The Week Ahead in the European Parliament – January 12, 2018

Summary

Next week, there will be a plenary sitting of the European Parliament in Strasbourg, France. Several significant debates, votes and committee meetings will take place.

On Monday, Members of the European Parliament (“MEPs”) will debate draft legislation concerning energy consumption. Under the proposed directives on energy efficiency and renewables, consumption of energy would need to drop 40% from 2005 levels by 2030, and renewable energy sources would need to increase from 27% to 35%. See the proposed directives here and here.

On Tuesday, the plenary session of the European Parliament will debate the conclusions reached by EU leaders at the European Council Summit on December 14-15, 2017. Among other issues, MEPs will discuss the Brexit negotiations, defense policy, migration and the reform of the Eurozone.

On Wednesday, Prime Minister of Bulgaria Boyko Borissov will introduce the incoming EU Council Presidency priorities to MEPs, which include the digital economy, security, stability, and the connectedness of the Western Balkans.

On the same day, MEPs will debate the Future of Europe together with special guest Leo Varadkar, the Taoiseach of the Republic of Ireland. This will be the first discussion in a series between MEPs and EU leaders on the future of the EU.

Also on Wednesday, the plenary session of the European Parliament will vote on a draft regulation concerning an extension of EU export controls on cyber surveillance tools, which could be used to hack computers, bypass passwords, or even violate human rights. See the proposed regulation here.

Meetings and Agenda

Monday, January 15, 2018

Plenary session

17:00 – 21:00

Debates

  • Promotion of the use of energy from renewable sources
    • Committee: ITRE
    • Rapporteur: José BLANCO LÓPEZ (S&D)
  • Energy efficiency
    • Committee: ITRE
    • Rapporteur: Miroslav POCHE (S&D)
  • Governance of the Energy Union
    • Committee: ENVI and ITRE
    • Rapporteurs: Claude TURMES (GREENS/EFA), Michèle RIVASI (GREENS/EFA)
  • Conservation of fishery resources and protection of marine ecosystems through technical measures
    • Committee: PECH
    • Rapporteur: Linnéa ENGSTRÖM (GREENS/EFA)
  • Implementation of EU macro-regional strategies
    • Committee: REGI
    • Rapporteur: Andrea COZZOLINO (S&D)
  • International ocean governance: an agenda for the future of our oceans in the context of the 2030 Sustainable Development Goals
    • Committee: ENVI
    • Rapporteur: José Inácio FARIA (EPP)
  • Women, gender equality and climate justice
    • Committee: FEMM
    • Rapporteur: Linnéa ENGSTRÖM (GREENS/EFA)

Committee on Legal Affairs

19:00 – 19:30

  • Promotion of the use of energy from renewable sources (recast) (COD) – vote on draft opinion in letter form
    • Rapporteur: Axel VOSS (EPP, DE)

Committee on Civil Liberties, Justice and Home Affairs

19:00 – 21:30

  • Interoperability package – discussion with Julian KING, Commissioner for the Security Union (19.00-20.30)

Joint debate
20:30 – 21:30

  • Situation of non-reciprocity with certain third countries in the area of visa policy and assessment of the effectiveness of the reciprocity mechanism provided for in Article 1(4) of Council Regulation (EC) No. 539/2001 and Visa Suspension Mechanism – First Report – discussion with Matthias OEL, Director, DG HOME, European Commission

Tuesday, January 16, 2018

Plenary session

09:00 – 11:50

Debates

  • Review of the Estonian Presidency
  • Conclusions of the European Council meeting of 14 and 15 December 2017

12:00 – 14:00: Votes + explanations of votes

15:00 – 21:00
Debates

  • EU support to the Colombian peace process
  • Situation in Zimbabwe
  • Control of exports, transfer, brokering, technical assistance and transit of dual-use items
    • Committee: INTA
    • Rapporteur: Klaus BUCHNER (GREENS/EFA)
  • Trade and sustainable development chapters in EU trade agreements  

Wednesday, January 17, 2018

Plenary session

09:00 – 11:50
Key debates

  • Presentation of the programme of activities of the Bulgarian Presidency
  • Debate with Prime Minister of Ireland Leo Varadkar on the Future of Europe

12:00 – 14:00

Votes + explanation

  • Nomination of a Member of the Court of Auditors – Eva Lindström
    • Committee: CONT
    • Rapporteur: Indrek TARAND (GREENS/EFA)
  • Nomination of a Member of the Court of Auditors – Tony James Murphy
    • Committee: CONT
    • Rapporteur: Indrek TARAND (GREENS/EFA)

Debates
15:00 – 21:00

  • Composition of the European Parliament
    • Committee: AFCO
    • Rapporteurs: Danuta Maria HÜBNER (EPP), Pedro SILVA PEREIRA (S&D)
  • Jurisdiction, recognition and enforcement of decisions in matrimonial matters and matters of parental responsibility, and international child abduction
    • Committee: JURI
    • Rapporteur: Tadeusz ZWIEFKA (EPP)
  • Marrakesh Treaty: facilitating the access to published works for persons who are blind, visually impaired, or otherwise print disabled
    • Committee: JURI
    • Rapporteur: Max ANDERSSON (GREENS/EFA)
  • Fight against trafficking of women and girls for sexual and labour exploitation in the EU

Thursday, January 18, 2018 

Plenary session

09:00 – 11:50

Debates

  • Implementation of the Youth Employment Initiative in the Member States
    • Committee: EMPL
    • Rapporteur: Romana TOMC (EPP)
  • Implementation of the Professional Qualifications Directive and the need for reform in professional services
    • Committee: IMCO
    • Rapporteur: Nicola DANTI (S&D)

