2019-10-08
by admin
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New Global Market Analysis: American Craft Whiskey

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The 21st century has seen a renaissance of craft distilleries throughout the United States as well as other countries, producing distinctive vodkas, whiskeys and bourbons as well as a wide range of specialty spirits. In the US, many have found distribution across large regional markets and a number have launched successful export programs.

But distillers have been hard-hit by the fallout from the Trump administration’s aggressive trade policies. Until 2018 many of the fastest-growing markets for American spirits were in the European Union. In a tit-for-tat response to US tariffs on aluminum and steel, however, the EU last year imposed a 25% import duty on a basket of American products including whiskey, causing sales to plummet. Until these disputes are resolved, US distillers are well advised to focus on other regions.

Nevertheless many high-potential export markets remain. Economic recovery in developed markets and an expanding middle class in emerging markets offer promising export opportunities in parts of Latin America and the Asia-Pacific region.

I recently published a report identifying non-EU markets with high growth potential for American whiskey based on an analysis of current trade and economic figures. The report also highlights next steps in building an export program with respect to primary and secondary target markets as well as indirect marketing opportunities. This will be the first of a series of global market analysis reports focusing on specific product categories.

If you’re an independent distiller pursuing stronger sales and strategic growth, the report offers current data and actionable insights for entering leading international markets. Purchase the Global Market Analysis: American Whiskey for 2019 here for immediate download.

2019-09-23
by admin
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Talk at Norrbottens Handelskammare

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I was invited to give an informal lunch talk at the Norrbotten Chamber of Commerce in Luleå during an all-too-brief visit to Sweden last week. Below are my notes for the talk (I’m sure there were some minor differences in wording when it was actually delivered).

First of all I’d like to thank Robert Forsberg of Norrbottens Handelskammare for the chance to speak to you today. And forgive me if I’ve mangled the pronunciation! This is my first visit to Sweden, and so far I’ve been delighted by the friendly welcome you’ve all shown me. I hope you’ll all reciprocate by visiting Austin soon. Perhaps we could make it an annual migration — I can come visit you in the north of Sweden each summer to escape the heat in Texas, and you can all join us in Austin during the winter to enjoy some sunshine and breakfast tacos!

Robert has asked me to share my thoughts about the current situation in global trade. Because I don’t think I can do that without expressing some strong political views, I should probably start by saying that everything I say today represents my own personal opinions. I’m not stating the positions of Tech Ranch, and I’m very definitely not representing the United States government!

Now, just yesterday during a workshop on US market entry in Skellefteå I mentioned that politics, together with sex and religion, is a taboo subject of conversation in American culture. Today I’m going to violate that taboo, and I’ll start by declaring that I am not a fan of our current president. Donald Trump, in my opinion, has been an utterly destructive and corrupting force with only one redeeming quality that I can see — the fact that his becoming president in the first place, and the damage he’s been able to do in office, highlights an acute need to rebuild institutions not only in the United States, but across the international community, that have been slowly eroding for decades before he ever came along.

The Trump administration’s trade policies have been erratic to say the least, with actions being announced one day, then suspended a few days later, then in some cases reimposed again after that. New threats and concessions seem to appear at the president’s whim. I haven’t been able to keep up with the news this week while traveling, so it’s quite possible that I’ve missed the latest developments. The state of affairs that I’m familiar with is current as of last weekend.

Trump’s political stock in trade is grievance, and he has consistently painted the existing trading arrangements with our leading trading partners as unfair to the United States. There’s some question as to whether Trump even understands how trade policy actually functions. For example, he has repeatedly implied that tariffs are a tax paid by foreign exporting nations when in fact they are paid by the buyer.

In any case, as I’m sure you’re aware, the Trump administration touched off a trade war in early 2018 when it imposed tariffs on imports of steel and aluminum from the European Union as well as China and our partners in the North American Free Trade Agreement, Canada and Mexico. The dispute with Canada and Mexico has since been resolved, at least for the time being, but the one with the EU continues to simmer, and in fact the dispute with China has steadily escalated.

