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Global Policy Watch

Key Public Policy Developments Around the World From Covington & Burling LLP

White House Mobilizes Forces Against Superbug

Posted in Health Issues

President Obama yesterday signed an Executive Order [1] (EO) directing Federal Government departments and agencies to take action at home and with international partners to combat this national security threat.  The White House also issued its five-year National Strategy for Combatting Antibiotic Resistance [2] and the President’s Council on of Advisor’s on Science and Technology (PCAST) also issued a related technical advisory report on Combating Antibiotic Resistance.[3] In press briefings, senior administration officials cited the risks of political instability, crushing economic costs and erosion of other security capabilities from potential superbug health epidemics, and warned that a $35 billion per year estimate of annual direct and indirect costs (and 23,000 deaths) in the U.S. alone from superbugs is extremely conservative. 

Against that backdrop, as one of the economic incentives for innovation, the EO announced a $20 million prize co-sponsored by the National Institutes of Health and Biomedical Advanced Research and Development Authority for the development of rapid, point-of-care diagnostics to identify highly-resistant bacterial infections. The U.S. Department of Health and Human Services (HHS) will soon hold a public meeting to help ensure the competition’s focus on priority needs.  Senior officials hoped that the prize might help mobilize far higher investment levels and awareness of the issue, as other such prizes have.  

The EO establishes a new interagency Task Force co-chaired by the Secretaries of Defense, Agriculture and HHS to submit (by February 2015, according to senior officials) a National Action Plan to the President with specific steps recommended to implement his Strategy and to address PCAST recommendations, including on how best to promote new and next generation antibiotics and diagnostics.   

The key role of industry is clearly acknowledged in this “major upgrade”  in White House efforts to fight what one official referred to as a “permanent battle” against antibiotic resistance.  That battle will require an “enduring arsenal of effective antibiotics.”  A Presidential Advisory Council on Combatting Antibiotic Resistant Bacteria” made up of non-government experts will be established and co-chaired by the Secretaries of HHS and the Department of Agriculture to provide advice, information and recommendations on all elements of the National Strategy.   Both the Advisory Council and the new Task Force will consider a wide range of economic incentives (e.g. user fees, higher reimbursements, faster clinical trials, etc.) to improve the returns to R&D on antibiotics and diagnostics.         

The EO also emphasizes intensive efforts to improve the stewardship of existing antibiotics.  HHS, Defense and Veteran’s Affairs are charged with reviewing existing regulations and practices at hospitals and inpatient facilities, and to propose new regulations and approaches.   FDA is also directed to continue working to eliminate the use of medically-important antibiotics for agricultural growth promotion purposes.  Recognizing that superbugs know no borders, the EO also directs the Secretaries of HHS and the State Department to engage the World Health Organization and its Member States (190-plus) to develop WHO’s Global Action Plan on antimicrobial resistance (AMR GAP).  That Action Plan is set for completion in 2015.

The White House Fact Sheet on its ramped up efforts [4] makes clear the intent to mobilize U.S. industry and expertise to help contain superbugs and to “expand the arsenal of diagnostics, antibiotics, and other countermeasures available to combat resistant bacteria.”  Next week, the White House will host an international meeting of over 30 countries on the Global Health Security Agenda (GHSA) and yesterday’s announcements positions the U.S. and its industry to help lead the way forward.    

Progress on Federal Trade Secrets Legislation

Posted in Congressional Action, Trade Agreements

Earlier this week, the House Judiciary Committee took an important step in the effort to create a federal right of action for the misappropriation of a trade secret.  We have blogged before on this legislation. On Wednesday, the Committee voted to approve the legislation. 

Led by Chairman Bob Goodlatte (R-VA), the Committee marked up H.R. 5233, the Trade Secrets Protection Act, the bipartisan bill introduced by Rep. George Holding (R-NC) and Rep. Jerrold Nadler (D-NY); there is bipartisan companion legislation in the Senate Judiciary Committee.  The bill enjoys the cosponsorship of key committee members on both sides of the political aisle.