Votes + explanation

12:00 – 14:00

Major interpellations

15:00 – 16:00

The Foreign Agents Registration Act (“FARA”): A Guide for the Perplexed

 Eighty years ago, Congress enacted the Foreign Agents Registration Act (“FARA”), requiring “foreign agents” to register with the Attorney General. As amended over the years, it applies broadly to anyone who acts on behalf of a “foreign principal” to, among other things, influence U.S. policy or public opinion. Until recently, it was a backwater of American law—and a very still backwater at that, with just seven prosecutions over the last half century.  That is changing now. Like the once obscure Foreign Corrupt Practices Act, which prosecutors revived from hibernation a decade ago, FARA may be ready for its close-up.  
In this guide, we identify the key points and provide a detailed primer on FARA registration, highlighting the ways in which it is now relevant to a broad cast of characters, including multinational corporations.

The Foreign Agents Registration Act (“FARA”): A Guide for the Perplexed

CBP Revises Rules for Border Searches of Electronic Devices

 Last week, U.S. Customs and Border Protection (“CBP”) released a revised Directive governing searches of electronic devices at the border.  These are the first official revisions CBP has made to its guidelines and procedures for devices since its 2009 Directive.  The new Directive is intended to reflect the evolution of technology over the intervening decade, and CBP’s corresponding need to update its investigative techniques.
Notably (and as in previous CBP Directives), the new Directive does not require officials to obtain a warrant before conducting searches of travelers’ devices—even if the traveler being searched is an American—based on CBP’s position that searches and seizures at the border are exempt from the Fourth Amendment’s “probable cause” requirement.  CBP nevertheless acknowledges that its searches must still meet the Fourth Amendment’s “reasonableness” requirement, which the self-imposed restrictions contained in the Directive are meant to achieve.Key Changes

  • “Reasonable Suspicion” for Forensic Searches: The new policy distinguishes between “basic” searches and “advanced” searches. “Basic” searches involve simply reviewing the device and the information contained on it, much as an ordinary user does when he or she scrolls through information on their phone or tablet.  As in the 2009 Directive, border officials are permitted to conduct such searches without any particularized suspicion.
  • “Advanced” searches, on the other hand, involve connecting external equipment to the device in order to not only gain access to it, but also to review, copy, and analyze its contents.  Under the new Directive, these more “forensic” searches now require supervisory approval and either a national security concern or reasonable suspicion of activity in violation of laws enforced or administered by CBP.
  • Protection of Information Stored in the Cloud: The new Directive continues the policy initiated by CBP in April 2017 that prohibited officials from intentionally accessing information stored remotely. In addition, the Directive specifies that in order to avoid accessing such cloud data, officials must request that the traveler disable connectivity to any network (for example, by placing the device in airplane mode). When warranted by national security, officials can disable the device’s network connectivity themselves.
  • Additional Procedures for Privileged Information: Although the 2009 Directive contained some limitations on reviewing information protected under the attorney-client privilege, the new Directive contains additional procedures that officials must follow if they encounter such data. Officials must now ask the traveler to clarify (ideally in writing) which specific files, file types, folders, or categories of information on their device may be privileged.  Such privileged information must then be segregated by a designated “Filter Team” comprised of legal and operational representatives in order to ensure the information is handled appropriately.
  • Bypassing of Passcodes and Encryption Mechanisms: The new Directive explicitly requires travelers to “present electronic devices and the information contained therein in a condition that allows inspection of the device and its contents.” In that vein, officials may request a traveler’s assistance in unlocking their device and its applications, and may detain the device for a certain period of time if they are unable to complete their inspection because the device is passcode or encryption-protected.  Moreover, the Directive specifically states that it does not limit CBP’s ability to use external equipment or “take other reasonable measures” to make the device and its contents legible, which may mean that officials are permitted to manually bypass passcode or encryption mechanisms themselves.
  • Obtaining Technical Assistance from Non-Government Entities: Like the 2009 Directive, the new Directive permits officials, with supervisory approval, to seek technical assistance for rendering a device or the information contained on it in a condition that allows for inspection. No individualized suspicion is required. However, whereas the 2009 Directive limited the provision of such technical assistance to other “federal agencies,” the new Directive removes this limitation.  As a result, entities (such as the device’s manufacturer or an application developer) may be asked to help CBP unlock a device or its contents.

What’s Next

CBP’s searches of electronic devices have increased by nearly 60 percent since FY 2016, and they likely will continue to increase in the years to come as the use of electronic devices (and the amount of data stored on them) proliferates.

Although many have welcomed CBP’s additional, self-imposed restrictions contained in the new Directive, others believe the Directive does not go far enough.  As a result, members of Congress may continue to propose legislation that would place additional limitations on CBP’s ability to search electronic devices (particularly when the device belongs to a U.S. person), such as the Protecting Data at the Border Act introduced last year by Senator Ron Wyden (D-OR) and co-sponsored by Senator Rand Paul (R-KY).

With or without legislative action, the Directive requires that its guidelines and procedures be reviewed at least every three years.  As a result, the debate over what rules of the road should govern electronic device searches will occur much more frequently than it has in the past.