In a tit-for-tat response to the US steel and aluminum tariffs, China, Mexico, and the European Union imposed a 25% tariff on a carefully selected basket of goods; Canada also imposed a 10% tariff. These products were specifically chosen to put pressure on members of the Senate and House of Representatives from the states where these products are made. For example, one of these products is American whiskey. Kentucky, home of Senate Majority Leader Mitch McConnell, is famous as the state where Kentucky bourbon whiskey is produced.

The EU is challenging the US tariffs on steel and aluminum at the World Trade Organization, but a ruling is not expected until the second half of 2020. Meanwhile the Trump organization has also been undermining the WTO itself by holding up appointments to the organization’s Appellate Body. Two of the body’s last three members’ terms expire at the end of November. It’s supposed to be a seven-member body. If new members are not appointed, the body will be unable to make rulings with just a single member remaining in December. Incoming EU Commission President Ursula von der Leyen has said that the next European Commission will consider imposing sanctions on the U.S. if this happens, although it is not currently clear what this would entail.

President Trump has also threatened to levy tariffs on European autos and auto parts in the name of national security. Trump said he would put off a decision on potential tariffs until mid-November to allow for the U.S. and EU to negotiate. The European Union has prepared a list of goods – worth nearly $40 billion – to hit with duties if the US tariffs are imposed.

Another point of contention is subsidies for aerospace manufacturers, i.e. Boeing in the US and Airbus in the EU. This dispute is currently under two separate arbitration proceedings at the WTO, where the expected outcome is that each side will be allowed to retaliate against the other. Each side has already drawn up a list of goods that could be hit by punitive tariffs. The American list of EU goods amounts to around $25 billion which could become subject to 100% tariffs. I don’t know if the size of the proposed tariff has been announced on the European side.

In spite of all that, the state of the US-EU trading relationship is not all doom and gloom. There’s a US-EU Executive Working Group that’s been meeting every few weeks to try to find common ground, although it doesn’t appear to have made much progress. The US side has been demanding to include agriculture within the scope of the talks, while the EU has staunchly refused.

Nevertheless U.S. Ambassador to the European Union Gordon Sondland has said that he is “optimistic” about working with Ursula von der Leyen and that the new Commission will represents a chance for the U.S. and EU to “re-engage.” The U.S. is interested in moving forward on cooperating on product conformity assessments and issues around pharmaceuticals, medical devices and cybersecurity

There have also been some goodwill gestures from the European side. In July the European Union authorized 10 genetically modified organisms, and at the beginning of August the U.S. and European Union on Friday finalized a deal giving U.S. hormone-free beef exporters a specific tariff-rate quota share.

There also seems to be some movement on France’s digital services tax, which would hit American tech companies disproportionately. France has agreed to reimburse companies paying the national tax once a multilateral mechanism is decided, but the concession may not be enough to satisfy the US.

The truth is, though, that the administration is devoting far more attention to China than to Europe. The People’s Republic of China is of course the world’s second-biggest economy after the United States. It also has the second-highest military budget and second-highest greenhouse gas emissions. China and the US are each other’s largest trading partners.

In recent years the United States and China have found themselves sparring not only over trade, but also in political and military competition as well as technology and international finance. Much of the friction in the relationship can be ascribed not only to the Trump Administration’s confrontational approach, but also to more assertive behavior by China under its president Xi Jinping. Trump has the instincts of a bully, but China has probably grown too big to push around, and I’m not sure Trump realizes it.

I’ve already mentioned that China was also a target of the steel and aluminum tariffs, but since then tariffs have been imposed on a far broader range of goods. To pressure China to change its economic practices, the United States currently has tariffs on approximately half of U.S. imports from China. China has responded with tariffs of its own, prompting threats from the US to raise its duties from 25% to 30% and expand them to cover all imports from China.

