US Unlikely to Sign New Global Tax Treaty

Businessman hand touching tax word on virtual screen the concept of online taxation.

USCIB’s vice president for taxation policy, Carol Doran Klein, was quoted extensively in a November 30 Bloomberg BNA article on the OECD’s multilateral tax treaty, known as the Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting. According to Doran Klein, while many countries are likely to sign on to parts of the treaty, it is unlikely the U.S. will sign on mainly because the multilateral instrument (MLI) “does not have a lot to offer the U.S. Many of the provisions are variations on treaty policies that the U.S. has been implementing for decades.”

Regarding effect on business, Doran Klein said it will be a challenge for companies and their advisers to analyze the changes made by the MLI to individual bilateral treaties. “This is actually a huge issue, because it may be difficult to work through exactly what the new treaty language is.” Doran Klein said she is worried that the tax treaty area will wind up like the trade area. The trade agreements are very difficult to read and understand, because they refer back to other agreements for basic principles. “I believe that the reason they do that is they do not want to open up the fundamentals of the old agreements to complete renegotiation, but it is therefore extremely difficult to understand the obligations.”

To read the full story, visit Bloomberg BNA (subscription required).

The Uncertain U.S. Role in Global Tax Debate

BEPS TaxationUSCIB’s vice president for tax, Carol Doran Klein, has recently been quoted in Bloomberg Government amid uncertainty around the U.S. role in global tax rewrite under President-elect Trump’s administration. Among the various issues, the project on tax base erosion and profit shifting (BEPS) will likely not unravel. Doran Klein trusts that the BEPS project will be included in the new administration’s ongoing work, hoping that the U.S. will “continue to participate actively because having the U.S. Treasury at the table makes the rules more likely to reflect the concerns of the U.S. as a government and the U.S. business community.” She goes on to say that there are “many countries that are getting significant benefits from the BEPS project, including things that have already been implemented, such as the reporting requirements.”

Read the whole story here. Please note you need a subscription to Bloomberg Government for full access.

The U.S. and Mexico Must Work Together as Neighbors

Flag Badges of America and Mexico in PileUSCIB Chairman Terry McGraw has joined with ICC Mexico Chair Maria Fernanda Garza in a joint appeal for the United States and Mexico to work together to address common challenges of trade, immigration and security.

In a joint op-ed in the Mexican newspaper El Financiero, the two business leaders urged their compatriots to reject the antagonism emanating from the U.S. campaign trail, reminding readers of the direct and measurable benefits the North American Free Trade Agreement has brought to both Mexicans and Americans alike.

McGraw and Fernanda Garza finished by reiterating that the business communities of both the United States and Mexico are united in their support for the Trans-Pacific Partnership, which they urged their respective legislatures to ratify without delay.

Please see below for the English translation of the op-ed. To read it in Spanish on El Financiero’s website, click here.

USCIB and ICC Mexico each serve as their country’s national committees of the International Chamber of Commerce.

 

The U.S. and Mexico Must Work Together as Neighbors

By Harold McGraw III and María Fernanda Garza

If the U.S. presidential campaign has reminded us of anything, it is the importance of neighborliness. Just as your own neighborhood deteriorates if you and your neighbors don’t communicate or work together well, so it is in business and international affairs.

Right now, on both sides of the U.S.-Mexico border, we face a stark choice: build walls, foster mistrust and disengage our economies – or work together to continue building shared prosperity. As representatives of the business communities from both nations, we strongly urge our fellow countrymen and our leaders to choose the latter course.

Since the North American Free Trade Agreement was negotiated more than 20 years ago, Mexico and the United States have enjoyed an increasingly close and mutually beneficial relationship that builds on our respective strengths and abilities, our vibrant economies and vast resources, our unique position as neighbors and, most importantly, our peoples. Mexico, the U.S. and Canada have turned North America into one of the most important and most dynamic free trade areas in the world. It has taken foresight and resolve.

Bilateral trade between Mexico and the U.S. has multiplied by six since NAFTA’s entry into force, reaching nearly $500 billion in 2015. Mexico is now the second-largest export market for U.S. goods and its second-largest supplier. It is estimated that U.S. trade with Mexico supports some six million American jobs.

With a growing, $1 trillion economy and a developing middle class that eagerly consumes U.S. and other foreign products, Mexico is the world’s 9th-largest world importer, and it buys 16 percent of everything the U.S. sells to the world. It is the largest export market for California, Arizona, New Mexico and Texas, and one of the three most important export markets for 29 other U.S. states.

