Transatlantic Trade: US and Europe – Final Report of 2020
The United Kingdom (UK) approved its second COVID-19 vaccine this week, while the European Union (EU) moved forward quickly with distribution of its first-approved vaccine to its Member States. United States (US) President Donald Trump signed another COVID relief measure linked to an Omnibus appropriations bill late on Sunday, after objecting initially to a number of provisions and calling for additional congressional action, which has kept the US Congress in Washington this week.
On the eve of Christmas Day, the UK and EU secured a deal outlining terms for the two trading partners after Britain exits the Customs Union on 31 December. This week, the EU also secured a deal with the People’s Republic of China (“China” or “PRC”) that addresses investments. Meanwhile, the US Government unveiled its new Aluminum Import Monitoring and Analysis (AIM) system and released two reports – one focused on human trafficking in the seafood supply chain and the other on American industries producing COVID-19 related goods. The US Government also moved this week to adjust upward its duties related to the ongoing large civil aircraft dispute with the EU.
COVID-19 Updates | US, UK, EU
Late Sunday evening, President Donald Trump signed the $1.4 trillion Omnibus appropriations and $900 billion COVID-19 relief measure into law, after warning last week that he was seeking amendments to the package. Lawmakers sent the enrolled bill to President Trump at Mar-a-Lago in Florida on Christmas Eve, where the President and his family spent the Christmas holiday. The President’s signature averted a Federal Government shutdown and reinstated federal unemployment benefits that temporarily lapsed on 26 December. A federal eviction moratorium for renters behind on their payments that was set to expire New Year’s Day was also extended for another month.
Among the changes requested last week, President Trump opened the door to the possibility of a $2000 direct payment for some US citizens; House Democrats took up and approved another version of its bill (H.R. 9051) on increased direct payments on Monday, 28 December, by a vote of 275 to 134. Their first attempt – by unanimous consent – failed on 24 December, when Republicans blocked the move in the lower chamber. On Tuesday, Senate Majority Leader Mitch McConnell (R-Kentucky) blocked attempts to bring the standalone $2K direct payment bill to the Senate floor.
Majority Leader McConnell instead introduced a measure to address the three major concerns raised by President Trump last week, which includes (1) the increased direct payments, (2) addressing election security and (3) repealing a 1996 law (often referred to as Section 230) that provides some legal protections to social media companies and other websites for content posted on their platforms. Several Republicans have voiced support for the increased direct payments, with some indicating they are opposed to rolling all three issues into one package. By Wednesday afternoon, Majority Leader McConnell suggested the 116th Congress would likely be unable to approve a bill with increased direct payments ahead of Noon on Sunday, when the 117th Congress is sworn-in and all legislation not advanced in the 116th Congress must be reintroduced.
The US Centers for Disease Control and Prevention (CDC) said this week that it is unknown how far the more infectious coronavirus variant first identified in the UK has spread in the United States, after California and Colorado confirmed one such UK variant case in each state and identified another suspected case in Colorado this week. The CDC is also tracking another coronavirus variant first identified in South Africa to see if it has spread to the United States. The CDC believes that the US-approved COVID-19 vaccines – manufactured by Pfizer/BioNTech and Moderna – provide protection from these variant strains.
To-date, the United States has identified over 19.6 million coronavirus cases and marked over 339,000 COVID-related deaths. On Tuesday, 29 December, Representative-Elect Luke Letlow (R-Louisiana) died from COVID complications, just days ahead of being sworn-in to the 117th Congress. He is the first person elected to Congress to die of COVID-19; he had just turned 41 years old.
The UK’s approval of the AstraZeneca/Oxford vaccine on Wednesday adds a second vaccine for distribution in that country. The vaccine costs less and is easier to store than the Pfizer/BioNTech vaccine that the UK approved on 2 December. As the UK contends with a new, more transmissible COVID variant, the Government has accelerated distribution of the approved vaccines, aiming to administer the first dose to one million people per week – rather than keep some supplies in reserve to ensure everyone receives a second dose, as the United States and EU are doing.