UK Government Consults on EU Cybersecurity Plans

 As we summarized last fall, the EU Commission published a new Cybersecurity Communication in September that, among other things, sets out proposals for an EU cybersecurity certification framework as part of ‎an EU “Cybersecurity Act” (see our post here and a more detailed summary here).  Just before the holidays, on December 20, 2017, the UK Government published a consultation on these proposals, which the UK Government will use‎ to help develop its position.  Key elements of the proposals that the UK Government is consulting on include:

  • Harmonizing the existing cybersecurity certification landscape to reduce costs and administrative burdens for companies by establishing a common “European Cybersecurity Certification Framework for ICT products and services.”
  • Further specifying and publishing best practices relating to incident reporting and security obligations for some digital service providers under the NIS Directive (see our reports here and ‎here).
  • Changes to the tasks and functions of ENISA, including providing ENISA with a strengthened and permanent mandate.

The UK Government also welcomes views from stakeholders on the impact of the proposals with respect to the UK’s exit from the EU.  The consultation closes on February 13, 2018.  Before then, and by January 20, 2018, the UK Government has been asked by the UK Parliament to clarify issues relating to the proposals, including on issues relating to the “Cybersecurity Act” and cybersecurity certification.

The Week Ahead in the European Parliament – January 5, 2018

Summary

Happy New Year to everyone!

Next week is a committee and political group week for the European Parliament.  Only a few committee meetings are scheduled.  Members of the European Parliament (“MEPs”) will spend most of their time with their political groups to prepare the plenary sitting that will be held from January 15 to 18, in Strasbourg.

On Thursday, the Committee on Environment, Public Health and Food Safety (“ENVI”) will exchange views with the Commission on the Commission’s report on the “State of Pediatric Medicines in the EU – 10 years of the EU Pediatric Regulation.”  This Report seeks to assess the impact of the 2006 Pediatric Regulation on public health and businesses.  See the Report here.

On the same day, the Committee on Industry, Research and Energy (“ITRE”) will consider the amendments submitted to the draft parliamentary report on the proposal for a “Regulation establishing the European Defense Industrial Development Program aiming at supporting the competitiveness and innovative capacity of the EU defense industry.”  The proposal seeks to enhance the competitiveness and innovation of the EU defense industry, including cyber defense.  Among other things, the proposal promotes collaboration among undertakings in the development of defense products and technologies and calls for a better exploitation of the results of defense research.  See the proposal for a Regulation here, the draft report here, and the amendments tabled here and here.

Meetings and Agenda

Monday, January 8, 2018

  • No meetings of note.

Tuesday, January 9, 2018

  • No meetings of note.

Wednesday, January 10, 2018

  • No meetings of note.

Thursday, January 11, 2018

Committee on Budgetary Control

15:00 – 18:30

Appointment of two Members of the European Court of Auditors

  • Partial renewal of members of the Court of Auditors – IE nominee (NLE) – Hearing of Tony MURPHY – candidate nominated by Ireland (new mandate)
    • Rapporteur: Indrek TARAND (Greens/EFA, EE)
  • Partial renewal of members of the Court of Auditors – SE nominee (NLE) – Hearing of Eva LINDSTRÖM- candidate nominated by Sweden (new mandate)
    • Rapporteur: Indrek TARAND (Greens/EFA, EE)

Committee on Employment and Social Affairs

14:00 – 15:00 

  • European Solidarity Corps
    • Rapporteur for the opinion: Brando BENIFEI (S&D, IT)

Committee on Environment, Public Health and Food Safety

09:00 – 12:30

  • Objection pursuant to Rule 106: The use of bisphenol A in varnishes and coatings intended to come into contact with food – Consideration of motion for a resolution
    • Co-rapporteurs: Martin HÄUSLING (Greens/EFA, DE), Sirpa PIETIKÄINEN (EPP, FI), Frédérique RIES (ALDE, BE)

  Votes

  • Objection pursuant to Rule 106: The use of bisphenol A in varnishes and coatings intended to come into contact with food – Adoption of motion for a resolution
    • Co-rapporteurs: Martin HÄUSLING (Greens/EFA, DE), Sirpa PIETIKÄINEN (EPP, FI), Frédérique RIES (ALDE, BE)
  • Early non-objection pursuant to Rule 106: Scheme for greenhouse gas emission allowance trading within the Community. EU Emissions Trading System (EU ETS) Directive – Adoption of motion for a resolution
    • Rapporteur: Julie GIRLING (ECR, UK)
  • Exchange of views with Mr. Christos STYLIANIDES, Commissioner for Humanitarian Aid and Crisis Management, on Civil Protection Mechanism
  • Exchange of views with the Commission on the Commission report on the state of pediatric medicines in the EU – 10 years of the EU Pediatric Regulation

Committee on Industry, Research and Energy

09:00 – 12:30

  • Establishing the European Defence Industrial Development Programme aiming at supporting the competitiveness and innovative capacity of the EU defense industry – Consideration of amendments
    • Rapporteur: Françoise GROSSETÊTE (EPP, FR)

Votes

  • Accelerating Clean Energy Innovation – Adoption of draft report
    • Rapporteur: Jerzy BUZEK (EPP, PL)
  • Common rules for the internal market in natural gas – Consideration of draft report
    • Rapporteur: Jerzy BUZEK (EPP, PL)

 Committee on Civil Liberties, Justice and Home Affairs

08:30 – 09:00

Voting time

  • Mutual recognition of freezing and confiscation orders: adoption of draft report and vote on the decision to enter into interinstitutional negotiations and on the composition of the negotiating team
    • Rapporteur: Nathalie GRIESBECK (ALDE)

DFARS Cyber Rule – What Questions Should Contractors Ask Themselves in the New Year?

