveness, support US jobs, eliminate thousands of tariffs and expand the rule of law in the Asia-Pacific region," Peter Robinson, president of the US Council for International Business, said in a statement. Good governance, transparency and establishing American commercial values in the region are important benefits for the United States, he added.

Political observers say Obama faces a difficult battle to win approval for TPP in Congress this year. A statement issued by Rep. Peter DeFazio, a Democrat from Oregon, illustrated the political challenge to TPP. "If we truly want economic security and opportunities for all, we need to prioritize the needs of the American people over those of massive corporations," the congressman said, calling TPP "a dangerous agreement that would export jobs, drive down wages, and devastate American manufacturing."


NFTC Responds to the President's State of the Union Address
National Foreign Trade Council - January 19, 2016
Following President Obama's final State of the Union address last Tuesday night, NFTC President Bill Reinsch issued the following statement:

"Tonight, the President talked about the need to continue strengthening the U.S. economy and ensuring well-paying jobs for American workers. Keys to unlocking that economic potential are found in trade and a competitive corporate tax system.

"We applaud the President's remarks on the Trans-Pacific Partnership (TPP) agreement. The NFTC believes firmly that the TPP is in our national interest - from generating economic growth to supporting jobs - and we call on the Administration and Congress to address remaining issues to ensure that the agreement provides the most benefits possible across the whole of the US economy.

"... We also welcome the President's call for ending the outdated embargo with Cuba. Finally, critical for sustained economic growth is a sound US tax policy that doesn't put US businesses at a competitive disadvantage when compared to their counterparts around the world. In 2016, we look forward to working with the Administration and Congress to make meaningful progress on all of these fronts."


2015, A Year of Achievement for Trade and Investment
US Department of Commerce - January 15, 2016
On Wednesday, Stefan Selig, US Under Secretary of Commerce for International Trade penned a blog post on Commerce.gov's blog on 2015 trade and investment successes.

Selig wrote: "One headline accomplishment from 2015 was our leadership in securing the first Trade Promotion Authority in 13 years, which will enable the President to conclude important trade agreements. One of these agreements represents another headline achievement: successfully completing negotiations for the largest trade deal in history in the Trans-Pacific Partnership, which will increase access for US businesses to 11 Pacific Rim markets representing 40% of global GDP.

"Last year's achievements also include the first ever US-India Strategic and Commercial Dialogue, which will serve as the signature bilateral forum for our two countries. We carried out the second 'reimagined' US-China Joint Commission on Commerce and Trade (JCCT), where we brought private sector stakeholders into our talks and worked throughout the year to secure real commercial gains.

The second ever SelectUSA Summit took place, which convened 2,600 participants from 70 countries to highlight investment opportunities in the US. We assisted in concluding the first international tariff liberalizing agreement in nearly 20 years, which will reduce tariffs on US information and communications technology exports valued at $130 billion annually.

Finally, after the second cabinet-level meeting of the US-Mexico High Level Economic Dialogue, several border infrastructure projects that will enhance our collective commercial and security interests were completed or nearly completed."

For the full blog post

"Hochberg's Comeback Tour"
POLITICO Morning Trade - January 14, 2016
Export-Import Bank Chairman Fred Hochberg will be taking to the skies this year to reassure both U.S. exporters and their foreign buyers that the bank is back in business. "I'm looking forward to being able to let people know that if you need us, that if we're going to be the difference between US goods and foreign goods, we're there. You can rely on us. We've got a four-year lease and we're raring to go," Hochberg told POLITICO. That?s a much stronger message than the one Hochberg previously could use to promote the international credit agency, which guarantees loans for foreign companies interested in buying U.S. exports while providing insurance and credit to help small U.S. exporters secure working capital and new overseas customers.


Groups Pressure Senate to Keep Internet Tax Ban
Mario Trujillo - 01/21/16
More than 40 groups are urging Senate leaders to pass a long-term extension of a ban on state and local taxes on Internet access. The coalition sent a letter to Senate Majority Leader Mitch McConnell (R-Ky.) and Senate Democratic Leader Harry Reid (D-Nev.) pressing them to keep the tax ban "permanent" in a customs bill that would extend the ban and has already passed the House.

"Numerous studies continue to show that cost remains an obstacle to Internet access and, if taxes on the Internet go up, even fewer people will be able to afford to go online," the groups wrote in a letter Thursday. "This would impede our nation's long held goal of universal Internet access."
The letter was signed by a number of groups representing business, women, minorities and conservatives. Those groups ranged from Americans for Tax Reform and the Chamber of Commerce to LULAC and the National Black Caucus of State Legislators.

The issue has been fiercely lobbied by both sides after the Internet tax provision made its way into a conference report on the customs bill late last year. The 1998 ban prevents most state and local governments from tacking taxes onto the monthly bills customers pay for Internet access. The ban has needed a number of extensions since initial passage, but some lawmakers are now trying to remove the sunset date on the banned tax.

tradeinfocus is a summary of news and events on the trade policy front for clients, trade & legislative colleagues, and professional friends of W.J. Byrnes & Co.