EU and Singapore agree
to comprehensive free trade


The European Union and Singapore submitted for approval today one of the world's most comprehensive free trade agreements. For the E.U., the agreement is seen as a stepping stone towards a wider deal with southeast Asia.
 
The chief negotiators on both sides presented the entire text of the agreement today after initialing each page of the roughly 1,000-page document.
 
Subject to approval in Singapore, the 28 E.U. member states and the European Parliament, the agreement should come into force in late 2014 or early 2015.
 
Trade between the two topped 52 billion euros in goods in 2012 and 28 billion euros in services in 2011. Meanwhile, mutual investment has reached 190 billion euros.
 
The European Union sees a free trade deal as opening the door to a deal with other members of the 10-nation Association of Southeast Asian Nations, known as ASEAN, which has set a goal of economic integration by 2015.
 
The E.U. and ASEAN launched free trade talks in 2007, but abandoned them two years later as the E.U. chose to instead conduct bilateral talks with individual members.
 
The European Commission is already negotiating free trade accords with Malaysia and Vietnam, and launched talks with Thailand in March.
 
Singapore has a population of just 5 million people, against some 600 million for the whole of ASEAN, but accounts for about a third of all E.U.-ASEAN trade and more than 60 percent of all investment between the two regions.
 
The deal goes beyond many other free trade accords in its commitment to opening up public procurement, an area where the EU has many leading suppliers. The pact also included agreements on technical standards in areas such as motor vehicles, electronics and green technologies.
 
The European Union gained better protection of geographical indications, for region-specific products such as Parma ham or champagne.
 
E.U. tariffs on virtually all items from Singapore will disappear over five years. Singapore has committed to its existing policy of zero tariffs on EU imports.
 
Singapore is likely to benefit from reduced tariffs for pharmaceutical and petrochemical products.
 
In services, particularly financial services, the agreement will ensure the right to sell directly or establish branches in each other's markets and promises to provide greater transparency over the award of licenses.


European politicians seeking
to close tech tax loopholes


Every year, the eurozone loses an estimated one trillion euros in revenue from multinational companies that don’t pay taxes on their European profits. These companies, including tech giants like Apple, Amazon and Google, as well as coffee company Starbucks, take advantage of loopholes in the complicated international tax code system and move their profits around the world to dodge tax payments. But they are facing increasing scrutiny from cash-strapped European governments and criticism from consumers.

Paying the bills every month is a challenge for businessman Jalil Kidder, the owner of a security company and small restaurant in a suburb of Frankfurt. Among his highest costs, the long list of German taxes.  In addition to other taxes, Kidder pays the German government on average 30 percent of his profits in income tax.

In Frankfurt's financial district, a short drive from his restaurant, Starbucks's flagship store in the city has paid no profit tax since it opened its doors 10 years ago. This contradiction is at the heart of a recent debate in Germany and the European Union about tax avoidance by wealthy multinational corporations.

"There is a saying here that goes like this, the big ones are eating the small," Kidder said. "That’s exactly what we are experiencing in this situation in Germany: the big companies are getting richer and richer in this country while small businesses like mine are struggling, they’re going kaput."

Starbucks and Apple declined interview requests.  But a recent investigation by the U.S. Senate shows that between 2009 and 2012, Apple paid no tax on its reported $74 billion in overseas income.  Apple achieved this by legally opening a subsidiary, or affiliate, in Ireland and exploiting a loophole in the Irish tax code.

Companies like Facebook and Amazon employ similar tactics, using a complex network of affiliates in countries like Luxembourg, the Netherlands or Switzerland to dodge billions of euros in taxes.  Taxes that would otherwise go to Germany or France go instead to Luxembourg or Ireland, but at a discounted rate.

Hanno Kube, a professor of tax law at the University of Mainz, says these seemingly legal tactics are unethical and unfair to small local businesses.

"They have competitive advantage which is not acceptable. Because they use international structures is not a justification for not making them pay taxes. Also, they use infrastructure provided by the states, they use the streets, our banking system, our laws, so it’s only fair that they also pay taxes for the profits they make," Kube said.

And European governments are hoping this happens sooner rather than later. The EU recently asked the governments of Ireland, the Netherlands and Luxembourg to disclose their corporate tax arrangements with U.S. tech giants, while the Organization for Economic Co-operation and Development, or OECD, presented the G20 in St. Petersburg earlier this month with a 15-step plan to tackle international tax avoidance.

The OECD tax reform plan would require multinationals with overseas operations to pay taxes on any profits coming from sales in that particular country, basically, to play by the same rules that apply to local businesses. Consumers in Germany agree the change is long overdue.

The issue has also been getting attention in the United States, with Apple executives going in front of a U.S. Senate subcommittee in May to explain the company's tax practices in the U.S. and abroad.

Kube of the University of Mainz says it’s no surprise many of the biggest tax avoiders in Europe are U.S. tech companies. The United States uses a tax law that subsidizes multinational companies and eventually leads to lost revenues for European countries. Resolving this issue, he says, will be hard, but the U.S. is part of the solution.

