Transatlantic Trade | US and Europe – Week of February 14, 2022
While Russian officials claimed early this week a withdrawal of some of its forces from Ukraine’s borders, the United States (US) quickly asserted it saw no such evidence, with one official stating intelligence reflected another 7,000 Russian troops have joined over 150,000 estimated troops already near Ukraine’s borders. US and European leaders continued to meet this week to further discuss Russia’s perceived aggression, including at the Munich Security Conference, which opened later this week in Germany. By Friday evening, the US President warned an attack by Russia could come in days.
On the trade front this week, the United Kingdom (UK) focused on Japan and Australia, along with the broader Indo-Pacific region this week. The European Union (EU) hosted its EU-African Union Summit, with a focus on creating a joint vision for 2030. The US released its 2021 Review of Notorious Markets for Counterfeiting and Piracy report, and a group of business and labor groups urged the US Congress to move swiftly on reconciling the competition bills, with an emphasis on addressing the semiconductor chips shortages. Meanwhile, governments around the world are moving to ease COVID-19 restrictions, as Omicron cases subside and citizens’ frustration levels increase over the government-imposed restrictions.
In this issue, we cover:
Ukraine and Russia tension;
Other notable US, UK, and EU developments;
A brief UK-EU trade deal update; and
COVID-19 highlights among the transatlantic partners.
US President Joe Biden addressed Americans on 15 February, providing an update on the situation between Ukraine and Russia. While he stressed diplomacy and de-escalation was preferred, he stated,
[W]e are ready to respond decisively to a Russian attack on Ukraine, which is still very much a possibility.”
He also said such an attack could result in energy prices increasing around the world, including in America. President Biden further warned that if Russia does attack Ukraine:
The United States and our Allies and partners around the world are ready to impose powerful sanctions on [and] export controls, including actions that did not — we did not pursue when Russia invaded Crimea and eastern Ukraine in 2014. We will put intense pressure on their largest and most significant financial institutions and key industries. These measures are ready to go as soon and if Russia moves. We’ll impose long-term consequences that will undermine Russia’s ability to compete economically and strategically. And when it comes to Nord Stream 2, the pipeline that would bring natural gas from Russia to Germany, if Russia further invades Ukraine, it will not happen.”
On 15 February, Secretary Blinken spoke with Russian Foreign Minister Sergey Lavrov, reiterating a desire for a diplomatic solution to the situation. The next day, US Secretary of State Antony Blinken said in an interview,
We continue to see critical units moving toward the border, not away from the border.” He added, “There’s what Russia says and then there’s what Russia does. We haven’t seen any pullback of its forces.”
That same day, North Atlantic Treaty Organization (NATO) Secretary General Jens Stoltenberg told reporters in Brussels that Russia had “increased the number of troops, and more troops are on the way.”
US and European leaders continue to closely coordinate and share intelligence on the tense situation with Russia. President Biden spoke with UK Prime Minister Boris Johnson on 14 February; French President Emmanuel Macron on 15 February. He spoke with German Chancellor Olaf Scholz on 16 February. On 17 February, President Biden and Italian Prime Minister Mario Draghi discussed Russia’s military build-up. On Friday, President Biden spoke with transatlantic leaders about the likelihood of further Russian aggression against Ukraine.
President Biden also provided an update again on Friday, recapping the situation and noting Russia is seeking to establish false pretexts for a pending invasion. He explained,
Over the last few days, we’ve seen reports of a major uptick in violations of the ceasefire by Russian-backed fighters attempting to provoke Ukraine in the Donbas.”
In response to a question from the media about whether Russian President Vladimir Putin has made a decision on whether to invade, President Biden stated,
I’m convinced he’s made the decision. We have reason to believe that.”
With diplomacy still the preferred avenue for de-escalating the regional tensions, Secretary of State Blinken and Foreign Minister Lavrov are set to meet on 24 February in Europe.
