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Court’s Decision Expands EU Powers

A landmark ruling by the European Court of Justice (ECJ) gives expanded trade negotiation powers to the European Commission (EC).

According to a story in The Telegraph, the ruling provides a significant boost to Britain’s ambition of signing a quick free trade agreement (FTA) with the European Union (EU) post-Brexit.

The decision stems from the EC’s request to the Court of Justice for an opinion to determine whether the EU had the power to sign and conclude a free trade agreement created with Singapore by a qualified majority vote, or whether the trade deal in question required ratification by the EU’s 38 national and local parliaments.

Although the court’s findings state that the EU could not complete the agreement in its current form without member states’ participation, it did outline key areas such as financial services and transport where the EU did not require ratification.

“Trade experts said the ECJ ruling could substantially reduce the risk of any future EU-UK free trade agreement getting bogged down in the EU national parliaments, opening the way for an FTA to be agreed upon by a qualified majority vote of EU member states,” The Telegraph reported. The ruling has “potentially massive implications for Brexit,” the story notes, provided the UK formulates “its own FTA to avoid investment provisions and investor-state dispute mechanisms, relying on alternative arrangements such as bilateral investment treaties and [World Trade Organization] WTO-style dispute resolution panels.”

 

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Angola: More of the Same Expected

After 38 years of “iron-fist” rule, Angolan President Jose Eduardo dos Santos will be stepping down. The likely victor of the Aug. 23 general election is expected to be the country’s current defense minister and long-time aid of dos Santos, Joao Lourenço, according to the May Risk Monthly report from Credendo.

“The resignation does not mean the end for dos Santos as he is expected to retain sweeping powers as president of the ruling MPLA [Movimento Popular de Libertação de Angola] party,” the credit insurance group said. Analysts view the country’s risk for political instability and civil unrest as moderate. Major policy changes are not expected “as the influence of the MPLA’s old guard and military is even likely to strengthen. … Without significant reforms, the outlook for Angola remains gloomy [and] payment delays to external suppliers are likely to continue.”

Prolonged exposure to a foreign exchange shortage, uncertainty for investors and currency depreciation have “heightened sovereign nonpayment and exchange transfer risks”to Africa’s seventh-largest country and second-largest oil producer,according to risk management firm Aon.“Economic risks have increased due to lower oil revenues. … Legal and regulatory risks remain very high due to corruption, nepotism, red tape and a general lack of skilled labor. This makes the business environment extremely challenging. … [Angola] is still vulnerable to supply chain disruptions, while social cohesion remains weak due to tribal and ethnic divisions.”

 

 

Japan on a Growth Run

Chris Kuehl, Ph.D.

Don’t look now, but Japan has been growing—and consistently. For the last five consecutive quarters, the Japanese economy has been notching respectable levels of growth. The latest numbers are as good as they have been in some time.

The first quarter saw growth of 2.2% after expectations were for only 1.7%. The long-run expectations have been for growth under 1%, but the global growth opportunities have allowed Japan to consistently exceed expectations. The weak yen has boosted the level of exports, and the Japanese consumer has been sufficiently stimulated to have pushed the economy into growth at a decent pace.

Much of the Japanese economic challenge was self-inflicted, but policies have been a little more coherent of late. In 2014, the much-discussed Abenomics plan—with all of its stimulative intent—was immediately followed by a massive consumption tax to offset government spending. It was essentially trying to go both ways at the same time and was a disaster.

The tax that sent consumers into hibernation offset whatever stimulus government spending created. Now the country has focused on actual stimulus. The growth in the export community has provided enough consumers with the money they needed to get out and spend. The question remains, however, whether the growth is long lasting enough without additional stimulating. The Bank of Japan doesn’t yet plan to pull back on its efforts.