"It needs the consensus of many nations because corporations will always find a small country which will attract them, a country which doesn’t cooperate," he said. "That’s a big problem in international tax law, but, in general, I do see a trend towards stricter international tax law and also towards more exchange of information between states, including Luxembourg and Switzerland, an exchange of information which we haven’t seen years ago. So the political pressure is increasing."

If adopted, the 15-point plan released earlier this month will overhaul the international tax system and eventually bring in billions of euros of much needed revenue to a region still grappling with debt and austerity measures. Most importantly, the plan will bring some relief to small businesses and ordinary taxpayers.


Flu shots protect more
but also are costing more


Big drug makers are seeking a boost from new four-in-one influenza vaccines that will be available for the first time this flu season.
 
Offering more protection to patients, the new quadrivalent vaccines provide a route to premium pricing that could improve margins and profits in a highly competitive market.
 
Sanofi, GlaxoSmithKline and AstraZeneca all have products ready to tap the new opportunity, while Novartis is lagging behind its rivals.
 
Until now, seasonal flu vaccines have only protected against three strains of flu, two strains of influenza A, which usually causes more cases and more severe illness, and one of influenza B, which is less common but also circulates in multiple forms.
 
The new vaccines include protection against a second strain of influenza B, which experts expect will prevent the vast majority of type B infections.
 
But extra protection comes at a price. French drug maker Sanofi, whose Sanofi Pasteur unit is the world's biggest supplier of flu vaccines, with sales of 884 million euros ($1.2 billion) in 2012, says it expects a premium of some 50 percent or more.
 
It reflects a determination by manufacturers to move up the value chain by developing more innovative and expensive vaccines, following the recent success of novel products such as HPV shots to protect girls against cervical cancer.
 
Contracts struck with the U.S. Centers for Disease Control and Prevention confirm a hefty price jump for the new four-strain flu vaccine, with GSK's quadrivalent Fluarix, for example, costing $12.03 per dose against $8.08 for the standard version, according to the agency's Web site.
 
Those price premiums may feed through to higher revenues and accelerated growth in a global flu vaccine market that research group Datamonitor Healthcare estimates at around $3.7 billion a year.
 
“Over time, more and more shipped vaccine is likely to be switched to quadrivalent, so over a five-year period it could lift revenue growth from the low single digit to the mid-to-high single digit [percentage] range,” said Alistair Campbell, an industry analyst at Berenberg Bank.
 
Some U.S. doctors see a more rapid take-up, with Paul Offit, chief of infectious diseases at the Children's Hospital of Philadelphia, predicting that only four-strain vaccines will be available within two years.
 

Pope talks gently on gays
and other defining issues


Pope Francis said the Catholic Church should not allow its bans on gay marriage, abortion and contraception to dominate its teachings but must be a more welcoming Church where priests are understanding pastors and not cold, dogmatic bureaucrats.

In a dramatically blunt interview with Civilta Cattolica, the Italian Jesuit monthly, Francis said the church had locked itself up in "small things, in small-minded rules." It must find a new balance between upholding rules and demonstrating mercy, "otherwise even the moral edifice of the church is likely to fall like a house of cards..."

Francis, the first non-European pope in 1,300 years and the first from Latin America, did not hold out the prospect of any changes soon to such moral teachings.

In the long interview with the magazine's director, Jesuit Antonio Spadaro, he also said he envisioned a greater role for women in the 1.2 billion member church but suggested it would not include a change in the current ban on a female priesthood.

In a remarkable change from his predecessor Benedict, who said homosexuality was an intrinsic disorder, Francis said that when homosexuals told him they were always condemned by the church and felt socially wounded, he told them "the church does not want to do this."

He re-stated his comments first made on the plane returning from Brazil in July that he was not in a position to judge gays who are of good will and in search of God.

In the interview released on Thursday, he added: "By saying this, I said what the catechism says. Religion has the right to express its opinion in the service of the people, but God in creation has set us free: it is not possible to interfere spiritually in the life of a person."

The Church, he said, should see itself as a field hospital after a battle and try to heal the larger wounds of society and not be "obsessed with the transmission of a disjointed multitude of doctrines to be imposed insistently."

John Gehring, Catholic program director at Faith in Public Life, a liberal advocacy group in the United States, said: "This pope is rescuing the church from those who think that condemning gay people and opposing contraception define what it means to be a real Catholic. Francis is putting a message of mercy, justice and humility back at the center of the church's mission. It's a remarkable and refreshing change."

The interview of some 12,000 words took place over three sessions in August in his simple quarters in the Vatican and was released on Thursday simultaneously in translations by Jesuit journals around the world.

"We cannot insist only on issues related to abortion, gay marriage and the use of contraceptive methods. This is not possible. I have not spoken much about these things, and I was reprimanded for that," said the pope.

"But when we speak about these issues, we have to talk about them in a context. The teaching of the church, for that matter, is clear and I am a son of the church, but it is not necessary to talk about these issues all the time," he said.