With the situation continuing to evolve, the EU is preparing a package of sanctions against Russia in case it continues with its military aggression. EU Trade Commissioner, Valdis Dombrovskis said during the informal Trade Council held earlier this week,
It’s going to have a broad range of topics: financial sanctions, economic sanctions, also sanctions in the area of trade including export controls”.
Meanwhile, European Commission (EC) President Ursula von der Leyen, European Council President Charles Michel and EU Foreign Policy Chief Josep Borrell spoke this week before the European Parliament on the evolving situation in Ukraine and the possible EU response to Russia in case of a military invasion.
EC President von der Leyen expressed hope Russia would instead de-escalate, while also criticizing the conflicting signals from Russia this week. She underlined:
Diplomacy has not yet spoken its last words. It is good to hear yesterday’s commitment to the Minsk Agreement. President Macron and Chancellor Scholz have travelled to Kyiv and Moscow. Several others are also speaking to both sides. I am constantly exchanging with all of them, as well as with President Biden, Prime Minister Trudeau and Prime Minister Johnson. The Transatlantic Community has for a long time not been so united.”
Echoing that sentiment, President Michel reiterated the European Council’s three strategic priorities: the need for diplomatic discussions, continued preparation of sanctions against Russia, and direct support to Ukraine. High Representative Borrell also highlighted during his remarks,
[W]e are ready to continue negotiations, talks, in order to look for a diplomatic solution to the worst crisis that Europe is living since the end of the Cold War.”
Meanwhile, a distributed denial of service (DDoS) attack began on Tuesday and temporarily knocked offline Ukraine’s Defense Ministry website and two of the country’s largest banks. It is viewed as the worst cyberattack in the country’s history. The next day, the US Government said it was investigating the cyberattack, along with Ukraine. The US Government also circulated guidance to US-based entities warning of potential cyberattacks, allegedly by Russian state-sponsored cyber actors. By Friday, White House Deputy National Security Adviser for Cyber and Emerging Technology Anne Neuberger told reporters that the US Government believes Russia is responsible for the DDoS attacks reported in Ukraine this week.
Notable US Developments
US Vice President Kamala Harris travelled to Germany on Thursday to attend the Munich Security Conference. On Friday, she met with NATO Secretary General Stoltenberg. The Vice President also held a multilateral meeting with the leaders of the three Baltic states: Latvia, Lithuania, and Estonia. In a separate engagement that day, she met with the US congressional members that are attending the Munich Security Conference. On Saturday, Vice President Harris addressed the Munich Security Conference, focusing her remarks on the tense Ukraine-Russia situation and stating,
Not since the end of the Cold War has this forum convened under such dire circumstances.”
The Vice President also met with Ukraine President Volodymyr Zelenskyy on the margins of the forum on Saturday. At a press gaggle, the Vice President fielded questions regarding how effective sanctions could be if SWIFT restrictions were not a part of the package from the start of imposition.
Ahead of a congressional recess – in observance of this coming President’s Day holiday (21 February) – the US Senate failed to act on a comprehensive sanctions package against Russia, after negotiations led by Senate Foreign Relations Committee Chairman (SFRC) Robert Menendez (D-New Jersey) stalled. Early in the week, SFRC Ranking Member James Risch (R-Idaho) led Republicans in introducing the Never Yielding Europe’s Territory (NYET) Act to provide the critical support Ukraine needs to defend itself and deter Russian aggression. A summary of the bill, which includes a focus on the Nord Stream 2 pipeline, is available here. Chairman Menendez criticized the Republican move as partisan posturing. Meanwhile, Senator Kevin Cramer (R-North Dakota) said it was “unfortunate” that a robust sanctions bill could not pass before Senators left Washington on Thursday. The Senate instead approved a non-binding resolution (S. Res. 519) that warned the Russian President to cease his threats to Ukraine and NATO.