Since August 2015, defense contractors have been on notice that they were required to implement the security controls in National Institute of Standards and Technology (“NIST”) Special Publication (“SP”) 800-171 no later than December 31, 2017 on covered contractor information systems.  Although the focus has been on meeting this deadline, contractors should add to their New Year resolutions compliance with other areas of DFARS 252.204-7012 (“DFARS Cyber Rule” or “Rule”) and confirm that their existing processes and procedures anticipate how the Department of Defense (“DoD”) will measure compliance with the Rule in the year to come.  In particular, contractors should assess whether they are providing “adequate security” beyond NIST SP 800-171, review their obligations with regard to their supply chain’s cyber risks,  understand how the System Security Plans and Plans of Action and Milestones could be used by the government and confirm that their incident response plan incorporates the requirements of the DFARS Cyber Rules.  The answers to these and other questions are included in the article that was originally published in Law360 and is linked here .

  [The referenced article was originally published in Law360.]

 

The Congressional Agenda for January

The Republican-led Congress and President Trump secured their first significant legislative victory with the December passage of tax reform legislation. Following that success, the GOP passed another temporary funding bill to avert a government shutdown before adjourning for the Christmas-New Year break. As a result, congressional leaders have again put off a resolution of a major fiscal debate over the budget, along with partisan disputes over immigration, health care, and national security, among other topics. The January work period is expected to focus on these issues, while Congress aims to meet a January 19 deadline for the current stopgap funding extension. The time to strike the necessary deals will be very tight. While the Senate returns to Washington on January 3, the House announced that it would not return to Washington until the week of January 9, not the prior week, as initially planned, leaving only a week and a half to find a resolution to the number of challenging agenda items the chambers confront.

The current four-week spending bill allows Republican congressional leaders and the White House additional time to negotiate with Democrats on spending legislation to prevent a government shutdown by January 19. With Republicans focused in December on tax reform, they lacked the time to resolve the contentious spending disputes both within their own party and with the Democrats. Because spending bills may not qualify for treatment under reconciliation procedures, Senate Republicans need Democratic votes for any eventual year-long spending bill, and that need creates stark challenges for House Republicans.

Lawmakers have been working towards a potential two-year budget agreement on discretionary spending levels for the remainder of Fiscal Year (FY) 2018 and FY 2019. Such a deal is certain to increase the spending caps established by the 2011 Budget Control Act, under which Congress may only appropriate up to $549 billion for defense programs and $516 billion for non-defense programs in FY 2018, a cut from FY 2017 levels. Republican defense hawks and the Trump Administration have been aiming to boost Pentagon spending above $600 billion. In return for such an increase, Democrats have been demanding that increases in defense spending be met with a dollar-for-dollar increase in non-defense spending. So far a deal has remained elusive, but leadership on both sides have indicated the conversations are ongoing. Should a budget agreement be reached, it is highly likely that the deal to revise the 2011 Budget Control Act caps would be enacted as part of another short-term spending bill in January. If such a bill is approved, congressional appropriators will then be able to draft an omnibus spending bill for the remainder of FY 2018 reflecting the spending agreement. In such a scenario, a final spending bill would likely be considered in February.

Democrats hold significant influence in the fiscal negotiations because any eventual legislation adjusting spending caps and authorizing spending will need Democratic support, due to expected opposition from fiscal conservatives in the House and the ability of Democrats to filibuster a spending bill in the Senate. Democratic leadership can be expected to press for adding a number of their policy priorities to the current short-term funding measure, such as a resolution to the ongoing immigration debate over the Deferred Action for Childhood Arrivals (DACA) program and a measure to provide stabilization to the health insurance market. Democrats had initially pushed to include both items in the December continuing resolution but ultimately decided to keep the stopgap bill free from riders. Given the adverse reaction reported in the media to the Democrats’ failure to insist on a resolution of at least the DACA issue in December, it is likely Democrats will draw firmer lines in January and utilize their leverage over these issues during negotiations.

In the interim, Republican Senate leadership and the White House have committed to bringing DACA fix legislation to the floor in January to protect persons who were brought to the country illegally by their parents when they were children, although the details on a bipartisan compromise remains unclear. The Trump Administration announced in September that it will end the popular DACA program in March 2018 because it lacked congressional authorization. Without congressional action by March 5, the nearly 700,000 undocumented immigrants currently enrolled in the DACA program would lose their protected status and could potentially face deportation. While congressional supporters have worked to develop a legislative fix, major divisions remain over how to authorize the program by law and whether to include border security and various enhanced immigration enforcement authorities in a DACA legislative package without alienating support from either party. Senate negotiators are reportedly still working through these details while also trying to ensure that any compromise bill for DACA authorization remains narrow in scope and does not turn into a comprehensive immigration reform proposal. Any eventual legislation negotiated in the Senate may face a difficult path in the House, as Speaker Ryan promised his conference upon assuming his leadership post in 2015 that he would only bring an immigration bill to the floor if it has the support from a majority of Republicans. Because of these challenges, supporters of a DACA fix are likely to want any legislation that is negotiated to be attached to the omnibus spending bill.

Senate Republican leaders have also agreed to bring two bills to the floor for a vote in response to the calls for a legislative effort to help stabilize the health insurance market. The first measure, sponsored by Sen. Lamar Alexander, (R-TN) and Sen. Patty Murray (D-WA), would resume the “cost-sharing reduction payments” discontinued by the Trump Administration in October. These payments reduced the out-of-pocket insurance costs for low-income individuals acquiring health insurance under the Affordable Care Act. The second measure, sponsored by Sen. Susan Collins (R-ME) and Sen. Bill Nelson (D-FL), would create a “reinsurance ” mechanism for federal funding to assist companies with backup coverage when policyholders have catastrophic medical costs. Both of these proposals will need to maintain significant Democratic support in order to be enacted, because conservative Republicans are wary of propping up the health-insurance marketplace established by the Affordable Care Act. It is likely that the measures would have to be linked to a piece of must-pass legislation, such as the omnibus spending bill, in order to ensure passage.

