Transatlantic Trade | US and Europe – Week of December 13, 2021
Russia’s military build-up at Ukraine’s border continues to dominate the attention of transatlantic partners, with officials from the United States (US), the United Kingdom (UK), and the European Union (EU) continuing to warn Russia to de-escalate the situation. In America, the US Congress wrapped up its legislative work for 2021, with Democrats not quite getting their social and climate change spending package to the finish line ahead of the congressional break. However, the US Congress did approve a bill that focuses on alleged forced labor concerns related to the People’s Republic of China (“China”).
Separately, in the EU, there is some increased pressure to act on a stalled proposal to address concerns with forced labor in the manufacturing of goods overseas. Meanwhile, transatlantic partners are separately seeking to define their 2022 priorities, with synergy – albeit separately – seen around digital trade and the Indo-Pacific region. With temperatures cooling around the world, transatlantic partners are also focused on addressing increased cases of the COVID-19 Omicron variant.
Notable US Developments
On 13 December, US President Joe Biden spoke with Finnish President Sauli Niinistö. A White House summary reflected the two leaders discussed “Russia’s destabilizing military buildup along Ukraine’s border and the importance of transatlantic efforts to de-escalate the situation.” President Biden also welcomed Finland’s selection of the F-35 for its next fighter jet, noting it would further bilateral defense ties.
This week, National Security Advisor Jake Sullivan continued a dialogue with European leaders on the tense situation, including the Bucharest 9. Sullivan also spoke with his Russian counterpart on Wednesday, reiterating U.S. concerns about Russia’s continued military build-up at Ukraine’s border. A readout of that call also reflected,
Assistant Secretary of State for European and Eurasian Affairs Karen Donfried will consult with NATO Allies in Brussels on December 16 to develop a coordinated approach.”
Russian President Putin submitted its proposal to the US and the North Atlantic Treaty Organization (NATO) this past week for new security guarantees, seeking pledges that would halt NATO’s eastward expansion (such as Ukraine membership) and block American military ties with former Soviet states. Moscow also reported this past week that it had increased discussions of military cooperation with Beijing, amid increased tension in the US-Russia and US-China relationships.
The US Senate approved the reconciled Fiscal Year 2022 National Defense Authorization bill on 15 December by a vote of 89-10. The compromise legislation totals $768 billion, well over President Biden’s original request for national defense spending. The upper chamber also worked to approve some long-stalled nominations this week. Early on Saturday, the Senate approved more than 30 Ambassador and other Biden Administration nominees, after Majority Leader Chuck Schumer (D-New York) agreed to schedule a vote on sanctions on the company behind the Nord Stream 2 pipeline that will deliver natural gas from Russia to Germany. This agreement had Senator Ted Cruz (R-Texas) lifting his hold on a number of these nominations; a vote on the Nord Stream 2 sanctions legislation is set for no later than 14 January. Among the US Ambassadors confirmed were the following with posts in Europe: Mark Gitenstein (EU); Julissa Reynoso Pantaleon (Spain); Denise Campbell Bauer (France); Claire D. Cronin (Ireland); Kent Doyle Logsdon (Moldova); Michael J. Murphy (Bosnia and Herzegovina); Jamie L. Harpootlian (Slovenia); Mark Brzezinski (Poland); Scott Miller (Switzerland/Lichtenstein); Michael M. Adler (Belgium); and Erik D. Ramanathan (Sweden).
Democrats in both chambers approved a measure this week that raised the US debt limit to nearly $31 trillion, after the Senate approved legislation that allowed the limit to be increased once by a simple majority vote. President Biden signed the legislation into law on Thursday. Notably, the United States’ debt has for several years eclipsed the nation’s gross domestic product (GDP), which the US Department of Commerce has reported is about $23 trillion.
On Thursday evening, President Biden conceded and shared that Senate Democrats would need additional time in 2022 to advance his Build Back Better Act (BBBA), the $2.2 trillion social and climate spending package approved by the House in November that is moving forward via the budget reconciliation process. In providing a statement on the status of the BBBA negotiations on Thursday, the President acknowledged Senator Joe Manchin (D-West Virginia) continued to express concerns about the bill’s cost exceeding the $1.75 trillion framework that the White House agreed to this fall. On Sunday, 19 December, Senator Manchin, however, said he could not support the bill. After appearing on Fox News and citing inflation and geopolitical concerns, the Senator issued a statement that reflected:
My Democratic colleagues in Washington are determined to dramatically reshape our society in a way that leaves our country even more vulnerable to the threats we face. I cannot take that risk with a staggering debt of more than $29 trillion and inflation taxes that are real and harmful to every hard-working American at the gasoline pumps, grocery stores and utility bills with no end in sight.”