On Friday, the US Department of State approved a long-awaited $6 billion deal to sell Poland 250 Abrams tanks. Secretary of Defense Lloyd Austin announced the deal while at a Warsaw press conference with Polish Minister of National Defense Mariusz Blaszczak. In Washington, Deputy Secretary of State Wendy Sherman met with Danish Acting Permanent Secretary Jesper Moller Sorensen; she welcomed Denmark’s 10 February announcement to begin negotiating a new Defense Cooperation Agreement between the United States and Denmark. Secretary of State Blinken met this week with officials from Albania and Estonia, prior to heading to Germany later in the week.
Participating at an event in California on Wednesday, Assistant US Trade Representative (A/USTR) Dan Mullaney acknowledged that trade agreements have served as “a strong tool” to remove unnecessary barriers and facilitate trade among allies, adding the Biden Administration would take a “bespoke, tailor-made approach” to trade policy. He said this approach would allow allies to reach “common goals, especially when it comes to things like our common objectives in China, and with respect to non-market economy policies and practices.” A/USTR Mullaney stated,
It may well be that a more tailored approach with the European Union, for instance, in the Trade and Technology Council [TTC], might be a more effective way of achieving those common goals.”
This includes a “range” of TTC issues that could be responsive to global challenges and project “transparency, rule of law, worker rights [and] climate protections,” Mullaney said.
On 17 February, the Office of the United States Trade Representative (USTR) released its 2021 Review of Notorious Markets for Counterfeiting and Piracy (“the Notorious Markets List”). The 2021 Notorious Markets List identifies 42 online markets and 35 physical markets that are reported to engage in or facilitate substantial trademark counterfeiting or copyright piracy. Some of the entities identified also operate in the UK and EU.
On 16 February, a broad coalition of business and labor groups sent a letter to congressional leaders, urging the US Congress to take immediate action and reconcile the two chambers’ competition bills. They spotlighted the critical funding for the Creating Helpful Incentives to Produce Semiconductors in America Act (CHIPS Act), and further called on Congress to adopt a strengthened version of the investment tax credit set forth in the Facilitating American-Built Semiconductors Act (FABS Act) for both semiconductor manufacturing and design. At an event on Wednesday, US Secretary of Commerce Gina Raimondo urged Congress to fund the CHIPS Act, stressing that reshoring semiconductor manufacturing “is not going to happen without it.”
Late on 11 February, the White House released its Indo-Pacific strategy (19-pages). On 14 February, SFRC Chairman Menendez and Ranking Member Risch issued a supportive statement on the new regional strategy. They said,
Even as we work with our allies and partners to face critical challenges around the world, the United States must not lose focus on the Indo-Pacific region. . . . We expect continuous consultation with the administration as the Indo-Pacific strategy is implemented, and that the strategy will be reflected in the president’s budget request. Finally, we are committed to meaningful engagement with our allies and partners to tackle shared challenges and seize opportunities to build a free and open region.”
Notable UK Developments
British Prime Minister Johnson also addressed the Munich Security Conference on 19 February. He affirmed solidarity with the US and EU regarding their collective response to Russia further invading Ukraine. The Prime Minister stated:
The UK has worked with the European Union and the United States to put together the toughest and strongest package of sanctions, and I spoke recently to President Ursula von der Leyen to discuss the measures prepared by the EU, in the closest coordination with our own. And if Russia invades its neighbour, we will sanction Russian individuals and companies of strategic importance to the Russian state; and we will make it impossible for them to raise finance on the London capital markets; and we will open up the matryoshka dolls of Russian-owned companies and Russian-owned entities to find the ultimate beneficiaries within. And if President Putin believes that by these actions he can drive NATO back or intimidate NATO, he will find that the opposite is the case.”
Whatever happens in the next few days and weeks, we cannot allow European countries to be blackmailed by Russia, we cannot allow the threat of Russian aggression to change the security architecture of Europe, we cannot permit a new Yalta or a new division of our continent into spheres of influence. We must now wean ourselves off dependence on Putin’s oil and gas.”