While DACA and health insurance market stabilization provisions were not included in the stopgap funding bill, the measure did include a short extension of expiring Foreign Intelligence Surveillance Act (FISA) authorities. Section 702 of FISA is considered by the intelligence community to be a pillar of U.S. counter-terrorism efforts, but many privacy and civil liberties advocates are critical of the program and have called for reforms. National security hawks and privacy advocates on Capitol Hill have been debating how to reauthorize the program, for how long to extend the surveillance authority, and what enhanced civil liberties protections can be included in a renewal. Several competing proposals have been introduced in both chambers, but lawmakers could not come to an agreement on how to provide for a long-term reauthorization of the program before its December 31 expiration date. Lawmakers instead provided for a short-term extension of the current authority in the stopgap funding bill, which will expire on January 19. Privacy advocates, including members of the House Freedom Caucus, want to see additional and significant protections put in place to protect Americans from intelligence activities. The Freedom Caucus reportedly secured a commitment from House leadership, in exchange for their votes on the stopgap funding bill, that they would be allowed to offer requested amendments to a long-term FISA reauthorization during floor debate, but it is unclear which bill will emerge as the vehicle. Members of the House Judiciary Committee advanced a bipartisan proposal that strengthens civil liberties protections and would reauthorize the program for six years, but a competing proposal from the House Intelligence Committee provides for less extensive privacy controls. Across the Capitol, Sen. Patrick Leahy (D-VT) and Sen. Mike Lee (R-UT) introduced a bill that places additional restrictions on intelligence activities. In October, the Senate Intelligence Committee advanced a bill that would extend Section 702 authority through 2025 and include modest reforms. Sen. Rand Paul (R-KY) and Sen. Ron Wyden (D-OR) and a bipartisan group of House lawmakers have also introduced legislation that would add more significant privacy protections under Section 702 and maintain the sunset clause requiring congressional reauthorization every four years. How these competing approaches will be sorted out and the program, a cornerstone of national security policy in an age of threats emanating from sources beyond traditional nation-state adversaries, remains uncertain.

Another program extended as part of the current continuing resolution is the flood insurance program, which the House has voted to reform but the Senate has not. The existing investor visa program, the so-called EB-5 program (named for the codified provision of the Immigration and Nationality Act at which it is found), has been renewed through appropriations bills for some time now. Negotiations between program supporters and those who want to reform the program have been ongoing for some time. Program supporters are likely aiming to resolve the matter and secure legislation soon because of the prospect that U.S. Citizenship and Immigration Services, the agency that oversees the program, will make significant regulatory changes to the program if legislation is not forthcoming.

Another issue that has previously roiled omnibus spending bills is the looming shortfall in various pension plans, especially those for coal miners. Resolution of that issue, and perhaps broader pension issues, is also likely to bedevil negotiations over spending caps and any omnibus spending bill that results from an overall spending deal.

Lurking in the background of the substantive discussions over spending is the political calculus both parties are making: if the negotiations fail, which party will be blamed for any eventual government shutdown. With control of both legislative chambers and the White House, Republicans fear they will be blamed for any shutdown, but some are suggesting that it depends on the reason why the government shuts down. Some Republicans think that if there is a deal on spending but not on DACA, they could point the finger at Democrats, and that could induce enough Democratic senators, especially from states won by President Trump, to support a spending bill and avoid a shutdown. These kinds of political calculations will be made as the January 19 deadline approaches and each party decides what is in its best political interests, as well as what is in the country’s best interests.

Aside from their work on spending caps and the omnibus spending bill dependent on resolving the larger budget issues, the Senate is also expected to take up another funding matter in January- an $81 billion disaster aid bill that passed the House in December, but stalled in the Senate. Republican Leader Mitch McConnell (R-KY) was unable to strike an agreement to speed up the floor debate on the measure before the chamber adjourned for the holidays, leaving it as another item on the to-do list for January. The bill provides disaster aid funding for communities affected by the recent hurricanes in Texas, Florida, Puerto Rico and the U.S. Virgin Islands, as well as wildfires in California. Democrats argued that the bill does not provide enough aid to Puerto Rico and the U.S. Virgin Islands, while the Texas congressional delegation is pushing for more money specifically for recovery efforts in their state. Any additional funds earmarked for Texas would likely be met with demands from other delegations, in particular Florida and California, whose communities were also hard-hit by storms or fires. Congress has already approved more than $130 billion in aid for natural disasters that occurred in 2017, and much of that money remains unspent, so there is less real-world urgency in wrapping up action on the next disaster relief bill.

During this work period lawmakers may also consider a package of tax extenders, popular tax breaks that expired at the end of 2016, but were not included in the newly-enacted tax reform legislation. In late December, Senate Finance Committee Chairman Orrin Hatch (R-UT) unveiled legislation to renew several dozen of the lapsed tax breaks through the end of 2018. House Ways and Means Committee Chairman Kevin Brady (R-TX) and other committee members have publicly stated that they are still discussing how to deal with the expired tax breaks and discussions will not begin until January at the earliest. Because the two chambers are on different timelines, it is not likely the legislation will be resolved in the coming month.