The legislation would amend the federal Economic Espionage Act to include a federal civil remedy for victims of trade secret misappropriation.  The existing federal law is a criminal statute that does not provide a civil remedy to parties whose property has been taken.

The federal legislation is modeled on the Uniform Trade Secrets Act, adopted in 48 states, and includes a narrowly tailored seizure provision to prevent a party who has stolen a trade secret from fleeing with stolen know-how. 

During the Committee’s consideration, the bill’s sponsor offered an amendment to clarify the seizure provision’s application only to the person who took the trade secret through improper means and to require a biennial study by the Attorney General and the White House Intellectual Property Enforcement Coordinator that would include recommendations for further steps that could be taken to enhance legal protections against international trade secret thefts. 

A second amendment was offered to strip-out the seizure provisions entirely on the basis that the provision could be subject to abuse and might especially harm start-ups.  The proponents of the legislation argued in response that the seizure provision was carefully crafted and quite limited.  The proponents persuaded the Committee members that there was no viable strategy for misusing the provision given the numerous safeguards included, but that the provision was necessary to stop a thief heading to the airport to fly overseas and sell American know-how. 

The Committee rejected the amendment, and then voted to report the bill favorably to the full House on a voice vote, with no member heard to dissent.  With the House planning to adjourn until after the upcoming elections, no further action is likely to occur until Congress reconvenes after the elections.

Foreign-owned hospitals in China

Posted in China, International Strategy

After the news this past July that German hospital operator Artemed had signed a framework agreement to establish the first wholly foreign-owned hospital in the Shanghai Pilot Free Trade Zone (“Shanghai FTZ”), foreign investors anxious for an opening into China’s tightly regulated healthcare sector may now have even more reason for (cautious) optimism.

The Chinese government has announced the launch of a pilot scheme allowing for the establishment of wholly foreign-owned hospitals (“WFOHs”) through greenfield investment or mergers and acquisitions in three centrally governed municipalities (Beijing, Tianjin, and Shanghai), which have provincial status, and four provinces (Jiangsu, Fujian, Guangdong, and Hainan). The August 27th announcement was made through a joint administrative notice (“Notice”) between two key central government agencies, the National Health and Family Planning Commission (“NHFPC”) and the Ministry of Commerce (“MOFCOM”), and is yet another example that the Xi administration is sincere in its rhetoric about using the Shanghai FTZ as a test lab for potentially nationwide economic reforms. It also comes at a time when the government is trying to ease growing tensions nationwide between doctors and patients evidenced in a series of gruesome knife attacks by patients against their doctors.

The provincial branches of NHFPC and MOFCOM will be responsible for approving WFOHs. Investors are expected to have strong track records in the operation and management of medical institutions and be capable of bringing in advanced medical technology and hospital management expertise from abroad. Only investors from Hong Kong, Macau, and Taiwan may open WFOHs focused on traditional Chinese medicine. While the Notice certainly represents a step forward, current challenges may remain with respect to the hiring of foreign medical practitioners, import of drugs and medical equipment, lack of non-profit status, and exclusion from the Chinese national medical insurance system as the Notice does not specifically touch upon these matters.

Now, investors must wait for more detailed implementing proposals to be put forth by the provincial branches of NHFPC and MOFCOM (according to one report before the end of the year), and reviewed by NHFPC and MOFCOM at the central level, before they can act. Nonetheless, interested investors might begin examining potential opportunities in the listed locations and start developing relationships with local officials and other relevant players.

Healthcare, a sector closely linked to the state, has been slower to open up to foreign investment than many other sectors of the Chinese economy. In July 2000, foreign investors were permitted to invest in mainland Chinese hospitals through “equity joint ventures” or “cooperative joint ventures,” and hold up to 70% of the equity in these entities. Since then, certain openings were created for investors from Hong Kong and Macau (and later Taiwan) to exert full ownership over hospitals in certain geographies, but the results were modest and most foreign investors interested in full ownership remained out of luck.