White House Press Secretary Jen Psaki issued a statement on Sunday in response to Senator Manchin’s surprise announcement on the BBBA, saying his actions were at odds with discussions with the President and other “public utterances” by the Senator. The lengthy White House response essentially seeks to rebut Senator Manchin’s concerns with the BBBA. It remains to be seen if Democrats in the Senate will move forward with a vote on the BBBA in 2022, a package that still includes the tax credits for electric vehicles (EV) that several countries have objected to, including European countries, Mexico and Canada. Congress is set to reconvene on 3 January 2022.
On Thursday, by a vote of 75-18, the Senate confirmed retired diplomat Nicholas Burns to serve as the next US Ambassador to China. Senator Marco Rubio (R-Florida) recently released his hold on the nomination as part of an agreement reached with the House and the Biden Administration that would clear the way for congressional approval of the Uyghur Forced Labor Prevention Act. This is a bill the Senator co-sponsored that establishes a rebuttable presumption that all goods originating from China’s Xinjiang region violate existing US law prohibiting the importation of goods made with forced labor. Notably, companies that produce goods in Xinjiang can be granted an exception, if they show proof that those products are not made using forced labor. The bill next heads to the President’s desk; White House Press Secretary Jen Psaki stated earlier this week that President Biden would sign the bill into law.
Notable UK Developments
Similar to the United States, British Prime Minister Boris Johnson remains focused on Russia’s military build-up along Ukraine’s border. He spoke with President Putin on 13 December, calling for Russia to de-escalate. Prime Minister Johnson spoke with Ukraine President Volodymyr Zelenskyy on 17 December, reaffirming the UK’s support for Ukraine’s territorial integrity. A 10 Downing Street summary further reflected the leaders “discussed the importance of Ukraine and other European states reducing their dependence on Russian gas and the need to cultivate green and diverse energy sources.”
On 16 December, the UK and Australia signed the UK’s first bilateral trade agreement since departing the EU. Prime Minister Johnson and Australian Prime Minister Scott Morrison agreed to the trade deal in principle while in London in June. The agreement will now be laid in the UK’s Parliament for a period of scrutiny.
On 14 December, UK Minister for Africa Vicky Ford gave a speech at Chatham House on her priorities for the UK relationship with the continent of Africa in 2022. She outlined five priorities: (1) strengthen freedom and democracy; (2) strengthen economic partnerships; (3) promote clean, green and sustainable growth; (4) improve security with African countries and help resolve conflicts; and (5) empower women and girls.
On 13 December, UK International Trade Secretary Anne-Marie Trevelyan gave a keynote speech at Asia House, outlining her plan to position the UK at the heart of future growth opportunities in the Indo-Pacific, such as digital trade. Among other things, she noted,
Next year will be a five-star year for the UK’s trade agenda, as we look to begin formal negotiations on deals with Canada, with Mexico, the Gulf Cooperation Council and India. In particular of course, a big focus will be our plans to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the CPTPP.”
Notable EU Developments
In light of Russia’s military build-up at Ukraine’s border, the European Council adopted sanctions earlier this week against the Wagner Group, a Russia-based unincorporated private military entity, targeting not only the group itself, but also eight individuals and three entities connected to it. On 16-17 December, EU Heads of State of Government convened for the last time in 2021; they threatened Russia with “massive consequences and severe costs, including restrictive measures coordinated with partners”, should the country not de-escalate tensions caused by the military build-up along its border with Ukraine.
Regarding broader security and defence matters, EU Leaders agreed that the EU will “take more responsibility for its own security and defence, pursue a strategic course of action and increase its capacity to act autonomously”, while they supported “the strengthening of the EU-NATO strategic partnership and looked forward to the third joint declaration on EU-NATO cooperation.” Separately, the European Parliament plenary formally endorsed their negotiating mandate this week on the International Procurement Instrument, opening the way for the first inter-institutional negotiation meeting with the Council on 16 December and attempting to narrow down the final provisions of the new trade defense mechanism.