As these major policy negotiations are occurring, Congress must also consider whether to raise or suspend the debt ceiling in order for the U.S. Treasury to avoid a default. Based on current projections, the Treasury can continue to take “extraordinary measures” to cover the nation’s debts until mid-March. Many view the eventual omnibus spending package as a likely vehicle for the debt limit increase.

Finally, among the Senate’s signal achievements of the past year was the number of federal judges it confirmed. It is likely the Senate will continue to focus floor time on confirming both executive branch appointees, in particular those nominated to regulatory agencies (at which they can advance the President’s deregulatory agenda), and judicial nominees.

Ramaphosa’s Victory: Progress or Paralysis?

The election of Cyril Ramaphosa as president of the African National Congress (ANC), and now the leading contender to become South Africa’s next president, was hailed as a “humbling rebuke” of South Africa’s President Jacob Zuma and a stark rejection of his policies, which have led to anemic economic growth, widespread corruption, and rising frustration in one of Africa’s most significant economies.

Indeed, the markets responded quickly as the South African rand initially surged by more than 4 percent on the news of Ramaphosa’s election, reaching its highest level against the dollar in six months, but were flat a day later.Ramaphosa’s victory represents an important win for those in South Africa who reject the capture of state institutions and crony capitalism that defined Zuma’s leadership. There were widespread concerns that Nkosana Dlamini-Zuma, Ramaphosa’s rival for the leadership position, would perpetuate many of these policies and shield her ex-husband from legal prosecution for the 783 counts of corruption, fraud, racketeering, and money laundering he is facing. The process of restoring South Africa to the ideals espoused by the late Nelson Mandela and putting the nation’s economy on a sound footing will not be easy, however.

THE SMALL MARGIN OF VICTORY MEANS THE FIGHT IN THE ANC IS NOT YET OVER

Ramaphosa’s electoral victory over Dlamini-Zuma, a former minister of health and foreign affairs and chair of the African Union, was razor thin. His margin was 179 ballots cast by 4,708 delegates—the slimmest margin of victory in any ANC leadership race in the 105-year-old history of the organization. These results indicate that the ANC is evenly divided between the reformist Ramaphosa faction and the populist Zuma one.

In addition, only three of the candidates Ramaphosa supported won spots among the top six positions in the ANC: Ramaphosa himself, Gwede Mantashe as the ANC chairperson, and Paul Mashatile as the treasurer-general. The other three positions were won by Zuma supporters: David Mabuza as the party’s deputy president (who also won the most votes of all candidates), Ace Magashule as the secretary-general, and party stalwart Jessie Duarte as the deputy secretary-general. The margin of victory in these leadership races ranged from 339 to 24.

Ramaphosa did not fare any better in the vote for membership on the powerful National Executive Committee—the ANC’s chief executive body. Zuma supporters appear to constitute the majority of the 86-member committee.

The narrowness of Ramaphosa’s victory will have significant ramifications. There were those who expected that a victory by the reform wing of the party would lead to Jacob Zuma’s exit from the presidency prior to the May 2019 elections. While he will step down as party leader within a week, it is unclear whether Ramaphosa will be able to cajole or force Zuma into early retirement.

A second challenge will be economic policy. Ramaphosa has promised a “new deal” for South Africa based on an “uncompromising” rejection of waste, cronyism, and corruption. He has targeted 5 percent growth (up from the current rate of 0.7 percent), the creation of 1 million jobs within five years, and the restoration of investor confidence. The difficulty of delivering on these promises was underscored on the last day of the party congress when the ANC resolved to amend the constitution to nationalize the South African Reserve Bank and expropriate land without compensation, policies that could undermine Ramaphosa’s agenda.

THE FOCUS ON RAMAPHOSA

Perhaps the first indication of Ramaphosa’s ability to chart a new direction for the ANC will be the appointment of a national director of public prosecutions, the government office that will oversee the prosecution of Jacob Zuma on corruption charges. The high court in Pretoria earlier this month declared Zuma’s selection of Shaun Abrahams for that position “invalid,” ruling that Zuma could not appoint the person who might prosecute him. The deputy president, Ramaphosa, was given 60 days to appoint a new director of public prosecutions. Zuma’s legal team has appealed this ruling.

One of Ramaphosa’s most pressing priorities will be to retool the ANC’s message going into the 2019 elections. In last year’s municipal elections, where the ANC lost control of Johannesburg, Pretoria, and Mandela Bay to the opposition Democratic Alliance (DA), the party’s support was 54 percent, the lowest since the first democratic elections in 1994 when Nelson Mandela led the party to a victory with 62 percent of the vote. In the 2016 elections, the DA campaigned on a platform of effective service delivery while the ANC was perceived by many to be a party of self-enrichment and detached from the priorities of the majority of South Africans, namely alleviating poverty, creating jobs and restoring the country’s economic health. Reaching voters and restoring the ANC’s image as the genuine party of the people will be an uphill task for the new party president.

This blog was cross-posted on Brookings’ “Africa in Focus” blog and can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

The Week Ahead in the European Parliament – December 15, 2017

Summary

Next week is constituency week for Members of the European Parliament (“MEPs”). MEPs will go back to their home countries to handle national issues or convene in their parliamentary delegations to work on matters related to non-EU Member States.

Next week is also the last week of parliamentary activities before the holiday break. MEPs will suspend their activities until January 8, 2017. This Week Ahead will therefore return on Friday, January 5, 2018.

This week, the European Parliament held the last plenary session of 2017 in Strasbourg.