The first sign of an opening for all foreign investors came in the form of a November 2010 notice issued by the State Council announcing that restrictions on foreign investment in medical institutions would gradually be relaxed and that a pilot program for allowing such foreign investment would be set up. While the healthcare sector was removed from the restricted list in China’s Foreign Investment Catalogue in 2011, it wasn’t until late 2013 into 2014 that further signs appeared that the State Council’s notice would be implemented. The Shanghai FTZ’s Framework Plan (issued in September 2013; an English translation prepared by Deloitte can be found here) stated that full foreign ownership of hospitals would be permitted within the zone, and Artemed appears to be the first to test those waters.  Now, the pace of reform appears to be accelerating.

Material for this post was supplied by Ashwin Kaja and Shirleen Hong of Covington & Burling LLP.

Vestager Gets Top Competition Post in Europe

Posted in EU Law and Regulatory

Ending months of speculation, Danish Commissioner Margrethe Vestager (46) has been nominated for the Competition portfolio in the European Commission. The former Danish Minister of Economic Affairs and the Interior, and Deputy-Prime Minister, will take up one of the most powerful positions in the Commission, succeeding Joaquín Almunia, with the task of scrutinizing mergers and hunting illegal cartels and state aid for a term of five years.

Vestager obtained a degree in economics from the University of Copenhagen in 1993, after which she immediately took on important positions within the Social Liberal Party (SLP). Vestager is not someone to be trifled with. In her role of Minister of Economic Affairs, she led some important discussions during Denmark’s EU presidency, negotiating a new law to safeguard derivative markets. She also brokered the agreement imposing losses on banks’ investors in case of failure, thereby providing a strong basis for the EU policy on government bank rescues. She is said to be methodical, unprejudiced and pragmatic in her work.

An additional level of hierarchy is being created within the College of Commissioners.  The Commissioner for Competition will not hold a Vice Presidency but will liaise with other Commission Vice Presidents and contribute to their projects. The Mission Letter of President elect Juncker insists on the fact that Commissioner Vestager “will, in particular, contribute to projects steered and coordinated by the Vice-President for Jobs, Growth, Investment and Competitiveness [Jyrki Katalnen], the Vice-President for the Digital Single Market [Andrus Ansip] and the Vice-President for Energy Union [Alenka Bratusek]. As a rule, you will liaise closely with the Vice-President for Jobs, Growth, Investment and Competitiveness in defining the general lines of our competition and state aid policies and the instruments of general scope related to them”.

Juncker’s Mission Letter to Vestager also asks the new Commissioner to focus on “[m]obilising competition policy tools and market expertise so that they contribute, as appropriate, to our jobs and growth agenda, including in areas such as the digital single market, energy policy, financial services, industrial policy and the fight against tax evasion. In this context, it will be important to keep developing an economic as well as a legal approach to the assessment of competition issues and to further develop market monitoring in support of the broader activities of the Commission”.

The question can be raised whether this means that competition law will be playing more of an instrumental role and would be more permeable to influences from other policy areas.  Vestager herself underlined the importance of fairness, legal certainty and transparency in her mission.

Vestager will need to be rigorous when taking on her duties as a Commissioner, as there will be billion dollar multi-national companies waiting for her verdict. For instance, she will continue the investigation into the credit derivatives market involving some of the biggest banks in the world. Next, she will decide whether the tax arrangements granted to Apple, Starbucks and Fiat by Ireland, Luxemburg and the Netherlands, consist of unfair advantages in the light of European competition objectives.  In addition, she will be dealing with the investigation of Google after Google’s last settlement proposal was rejected following negative feedback from competitors.