The most recent moves that I’m aware of have been more conciliatory. Trump last week announced — on Twitter — that he would delay the 5 percentage point increase originally scheduled for October 1 by 15 days as a goodwill gesture. China meanwhile has stated that it will exempt 16 U.S. product lines from its retaliatory tariffs.

The situation has been especially hard on US farmers deprived of the China market, but also on industrial companies who have integrated Chinese manufacturers into their supply chains.

High-level talks between the US and China are scheduled to resume next month. Mid-level officials are meeting in Washington this week.

I truly believe that Trump has no real objectives in any of this other than to look strong and dominant and keep attention focused on himself. So I don’t see the situation calming down as long as he remains in office. The people on the negotiating teams are responsible professionals, so some of the specific disagreements may be resolved. But even if that happens, Trump needs chaos to keep media attention on himself, so in all likelihood he’ll stir up something else.

Of course we do have a presidential election coming up late next year, and my sense is that the odds are against Trump being reelected. How that will impact trade policy of course depends on who the Democratic candidate ends up being, which we may not know for many months yet. Some of the leading candidates are more pro-trade than others. If Trump is reelected, which we certainly can’t rule out, it’s honestly difficult to find any grounds for optimism about our trade relations at all.

Democrats are also likely to make gains in Congress. This is not necessarily good news for trade policy since Democrats have historically been less committed to free trade than Republicans, and many still have protectionist instincts.

But still, at the very least a new administration and Congress are likely to mean calmer seas and steadier, more rational policies. The idea that European cars and auto parts are a security threat to the United States, for example, is frankly ridiculous, and I think any new Democratic administration will acknowledge that.

Viewed rationally, the United States and Europe have a wide range of common interests, not the least of which is preventing China from dominating the global agenda. Leading pro-trade Democrats in Congress have already expressed a desire to work more closely with allies in confronting China. To the extent that China should be seen as a threat, or at least a major challenge, the US and EU should be natural allies in containing it.

120 years ago the confident, aggressive new rising power on the international scene was Germany. We all know how badly things turned out when that situation wasn’t managed effectively. I’m convinced that significant tensions with China will remain under the next president, and that she or he will want to mend fences with our traditional allies in Europe and elsewhere.

That may very well include trying to revive something resembling TTIP, the Transatlantic Trade and Investment Partnership that was discussed during the Obama administration. At that point the ball will be back in Europe’s court. Most of the resistance to TTIP at that time came from the European side, and frankly I think you missed a great opportunity to secure a deal that would have brought a lot of benefits to both sides.

One thing that will not change under a Democratic administration is a strong American interest in including agriculture in US-EU trade negotiations. In fact we shouldn’t overlook the fact that alongside all the common interests between the US and Europe, there are also some very real differences. The United States has a growing trade deficit with the European Union. In 2018 US imports from the EU exceeded exports by over $168 billion, or nearly 53%, up from 28% in 2009.

Even in a best-case scenario, I’m not sure anyone on either side of the Atlantic has really quite grasped just how big a job we have ahead of us to rebuild trust and reform weakened institutions — all while simultaneously fundamentally restructuring our economies to meet the existential challenge of climate change and managing the new realities of China’s growing power and influence, as well as that of next-tier rising powers such as India.

2019-07-19
by Eurobubba
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Financial assistance for export operations

Exporters often face challenges in financing their businesses that companies with purely domestic operations don’t have to deal with. For one thing, their receivables, and possibly a portion of their inventory and other physical assets, are located abroad. This can make commercial bankers reluctant to lend, especially as overseas assets generally can’t be used as collateral to secure a loan or line of credit. Moreover, buyers in many foreign markets expect — and competitors from other countries will offer — credit, or credit on longer payment terms than we’re accustomed to in the US.