 

Election Calendar

May 24 – Cayman Islands, Cayman Legislative Assembly
June 11 – France, National Assembly of France
June 18 – France, National Assembly of France (second round, if needed)
June 24 – Papua New Guinea, National Parliament of Papua New Guinea
June 26 – Mongolia, President
July 2 – Senegal, Senegalese National Assembly
Aug. 4 – Rwanda, President
Sep. 11 – Norway, Norwegian Parliament
Sep. 23 – New Zealand, New Zealand House of Representatives
Sep. 24 – Germany, German Federal Diet
Oct. 10 – Liberia, President
Oct. 10 – Liberia, Liberian House of Representatives
Nov. 19 – Chile, Chilean Chamber of Deputies
Nov. 19 – Kyrgyzstan, President
Nov. 19 – Chile, Chilean Senate
Nov. 19 – Chile, President
Nov. 26 – Honduras, Honduran National Congress
Nov. 26 – Honduras, President

 

Global Roundup

Brazil roiled as President Temer reportedly taped arranging bribe. Brazilians awoke to fresh political turmoil on the morning of May 18 as federal police moved against key allies of the president and arrested a prosecutor in response to secret tapes about bribery, allegedly made by a meat baron as part of a plea bargain. (Globe and Mail)

Venezuela crisis worsening; U.S. wants to prevent new Syria. On May 17, the U.S. called the first-ever UN Security Council consultations on Venezuela because the crisis is getting worse, and the Trump administration wants to prevent another conflict like Syria, North Korea or South Sudan. Venezuelan Ambassador Rafael Ramirez strongly rejected the U.S. bringing his country’s political dispute to the UN’s most powerful body and accused Washington of again trying “to interfere in our domestic issues.” (Business Mirror)

China’s ambitious Silk Road summit. In the last 20 years, the rise of China has been the most significant geopolitical and global economic development. It now faces further challenges in reforming its economy, an endeavor in which Europe can play a part. (EurActiv)

Trump administration notifies Congress of intent to launch NAFTA talks. The Trump administration informed U.S. lawmakers that it intends to launch formal negotiations on overhauling the North American Free Trade Agreement (NAFTA), a big bet by President Donald Trump that he can win concessions from Canada and Mexico, and push a deal through Congress. (HSN)

A decade after debt forgiveness, Africa still hooked on dollars. When rich countries wrote off billions of dollars of African debt in 2005, they hoped governments would think twice about borrowing again in costly foreign currencies. Over a decade later, most sub-Saharan African countries still rely on U.S. dollar-denominated debt to finance their economies. Some investors say this is sowing the seeds of future debt crises. (Reuters)

Can Puerto Rico escape disaster? In early May, Puerto Rico filed for bankruptcy in federal court to stave off lawsuits, under a law Congress passed last year, to help the island cut its debt and escape financial disaster. The saga now heads to federal court, where the struggle between Puerto Rico and its creditors will be decided. (Global Risk Insights)>

Latin America and the Caribbean: Bouncing back from recession. Latin America and the Caribbean are expected to gradually emerge from recession in 2017, but to secure strong and inclusive growth going forward, the region needs to address gaps in infrastructure, improve education outcomes, strengthen the business environment and tackle corruption. (IMF)

Erdogan leaves meeting with Trump empty-handed. The language at the press conference following their meeting early last week may have been conciliatory, but there is no masking the tensions between U.S. President Donald Trump and his Turkish counterpart President Recep Tayyip Erdoğan. The list of grievances Turkey brought to the meeting in Washington on May 16 was long, and ultimately, Erdoğan seems to have walked away empty-handed. (The Interpreter)

Trade-based money laundering: not just a bank’s burden. U.S.regulators are clamping down on trade-based money laundering, but they should look further than banks to combat the practice. Global Trade Review explains why. (Global Trade Review)

Export assistance: State, federal and international resources. Many people who are just starting to export or are considering it, feel lost as to where to begin. Luckily, there are lots of resources available for exporters to receive assistance. This article is an overview of the state, federal and international organizations that provide assistance for exporters. (Shipping Solutions)

 

Week in Review Editorial Team:
Diana Mota, Associate Editor and David Anderson, Member Relations