Dr. Moncef Slaoui, head of the US Operation Warp Speed program, suggested on 30 December that the US Government’s timeline for emergency use authorization (EUA) for the AstraZeneca/Oxford University COVID-19 vaccine candidate could slide by at least two months from February to April, with questions remaining over the vaccine’s efficacy. Dr. Slaoui’s remarks to the press on Wednesday came just hours after UK regulators authorized the AstraZeneca/Oxford vaccine.
The European Medicines Agency (EMA) granted conditional approval for Pfizer/BioNTech’s COVID-19 vaccine on 28 December, moving swiftly to distribute the initially allocation of the vaccine among each EU member state. Moderna’s vaccine is on track for approval on 6 January; a timetable for the AstraZeneca/Oxford vaccine remains unknown, as the EMA awaits formal marketing authorization.
Meanwhile, purchases of additional vaccine doses continue across the Atlantic Ocean. European Commission President Ursula von der Leyen said on Tuesday, 29 December, that the EU would buy an additional 100 million doses of Pfizer/BioNTech’s COVID-19 vaccine, bringing the total to 300 million doses. On 23 December, the US Government announced a deal to purchase another 100 million doses of the Pfizer/BioNTech vaccine, with the option of acquiring another 400 million doses, for delivery in the second quarter of 2021.
UK-EU Secure a Trade Deal
On 24 December, the EU and United Kingdom (UK) reached a “zero tariff-zero quota deal” trade deal for the two sides ahead of the conclusion of Britain’s transition period from the bloc on 31 December. A UK spokesperson said of the deal, “This agreement allows the beginning of a new relationship between the UK and the EU. One that we have always wanted – a thriving trading and economic relationship between a sovereign UK and our European partners and friends.” Minister for the Cabinet Office Michael Gove suggested in an opinion piece that the new deal would help the UK forge a new “special relationship” – language typically reserved for the description of the UK-US relationship – with the bloc.
On Wednesday, 30 December, the UK House of Commons approved the trade deal; the House of Lords followed suit later that day. On Thursday, the trade deal passed into law after receiving royal assent early that morning. The UK Government is expected to move forward with implementing the deal regardless of whether the devolved administrations in Scotland, Wales and Northern Ireland express their consent.
On the House floor on Wednesday, Prime Minister Boris Johnson stressed the deal achieved sovereignty for the United Kingdom, adding, “on Friday – for the first time 50 years – … the UK will once again be recognised as an independent coastal state, regaining control of our waters, righting the wrong that was done by the Common Fisheries Policy throughout our EU Membership.” He spotlighted the negotiations had whittled down the EU’s demand of a 14 year transition window for European fishers in UK waters to five and a half years. Notably, Scotland’s First Minister Nicola Sturgeon voiced disapproval of the agreement; the UK’s fishing industry was also not pleased with the deal’s outcome for their sector.
On Monday, 28 December, EU ambassadors approved a provisional application for the deal after working through the Christmas holiday. The agreement enters into force on 1 January; the European Parliament is expected to give its approval retroactively in January.
Some Democratic US lawmakers welcomed the deal, particularly the preservation of the Good Friday Agreement. Outgoing House Foreign Affairs Committee Chairman Eliot Engel (D-New York) said in a statement issued on 26 December, “I hope that this agreement will serve as a foundation for strengthened ties and for the next chapter in the long and successful transatlantic relationship that has helped ensure our security and prosperity for nearly a century.” He added, “Thankfully, with the implementation of the Northern Ireland protocol and an agreement on trade, the Good Friday Agreement is secure and a hard border on the island of Ireland has been avoided.” House Ways & Means Committee Chairman Richard Neal (D-Massachusetts) also welcomed the deal, commended the preservation of the Good Friday Agreement and added, “I look forward to continued U.S. engagement with our trading partners across the Atlantic in the years to come.”
Other Notable UK Trade Developments
On 29 December, the UK and Turkey signed a Free Trade Agreement, noting a commitment to working towards a more ambitious free trade agreement in the future. According to the UK Government, the initial FTA secures existing preferential tariffs for the 7,600 UK businesses that exported goods to Turkey in 2019, ensures supply chains are protected for automotive manufacturers, and supports UK importers of textiles.