The European Commission will officially take office in November 2014, after the European Parliament has approved of Jean-Claude Juncker’s team and the final division of portfolios.

Scottish Independence and the EU

Posted in EU Law and Regulatory, International Strategy

On 18 September 2014, Scotland will vote in a referendum on whether or not it should declare independence from the UK.  Much debate in the referendum campaign has focussed on an independent Scotland’s (iScotland) relationship with and membership in the EU.  This is a unique situation: never before has a constituent part of an EU Member State declared independence and sought to remain a member of the EU.  There are many unanswered questions, with legal and political implications.

The UK enjoys specifically negotiated EU membership terms.  The ‘yes’ campaign seeks ‘continuity of effect’ in iScotland’s relations with the EU, i.e, the same treatment for iScotland (see pages 221 and 222 of here), including:

  • Opt-out from membership of the Euro.  All Member States of the EU are obliged to join the Euro once the necessary preconditions are fulfilled (see).  The UK and Denmark have negotiated formal opt-outs from Euro membership (the UK’s opt-out is enshrined in Protocols 15 to the TFEU and the Treaty on European Union (TEU), which also specifically maintains the UK’s autonomy in monetary policy).  Sweden has an informal opt-out.  It argues that membership of ERM II, a prerequisite of Euro membership, is voluntary, and that on account of its non-membership of ERM II, it hasn’t met the qualifying criteria for Euro Membership.
  • The Schengen Agreement, on reduced border controls between participating states.  All EU Member States participate in the Schengen arrangements, save for the UK and Ireland, which negotiated opt-outs, and recent accession states, Bulgaria, Croatia, Cyprus and Romania, which are legally obliged to implement Schengen in time.  Protocol 19 to the TEU requires new EU Member States (i.e., likely iScotland) to accept Schengen in full.
  • The UK’s budget rebate.  The UK benefits from a partial rebate to its financial contributions to the EU.  The rebate was estimated at £3.3 billion in 2013 (see page 14 of here).  On a GDP pro-rata basis, this rebate it worth approximately 8%, or £264 million to Scotland.

The ‘yes’ campaign argues that iScotland’s membership terms can be negotiated with the EU using the expedited mechanism at Article 48 of the TEU.  The ‘yes’ campaign claims that this mechanism, which allows for amendments to the EU treaties, would facilitate necessary treaty changes prior to iScotland’s independence (i.e., in the expected 18-month period between a yes vote in the referendum, and formal independence).  Only Member States, the European Parliament or the European Commission can initiate the expedited process under Article 48.  Prior to independence, Scotland won’t have direct representation on these bodies, so the process could likely only be started by the UK Government, which it might refuse, until bilateral iScotland/rUK terms of secession: currency; share of natural debt; share of North Sea oil and gas reserves, are agreed.  The more likely route for accession is Article 49 of the TEU, the route followed by other accession states.   The process for negotiating and joining the EU pursuant to Article 49 can be lengthy.  iScotland has a reasonable argument for expedited accession, having been de facto member since the UK joined the EU in 1973.  However, iScotland’s pursuit of the beneficial UK opt-outs detailed above, could slow the negotiation and accession process.

Approval of new members to the EU requires unanimous approval from existing members.  There has been speculation on whether certain countries might veto iScotland’s application so as to dissuade domestic regional independence movements.  Spain, with concerns on the Catalan independence movement, is a commonly cited example, but no Member States have said they would veto an application by iScotland.  Furthermore, iScotland’s approach to its future currency will impact on an application to join the EU.  Olli Rehn, a former EU commissioner for monetary union, is on record saying that iScotland could not join the EU unless it had its own central bank.  If correct, then Serlingisation (a currency option for iScotland examined in an earlier GlobalPolicyWatch blog is incompatible with iScotland’s EU membership).