To help keep American businesses competitive in international markets and secure American jobs, the US government has instituted various programs to help American companies finance export operations. Most of these are administered by the Small Business Administration or the Export-Import Bank of the United States (Ex-Im Bank)

Small Business Administration

Under its export programs, the SBA will guarantee up to 90% of export-related loans from eligible commercial banks. Its most important programs for international traders are:

Export Express loan

Unlike most SBA loans, these require no prior approval from the SBA itself. Instead, pre-certified lenders can underwrite loans of up to $500,000 directly. Approval typically takes just a day or two. The SBA guarantee covers 90% of loans up to $350,000 and 75% of bigger amounts.

Export Working Capital loan

This program guarantees loans and revolving lines of credit for up to $5 million with terms of up to 12 months. The funding can be used for working capital to produce goods for export, to finance export receivables, or for standby letters of credit for bid or performance bonds.

International Trade loan

These loans provide long-term financing (up to 10 years) of fixed assets or export working capital up to $5 million. The guarantees are available not only for exporters, but also for companies facing competition from imports.

Export-Import Bank of the United States (Ex-Im Bank)

Ex-Im is a “bank,” but indie businesses may find its insurance products more helpful than direct lending. It does offer loans, but borrowing from a commercial lender with an Ex-Im guarantee often results in a lower total financing cost. Its key programs include:

Working Capital Guarantee

Like the SBA’s similarly named offering, this product protects commercial lenders, generally guaranteeing 90% of the loan amount. The funds can be used to purchase materials and equipment to produce goods for export, to purchase finished products for export, or to post standby letters of credit for performance bonds and the like. Unlike SBA guarantees, there is no maximum transaction amount.

Supply Chain Finance guarantee

This program provides accounts receivable financing for exporters and their domestic suppliers, allowing suppliers to sell their receivables at a discount to accelerate cash flow and improve liquidity.

Export Credit Insurance

Ex-Im Bank’s insurance products cover commercial and political risks of international trade, insuring up to 100% of political risk and 98% of commercial risk. The latter includes the familiar risks of insolvency and non-payment. Political risk refers to eventualities related to the political situation in a foreign market, such as changes in the convertibility of a foreign currency (so a buyer can’t get hold of dollars to pay you with), the buyer being nationalized or otherwise prevented by government action from fulfilling its end of a transaction, or even the outbreak of war. In addition to a range of policies for exporting sellers, Ex-Im Bank also offers Bank Buyer Credit policies, which cover bank loans to foreign buyers, generally for purchases of production equipment and capital goods from US suppliers. Export credit insurance is also offered by a number of private companies, notably Coface.

Direct loans

As mentioned above, Ex-Im Bank also offers direct loans to exporters and foreign buyers.

More information on Ex-Im Bank’s programs, including some more specialized offerings, is available here.

State Trade Expansion Program (STEP)

This is one of my favorite financial resources for exporters because it’s a grant program. Free money! What’s not to love? STEP is funded by the SBA, but for Texas is administered by the state Department of Agriculture. (Applications are not restricted to agricultural businesses.)
The STEP grant program is designed to assist small businesses who are first-time exporters or expanding their export activities. The exported goods must be of US origin. The funds can be used for:

  • Participation in trade missions or trade shows
  • US Commercial Service export assistance programs
  • Export counseling & training
  • Shipping of samples
  • Website translation & localization

The grants are awarded on a first-come, first served basis and the funds do run out, so be prepared! Applications are currently closed for 2019. Information about grants for 2020 should become available this October, according to the Texas Department of Agriculture. This web page provides more details of the program and a link where you can sign up for e-mail updates.

2018-03-28
by admin
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Adventures in international (mis-) communication

When communicating with business associates whose native language is different from your own, no matter how proficient you think you are in their language or they in yours, it’s a good idea to double-check if anything is less than absolutely clear. A foreign business contact recently wrote to say he’d be in town briefly “by Wednesday” and wanted to meet. We set an appointment which I duly entered in my calendar. Only when it was too late did I discover that he was only in town until Wednesday and had intended to meet on Tuesday. Another lesson learned the hard way.