On 30 December, the UK and Government of Cameroon secured an Economic Partnership Agreement (EPA) that ensures mutual continuity of trade beyond 1 January. On 23 December, the UK and Government of Kenya also signed an EPA. On 24 December, the UK and Moldova signed a Strategic Partnership, Trade and Cooperation Agreement that strengthens the trading relationship between the two countries.
Other Notable EU Developments
Despite the EU’s concerns on slave labor and restrictions on freedom of expression, access to information, and intimidation and surveillance of journalists, on Wednesday, 30 December, the EU and China reached an agreement in principle on investment, known as the Comprehensive Agreement in Investment (CAI). Following a videoconference with Chinese President Xi Jinping, European Commission President von der Leyen noted in a statement, “Today‘s agreement is an important landmark in our relationship with China and for our values-based trade agenda. It will provide unprecedented access to the Chinese market for European investors, enabling our businesses to grow and create jobs. It will also commit China to ambitious principles on sustainability, transparency and non-discrimination. The agreement will rebalance our economic relationship with China”
The CAI serves as a step to opening China to EU investments that could lead to new opportunities for EU companies and help eliminate market access barriers. The investment agreement involves a number of sectors, including hospitals, telecommunications, financial services, automotive, and air and maritime transport services, among others. The CAI includes arrangements for state-to-state dispute settlement and an institutional framework to monitor its implementation. The investment agreement also includes provisions to achieve non-discriminatory treatment, prohibition on performance requirements, and equal participation to address the EU’s concerns regarding Chinese state subsidies.
The EU reiterated in the joint statement issued with China “its expectation that China will engage in negotiations on industrial subsidies in the [World Trade Organization] WTO”, along with emphasizing the need to improve agri-food and digital market access for EU traders and the need to address steel and aluminum overcapacity. The EU published a Q&A section discussing the commitments, benefits and potential impacts of the agreement.
Next steps for the CAI in the EU include the release of legal text, approval by EU Governments and the European Parliament, along with potentially national parliament approval, which could take until 2022. Notably, the CAI may face major challenges in the EU Parliament, particularly since that body has previously adopted a resolution condemning the human rights situation in China, namely the perceived Government-led system of exploitation of the Uyghur and other ethnicities.
In the annual year-end trade-related Presidential Proclamation issued on 22 December, President Trump implemented the lobster “mini-deal” that was reached with the European Union (EU) in August.
On 30 December, the US Government adjusted tariffs on certain products imported from the European Union in regards to the ongoing large civil aircraft WTO dispute. In announcing the changes, the Office of the US Trade Representative (USTR) explained the EU’s use of trade data from a “distortive” period (August 2019 to July 2020) effected by COVID-19 had resulted in Europe imposing “tariffs on substantially more products than would have been covered if it had utilized a normal period.” Thus, to keep the two sides’ WTO retaliation-approved tariffs proportionate, “the U.S. is forced to change its reference period to the same period used by the European Union.” USTR further noted that in order not to escalate the situation, “the United States is adjusting the product coverage by less than the full amount that would be justified utilizing the EU’s chosen time period.” The United States was authorized in October 2019 to impose additional duties on approximately $7.5 billion in EU products because of the WTO Large Civil Aircraft litigation. The EU was authorized to impose tariffs affecting $4 billion in US trade because of related WTO litigation in September 2020.
USTR also noted another issue with respect to the EU’s tariff retaliation calculations, adding the EU needs “to take some measure to compensate for this unfairness.” According to USTR, “The EU calculated the amount of trade to be covered using EU-27 trade volume (i.e., excluding UK trade). The effect of this was to unfairly increase the retaliation for the 52 days in which the UK remained within the EU for tariff purposes.” USTR noted in a forthcoming Federal Register notice that it had given the EU time to address these concerns, adding the “EU has declined to do so.”