This burgeoning trade relationship is built upon regional economic integration, cooperation and capitalizing on both nations’ competitiveness. Bilateral trade often occurs in the context of shared production, where manufacturers on each side of the border work together to produce goods. The development of robust supply chains as a result of NAFTA has translated into highly integrated trade in such key industries as automobiles, aerospace and electronics.

For instance, Mexican exports to the U.S. contain 40 percent of U.S. value-added, which is much higher than those from South Korea or China which are at five percent and four percent, respectively.

The U.S. and Mexico have a shared interest in fostering economic integration in North America, which is becoming, once again, the most competitive region in the world. Among other things, both countries need to ensure an efficient and secure border, the development of human capital for innovation and the growth of the services sector.

Businesses on both sides of the border firmly believe that the Trans-Pacific Partnership (TPP) will further strengthen Mexico-U.S. relations, North American competitiveness and our shared prosperity by encouraging competition and setting new and modern disciplines in the Asia-Pacific Region. With TPP, North America will become an even more important export platform to the world, with the consequent creation of jobs. We therefore are urging our respective legislatures to quickly ratify the TPP.

Especially in the face of growing protectionist and isolationist sentiment, we cannot stress strongly enough the critical importance of closer cooperation between our two governments in fostering a strong U.S.-Mexico relationship – one that contributes to shared economic growth, competitiveness and prosperity throughout North America. As neighbors, we have a shared responsibility to keep the neighborhood safe and prosperous.

Harold McGraw III is chairman of the United States Council for International Business. Maria Fernanda Garza chairs the Mexican chapter of the International Chamber of Commerce.

Transatlantic Trade Talks Lack European Leadership

Originally published in the Wall Street Journal on September 20

Many details of TTIP still need to be negotiated. But what’s missing is a sign of seriousness from the EU.

By PETER ROBINSON and THOMAS NILES
Sept. 20, 2016 3:05 p.m. ET

us_eu_flags_3Readers following the progress of negotiations over the Transatlantic Trade and Investment Partnership would be forgiven for thinking that a deal is now impossible. Between the Brexit vote, antitrade rhetoric on the U.S. presidential campaign trail and stern opposition by assorted European political leaders, TTIP appears to lack the kind of serious support needed to succeed.

The commercial and diplomatic logic behind TTIP remain as compelling as ever. An agreement would further open each side’s market to mutual trade, which currently amounts to more than $1 trillion annually. It would strengthen rules-based investment in what is already the world’s largest relationship for foreign direct investment. And it would improve market access for trade in services while tackling costly nontariff barriers, including regulatory obstacles.

Done right, the effort to roll back the impediments to trade and investment between the U.S. and the European Union could be a huge boost to both economies. Business leaders on both sides of the Atlantic are united in support of an ambitious agreement.

But progress in the 4-year-old talks has come more slowly than the governments or the business communities had hoped. TTIP certainly faces headwinds in the U.S., where the two major candidates in this presidential election have turned their backs on a half century of bipartisan trade policy and American global engagement. Instead, they pander to antitrade, isolationist, protectionist forces.

But the greatest challenge to TTIP right now comes from Europe, in the form of naked antitrade and anti-American prejudices from some European leaders.

Over the past couple of years, the European Parliament has consistently belittled American policies and positions, issuing unhelpful “red-line” declarations, for example, that no single EU policy or regulation could possibly be modified under a TTIP agreement, or that the U.S. would have to adopt wholesale the EU’s regulatory regime.

Particularly disappointing have been a series of high-level political statements in recent weeks from senior Austrian, French and German officials calling for a stop to TTIP negotiations because of American intransigence. These complaints are unfounded. In fact, the U.S. has been quite forthcoming about eliminating tariffs on industrial goods and agriculture, as well as removing barriers to trade in services and in government procurement. The EU has declared far more areas of negotiation to be off limits.

While Cecilia Malmström, the EU’s trade commissioner, has, to her credit, defended TTIP, the overall response from the European political leadership has been disappointing. Many prominent EU leaders have remained silent. And while Germany’s Chancellor Angela Merkel has shown consistency and courage with a strong defense of TTIP, too many other European leaders haven’t matched her commitment or clarity.

Like all real-world negotiations, getting to agreement on TTIP will require tough decisions and compromise. American business groups are joining with other stakeholders in pushing their government to achieve an ambitious,
comprehensive, high-standard TTIP agreement. They have consistently opposed, for instance, the U.S. government’s insistence that the regulation of financial services be excluded from TTIP.