2017-03-02
by admin
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Internship program brings global business skills to local companies

Austin Community CollegeI’ve been quite impressed with the sophistication of Austin Community College’s international business programs, which go far beyond what I’ve seen elsewhere at the community college level. ACC’s Center for Experiential Learning is a new program that aims to create a sort of clearinghouse for internship opportunities for ACC students. Besides the chance to working at an organization in the “real world”, participants receive supervision, mentoring and evaluation in pursuit of specific learning objectives.

For employers, hiring an ACC intern means far more than just cheap labor. Program participants are smart, highly motivated professionals-in-training who already have a grounding in valuable skills such as international business and supply chain management. An employer account at the CEL website allows firms to browse, search, filter, and save students’ resumes and reach out to interesting candidates. The CEL also aims to help employers develop internship and “coop” (multi-semester) programs and take part in departmental industry advisory committees. It’s a great way for local businesses to tap into up-and-coming talent, and maybe even find the star performer who can take them to the next level of success.

2017-02-09
by Eurobubba
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Free money for small exporters


Export grants from the SBA

The U.S. Small Business Administration is providing grants (free money!) of up to $5000 for qualified small businesses under the State Trade Expansion Program (STEP). The grants are intended to help small businesses launch or expand their export programs. In Texas these grants are being administered by the state Department of Agriculture, but recipients are not required to be in an agriculture-related business.

To qualify, a company must be a “small business” under SBA rules and produce a product or service in Texas.

The grants are provided as post-completion reimbursement for export-related activities. These can include a range of services provided by the U.S. Commercial Service, translations and design of export marketing collateral or websites, travel and tradeshow participation, among others. (And I’d be remiss not to mention that we offer many of the eligible services at Swift Passage.)

2015-08-07
by Eurobubba
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Singapore, gateway to Southeast Asia, celebrates 50 years of independence

Singapore flag This Sunday, August 9, marks the 50th anniversary of independence for Singapore. The island city-state is celebrating the occasion with an elaborate series of events under the tag SG50. Singapore became independent in 1965 after a short-lived merger with Malaysia, having previously been a British possession. The British Empire left Singapore with English as the language of business, education, government, and media, along with an efficient legal system based on English common law.

Over the past half-century, Singapore has been one of the world’s great economic success stories. Its GDP at purchasing-power parity (PPP) passed that of the United States in 2004 and stood well over $80,000 in 2014. (Nominal GDP per capita is lower due to exchange rate effects.) The World Bank ranks Singapore number one in the world in its Ease of Doing Business rankings. The city-state boasts a bustling container port, an efficient airport and extensive refinery and petrochemical complex.

Although its government has been accused of authoritarian tendencies — the ruling People’s Action Party has never lost an election, and opposition voices have faced heavy-handed legal challenges in the past — Singaporean officials are famously free of corruption.

Map of Singapore in region

Regional Hub

Singapore is a major regional hub for commerce, finance, shipping, and travel. The modern city was founded in 1819 as a trading post of the British East India Company, and it remains true to its free port traditions today. Its container port is the second-busiest in the world, and its trade-to-GDP ratio is the world’s highest at over 400%. Some two-thirds of imports are re-exported to third countries in the region, and there is an extensive system of Free Trade Zones to facilitate re-export and transshipment.

Business Opportunities

The U.S. Singapore Free Trade Agreement came into effect in 2004. Singapore was the 13th-leading export destination for U.S. goods in 2014. Its business culture is dynamic and firms are aggressive in pursuing new opportunities. Many distributors already have extensive experience representing American suppliers not only in Singapore itself but across broader regional markets.

In many ways Singapore offers the best of both worlds for American exporters — ready access to the rapidly growing emerging markets of Asia, in a business-friendly, English-speaking environment with an efficient and familiar legal system, strong intellectual property protections, and virtually no official corruption.