The adoption of the European Parliament’s negotiating mandate for the proposed Digital Markets Act and the Committee approval of the Digital Services Act Report were also among the high-profile votes in this week’s Parliamentary agenda. The Digital Markets Act will apply to companies providing core platform services, who are most prone to unfair business practices, such as online intermediation services, social networks, search engines, operating systems, online advertising services, cloud computing and video-sharing services. Criteria are set forth to define whether these services can be designated as gatekeepers. Notably, the EU Parliament proposed that web browsers, virtual assistants and connected TV be added to the scope of the proposal. The EU Parliament’s position also endorsed new provisions related to targeted advertising and the interoperability of services, along with restrictions on “killer acquisitions”. The inter-institutional negotiations with the Council, who endorsed its negotiating mandate at the end November, are due to commence in early 2022, under the leadership of the French Presidency.
Separately, with respect to the Digital Services Act (DSA) one of the most contentious changes introduced in the DSA Report is a ban on online advertisements that target children. A Plenary vote on the DSA is expected in January 2022, after which inter-institutional negotiations with the Council can also start.
Hundreds of Members of the European Parliament (MEPs) sent a letter to Executive Vice President and Trade Commissioner Valdis Dombrovskis calling the EU to move swiftly on a ban on imports made with forced labor. The letter urged the European Commission to present a regulation that would directly impose a ban on forced labor imports, instead of the current plans of introducing a forced labor provision within the future sustainable corporate governance proposal, which aims to establish a mandatory due diligence regime through supply chains. The future corporate governance proposal has received a lot of political attention, since it has been delayed on multiple occasions, in part due to the double rejection of the preliminary draft by the European Commission’s Regulatory Scrutiny Board (independent body tasked for quality control and assessment during the first stages of a draft EU law). Some MEPs have been seeking increased transparency on this process, calling for the release of the Regulatory Scrutiny Board’s reports, which would shed more light behind the Board’s reasoning for rejecting the Commission’s draft twice.
The European Commission imposed on 15 December 2021 definitive anti-dumping duties on Chinese steel wind towers, via an Implementing Regulation. The duties range from 7.2 to 19.2 percent and have been imposed after an investigation, which according to the Commission, confirmed that “imports of steel wind towers from China at an annual value of €300 million were taking place at dumped prices, causing economic damage to EU producers”. The Commission statement continued noting,
These anti-dumping measures will also help protect the steel value chain and over 3600 direct jobs in the EU.”
The Deputy Director General of the European Commission’s DG Trade, Maria Martin-Prat, stated during an intervention at a European Council of Foreign Relations event that the EU is currently not considering applying to become member of the CPTPP. Martin-Prat referred to the geographical and political realities that need to be considered for such a decision. Furthermore, due to the existing trade relations the bloc has with the region, being affiliated with the CPTPP could mean the EU would need to accept certain standards, which may not align with the bloc’s standards.
UK-EU Trade Deal Update
In light of continued post-Brexit negotiations on the Northern Ireland Protocol, the European Commission published a proposal on 17 December that would ensure a steady continuation of the supply of medicines in Northern Ireland, along with Ireland, Malta and Cyprus. The proposal stipulates that producers could request authorization to ship off-patent medicines (such as paracetamol) from UK regulatory authorities without the custom control checks with EU countries, and they would be able to use UK specific packaging and leaflets. Meanwhile, the post-Brexit negotiations on the Northern Ireland Protocol are expected to continue in 2022.
On 18 December, UK Lord David Frost, Minister of State of the Cabinet Office, submitted his letter of resignation to Prime Minister Johnson, noting that they had previously discussed him passing “the baton” to others to handle the UK-EU relationship in January. After reports leaked to the media, he tendered his resignation, stepping down immediately. Prime Minister Johnson responded with a letter thanking Lord Frost for his service and his “unique contributions towards getting Brexit done.” UK Foreign Secretary Liz Truss is now serving as the lead UK negotiator with the EU on the Northern Ireland Protocol.