As a result of USTR moving to “mirror” the EU’s time period, the US Government is imposing tariffs on additional products from France and Germany, noting “these countries have provided the greatest level of WTO-inconsistent large civil aircraft subsidies.” The additional products subject to US duties include “aircraft manufacturing parts from France and Germany, certain non-sparkling wine from France and Germany, and certain cognac and other grape brandies from France and Germany.”
Jake Sullivan, President-Elect Joe Biden’s nominee to serve as National Security Advisor, suggested on 22 December that the incoming Administration would work with the EU to address China concerns. He tweeted, “The Biden-Harris administration would welcome early consultations with our European partners on our common concerns about China’s economic practices.”
Other Notable US Developments
Lawmakers returned to Washington on Monday, 28 December, to move forward with a veto override of the Fiscal Year 2021 National Defense Authorization Act (NDAA; H.R. 6395), after President Trump vetoed the measure on 23 December. A presidential veto override requires 2/3 majority in both chambers of Congress.
The House of Representatives voted 322 to 87 on Monday, advancing the NDAA veto override. The Senate reconvened on Tuesday to follow suit but faced obstacles from some Senators moving to delay the vote in an attempt to leverage Senate action on the increased $2K direct payment legislation. Senator Bernie Sanders (I-Vermont) is leading the Democratic caucus – along with Senator Josh Hawley (R-Missouri) – in objecting to Senator McConnell’s maneuvers to prevent a vote on the House-passed $2K direct payment bill.
Senate Majority Leader McConnell filed a cloture motion Wednesday evening to limit debate of the defense bill veto override and break any filibusters. Unless Senators agree to hold the vote sooner, this sets up a procedural cloture vote on Friday, 1 January; and a final veto override vote would happen on Saturday, 2 January, just hours ahead of the 116th Congress adjourning on 3 January.
Among other provisions, the NDAA includes a provision that expands the scope of sanctionable activities to prevent the completion of the Nordstream 2 (NS2) pipeline. Congress believes these sanctions are important tools in countering Russia’s malign influence in the European region and protecting the integrity of NATO allies’ security.
On 22 December, the US International Trade Commission released a report on American industries producing COVID-19 related goods and the supply chain challenges and constraints that affected the availability of such goods. The House of Representatives’ Committee on Ways and Means and Senate Committee on Finance requested the report in August. Among other “major findings,” USITC noted in an accompanying press release, “The major factors affecting domestic production of COVID-19 related goods include the availability and costs of inputs, the time and cost of bringing additional production capacity online (including purchasing and installing new machinery), and the time needed to recruit and train new workers. . . . U.S. producers faced, and continue to face, a conundrum when deciding whether to invest in domestic production, as there is little certainty about long-term demand and the ability to recoup investments, and a concern that post-pandemic purchasers will revert to buying from the lowest-cost suppliers, which often manufacture overseas.”
On Wednesday, 23 December, the US Department of Commerce unveiled its new Aluminum Import Monitoring and Analysis (AIM) system. AIM mirrors the Department’s Steel Import Monitoring and Analysis (SIMA) system and will be operational on 4 January 2021, requiring licenses for “all covered aluminum imports” by 25 January. According to Commerce, the AIM monitor “will track aggregate trends in U.S. imports of certain aluminum products in almost real-time, providing an early indication of trends. The AIM monitor will also identify surges of specific aluminum products suggesting potential transshipment and circumvention relating to these products.”
Notably, Commerce will require importers to report the country where imported aluminum products were smelted, starting in one year. Meanwhile, the Commerce Department will offer another opportunity to comment on this and other aspects of the licensing requirements in the coming months. Commerce’s International Trade Administration published a Federal Register notice the same day that provides further guidance.
On 23 December, the US Department of State and the National Oceanic and Atmospheric Administration (NOAA) submitted a joint report to Congress titled, “Human Trafficking in the Seafood Supply Chain.” According to NOAA, “The Report lists 29 countries that are most at risk for human trafficking in the seafood sector –documenting the quantity and value of seafood imports from each listed country, and discusses seafood traceability programs in each listed country.” The report includes ten recommendations for legislative and administrative action to combat human trafficking in this sector. One recommendation includes strengthening existing efforts between NOAA and the Department of Homeland Security to support CBP’s efforts to block products caught or processed using forced labor from reaching US markets.