With its business-friendly culture, Singapore is generally welcoming to both visitors and long-term residents from developed countries. (That said, it is a densely populated island nation with limited land and resources, and popular resistance to immigration has grown in recent years.) Michael Jahn, an American citizen and longtime Singapore resident, notes that business opportunities there are “definitely not just for big companies in Singapore. The Singaporean government invests in whole industries at a time, and small companies can get grants or other help.” The country’s close trade relations with other nations in the region are paralleled by travel opportunities, and Jahn has relished the chance to visit Malaysia, Vietnam, Cambodia, Thailand, Indonesia, Myanmar, Sri Lanka, China, and Japan wile living there.

The U.S. & Foreign Commercial Service, an agency of the Department of Commerce, has identified the following leading opportunities for U.S. exports to Singapore:

  • Aircraft and parts
  • Medical devices
  • Computer hardware, software & peripherals
  • Laboratory & scientific instruments
  • Environment control equipment
  • Oil & gas
  • Telecommunications equipment
  • Education
  • Fresh and processed fruit & vegetables and juices

Background

  • Currency: Singapore dollar (SGD, $)
  • Population: 5.4 million
  • GDP (2014): $308.1 billion
  • Forecast GDP growth (2015): 3.2%
  • World Bank Doing Business ranking: 1st of 189
  • Imports from U.S. (2013): $42 billion

More information

The Singapore exception, The Economist Special Report, July 18th 2015

Doing Business in Singapore: 2014 Country Commercial Guide for U.S. Companies, U.S. Commercial Service publication

2015-02-07
by Eurobubba
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TTIP negotiations resume in the face of political headwinds

As American and European Union negotiators returned to the bargaining table this week for the eighth round of talks on a proposed Transatlantic Trade and Investment Partnership, political headwinds in Europe were approaching gale force. While protesters descended on the negotiation venue in Brussels, a fresh spate of leaked documents ignited new fears among the pact’s opponents. Meanwhile a deputy minister in Greece’s newly elected leftist government says his country’s parliament “will never ratify” TTIP.

With a new Congress in Washington and a new European Commission in Brussels, negotiators had promised a “fresh start” after last year’s rising tide of skepticism among European consumer, environmental and labor groups, even as the American public remained largely oblivious. Like most international trade agreements, this one is being negotiated behind closed doors. Much to the Commission’s dismay, globalization opponents have filled the resulting information vacuum with increasingly dire forebodings, from a flood of GMOs and chlorine-soaked chicken in supermarkets to forced privatization of Britain’s National Health Service.

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Much of the alarm owes more to stereotypes of the United States as home of “wild-west capitalism” and to rampant mistrust of institutions in the wake of the global financial crisis than to anything in reality. The European Commission has repeatedly denied that TTIP will weaken existing safety and environmental regulations or impair governments’ ability to regulate and is trying to counter fears by holding public consultations and publishing some of its negotiating drafts. But the “consolidated texts” documenting the outcomes of previous negotiating rounds have remained a closely guarded secret. Germany’s Tagesspiegel recently published an article detailing the restrictive rules for access to the documents that the American side has insisted on, even for European national trade officials (article in German with link to access rules document in English).

Probably the most serious objection to TTIP has centered on proposed “investor-state dispute settlement” (ISDS) mechanisms that would allow corporations to sue governments over regulatory actions in special tribunals, bypassing national court systems. Although ISDS is already part of hundreds of trade agreements, including many that individual EU member states have concluded with each other or the US, its inclusion in TTIP has drawn protests throughout Europe. An anti-TTIP petition focusing on ISDS gathered over a million signatures. Representatives of several national governments, including heavyweights like Germany and France, have also spoken out against ISDS, but so far none has proposed amending the Commission’s negotiating mandate to exclude it. Trade Commissioner Cecilia Malmström has argued that ISDS needs to be part of TTIP precisely because the existing system “needs to be quite dramatically reformed.” But proposals such as adopting UN-sponsored transparency rules seem unlikely to placate critics. For now, the Commission has suspended negotiations on ISDS pending further consultations.