Amongst the uncertainty, one thing is clear.  Negotiations involve give and take, and it seems highly unlikely that on EU accession, iScotland could retain the full group of beneficial opt-outs presently enjoyed by the UK.  Indeed, iScotland might not retain any of the opt-outs or a portion of the UK’s rebate.  With its opt-out, the UK has a sometimes reputation as an awkward member of the EU; it’s not clear that other Member States would welcome a second awkward member.  One anomaly of accession by iScotland is that failure to achieve an opt-out from Schengen would lead to light-touch border controls with other EU Member States.  In this scenario, in order to maintain current levels of control over movement with the EU, the rUK would need to impose controls on its border with iScotland.

A complicating factor in the political debate is the commitment from the UK Conservative Party, to give the UK electorate a referendum on continuing EU Membership, if the Conservatives win the next UK General Election in 2015.  There is far stronger support for EU membership in Scotland than in the remainder of the UK, and in particular in England.  Scottish/European relations long predate the 1707 union between Scotland and England that created the UK; the Auld Alliance between Scotland and France dates from the late 13th Century, reflecting a common need to curtail English expansion.    If Scotland votes for independence it will once more forge relations with Europe direct, possibly contemporaneously with the rUK withdrawing from the EU.

Understanding the Russian Move Into Ukraine

Posted in International Strategy, Russia

In a 2005 Kremlin speech, Russian President Vladimir Putin, characterized the collapse of the Soviet Union as the “greatest geopolitical catastrophe of the Twentieth Century.”  He elaborated on his focus. “As for the Russian nation, it became a genuine drama.  Tens of millions of our co-citizens and co-patriots found themselves outside Russian territory. Moreover, the epidemic of disintegration infected Russia itself.”

The near-decade between the Soviet period and the rise of Putin was a time of upheaval in Russia.  Gone was the ruling party.  Gone was the structure that bound Russia together with Ukraine and thirteen other Soviet Republics.  Gone was the Warsaw Pact, which offered Russia geographic and political insulation from Western invasion.  Gone was the cradle-to-grave social safety net.  Life expectancy sharply declined.  Rampant was hyper-inflation, endemic corruption, the rise of the Russian mafia, domestic terrorism, and the general breakdown of social order.  The Yeltsin years were unhappy in Russia, however pleased people may have been to see the Communist Party out of the way.

At first welcomed, Western advisers and their patrons in the Yeltsin government were then pilloried.  In the chaos, it was easy to believe the worst.  Wasn’t it Americans who promoted economic “shock therapy?”  Wasn’t America glad to deal with an impoverished and impotent Russia, rather than the rival from the Cold War.  Wasn’t Russian debility in America’s national interest?

As the 1990s progressed, these attitudes hardened.  In Russia, a zero-sum logic developed.  The country was weak and foreigners preferred things that way.  For Russians, NATO expansion was a vivid example of the West taking advantage of  weakness, in a fashion impossible during the Soviet era.

When Putin spoke about geopolitical catastrophe, he was echoing sentiments already deeply felt in Russia.   His was not a call to recreate the entire Soviet structure, including absorption of large Islamic populations, much less a desire to restore Communism. Instead, he decried the upheaval that followed disintegration.  Putin spoke at a time of the Rose Revolution in Georgia and the Orange Revolution in Ukraine.  In Moscow, these events were not seen as celebrations of democracy. They were seen as Western-inspired incursions into Russia’s space.  Russian objections were overridden.  Putin’s speech, lamenting the loss of national prestige and influence, channeled his people.

Soon, Putin started to reorient things to Russia’s preferences.  He began with his 2008 invasion of Georgia.  He took another major step through his destabilization of Ukraine.  Very likely, he is not done.

There is a substantial history in his country of pushing back against powers who Russians fear would exploit national weakness.  It happened early in the Seventeenth Century, when Poles and Swedes took advantage of a dynastic collapse.  Trying to dominate, they put bogus claimants on the Russian throne.  The Time of Troubles, as it is known, ended in 1613, when boyars and peasants forcibly expelled the foreigners and made Mikhail Romanov their new tsar.

