International Trade

A Further Step in the Implementation of the European Union Financial Transactions Tax

By Constance Descout, LLM Candidate 2013 | Posted on

On October 23, 2012, the European Commission (the executive body of the European Union) proposed a Council Decision to enhance cooperation throughout the EU with a European Financial Transactions Tax (“FTT”).  The Council Decision follows a litany of previously failed attempts to enact an EU-wide FTT.

The harmonized European Financial Transactions Tax could have significant advantages for the economies of participating Member States.  Lithuanian Commissioner for Taxation Algirdas Šemeta explains:

“There are EU wide benefits to a common FTT, even if it is not applied EU wide.  It will create a stronger, more cohesive Single Market and contribute to a more stable financial sector.  Meanwhile, those Member States that have signed up for this tax will have the added bonus of new revenues and fairer tax systems that respond to citizens’ demands.”

The legal bases for the FTT are the enhanced cooperation provisions laid out in Article 20 TEU and Articles 326 to 334 TFEU. These provisions create a special decision-making procedure whereby a minimum of nine Member States is needed to reach a binding decision.  The resulting legislation is binding only on those Member States that are parties to the decision.  The October 23rd initiative is the most significant instance of a small group of nations moving forward without the rest of the EU.  The only other times the enhanced cooperation provision has been used is in simplifying cross-border divorces and cross-border patents.

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Trans-Pacific Partnership Seeks New Global Standard in Free Trade and Intellectual Property

By Michael S. Young, J.D. Candidate 2012, UC Berkeley School of Law | Posted on

As we discussed in our recent pieces about the Stop Online Piracy Act (SOPA) and the Anti-Counterfeit Trade Agreement (ACTA), online communities have grown increasingly agitated by efforts to globalize the U.S. intellectual property regime.    But the Trans-Pacific Partnership Agreement (TPP), a free trade agreement that liberalizes far more than intellectual property protection, has so far not sparked the type of viral outrage that halted SOPA and ACTA.

The TPP seeks to establish an entirely new free trade zone among Pacific Rim nations.  The agreement originated in 2006 between Chile, New Zealand, and Singapore but participants now include Australia, Brunei Darussalam, Malaysia, Peru, the United States and Vietnam.  Canada, Japan, and Mexico have expressed an interest in joining talks, but membership could require significant changes to domestic laws – for example, Canada may be required to cease its protectionist dairy supply management regime.

TPP responds not only to the breakdown of world trade talks within the framework of the WTO, but also specifically to the emergence of China, whose exclusion from talks is no accident.  As much a successor to NAFTA as to ACTA, the TPP seeks to eliminate all tariffs on a broad range of goods and services (including intellectual property) between members, to establish new rules for determining an import’s country of origin, and to create a new regime of legal remedies available to foreign businesses against national governments.  According to Ron Kirk, the U.S. Trade Representative, the agreement “sets modern trade standards, including ensuring worker rights and protecting the environment.”

One of the means the TPP employs in reaching these stated aims is to prohibit nations from using capital controls (regulation of the flow of speculative capital).  Capital controls remain popular in Asia, where they are sometimes credited with shielding India, China, and Malaysia from the effects of the 1997 Asian Financial Crisis.

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ACTA Refracta: Future Uncertain for ‘Secretive’ IP Trade Agreement

By By Michael Young, J.D. Class of 2012 | Posted on

The SOPA/PIPA uprising appears to have doomed those bills, but the United States Congress is not the only entity considering new restrictions on the web.  Trade agreements are emerging as the new legal device for combatting unlicensed use of intellectual property online – avoiding the legislative process, and potentially impacting the openness of the Internet in ways that are inciting outrage in the online community.  Two such agreements are positioned to have considerable effects on the global enforcement of intellectual property rights – the Anti-Counterfeiting Trade Agreement (ACTA) and the Trans-Pacific Partnership Agreement (TPP).  This post looks at the first of these agreements, ACTA; check back shortly for our discussion of TPP.

