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Commercial Awareness Update- December 2018
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<blockquote data-quote="Bugsy Malone" data-source="post: 6043" data-attributes="member: 201"><p>Hi everyone! This is our final commercial update for 2018! Hope you find this update helpful and have a lovely Christmas break J. As always please feel free to ask any questions.</p><p></p><p>12th December </p><p></p><p><strong>1. French <em>gilets jaunes</em> protests and environmental reform (contributed by Shu Qin Low)</strong></p><p></p><p><strong>The story:</strong></p><p></p><p>Fuel tax rises by the French government have sparked over three weeks of violent protests in Paris, the worst riots the city has seen in 50 years. On December 1, thousands of protestors set fire to cars, houses and banks, looted shops and fought battles with police, who resorted to water cannons and tear gas. The protestors, clad in yellow vests (or in French, <em>gilets jaunes</em>), were spurred by a proposed fuel ‘eco-tax’ which would see the cost of petrol and diesel rise by 2.9 cents and 6.5 cents a litre starting January, in an attempt to reduce carbon emissions. Rising fuel costs have particularly affected rural regions, where citizens have few alternatives to driving, unlike more affluent cities which have greater public transport options.</p><p></p><p>In response to the protests, Emmanuel Macron removed the proposed tax from the 2019 budget altogether. However, this failed to appease the <em>gilets jaunes</em> protestors, who are now seeking wider economic reforms to address the wide income gap between wealthy Parisians and the rural poor.</p><p></p><p>The removal of the eco-tax comes as a setback to Macron’s ‘climate change solidarity package’, which seeks to reduce carbon emissions in accordance with the Paris Agreement. Energy reform is an urgent priority for France. Even with its heavy reliance on nuclear power – 75% of French electricity is produced by nuclear plants – France’s carbon emissions were 3.6% over target in 2016. Furthermore, its 58 nuclear plants are ageing – almost 75% of French nuclear plants’ have life-cycles ending in 2030. While it may be possible to extend those lifespans by up to 20 years, this is an expensive process, and high-profile nuclear disasters such as Fukushima may make this an undesirable proposition.</p><p></p><p><strong>Impact on businesses and law firms:</strong></p><p></p><p>The <em>gilets jaunes</em> protests have particularly impacted French tourism and retail companies, as international customers grow afraid of visiting France, and local residents become wary of leaving their houses. Air France and Carrefour shares dropped by 10% and 7.6% respectively this week. Prolonged protests could further affect their performance.</p><p></p><p>While the French protests illustrate the difficulty of implementing national climate change policies, Macron has stated that they would not make him rethink his clean energy policies. Last week, Spain unveiled its new renewable energy proposal, under which it plans to produce 100% of its electricity from renewable sources by 2050, and reduce carbon emissions by 90%. Outside of national measures, many investors such as <a href="https://www.blackrock.com/investing/insights/blackrock-investment-institute/climate-change" target="_blank">BlackRock</a> are beginning to recognise that the severity of climate change disasters (for example, the Californian wildfires last month) and tightening regulations are making climate change a material risk for their investment portfolios. Royal Dutch Shell, for instance, has yielded to intense shareholder pressure for sustainable energy practices, and has set carbon emissions targets that will be linked to the long-term remuneration of top management executives. This is likely to set a precedent for other oil companies.</p><p></p><p>The undeniable global push towards sustainability will likely prompt businesses to begin planning or implementing alternative energy practices to minimise future disruption. French energy giant EDF has already been asked to submit restructuring proposals to separate its nuclear and renewables activities. Similar companies seeking to streamline their businesses should provide opportunities for law firms to assist with corporate restructuring and possible strategic acquisitions. As environmental regulations begin to be put into place, businesses will also require advice on compliance with their legal obligations.</p><p></p><p><strong>2. The arrest of Huawei’s CFO (contributed by Angel Siah) </strong></p><p></p><p><strong>The Story:</strong></p><p></p><p>On the 1st of December, Huawei’s CFO Meng Wanzhou was detained while changing planes in Vancouver, Canada. Prosecutors alleged that Meng had committed fraud by lying about the links between Huawei and a shell company used to sell telecommunications equipment to Iran, which violates the US sanctions on Iran. US law enforcement officials had since issued a warrant for arrest and Meng may face extradition to the US.</p><p></p><p>Huawei is the biggest global supplier of network equipment for phone and internet companies. With its ties to the Chinese government, the tech giant is a target of the US government in their long-running effort to push back against Huawei, which US intelligence sees as a security threat. The US had pressured allies in Europe and Asia to limit the use of Huawei’s technology, warning that they could be opening themselves up to the surveillance and theft of information. The arrest is arguably the most provocative step the US government has taken so far.</p><p></p><p>China is not taking the arrest easy either. Chinese state-run newspaper lashed out at Canada over the arrest, saying that it is bowing to pressure from the US and likening the treatment of Meng, including being handcuffed, to a ‘show trial’. The newspaper said that such actions were aimed at humiliating China for challenging the US in global technology leadership.</p><p></p><p><strong>Impact on businesses and law firms:</strong></p><p></p><p>Against this background is the agreement of Trump and Xi to a truce in the trade war between US and China at the G20 meeting in Buenos Aires. The leaders have agreed to delay a planned 1st of January hike in US tariffs on $200billion of Chinese goods and to give their negotiations 90 days to resolve the trade disputes between the two countries.</p><p></p><p>Businesses and investors would be keen to follow the story of Meng’s arrest as such news risk derailing the truce. While Meng’s arrest has not (and likely, will not) halt the US and China from reopening negotiations, the arrest does highlight worsening fissures between the two countries.</p><p></p><p>Following the news, markets in Asia plummeted. The arrest is an example of how the US will not ease its stance on China and investors are concerned over a further escalation in the trade war between the two countries. Major indexes fell as investors dumped their shares. The HK Hang Seng Index suffered the steepest fall compared to the others. Shares with ties to Huawei were hit particularly hard.</p></blockquote><p></p>