In a call with Japanese Prime Minister Fumio Kishida, Prime Minister Johnson thanked Japan for diverting energy supplies to Europe. He also expressed gratitude for Prime Minister Kishida’s support for the UK’s accession to the Trans-Pacific Partnership trade bloc, adding the UK looked forward to further strengthening trade ties with Japan in the near future.
Prime Minister Johnson and Australian Prime Minister Scott Morrison met virtually on 16 February. Apart from discussing the Ukraine-Russia situation, they focused on the Indo-Pacific and ensuring “a free, open, inclusive and prosperous region.” Complementing Australia’s efforts, the UK committed £25 million to strengthen regional resilience in areas including cyberspace, state threats and maritime security. The Prime Ministers also spotlighted the UK-Australia free trade agreement and progress to support critical minerals supply chains, including through the establishment of a Joint Working Group on critical minerals in 2021. Other topics of discussion ranged from AUKUS and national security matters to climate, environment, health, and science and technology. A detailed readout of the talks is available here.
Notable EU Developments
The EU27 Trade Ministers met on 13-14 February in an informal setting to discuss the EU trade policy priorities. Trade Ministers held strategic discussions in preparation for the EU-African Union Summit later that week. The next round of the US-EU Trade and Technology Council meeting, expected to be held in France this spring, was also discussed, with a focus on digital, climate and new technologies issues, along with supply chain issues experienced in general. Trade Commissioner Valdis Dombrovskis weighed at the Ministerial discussion on the EU’s strategy for multilateral trade issues. The EU Trade Ministers also met with World Trade Organization (WTO) Director General Ngozi Okonjo-Iweala to discuss trade issues, particularly concerning the supply of COVID-19 vaccines. While a formal date has not been set yet for the upcoming WTO Ministerial Conference, there was consensus to set up the meeting at the latest by the end June.
The EU-African Union (AU) Summit was held on 17-18 February with the purpose of creating a joint vision for 2030, leveraging existing relationships to build a new partnership between Africa and Europe based on shared principles of mutual respect, respect of African sovereignty, solidarity, security, sustainability, transparency and multilateralism. A key pillar of the summit was focused on expediting recovery from the COVID-19 pandemic and promoting an ambitious large-scale investment package for Africa.
A declaration on a Joint Vision for 2030 outlines the main ambitions of the renewed partnership, focused on solidarity, security, peace and sustainable and sustained economic development and prosperity. An Africa-Europe Investment package of €150 million was announced to boost investments in energy, climate, transport and digital sectors, as well as sustainable growth and job creation. With respect to the COVID-19 vaccines, the EU reaffirmed the commitment to provide at least 450 million vaccine doses to Africa by mid-2022. However, on the thorny issue of a WTO intellectual property (IP) waiver for COVID-19 vaccines, the EU and African leaders remained divided. The declaration notes the commitment to “engage constructively towards an agreement on a comprehensive WTO response to the pandemic, which includes trade related, as well as intellectual property related aspects.”
After the Summit, a Joint EU-AU Innovation Agenda to advance sustainable growth and create jobs was also put forward, as part of the Global Gateway Investment Package. A public consultation on the AU-EU Innovation Agenda is currently ongoing until 13 May 2022. Finally, EU-AU Leaders affirmed their commitment to multilateralism and pledged to continue their close collaboration in multilateral fora, and to provide “political support to achieve the necessary reform of the WTO and to improve its functioning in order to strengthen the multilateral trading system.”
The informal Trade Council meeting also touched on EU-Sino relations and the ongoing WTO dispute complaint the EU initiated against the People’s Republic of China (“China”), especially since the EU-China Summit is now penciled for 1 April 2022 and could possibly serve as grounds for reconciliation on this trade dispute. Meanwhile, the WTO published the requests from the US, Japan as well as separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu to observe consultations in a dispute between the EU and China.