But the real question isn’t what detailed provisions will be included in a TTIP agreement. Rather, it’s whether the EU is serious about the negotiations at all. Will European leaders simply use TTIP to mollify their own critics at home? If the EU is serious about cementing its member economies more closely to each other, then European leaders need to stand up in support of a deal, and they need to do so now. Meanwhile, the European Commission should move quickly to schedule multiple negotiating rounds with the U.S. before the end of the year.

The two sides have agreed to continue talking, with the next round of TTIP negotiations set for early October. Hopefully this will result in actual progress and not additional excuses for delay. Both the U.S. and EU need to show the courage, vision and commitment to the transatlantic relationship and to push forward for the kind of balanced, ambitious, high-standard TTIP that both economies need.

Mr. Robinson is president and CEO of the United States Council for International Business. Mr. Niles, the council’s past president, is a retired U.S. diplomat who served as ambassador to the European Union.

What’s the Big Deal About Trade?

AIADA_TradeThe 2016 presidential race has brought trade under heavy fire, with both candidates opposing the the Trans-Pacific Partnership. Jonathan Huneke, USCIB vice president of communications and public affairs was quoted in an article by the American International Automobile Dealers Association about current misconceptions about trade.

Read the article

Jonathan Huneke, the vice president of Communications at the U.S. Council for International Business, echoes that belief, noting that many Americans believe the economic climate is working against them. “Despite steady growth in jobs since 2010, wage stagnation in the United States has led many in the United States to believe that the odds in the current economy are stacked against them,” he notes.

According to Huneke, “American dealers have a lot at stake in keeping our trade policy fundamentally open and forward-leaning. There is huge demand and growth potential for innovative automobiles that meet the needs of U.S. consumers. Many of the most innovative automakers rely heavily on the American market, and on skilled American workers, to compete globally.”

Huneke agrees. “Trade agreements serve important diplomatic and geopolitical purposes in addition to their economic benefits, something that most Americans probably understand,” he says. “For example, the TPP and TTIP agreements can play an important role at a time when we are seeking to strengthen our Asian and European alliances in the face of threats like North Korea and ISIS.”

Read the article

The Business of Achieving the Sustainable Development Goals

Business for 2030 logo

The Sustainable Development Goals (SDGs) bring the global community together in a bid to end poverty and hunger, fight climate change, and achieve sustainable economic growth. How can businesses play their part in this universal effort, and what’s in it for them?

USCIB Vice President for Labor Affairs, Corporate Responsibility and Governance Ariel Meyerstein was quoted in an article by Eco-Business about how the private sector is participating in the global development agenda.

One major initiative is Business for 2030, launched last September by the New York-based United States Council for International Business (USCIB). The programme showcases efforts by companies worldwide to contribute to the SDGs, and aims to foster partnerships between the public and private sectors to meet the goals.

Ariel Meyerstein, USCIB’s vice-president of labour affairs, corporate responsibility and governance, recalls that in 2014, the organisation recognised that the SDGs offered an unprecedented space for the private sector to participate in the global development agenda.

“This meant that businesses needed to quickly get up to speed on this vast, ambitious, and dizzying new framework,” he says. “Business for 2030 provides a public resource that helps translate existing and ongoing corporate activities into the new SDG language.”

This collection of concrete examples not only offers other businesses case studies on how to get involved, but also allows governments to identify good corporate initiatives in their own countries, which they can then collaborate with, explains Meyerstein.

The site today hosts more than 140 initiatives from 35 firms which are implemented across 150 countries.

Read the full article at Eco-Business

Finance Disrupted – Collaborate or Die?

Finance Disrupted BannerUSCIB is proud to partner with The Economist for the October 13 event “Finance Disrupted: Collaborate or Die?” in New York City. The wave of fintech disruption that is sweeping through the financial services industry is approaching a critical phase. The rise of startups targeting every corner of financial services – from currency transactions to trading and wealth management – has won the attention of the industry’s incumbent giants.

USCIB members save 15% on The Economist’s “Finance Disrupted” conference

Building on 2015’s acclaimed Buttonwood Gathering, “The Valley Meets the Street”, we are pleased to announce that our Finance Disrupted conference will take place this October 13th 2016 at 10 on the Park at the Time Warner Center in New York. Join editors of The Economist, industry leaders, entrepreneurs, investors, academics and policymakers to explore the role of collaboration in surviving the fintech revolution.

Visit The Economist’s website for program and registration information.

Businesses Say Proposed Tax Rule Is Too Complicated

USCIB Vice President and International Tax Counsel Carol Doran Klein and Chair of USCIB’s Taxation Committee William Sample (Microsoft) were quoted in a July 6 Wall Street Journal article about the U.S. Treasury’s controversial new proposed rules to curb tax avoidance. USCIB and other groups have argued the new rules would harm common business structures.

