December 2003

Second Reading for Corporate Responsibility Bill

London

The Corporate Responsibility Bill, which would require companies to publish reports and assessments on the social, economic and environmental impact of their operations, received Second Reading in the House of Commons on November 21.

The legislation, introduced in June by MP Linda Perham (Lab), and sponsored by the Corporate Responsibility Coalition (CORE), would also require companies to consult stakeholders on projects that may have ‘significant impact’ on them. In addition, directors of companies would have a duty to consider the social, environmental and economic impacts of their operations. Where the actions of corporations or their subsidiaries cause environmental damage or harm to workers, consumers or communities – in the UK or overseas – the company would be directly liable for damages under this proposed Act.
 

Politics at a Glance Westminster: The UK Department for Transport due to release its White Paper on the Future of Air Transport in the UK Dec 16. Washington: First Democratic Primary, the DC Primary Jan 13, 2004. Brussels: Summit of the Heads of State of the EU, Dec 12-13.

BritishAmerican Business Action

UK Government to Consult on Societas Europeae

From June 2004, it will be possible to form a European company, to be known by the Latin name, Societas Europeae (SE). Each SE will be registered in only one Member State.

Forming an SE will be an efficient way for multinationals to operate a branch structure because businesses can effectively choose where to place their administrative head office. This decision will hinge on which country’s national laws work best for business. A decision on where to incorporate will also mean a decision on where and how one pays taxes and under which employment law system one works under.

On October 7, BritishAmerican Business met with the Department of Trade and Industry to discuss the steps they were taking to position the UK as the jurisdiction of choice for companies wishing to establish an SE. The DTI has now opened a Consultation seeking views on the application in Great Britain of the European Company Statute. The closing date to contribute to the process is January 9, 2004.

First Round of Air Services Negotiations Completed

Washington

The first round of EU/US Air Services negotiations took place in Washington October 1-2. The two sides identified issues where there is agreement in principle, as well as issues that could prove more difficult. Issues agreed in principle include coverage of scheduled and charter services of passenger and cargo operations, freedom for all airlines to determine the prices they can charge and the capacity and frequency that they may offer. There was also agreement, in principle, on user charges, Computer Reservation Systems (CRS), ground handling and inter-modal operations. The two sides also recognised the importance of close co-operation in the areas of safety, security and competition.

More difficult issue were ones that would require changes to US legislation, including airline ownership and control rules.

An action plan was agreed to set in motion further work on many of the issues. Two working groups will be established, one on safety and one on competition, to drive forward the action plan in preparation for the second round of negotiations to be held in Brussels the week of December 8.

US/UK Enterprise Agreement Announced

Birmingham, UK

On November 18, Chancellor Gordon Brown and his US counterpart, Treasury Secretary John Snow, announced a joint US/UK Enterprise Agreement.

The Agreement calls for a comprehensive trade review to identify ways to improve the transatlantic marketplace through better coordination of policies and will reinforce the US/UK business relationship through further trade liberalisation and agreed approaches to competition and regulation.

The review would map out ways to enhance transatlantic trade through liberalisation, the reduction of regulatory barriers, and an agreement on common approaches to competition and investment policies between the US and the EU.

The Agreement could create $160 million and over one millions jobs in the transatlantic market. The first step of this initiative is to support a study within the Organization for Economic Cooperation and Development (OECD) to quantify the benefits of closer economic integration.

Talk of Trade Wars Returns

Washington

The European Union has threatened to impose trade sanctions against the US as early as mid-December if the Bush Administration does not comply with a WTO ruling requiring them to lift tariffs on steel imports. As reported in the October Issue Insight, there is political pressure on the Administration to repeal the steel tariffs, following a US International Trade Report indicating that only moderate gains were made with the measure.

The EU has also announced it will apply punitive sanctions of US$200 million against US exports to the EU from March 2004, if the US fails to repeal the Foreign Sales Corporation (FSC) and Extraterritorial Income Act (ETI) provisions in the US tax code before the end of the year. A WTO ruling actually allowed the EU to levy up to US$4 billion until the FSC scheme is ended. US lawmakers are particularly concerned with the EU’s vociferousness because they claim that Congress will not have the time to address the issue until the New Year because of an overloaded legislative schedule.

More Transparency the Answer for Commission

Brussels

On November 4, Finance Ministers from EU Member States debated the merits of the European Commission’s so-called Transparency Directive, which would force European listed companies to issue quarterly audit reports. Currently, no European-wide law requires companies to publish their results so frequently, although such laws do exist in countries such as France, Germany and Italy, and around 2,000 of Europe’s 7,000 listed companies already do so.

The Directive, published in March 2003 would, if unchanged, require implementation by all Member States by 2005. Proponents argue that forcing European companies to report more frequently will help avoid major corporate scandals such as those recently in the US and will bring Europe closer in line with Sarbanes-Oxley requirements. Critics argue that increased reporting will mean increased costs for companies with little benefit. Countries that support the initiative include France, Germany, Portugal, Spain, and Italy. Those opposed include the UK, Austria, Denmark and Ireland.

The Directive must be approved by MEPs in the European Parliament and by the 15 Member States before Parliament breaks for elections in June 2004 or it must be dropped and re-introduced.

Buy America Legislation Through Congress

Washington

After months of negotiations, the Bush Administration reached agreement with House Armed Services Chairman Duncan Hunter earlier this month on weakened “Buy America” language for the bill authorising funds for the Defense Department. The defence industry has welcomed the agreement, which stripped out a number of provisions that threatened international weapons programmes. Both the House and Senate have now passed the legislation.

Hunter had originally proposed an onerous set of new restrictions on the Defense Department’s ability to buy goods with foreign content. Under his proposal, the minimum US content of some weapons systems would have been raised from 50 per cent to 65 per cent, and US defence manufacturers would have been required to re-tool their facilities with US-made machine tools. Contractors and the White House strongly objected to Hunter’s proposal, arguing that it would raise costs for both manufacturers and the Government, and that it would it endanger major weapons programmes that have international partners, such as the Joint Strike Fighter. The UK and other governments also objected to the proposal.

Under the compromise approved by Congress, the Defense Department will be required to conduct an assessment of US capabilities to produce critical weapons and to publish a list of unreliable foreign suppliers. In addition, the Administration is asked to establish an incentive programme for defence contractors that use US machine tools. However, the incentive programme may never get off the ground, because the legislation stipulates that none of the provisions will take effect if they violate any international trade agreement. Providing incentives for US machine tools may in fact violate US obligations under the World Trade Organization's government procurement agreement.

Upcoming BritishAmerican Business Policy Events

December 3, 2003, Annual BritishAmerican Business-RUSI Conference, “Strategic Impact of the Trans-Atlantic Science and Technology Gap"

February 5, 2004, “E-Commerce and Business Process; Where Are We Now?”

February 19, 2004, “Regulatory Risk in the New Europe”

Please contact: ukevents@BritishAmerican Businessnc.org