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The Network Lecture Series: Professor Nicholas C. Howson’s Insider Trading and China’s Administrative Law Crisis

By By Vibhooti Malhotra, L.L.M Class of 2012 | Posted on

Information is relevant to many exchanges. Those familiar with capital markets will appreciate the important role that information plays in capital trading. Securities regulators across the globe attempt to regulate the flow of information in markets to ensure efficiency and protect the interests of reasonable investors.

Prof. Nicholas Howson made a very interesting presentation regarding the nuances of Securities Law of the People’s Republic of China, 2006 (‘2006 Statute’) last Wednesday as a part of BCLBE’s lunch lecture series. His presentation addressed three broad subjects: 1) Section IV of the 2006 Statute concerning insider trading; 2) enforcement issues presented by the internal guidance issued under Article 74; and 3) general comments on the creation and reception of law in China.

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Out, Out Brief Candle: European Union Competition Commission Blocks NYSE Euronext-Deutsche Boerse Merger

By By Mike Perez, J.D. Candidate Class of 2012 | Posted on

As reported by the Network last month, the proposed merger between NYSE Euronext and Deutsche Boerse (DB) was in jeopardy as Juan Alumnia, head of the European Union’s Competition Commission, publicly stated that he would recommend prohibiting the deal from going forward. On February 1, the commission officially blocked the proposed merger that would have created the world’s largest exchange operator. As a result of the decision, NYSE Euronext announced that “both companies have agreed to a mutual termination of the business combination agreement originally signed by the companies on February 15, 2011.”

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Banking Supervision: Capital Conservatism

By By Vibhooti Malhotra, L.L.M Class of 2012 | Posted on

The broad supervisory standards and guidelines issued by the Basel Committee on Banking Supervision (‘the Committee’) have greatly influenced the manner in which Banks are organized in various jurisdictions. The Committee claims that the main culprit behind the current financial crisis is excessive leverage assumed by banks both on and off the balance sheet. The latest in the series of proposed changes propounded by the Committee is Basel III, which seeks to restructure banks like shock absorbers rather than transmitters of financial risk.

The Federal Reserve Bank (‘Federal Reserve’) has responded to Basel III by asking bank holding companies (‘BHCs’) to submit comprehensive capital plans over the next 24 months. It is noteworthy that BHCs are required to notify the Federal Reserve of any change in their capital structure under Section 224.5(b) of Regulation Y issued under section 5(b) of the Bank Holding Company Act of 1956. Basel III, which has been designed conservatively, creates a framework whereby banking companies are to maintain higher common equity ratios, institute tougher stress tests for liquidity, and enhance market discipline and disclosure, among other things. Furthermore, trading positions will be subject to more stringent review, as the Federal Reserve believes that such changes are in the spirit of financial reform initiated by the Dodd-Frank Act.

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The Largest Exchange Operator That May Never Be

By By Mike Perez, J.D. Candidate Class of 2012 | Posted on

On January 10th, 2012, it was reported that European Competition commissioner Joaquin Alumnia would recommend blocking the proposed merger between NYSE Euronext and Deutsche Boerse by the European Union’s Competition Commission at its February 1st meeting. For 11 months, NYSE’s Duncan Niederauer and Deutsche Boerse’s Reto Francioni have been trying to quell Mr. Alumnia’s concern that such a merger would give the resulting exchange control over approximately 90% of Europe’s traded derivatives. If allowed to proceed, the merger would create the world’s largest stock exchange operator.

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Reactions Against Currency Manipulation: More Than A Chinese Whisper?

By By Vibhooti Malhotra, L.L.M Class of 2012 | Posted on

The trade balance between United States and China has been heavily in favor of the People’s Republic for a long time. An often-cited reason for this phenomenon is the de facto pegging of the Renminbi (‘RMB’) to the US Dollar. It is believed that the Chinese Government actively purchases American dollars with the aim of artificially undervaluing its own currency. The result of this exercise is that even cheaper Chinese goods reach the American markets.

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