On Tuesday, MEPs approved a report of the Committee on Economic and Monetary Affairs (“ECON”) and the Committee on Budgets (“BUDG”) that proposes extending the European Fund for Strategic Investments (“EFSI”) until 2020. The report also recommends that additional funds be provided to finance projects with the most promising social and economic returns in the EU. See the report here.

On Thursday, MEPs also voted in favor of a resolution on a European Strategy for Low-Emission Mobility. The Parliament seeks to focus on transport to reduce green gas emissions and meet the EU’s reduction target set by the Paris Agreement. The resolution calls on the European Commission and EU Member States to adopt initiatives to enhance the development of low-emission transport. Among these initiatives, the Parliament calls on the EU Member States to speed up the implementation of the Single European Sky, and on the European Commission to adopt an ambitious action plan for the market uptake of electric vehicles. See the resolution here.

In closing, we wish you a wonderful holiday season!

Meetings and Agenda

No official meetings in the European Parliament are scheduled before January 8, 2018.

U.S.-China Trade Relations Heat Up Post Trump Visit

By official accounts, President Trump’s November visit to China went off well with positive atmospherics, including an unprecedented (for a foreign leader) dinner inside the Forbidden City and the signing of over $250 billion of commercial deals and two-way investment agreements. On the other hand, most western analysts have quickly pointed out that much of this was symbolism since most of the commercial deals were already or projected to be in the pipeline and many of the agreements were in the form of memoranda or letters of intent yet to be finalized. More importantly, they noted that there was no commitment on the part of China to undertake major policy and structural reforms that would significantly open up market access or improve the foreign investment environment in the country. Even the subsequent announcement by China that foreign financial firms would eventually be allowed to operate as wholly-owned foreign enterprises indicated there was “no specific timetable” for lifting the equity ownership limit. Current restrictions have “left foreign banks with a combined market share of just 1.5 percent of the Chinese banking system’s assets” (NY Times, Nov 7, 2017) and foreign insurance companies at around the same level.

Recent U.S. Trade Actions toward China

Shortly after the visit, the U.S. Commerce Department announced (on Nov 28) that it would self-initiate “historic antidumping and countervailing duty investigations on common alloy aluminum sheet from China.” In the press release, Commerce Secretary Ross stated that “we are self-initiating the first trade case in over a quarter century, showing once again that we stand in constant vigilance in support of free, fair, and reciprocal trade.” In this process, the International Trade Commission (ITC) is expected to make preliminary injury determinations on or before January 16. Assuming positive findings, Commerce could announce preliminary countervailing duties (CVD) by February and antidumping duties (AD) by April of 2018, with the immediate collection of these duties (as cash deposits) by customs authorities on an estimated $600 million of Chinese aluminum sheet imports. Final ITC determinations would be made a few months afterwards.

Two days later, the United States made public that it had just submitted a third-party brief to the WTO in support of the European Union (EU) position against the recognition of China as a “market economy” despite the expiration last year of relevant provisions contained in China’s 2001 WTO accession protocol. The United States and EU both argued that the continuing pervasive role of the state in the Chinese economy, especially the use of large scale subsidies, has seriously distorted domestic prices, hence necessitating the continued use of third-country price comparisons in antidumping cases. Earlier in June, underscoring the broad significance of this action, US Trade Representative (USTR) Robert Lighthizer told Congress that this case was “the most serious litigation we have at the WTO right now” and a decision in China’s favor “would be cataclysmic for the WTO.” On the same day of this announcement, U.S. Treasury undersecretary David Malpass told an audience in New York that “China’s industrial policy has become more and more problematic for foreign firms” and that “huge export credits are flowing in non-economic ways that distort markets.” “The WTO has shown an inability to resolve disputes, limit subsidies or draw China into the market status that was envisioned when China joined the WTO,” he stated.

Meanwhile, the Trump administration is expected to complete a number of earlier trade actions in the coming year, including two Section 232 (national security) investigations on steel and aluminum, one Section 201 (safeguard) investigation of Chinese solar cells and modules and, more broadly, a Section 301 investigation of China’s policies regarding transfers of technology, intellectual property, and innovation. In initiating the Section 301 investigation in August, the USTR pointed to growing frustration with respect to Chinese policies and practices that “reportedly deprive U.S. companies of the ability to set market-based terms in licensing and other technology-related negotiations with Chinese companies and undermine U.S. companies’ control over their technology in China.” The notice pointed specifically to China’s “strategy to become a leader in a number of industries, including advanced technology industries, as reflected in China’s ‘Made in China 2025’ industrial plan.” Under Section 301, President Trump would potentially have the power to impose broad sanctions against Chinese imports and take other actions if a negotiated settlement is not reached that addresses U.S. concerns.

 How will China respond?

China has responded quickly and sharply to these recent U.S. trade actions. At a briefing on December 1, China’s Foreign Ministry spokesman said that “the practice of using a third country to measure the cost of Chinese products in anti-dumping cases must end,” and that the opposition to granting China market economy status “harked back to the cold war.” (South China Morning Post, Dec 1, 2017) In the same article, a senior researcher with a government think tank was quoted as saying that “the China hawks in the Trump administration had been plotting the recent moves, which were part of U.S. efforts to contain China’s rise on the world stage.” She added that “the competition between the two countries will be a permanent fixture….and the balance of power is now tilting towards China.” The following week, a Chinese Commerce Ministry official said that the U.S. rejection of China’s market economy status “undermines the seriousness and authority of multilateral rules.” (Xinhuanet, Dec 4, 2017) Another researcher was quoted as saying that “the U.S. rejection reflects its panic and ideological prejudice.”