Josef Stalin also spoke about redressing the cataclysm of weakness.  In 1934, before Party cadres, he noted:

“The history of old Russia was that she was ceaselessly beaten for her backwardness.  She was beaten by the Mongol Khans, she was beaten by the Turkish beys, she was beaten by the Swedish feudal lords, she was beaten by the Polish-Lithuanian Pans, she was beaten by Anglo-French capitalists, she was beaten by Japanese barons, she was beaten by all – for her backwardness.  We are fifty or a hundred years behind the advanced countries.  We must make good this lag in years.  Either we do it or they will crush us.”

Putin wants neighboring states that pursue policies subordinate to Moscow and that cannot be used to destabilize Russia itself.  He calculates that these are core interests for Russia and peripheral matters for the West.  He judges that the correlation of forces in the region works in his favor.  He believes the West will fill whatever vacuum Russian weakness or irresolution creates.  In asserting Russian hegemony over the near abroad, he seems ready to call the Western bluff.

Data Collection and Privacy

Posted in Intellectual Property Protection

In view of the importance of privacy issues to readers of GlobalPolicyWatch,  we have reprinted below a blog post by Morgan Kennedy from Covington’s Washington office  which appeared on the Covington InsidePrivacy blog on September 12.

*   *   *

Forever 21 Faces Point-of-Sale Data Collection Class Action Lawsuit

Fast fashion retailer Forever 21 Retail Inc. faces a putative class action lawsuit alleging that the retailer violated California law by requesting and recording shoppers’ credit card numbers and personal identification information at the point-of-sale.

Forever 21 shopper Tamar Estanboulian filed the lawsuit on September 7 in U.S. District Court for the Central District of California.  Estanboulian alleges that Forever 21 has a policy requiring its cashiers to request and record credit card numbers and personal identification information from customers using credit cards at the point-of-sale in Forever 21’s retail stores in violation of the Song-Beverly Credit Card Act of 1971, California Civil Code § 1747.08.  The complaint further alleges that the retailer pairs the obtained personal identification information with the shopper’s name obtained from the credit card used to make the purchase to get additional personal information.

According to the complaint, Estanboulian purchased merchandise with a credit card at a Forever 21 store in Los Angeles, CA this summer.  The cashier asked Estanboulian for her email address without informing her of the consequences of not providing the information.  Estanboulian alleges that she provided her email address because she believed that it was required to complete the transaction and receive a receipt.  She also claims that she witnessed cashiers asking other shoppers for their email addresses.  Shortly after completing her purchase and leaving the store, Estanboulian received a promotional email from Forever 21.

The proposed Class would include:  “all persons in California from whom [Forever 21] requested and recorded personal identification information in conjunction with a credit card transaction within one (1) year of the filing of this case.”

Forever 21 is not the only retailer that has been hit with a class action lawsuit for its data collection practices at the point-of-sale.  In June 2013, a putative class action was filed in U.S. District Court for the District of Massachusetts against J.Crew Group Inc. alleging that it collected zip codes from customers when they made purchases with credit cards at its Massachusetts stores.  The lawsuit also alleged that J.Crew then used that information to send unsolicited marketing and promotional materials.  The court approved a preliminary settlement in June pursuant to which J.Crew will provide $20 vouchers to eligible class members, up to $135,000 in attorneys’ fees and costs, and up to $3,000 to each of the class representatives.

ITC Report Examines Online Trade Barriers

Posted in Intellectual Property Protection, International Strategy

On Sept. 11, 2014, the U.S. International Trade Commission released Digital Trade in the U.S. and Global Economies, Part 2, a report that highlights the significant trade impact of digital and Internet-based industries.  The 331-page report also identifies potential obstacles to cross-border digital trade, including inadequate intellectual property rights enforcement and privacy regulation.