Impeccably pro-business voices including the Cato Institute and the Financial Times have advocated jettisoning ISDS to smooth passage of TTIP as a whole. (For whatever it’s worth, this is my own position as well.) TTIP without ISDS would still be a landmark achievement. But fresh opposition to the pact’s proposed regulatory cooperation provisions strikes at TTIP’s heart. Measures for harmonization and/or mutual recognition of regulations and technical standards have been part of the TTIP blueprint from the beginning. Indeed, given the already-low tariffs on most goods in transatlantic trade, they would be the source of much of the agreement’s benefits. Potential cost savings for small and medium enterprises from eliminating duplicate certification and parallel product lines have been a major selling point for proponents. But the details in a draft European proposal for the Regulatory Cooperation chapter leaked this week have set off new alarm bells in the opposition camp.

The draft calls for an “early warning” procedure in which each side would periodically submit plans for future laws and regulations to the other for consultation. Foreign and domestic “stakeholders” would then be invited to “provide input through a public consultation process” — a new venue, critics say, for corporate lobbyists to block regulations and shape legislation to their own liking. Proposed new rules would undergo an “impact assessment” to gauge their potential effects on trade and investment, a procedure that critics insist is “tilted towards the interests of business, not citizens.” Moreover, the proposal would institute “regulatory exchanges” and a bilateral Regulatory Cooperation Body that would, in effect, give each side a voice in formulating the other’s future laws and regulatory framework. The normally staid Frankfurter Allgemeine Zeitung, hardly a hotbed of radical anti-globalization sentiment, responded to the draft with a startled article under the headline “America to have a say in our laws.”

Business groups have only belatedly started more actively injecting their pro-TTIP voices into the public debate. Needless to say, they’ve had a role in setting the agenda from the start, but it’s only recently that vigorous high-profile defenses of the trade pact have started appearing from organizations like the US National Association of Manufacturers, the German Bundesverband der Deutschen Industrie, the Confederation of Swedish Enterprise, the European Association of Automotive Suppliers, and the American Motor & Equipment Manufacturers Association.

The heady days of early 2013, when the parties hoped to wrap up negotiations by the end of 2014, are all but forgotten. Most recently, Commissioner Malmström suggested that “the bare bones of an agreement” might be completed by the end of this year. Without a great deal more work to counter the naysayers, winning ratification from the European Parliament and 28 member states’ parliaments will be an uphill struggle.

Want to learn more about TTIP? A good place to start is the United States Trade Representative’s online TTIP Information Center.

2013-09-27
by Eurobubba
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The Transatlantic Trade and Investment Partnership: opportunity and challenges


The second round of Transatlantic Trade and Investment Partnership (TTIP) negotiations between the United States and the European Union — what US Trade Representative Michael Froman has called the start of “real negotiations” — is scheduled to commence on October 7.

If successful, TTIP will be the biggest free trade agreement ever negotiated. Already, despite the economic troubles of recent years, the United States and European Union together still account for half of the world’s GDP and roughly one-third of world trade. The potential gains from expanding trade between them could be enormous, representing a significant economic “stimulus” without the need for additional government spending. A German study projects that a “deep agreement” addressing a full spectrum of non-tariff barriers could yield a 13.4% boost in per capita real income for the United States, 5% for Europe, though other estimates are more modest. A study commissioned by the British Embassy in Washington and published this week sets out detailed job growth predictions for each of the fifty states. The US International Trade Commission was scheduled to publish an impact assessment this week, but the report has not yet appeared on the ITC’s website.