On 18 February, the European Commission announced the EU would be filing another case against China before the WTO based on alleged restrictions imposed on EU high-tech companies for protecting and using their patents. The European Commission claimed China “severely restricts EU companies with rights to key technologies (such as 3G, 4G and 5G) from protecting these rights when their patents are used illegally or without appropriate compensation by, for example, Chinese mobile phone manufacturers”, which leaves European high-tech companies at a significant disadvantage.
Last week, the European Commission issued its anticipated European Chips Act legislative package, comprising of initiatives outlining the methodology to implement the European Commission’s ambition to bolster the EU sovereignty in semiconductor production toward achieving improved chips supply chain resilience for the bloc. For further analysis of the legislative package, please see our summary here.
Further advancing the EU’s technological sovereignty agenda and reinforcing the EU’s technological resilience, the European Commission and the High Representative of the Union for Foreign Affairs and Security Policy published their policy initiatives this week for implementing the EU’s space ambitions. The proposal includes a Regulation aimed at creating an EU satellite-based connectivity system that would ensure long-term availability of world-wide-uninterrupted access to secure and cost-effective satellite communication serves and allow commercial services to enable access to advanced, reliable and fast connections for citizens and businesses across Europe, Similarly, a Joint Communication outlines the EU’s plans to boost actions on Space Traffic Management.
UK-EU Trade Deal Update
On 15 February in a call with EC President von der Leyen, UK Prime Minister Johnson “raised the growing issues around the Northern Ireland Protocol, and the need to take action to safeguard the Belfast (Good Friday) Agreement in all its dimensions.” Both leaders agreed to stay in touch on this matter.
This week, a number of European jurisdictions announced they are scrapping restrictions in their territories as COVID-19 infections are becoming more controlled, particularly with respect to the impact on the healthcare systems resilience. Portugal, Germany, Switzerland, Austria and the Netherlands announced they would be gradually or completely scrapping restrictions (albeit in some jurisdictions some baseline measures are still being maintained, such as wearing a mask in indoor spaces and public transport).
In America, California became the first US state to shift formally to an “endemic” approach to the coronavirus, after Democratic Governor Gavin Newsom announced a plan on Thursday that emphasizes prevention and quick reaction to outbreaks over mandated masking and business shutdowns. Despite several US states easing restrictions, on 18 February, President Biden extended the COVID-19 national emergency beyond 1 March, citing,
The COVID-19 pandemic continues to cause significant risk to the public health and safety of the Nation.”
In the United Kingdom, Buckingham Palace confirmed Queen Elizabeth II tested positive for COVID-19 on Sunday and is experiencing mild symptoms. Prime Minister Boris Johnson tweeted well wishes:
I’m sure I speak for everyone in wishing Her Majesty The Queen a swift recovery from COVID and a rapid return to vibrant good health.”
The UK Government is reportedly preparing to lift the remaining COVID restrictions, with an announcement expected this coming week when Parliament returns to session, as the country shifts to a “living with COVID” approach.
Earlier this week, a self-proclaimed ‘freedom convoy’ inspired by the recent Canadian demonstration protested in Brussels (as the de-facto EU capital) earlier this week about the restrictions and vaccinations mandates. Despite over 1300 vehicles gathered on Sunday close to the Belgian border, a coordinated Belgian police response halted the protest, which ultimately did not result to any trade disruptions. In the US, a political action committee is reportedly partnering with American truck convoys to similarly protest COVID-19 restrictions and mandates. Routes for the convoys are expected to start in Cleveland, Columbus, Ohio and California and will end in Washington on 6 March.
On 17 February, US Agency for International Development (USAID) reported US efforts via Global VAX in Côte d’Ivoire, Uganda, and Zambia showed recent targeted efforts to accelerate COVID-19 vaccinations in these sub-Saharan Africa countries are making significant progress. Amid governments around the world easing COVID-19 restrictions, new research reported this week notes the BA.2 virus, a subvariant of Omicron, is spreading faster, eludes approved COVID-19 vaccines, and may also cause more severe disease.