The ITC’s report, requested by the Senate Finance Committee, is based on case studies and a survey sent to nearly 10,000 U.S. businesses in “digitally intensive” industries, such as online publishing, digital communications, and online retailing.

Among the report’s notable findings:

  • U.S.-based digitally intensive firms sold $935.2 billion in products and services and purchased $471.4 billion over the Internet in 2012. Thirty-one percent of those sales and 10.5 percent of those purchases were delivered entirely over the Internet, rather than physically.
  • Digitally intensive U.S. businesses exported $222.9 billion in products and services online, and imported $106.2 billion.
  • Digitally intensive small- and medium-sized enterprises comprised one-fourth of the total online sales and one-third of the total online purchases.
  • The efficiencies created by digital trade increased U.S. wages by between 4.5 percent and 5 percent, and increased U.S. total employment by up to 2.4 million full-time equivalents.

The ITC estimates that removing foreign barriers to digital trade in digitally intensive industries would create an increase of .1 percent to .3 percent in U.S. Gross Domestic Product in 2011, and increase total U.S. employment by up to .3 percent.  Survey respondents identified the following as obstacles to international digital trade:

  • Intellectual property rights infringement:  U.S. businesses are concerned about online intellectual property rights violations, including cybersquatting and other misuse of a company’s brand, online copyright infringement, theft of trade secrets, and patent infringement. Companies told the ITC that China is the top location for obstacles related to intellectual property rights, followed by the European Union, Russia, Canada, and Mexico.
  • Data privacy and protection requirements: U.S. firms are particularly concerned about the European Union’s stringent data privacy requirements.  The EU prohibits the export of its residents’ personal data to foreign companies that are not bound by “adequate” data protection requirements, either through privacy laws, contracts, corporate rules, or voluntary compliance programs, such as the Safe Harbor Framework that is enforced by the Federal Trade Commission. The ITC reports that many U.S. digitally intensive businesses are unsure about how to comply with the Safe Harbor Framework’s requirements, and that “strict privacy regulators in some EU countries have found that Safe Harbor compliance does not satisfy data protection requirements.”
  • Localization requirements: Businesses report that localization requirements — which favor a country’s domestic companies — present a barrier to online trade.  Respondents were particularly concerned about laws or proposed legislation that require Internet companies to store personal data about a country’s residents in that country. Compliance with such requirements “can be expensive, time-consuming, and disruptive to business planning and operations,” the ITC wrote.
  • Legal liability rules: Some respondents stressed “the importance of clear legal frameworks to govern the rights and responsibilities of online intermediaries and others online,” such as section 230 of the Communications Decency Act and the Digital Millennium Copyright Act’s safe harbor provisions.
  • Censorship: U.S. firms were particularly concerned about steps that the Chinese government has taken to censor online content (such as blocking IP addresses of certain websites).  Respondents also said that other countries, including Russia, Saudi Arabia, Egypt, Turkey, Vietnam, and the United Arab Emirates, have imposed some censorship measures that create barriers to online trade.
  • Customs requirements:  U.S. companies told the ITC that some countries’ customs laws and procedures change frequently without transparency, and that “government actions can be punitive when violations are found, notwithstanding the lack of clear notice.”

Senator Carl Levin on American Foreign Policy in Iraq

Posted in Asia, Defense Issues, International Strategy

While members of Congress, the news media, and the American public debate the merits of President Obama’s new strategy to confront ISIS in the Middle East, Senator Carl Levin (D-MI), Chairman of the Senate Armed Services Committee, participated in a discussion at the Council on Foreign Relations yesterday on this topic.  Kaitlyn McClure of Covington’s PPGA group covered this event and set forth below is her report:

Senator Levin stated, “In Iraq and Syria and Ukraine, the fight is for their people to win – but we can and should provide robust assistance to those who are prepared to fight for themselves against terror and aggression. It is the right thing to do, it reflects our values, and it is in our national interest.  U.S. military force is not always the answer, but it can be, and often is an essential part of the answer to terror and aggression.”