The objectives of the negotiations, set out by a joint High Level Working Group on Jobs & Growth, include:

  • Eliminating/reducing tariffs and quotas
  • Eliminating/reducing barriers to trade in goods & services and investment
  • Enhancing compatibility of regulations and standards
  • Eliminating/reducing/preventing “behind the border” non-tariff barriers
  • Enhancing cooperation on global trading rules and concerns

For the most part, tariffs between the two sides are low already, although the EU does impose duties of 8% on motor vehicles (including parts) and 14.6% on processed foods. Outside those sectors, major gains will come from harmonization and/or mutual recognition of regulations, standards, and licensing. The cost savings to businesses from avoiding duplicate compliance efforts and the need to maintain parallel product lines will be considerable.

Although the ultimate public health and safety outcomes in the US and EU are broadly similar, American and European regulators are divided by profound philosophical differences. The precautionary principle embodied in the European regulatory approach is anathema to American business. TTIP is hardly likely to reconcile these differences at a stroke. Instead, a best-case outcome might entail the establishment of joint institutions and a procedural framework for advancing harmonization over a period of years. If the initiative succeeds, however, the sheer size of the transatlantic market will ensure that its harmonized rules, regulations and standards become the de facto standards for the world. Indeed, some observers see TTIP largely as an effort to counter China’s growing influence on the world economic stage.

Officials on both sides emphasize an ambitious 2014 target for completing the negotiations, hoping to head off public skepticism in light of the many political challenges to be overcome and the seeming failure of the multilateral Doha Round trade negotiations. Indeed, some are painting TTIP as a potential end-run around the multilateral WTO framework. Taking a cue from the EU’s own history of ongoing enlargement, German officials have expressed a desire to open TTIP to third parties in the future as a means to set higher global standards. Each side’s traditional trading partners will have plenty of motivation to sign up, as the Bertelsmann Stiftung/Ifo Institute study mentioned above calculates GDP losses between 2.5% and 9.5% to those countries from diversion of trade.

Reaching a comprehensive agreement will be far from easy. Recent revelations of NSA data gathering have raised hackles in Europe and will make it harder to negotiate access to EU markets for US tech companies. Other issues have been bones of contention between the two parties for decades. One of these, the audio-visual sector, has already been excluded from the European Commission’s negotiating mandate at the insistence of France, which considers cultural heritage goods such as film sacrosanct. It is unclear just how firm the exclusion will be if push comes to shove; German media have presented it as more of a bargaining chip than a no-go zone. The United States for its part will be loth to give up “Buy American” public procurement policies, and it remains unclear how the fifty states could be induced to abandon their own buy-local policies. Meanwhile, environmental and consumer groups are already warning of a potential regulatory race to the bottom. It’s a sure bet that corporate lobbyists will be pushing for a regulatory framework that is not merely harmonized, but also looser overall.

Both sides have taken steps to counter accusations of lack of transparency. The US has released the names of its lead negotiators and launched a series of small business roundtables, while the EU has published six of its ten initial position papers.

Political will to reach an agreement seems strong on both sides. The initial July round of negotiations focused on procedure and priorities and set up 24 working groups to address specific issues. These groups are currently preparing the October round of negotiations, to be followed by a third round in December. In January USTR From an will meet EU Commissioner for Trade Karel De Gucht for a “stock-taking exercise” to assess progress.

2013-09-06
by Eurobubba
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TTIP a threat to Turkish economy?

Turkey stands to be a big loser from the pending US-EU Transatlantic Trade and Investment Partnership (TTIP), according to a Brookings Institute study reviewed in Hürriyet Daily News. Under the terms of Turkey’s existing customs union agreement with the European Union, if the EU enters into a free trade pact with a third party, that party’s goods can also enter Turkey duty-free, but the third party is under no obligation to provide the same access to Turkish goods.

Moreover, the United States is also in negotiations with (currently) eleven Asian countries on an agreement known as the Trans-Pacific Partnership (TPP). Free access to the American market for those countries’ products will put Turkish goods under even more competitive pressure.