[QUOTE="Bugsy Malone, post: 6043, member: 201"] Hi everyone! This is our final commercial update for 2018! Hope you find this update helpful and have a lovely Christmas break J. As always please feel free to ask any questions. 12th December [B]1. French [I]gilets jaunes[/I] protests and environmental reform (contributed by Shu Qin Low)[/B] [B]The story:[/B] Fuel tax rises by the French government have sparked over three weeks of violent protests in Paris, the worst riots the city has seen in 50 years. On December 1, thousands of protestors set fire to cars, houses and banks, looted shops and fought battles with police, who resorted to water cannons and tear gas. The protestors, clad in yellow vests (or in French, [I]gilets jaunes[/I]), were spurred by a proposed fuel ‘eco-tax’ which would see the cost of petrol and diesel rise by 2.9 cents and 6.5 cents a litre starting January, in an attempt to reduce carbon emissions. Rising fuel costs have particularly affected rural regions, where citizens have few alternatives to driving, unlike more affluent cities which have greater public transport options. In response to the protests, Emmanuel Macron removed the proposed tax from the 2019 budget altogether. However, this failed to appease the [I]gilets jaunes[/I] protestors, who are now seeking wider economic reforms to address the wide income gap between wealthy Parisians and the rural poor. The removal of the eco-tax comes as a setback to Macron’s ‘climate change solidarity package’, which seeks to reduce carbon emissions in accordance with the Paris Agreement. Energy reform is an urgent priority for France. Even with its heavy reliance on nuclear power – 75% of French electricity is produced by nuclear plants – France’s carbon emissions were 3.6% over target in 2016. Furthermore, its 58 nuclear plants are ageing – almost 75% of French nuclear plants’ have life-cycles ending in 2030. While it may be possible to extend those lifespans by up to 20 years, this is an expensive process, and high-profile nuclear disasters such as Fukushima may make this an undesirable proposition. [B]Impact on businesses and law firms:[/B] The [I]gilets jaunes[/I] protests have particularly impacted French tourism and retail companies, as international customers grow afraid of visiting France, and local residents become wary of leaving their houses. Air France and Carrefour shares dropped by 10% and 7.6% respectively this week. Prolonged protests could further affect their performance. While the French protests illustrate the difficulty of implementing national climate change policies, Macron has stated that they would not make him rethink his clean energy policies. Last week, Spain unveiled its new renewable energy proposal, under which it plans to produce 100% of its electricity from renewable sources by 2050, and reduce carbon emissions by 90%. Outside of national measures, many investors such as [URL='https://www.blackrock.com/investing/insights/blackrock-investment-institute/climate-change']BlackRock[/URL] are beginning to recognise that the severity of climate change disasters (for example, the Californian wildfires last month) and tightening regulations are making climate change a material risk for their investment portfolios. Royal Dutch Shell, for instance, has yielded to intense shareholder pressure for sustainable energy practices, and has set carbon emissions targets that will be linked to the long-term remuneration of top management executives. This is likely to set a precedent for other oil companies. The undeniable global push towards sustainability will likely prompt businesses to begin planning or implementing alternative energy practices to minimise future disruption. French energy giant EDF has already been asked to submit restructuring proposals to separate its nuclear and renewables activities. Similar companies seeking to streamline their businesses should provide opportunities for law firms to assist with corporate restructuring and possible strategic acquisitions. As environmental regulations begin to be put into place, businesses will also require advice on compliance with their legal obligations. [B]2. The arrest of Huawei’s CFO (contributed by Angel Siah) [/B] [B]The Story:[/B] On the 1st of December, Huawei’s CFO Meng Wanzhou was detained while changing planes in Vancouver, Canada. Prosecutors alleged that Meng had committed fraud by lying about the links between Huawei and a shell company used to sell telecommunications equipment to Iran, which violates the US sanctions on Iran. US law enforcement officials had since issued a warrant for arrest and Meng may face extradition to the US. Huawei is the biggest global supplier of network equipment for phone and internet companies. With its ties to the Chinese government, the tech giant is a target of the US government in their long-running effort to push back against Huawei, which US intelligence sees as a security threat. The US had pressured allies in Europe and Asia to limit the use of Huawei’s technology, warning that they could be opening themselves up to the surveillance and theft of information. The arrest is arguably the most provocative step the US government has taken so far. China is not taking the arrest easy either. Chinese state-run newspaper lashed out at Canada over the arrest, saying that it is bowing to pressure from the US and likening the treatment of Meng, including being handcuffed, to a ‘show trial’. The newspaper said that such actions were aimed at humiliating China for challenging the US in global technology leadership. [B]Impact on businesses and law firms:[/B] Against this background is the agreement of Trump and Xi to a truce in the trade war between US and China at the G20 meeting in Buenos Aires. The leaders have agreed to delay a planned 1st of January hike in US tariffs on $200billion of Chinese goods and to give their negotiations 90 days to resolve the trade disputes between the two countries. Businesses and investors would be keen to follow the story of Meng’s arrest as such news risk derailing the truce. While Meng’s arrest has not (and likely, will not) halt the US and China from reopening negotiations, the arrest does highlight worsening fissures between the two countries. Following the news, markets in Asia plummeted. The arrest is an example of how the US will not ease its stance on China and investors are concerned over a further escalation in the trade war between the two countries. Major indexes fell as investors dumped their shares. The HK Hang Seng Index suffered the steepest fall compared to the others. Shares with ties to Huawei were hit particularly hard. [/QUOTE]
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