“If it were a targeted rule, the companies wouldn’t be going nuts the way they are,” said Carol Doran Klein, USCIB’s vice president and international tax counsel. “It hits virtually everything they do.”

Read the entire article.

The Unexpected Regulatory Threat to Global Trade

The International Chamber of Commerce was quoted in an article in the Wall Street Journal, “The Unexpected Regulatory Threat to Global Trade,” about a European Union regulation on the short-term financial instruments that connect buyers and sellers of goods across countries.

The EU included trade-finance instruments, such as letters of credit, in the list of bank liabilities that could be written down if a bank goes under: “This decision, the banks say, creates an enormous compliance headache and a competitive disadvantage, and could leave unsuspecting parties holding the bag if foreign buyers fail to pay their bills.”

“It’s a poorly thought-out regulation that will hurt EU businesses,” said Emily O’Connor, senior policy manager at the Paris-based International Chamber of Commerce.

Read the full article at the Wall Street Journal’s website.

Business Can Help Shape the Future of Global Trade

The following op-ed was published in the Wall Street Journal on May 26.

The World Trade Organization is seeking input from the private sector on the next steps for trade liberalization.

In the span of two short years, the World Trade Organization has given businesspeople around the world a number of reasons to sit up and take notice. Through a series of negotiated trade agreements, it has demonstrated that its efforts can bring massive, widespread benefits. Now the WTO is looking to work in closer partnership with the private sector to bring further gains to the international trade regime.

In 2013, WTO members delivered the Trade Facilitation Agreement. This was the first global trade deal in 18 years. Once ratified, it promises to slash red tape and reduce border delays. Trade costs will be lowered by an average of nearly 15%. Global trade could be lifted by as much as $1 trillion.

This impact is bigger than if every remaining tariff in the world were reduced to zero. Full implementation could create more than 20 million jobs and lift global gross-domestic-product growth by up to 0.5 percentage points. Businesses around the world will get a significant boost.

Then in 2015, a group of WTO members came together to free up trade on a range of information-technology products, including the latest-generation semiconductors, telecommunications satellites, medical devices and video games.

This deal, expanding the existing Information Technology Agreement, eliminates tariffs on approximately $1.3 trillion in annual exports. That’s more than the value of the global trade in automobiles.

That same year, WTO members agreed on a world-wide ban on export subsidies on agricultural products, the biggest agriculture-trade reform in 20 years. Governments had been spending up to $13 billion on these economically distorting subsidies each year. The private sector supported these deals, and their engagement made a huge difference in the outcome.

Before this recent flurry of breakthroughs at the WTO, businesses had very little interest in trade negotiations. Prolonged lack of progress in global trade negotiations had led many countries to focus elsewhere and pursue bilateral and regional trade initiatives. Such initiatives can deliver significant economic gains, but there’s no question that global agreements can deliver even more benefits to more people.

The private sector recognizes this. A complicated patchwork of overlapping trade regulations and standards is less efficient than global rules. That’s why business leaders want and need a strong WTO.

Shared rules and enhanced market access in 162 countries is something no regional trade agreement can offer. Now that the WTO has showed that it can deliver these results, private-sector interest is rising fast and businesses are asking: What’s next?

The precise shape of the WTO’s future negotiating work remains an open question. All members agree that long-standing differences in agriculture, industrial goods and trade in services must be tackled, and that development should remain a central priority.

But at present there’s no agreement on precisely how to proceed with these negotiations, or what specifically should be on the agenda. Areas for discussion include supporting trade by micro-, small- and medium-size enterprises; promoting and facilitating investments; supporting e-commerce; tackling fisheries subsidies; and lowering nontariff barriers.

In this context, the private sector has asked that its voice to be heard, not to dictate the agenda, but to provide perspective. Two major business organizations, the International Chamber of Commerce and the B-20 (the private-sector arm of the G-20) approached the WTO requesting a platform to discuss current trade issues and present their thoughts to WTO members.

That meeting, the first of its kind, will take place on Monday in Geneva. Business leaders from small and large enterprises, from developed and developing countries, along with other stakeholders, will brainstorm with WTO members. We hope that this interaction will help their governments as they shape the WTO’s future agenda.

In recent years the WTO has shown that, with the support of the private sector and others, it can achieve major, economically significant trade agreements. Strengthening this partnership will ensure that the WTO’s record is maintained and that it keeps delivering for growth, development and job creation around the world.

Mr. Azevêdo is the director-general of the World Trade Organization. Mr. Mittal is the first vice chairman of the International Chamber of Commerce.