Negotiations on the post-Brexit status of Gibraltar are also set to continue between Spain and the UK in early 2022, since an agreement was not reached during the latest meeting of the British and Spanish Foreign Ministers, Liz Truss and José Manuel Albares, on 15 December.
On 15 December, the US Federal Reserve announced plans to speed up the withdrawal of its extraordinary support for the American economy during the pandemic and suggesting the stimulus would end by March 2022. Federal Reserve officials are forecasting that inflation will run higher next year than they had previously projected; they backed away from the “transitory” characterization previously used to describe inflation increases seen this year in the United States.
On 14 December, President Biden said his Administration had ordered enough of Pfizer’s COVID-19 antiviral pill – Paxlovid – to treat 10 million Americans. The company has reported trial data that reflects Paxlovid reduces the risk of hospitalization or death by 89 percent in high-risk adults. Paxlovid is a combination of Nirmatrelvir, a new experimental medicine, and Ritonavir, an existing antiviral used against HIV, and is taken over five days. Pfizer submitted its application to the US Food and Drug Administration (FDA) last month for emergency approval of the treatment and, in light of Omicron, is anticipating approval this month. In anticipation of the approval, Pfizer CEO Albert Bourla shared with the media this week,
We have already shipped product into the U.S., so product will be available this month if it’s approved.”
On 16 December, a U.S. Centers for Disease Control and Prevention (CDC) advisory panel recommended Pfizer/BioNTech or Moderna COVID-19 vaccine for adults, over Johnson & Johnson’s vaccine, after the agency reported the rate of a rare, but serious, blood-clotting condition was higher than previously estimated in both men and women, and in a wider age range. Other countries, such as Canada and the United Kingdom, have made similar recommendations.
With respect to the Biden Administration’s Occupational Safety and Health Administration’s (OSHA) emergency temporary standard (ETS) requiring employers with 100 or more employees to mandate COVID-19 vaccines or weekly testing, the Sixth Circuit decided on Wednesday to hear the case initially before a three-judge panel, rather than all 16 active judges on the court. Late on Friday, the Sixth Circuit lifted the stay on the mandate, allowing OSHA to move forward with its vaccine or test employer mandate that affects about 84 million American workers.
The UK is pushing forward with a campaign encouraging its citizens to get COVID-19 booster shots. Meanwhile, Britain’s Health Secretary has not ruled out imposing tougher COVID-19 restrictions before Christmas, amid the rapid rise of Omicron infections. This week, Prime Minister Johnson reinstated face mask requirements in shops and rules requiring people show proof of vaccination or a negative coronavirus test before entering night clubs and other crowded venues.
Also this week, the European Medicines Agency (EMA) recommended thirteen new medicines for approval against COVID-19 including GlaxoSmithKline/Vir’s monoclonal antibody drug Xevudy, while it recommended the extension of therapeutic indication of the Swedish Orphan Biovitrum’s immunosuppressant drug Kineret and Gilead’s Veklury (remdesivir). The European Commission now needs to decide on the final approval of the treatments in the coming days. The EMA also issued positive advice on the use of Pfizer’s Paxlovid as a treatment against COVID-19, but it issued a negative opinion on Biogen and partner Eisai’s Alzheimer’s medicine Aduhelm. Furthermore, the EMA is advancing its evaluation of the COVID-19 vaccine produced by Novavax; a decision on whether to grant a conditional marketing authorization is anticipated on 20 December.
EU Leaders also addressed in their Conclusions the impact of the emergence of the Omicron COVID-19 variant, agreeing on the need for continued travel coordination in the EU to ensure that precautionary measures would not interfere with free movement in the bloc. Administrating booster shots remains a critical component to fight against the spread of the Omicron variant.
Meanwhile, on Thursday, the World Trade Organization’s (WTO) TRIPS Council failed to conclude the ongoing discussions on the intellectual property (IP) waivers for COVID-19 related products. The two camps of countries – composed of India, South Africa and allies on one side, and the EU, UK, Switzerland and allies on the other side of the argument – remain divided on the issue. The European side continues to argue that IP is not curtailing global vaccine production, and that an IP waiver could weaken incentives for innovation. While the Biden Administration has supported discussions on the proposed IP TRIPS waiver, American manufacturers and other companies have spoken out against the IP waiver proposal, citing innovation and other concerns.