The Senator placed the highest emphasis on the importance of an international response to ISIS extremism, stating that opposition to ISIS should be the “glue” that brings together the Muslim world.  As President Obama is leading efforts to build a broad coalition of forces, Levin views participation from Arab states and the Muslim community as essential to turning the momentum against extremists.   Senator Levin believes both of these groups will take a public role because of the threat ISIS poses not only to their governments, but also the stability of the entire region and mainstream Islam.   Further, President Obama’s request to Congress for $500 million in funding to train and equip Syrian rebels shows the Arab world that the U.S. is actively working to contain and defeat ISIS, and will help them to do the same.   In order to be successful against violent extremism in the long-term, mainstream Muslims and Arab nations must unify to “expunge this poisonous offshoot.”

As noted in our previous post, American air strikes in Iraq and cooperation between the Iraqi army and Kurdish peshmerga forces have helped push back against ISIS forces in recent weeks, but air strikes alone will not be a sufficient response to the rapid spread of ISIS forces.   President Obama’s new strategy includes expanded airstrikes in Iraq and additional airstrikes in Syria , which Levin believes Congress will authorize, and American military assistance in the form of equipment and training for Syrians, Iraqis, and Kurds who are willing to fight ISIS on the ground. By providing these tools to the people of Iraq and Syria, the U.S. is giving them the opportunity to eradicate ISIS and extremism on their own, which Levin hopes will result in a less sectarian government in Iraq and an alternative to President Assad or ISIS in Syria.

Senator Levin admitted that implementing this new strategy will be a challenge, but believes success is achievable.   He predicted the President’s proposal will receive bipartisan support in Congress; however, it remains to be seen whether any legislation will be considered before both chambers adjourn for the midterm elections.

Most disconcerting of Senator Levin’s remarks was the admission that there may not be a ‘Plan B’ should a coalition of allies fail to defeat ISIS on the ground in Syria and Iraq. “The focus has got to be right now on fleshing out Plan A. […] I haven’t heard too many alternatives to this plan. I’ve heard a lot of criticism, but I haven’t heard of many alternatives.”

Rough Road in Eastern Europe

Posted in EU Law and Regulatory, International Strategy

Companies doing business in Eastern Europe are likely to face an uncertain political climate in the near future.  Part of this is the fallout from the Russian Ukraine controversy.  Another factor is the residual effects of the 2008 economic collapse and the inability of economies to recover.  A third is political growing pains accompanying the conversion from communism to liberal democracy.

In Poland, the effects of turmoil in Ukraine are being felt most dramatically.  As Russia’s confrontation with the EU continues to escalate, Poland, a NATO member, is feeling pressure as a front line state.  With a long history of conflicts with Russia, the Poles have reason to be wary.  In response, they are undertaking a $46 billion military modernization program, which includes a modern short and medium range air defense system.

Croatia is an example of a country still reeling from the 2008 financial crisis.  That nation is now in its sixth consecutive year of recession without any end in sight.  Their economy was looking for a boost from trade with western Europe, but unfortunately even some western Europeans including nearby Italy are still struggling themselves.  Some large Croatia companies are managing to expand, but their growth is coming primarily from outside the country.

On the political front, Hungary’s government is grappling with the question of how democratic and liberal it should be.  This issue was starkly raised by Prime Minister Viktor Orban in a recent speech in Romania.  Hungary is a member of the EU, and the country’s economic growth depends on how the government resolves this issue.  This is because the EU has promised Hungary $20 billion in aid over the next seven years.  EU leaders might very well link that aid to political developments within Hungary.

Those companies seeking to do business not merely in Poland, Croatia, and Hungary, but elsewhere in eastern Europe have to weigh carefully the political and economic issues in each country.  Turmoil is likely to continue at least in the short term.