Speaking specifically of homosexuals, he said, "We must always consider the person. Here we enter into the mystery of the human being. In life, God accompanies persons, and we must accompany them, starting from their situation. It is necessary to accompany them with mercy. When that happens, the Holy Spirit inspires the priest to say the right thing."

The Catholic Church teaches that homosexual tendencies are not sinful but homosexual acts are.

But in several parts of the interview, which took place in his simple quarters in a Vatican guest house where he has lived since his election instead of the spacious papal apartments, he stressed the need for mercy and understanding by priests.

"The confessional is not a torture chamber, but the place in which the Lord's mercy motivates us to do better," he said.


U.S. congressional leaders
continue their debt face off


Less than two weeks before a threatened U.S. government shutdown, leaders of the House and Senate have each ruled out the other’s demands for a funding extension. America’s latest fiscal standoff revolves around funding for President Barack Obama’s signature health care law.

Put simply, a core group of House Republicans refuses to extend federal spending authority that funds the Affordable Care Act, or Obamacare. Senate Democrats refuse to consider any spending bill that omits it.

Leaders of both chambers dug in their heels Thursday. House Speaker John Boehner announced the chamber would vote Friday to keep the government running without Obamacare.

“When it comes to the health care law, the debate in the House has been settled.  I think our position is very clear: The law is a train wreck, and it’s going to raise costs. It’s destroying American jobs, and it must go,” he said.

If passed, the House bill would go to the Senate, where Majority Leader Harry Reid made this announcement, “Any bill that de-funds Obamacare is dead. Dead. It is a waste of time, as I have said before. In fact, I told the speaker that last week.”

The Senate is expected to pass a spending bill that sustains funding for Obamacare. Unless an identical measure passes both houses of Congress by the end of the month, a limited federal government shutdown will begin.

Obama and Democratic lawmakers said there would be no negotiations on Obamacare, or on raising America’s debt ceiling. The federal government will exhaust its ability to borrow sometime next month.

Sen. Charles Schumer said Democrats were united and will stand firm.

“We will not blink," he said. "Do not get it into your heads that we will. We will not!”

But Boehner said negotiations were needed, and that Obama’s stance on fiscal matters was indefensible, given his recently demonstrated willingness to strike deals with foreign leaders.

“So while the president is happy to negotiate with Vladimir Putin, he will not engage with the Congress on a plan that deals with the deficits that threaten our economy,” he said.

Democratic lawmakers said they were eager to find ways to improve America’s fiscal health, but insisted that a government shutdown or a debt default must not be used as bargaining chips.

The Affordable Care Act seeks to boost the number of Americans with health care insurance and to reduce health care costs overall. The law was passed in 2010, when Democrats controlled both houses of Congress. Major components go into effect next month. Many Republicans see Obamacare as a damaging expansion of government power, and view looming fiscal deadlines as their last chance to derail the law.


U.S. House cuts food stamps
to send unemployed to work


The U.S. House of Representatives has narrowly passed a bill to cut $4 billion a year from programs mainly aimed at preventing hunger. Projected savings over 10 years would amount to $40 billion.
 
Republican House leadership said the measure will restrain the explosive growth of the programs and encourage more people to go back to work. But Democratic opponents said it harms the neediest at a time when poverty levels are stubbornly high and jobs are hard to come by.
 
The largest part of the federal anti-hunger safety net is the Supplemental Nutrition Assistance Program. SNAP (formerly called the Food Stamp program) which helps people who fall below a certain income level to pay for groceries.
 
The number of people receiving SNAP benefits nearly doubled with the latest recession, from 28 million in 2008 to 47 million last year. Spending on the program doubled along with it, to $75 billion in 2012.
 
But Republican critics note that while the economy has improved somewhat in the last few years, SNAP enrollment has continued to grow.
 
“It is imperative that Congress takes steps to rein in this out-of-control entitlement, and I believe this bill does that,” said Kansas Republican Tim Huelskamp during debate on the bill in the House. Huelskamp led efforts to require that beneficiaries work in order to receive benefits.
 
“If you’re a healthy adult and don’t have somebody relying on you to care for them, you ought to earn the benefits you receive,” Huelskamp said. “You can no longer sit on your couch and expect the federal taxpayer to feed you.”
 
The bill requires recipients to work 20 hours per week, get job training or do community service.
 
Along with other tightened eligibility requirements, 3.8 million people would lose SNAP benefits.
 
The bill passed by a vote of 217 to 210 with no Democrats voting in favor. They objected that the tepid economic recovery has not reached lower-income people.
 
New data from the U.S. Census Bureau released this week shows 1 in 6 Americans, or 49 million people, live in poverty, and that rate has not dropped since 2006, even though the economy has recently improved somewhat.
 
The day before the House vote, the chair of the Senate Agriculture Committee, Michigan Democrat Debbie Stabenow, made it clear that the Senate has no intention of passing $40 billion in nutrition cuts.
 
“What the House Republicans are voting on is nothing more than an extremely divisive, extremely partisan political exercise that is, by the way, going nowhere,” she said.
 
President Obama has also threatened to veto the House version of the bill.