It is quite clear from these initial responses that China does not intend to respond positively to U.S. pressure or to undertake significant market reforms at this time. In fact, President Xi Jinping had just re-affirmed the leading role of the party and the state in the economy at the recently-concluded 19th Communist Party Congress in October, just before Trump’s visit to China. Xi called for further measures to support, consolidate, and make more efficient China’s debt-laden state-owned enterprises, and focused on government industrial policies to promote technological advances, innovation, and “national champions,” as laid out in the government’s “Made in China 2025” report. While calling for continued “reform and opening,” Xi proposed setting up more special economic zones to attract foreign high-tech companies into strictly-confined areas of the country, essentially following the pattern of China’s economic development since 1979. Thus, while the market can play a role in the economy, China’s economic policies will continue to be led by the state under this touted model of “socialism with Chinese characteristics.”

As on many occasions in the past, China is thus expected to threaten retaliation against U.S. companies that benefit from the current bilateral trade relations in order to mobilize them against new U.S. trade sanctions. Shortly after the USTR announced its Section 301 investigation in August, a government-owned media reported that “a full-blown trade war between China and the United States still doesn’t seem inevitable, but that shouldn’t prevent Beijing from taking measures to cope with the U.S.’ trade protectionist weapon: Section 301.” (The China Daily, September 5, 2017)   Analysts expect that China would threaten to stop buying aircraft and agricultural products from the United States or impose its own antidumping duties on U.S. imports. (SCMP, Dec 5, 2017) In 2016, China accounted for 62% of U.S. soybean exports, 14% of U.S. cotton exports, and 25% of U.S. aviation exports. (Business Insider, August 18, 2017) Some have suggested that China could also cancel aspects of the “100 Day Plan” trade agreement reached shortly after the Xi-Trump Florida summit, in which China agreed to lift the ban on U.S. beef imports and expand access for certain U.S. financial institutions.

Heading Toward a Trade War?

At this point, given recent U.S. trade actions and China’s response thus far, it is almost certain that trade tensions will increase, but will this lead to a large scale trade war? The immediate question is whether the Trump administration will in fact move ahead to impose serious tariffs and quotas on Chinese imports, pending the completion of its various ongoing investigations. Assuming the investigations validate the premise of recent U.S. trade actions, i.e., that China’s interference in the market has seriously distorted prices and violated U.S. intellectual property rights, the Trump administration will have to take appropriate action to enforce U.S. trade laws or quickly lose credibility especially via-a-vis the Chinese. In fact, President Trump himself noted in a public speech in Beijing that “trade between China and the United States has not been, over the last many, many years, a very fair one for us.” Instead of directly criticizing China, however, Trump “blame(d) past administrations for allowing this out of control trade deficit to take place and to grow.”

As in the past, however, there are likely to be strong concerns and opposition among many in the U.S. business community to the Trump administration taking strong trade remedy actions that could result in China retaliating against their exports or businesses in China. Fully aware of this, China can be expected to use its increasingly large and attractive domestic market as leverage against U.S. trade sanctions. Additionally, U.S. retail and downstream companies that benefit from low-priced Chinese imports (whether dumped or not) are also likely to oppose increased U.S. tariffs or quotas against these imports. It is uncertain at this time how the Trump administration will balance these interests and concerns. Given recent statements by senior administration officials, however, it should not be a surprise to see new U.S. trade sanctions against a range of Chinese imports in the coming months.

Assuming the United States does follow through with trade sanctions, one would expect China to retaliate, directly or indirectly, against U.S. imports and businesses as it has in the past. The only question is how and to what extent China will do so. On the issue of China’s non-market economy status, the fact that the EU and the United States are aligned in making the point that, purely as a matter of fact, China’s state-dominated economy does not allocate investment resources through market economy mechanisms, probably limits the degree to which China can justifiably introduce retaliatory measures focused on these actions. Moreover, while it is still unclear how significant U.S. trade sanctions in these cases will be (especially those related to Section 301), they are likely to have a relatively limited impact on China’s overall exports to the United States. An overreaction on China’s part could backfire and lead to further U.S. responses and eventually escalate into a more serious trade war, in which both have much to lose. In 2016, the U.S. market accounted for about 20% of China’s total exports while U.S. exports to China accounted for about 8% of overall U.S. exports. Moreover, despite its rapidly expanding domestic market, China’s total exports continue to represent nearly 20% of its GDP, as opposed to about 12% for the United States.

On a more positive note, while increased trade tensions could eventually lead to a trade war with dire consequences for both, they would also highlight the need for both sides to address the fundamental issues in our trade relations more urgently. As China’s ambassador to the United States urged in a press briefing just prior to Trump’s visit, bilateral trade disputes should be handled in a “very constructive and pragmatic manner,” so as not to “undermine the overall relationship.” Hopefully, the very real risk of a trade war will prompt the Chinese government to accelerate the reform agenda issued at the Third Plenum of the 18th Party Congress in 2013. In its communique, the first major policy blueprint after President Xi took office, the Party laid out a bold agenda for deepening economic reforms “to allow the market to play a ‘decisive role’ in the allocation of resources” and stated that “both the public and private sectors are the same important components of a socialist market economy.” In this connection, for example, the Section 301 investigation can be seen as an opportunity for China and the United States to work together to develop the rules of the road limiting government support and subsidies to high tech industries and ensuring a level-playing field for all companies, foreign or domestic, and public or private. Such efforts would enhance market reforms that will go a long way to stabilize and strengthen overall U.S.-China economic relations.

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