Sanctions Updates | US
The United States imposed sanctions these past two weeks on individuals and entities in the Western Hemisphere, Syria and Belarus. Within the Western Hemisphere region, the US Treasury Department’s Office of Foreign Assets Control (OFAC) levied sanctions on entities/individuals in Venezuela, Nicaragua and Cuba. The US Department of Commerce also amended its export control regime, adding a new list that focuses on concerns with respect to exports, re-exports or transfers of products that end up in the hands of “military end users” in countries of concern.
On 18 December, OFAC designated Ex-Cle Soluciones Biometricas C.A. for materially supporting the illegitimate President of Venezuela Nicolas Maduro Moros. OFAC also designated Guillermo Carlos San Agustin and Marcos Javier Machado Requena for having acted for or on behalf of Ex-Cle Soluciones Biometricas C.A. On 30 December, OFAC designated Venezuelan judge Lorena Carolina Cornielles Ruiz and Venezuelan prosecutor Ramon Antonio Torres Espinoza, the Venezuelan government officials who presided over and prosecuted the November 2020 trial and sentencing of six US persons, known as the “Citgo 6,” in Venezuela. The US Government noted the Citgo 6 “were unjustly imprisoned in Venezuela in November 2017 after being lured to Caracas under false pretenses.”
On 21 December, OFAC designated the Vice President of the Nicaraguan Supreme Court of Justice, Marvin Ramiro Aguilar Garcia; a Deputy of the National Assembly, Walmaro Antonio Gutierrez Mercado; and a Chief of the Nicaraguan National Police in Leon, Fidel De Jesus Dominguez Alvarez. Also on 21 December, OFAC identified three entities controlled by the Cuban military with strategic roles in the Cuban economy that had evaded sanctions. Two of the entities reportedly used their Panamanian incorporation to subvert international trade restrictions.
On 23 December, (OFAC) designated one individual and four entities for their roles in the 9 August 2020 presidential election in Belarus, which was deemed fraudulent, and the subsequent violent crackdown on peaceful pro-democracy protests. To date, OFAC has sanctioned 25 Belarusian individuals and 13 entities. Separately, the US Department of State took action pursuant to Presidential Proclamation 8015 and identified 39 individuals responsible for undermining Belarusian democracy, consequently imposing visa restrictions on them. In total, 63 individuals now face visa restrictions related to the ongoing situation in Belarus.
On 22 December, OFAC sanctioned a high-ranking official in the Syrian government; her husband, a member of the Syrian People’s Assembly; and their business entities. In addition, OFAC added the Central Bank of Syria to the Specially Designated Nationals and Blocked Persons List (SDN List).
On 21 December, the US Commerce Department amended the Export Administration Regulations (EAR) by adding a new ‘Military End User’ (MEU) List. Commerce also announced the “first tranche” of 103 entities, including 58 Chinese and 45 Russian companies. The Department noted, “The U.S. Government has determined that these companies are ‘military end users’ for purposes of the ‘military end user’ control in the EAR that applies to specified items for exports, reexports, or transfers (in-country) to the China, Russia, and Venezuela when such items are destined for a prohibited ‘military end user.’” Secretary of Commerce Wilbur Ross said of the action, “The Department recognizes the importance of leveraging its partnerships with U.S. and global companies to combat efforts by China and Russia to divert U.S. technology for their destabilizing military programs, including by highlighting red flag indicators such as those related to Communist Chinese military companies identified by the Department of Defense.” A Federal Register notice on the Final Rule is available here.
Also on 21 December, the US State Department announced visa restrictions “for Chinese officials who are believed to be responsible for, or complicit in, policies or actions aimed at repressing religious and spiritual practitioners, members of ethnic minority groups, dissidents, human rights defenders, journalists, labor organizers, civil society organizers, and peaceful protestors.” Family members of such persons may also be subject to these additional restrictions.