Transatlantic Trade | US and Europe – Week of February 15, 2021
United States (US) engagement with transatlantic partners came across multiple fronts this week, via the White House, State Department outreach, the NATO Defense Ministerial and Treasury Department outreach. The European Commission released its trade strategy, with the “Open Strategic Autonomy” principle at the center, but also prioritizing strengthening the European Union (EU)-US relationship. Effective this week, travelers visiting the United Kingdom (UK) must now comply with tougher restrictions or face increased fines and possible imprisonment. The UK has also been spearheading efforts to address “vaccine nationalism” concerns, as it virtually hosts the Group of 7 (G7) Leaders this week and in its capacity at the United Nations (UN). There were also transatlantic responses this week to situations related to Russia, Belarus, Myanmar and Iran.
In this issue, we also cover:
COVID-19 developments more broadly, with respect to the US, UK and EU;
Updates related to the EU COVID-19 export control mechanism;
EU-UK trade deal developments;
Other UK, EU and US developments;
A US-EU update; and
Sanctions developments with respect to Russia, Belarus, Myanmar and Iran.
COVID-19 Updates | US, UK, EU
Incoming World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala warned on Monday that “vaccine nationalism” poses a risk for a global economic recovery from the COVID-19 pandemic, calling for a free flow of vaccines to all countries. She implied export control restrictions need to end, saying, “No one is safe until everyone is safe. Vaccine nationalism at this time just will not pay, because the variants are coming. If other countries are not immunized, it will just be a blow back.” In an interview with Reuters, she affirmed a priority for her is that WTO members come to the next ministerial with “solutions as to how the WTO can make vaccines, therapeutics and diagnostics accessible in an equitable and affordable fashion to all countries, particularly to poor countries.” Okonjo-Iweala also acknowledged long-standing US concerns with the WTO, saying reforms would not be a quick or easy process, while adding there appears to be a path forward.
Meanwhile, France has pledged to donate five percent of its secured vaccine supplies to poorer countries. The United States is inoculating its own citizens with its secured vaccine doses. In the interim, the US Government will contribute up to US$4 billion to the global effort to fund vaccinations in lower-income countries. In remarks to the UN Security Council on Wednesday, 17 February, Secretary of State Antony Blinken announced the United States would provide more than US$200 million to pay off arrears it owes to the World Health Organization (WHO), as well as its current year obligations. This comes after former President Donald Trump announced he was freezing payments to the WHO on the grounds the UN agency had not pressed the People’s Republic of China (“China”) hard enough about the origins of the coronavirus pandemic.
UK Prime Minister Boris Johnson is hosting fellow G7 leaders for a virtual meeting on Friday, 19 February. The agenda includes discussing how the world’s leading democracies can work together to ensure equitable distribution of coronavirus vaccines around the world, prevent future pandemics and build back better from coronavirus.
At the G7 meeting, US President Joe Biden called on G7 partners to prioritize a sustainable health security financing mechanism aimed at catalyzing countries to build the needed capacity to end the COVID-19 pandemic and prevent the next one. Using money appropriated by Congress in December, the United States will provide an initial US$2 billion contribution to Gavi, the Vaccine Alliance for the COVAX Advance Market Commitment. He also reaffirmed a US commitment to advancing the Global Health Security Agenda (GHSA). The White House released a related fact sheet, available here.
On 17 February 2021, the European Commission announced the creation of the European Health Emergency Preparedness and Response Authority’s (HERA) Incubator, a new European bio-defence preparedness plan against COVID-19 variants. The HERA Incubator will serve as a blueprint for the EU’s long-term preparedness for health emergencies. It aims to boost preparedness, assist in the development of vaccines for the variants and increase industrial production by: (i) detecting, analyzing and assessing the variants, (ii) speeding up regulatory approval of adapted vaccines, and (iii) ramping up production of COVID-19 vaccines. The plan will also contribute to global-level cooperation at the WHO.
Also on Wednesday, with respect to vaccine purchases, the European Commission announced the approval of a second contract with Moderna that would provide an additional 300 million COVID-19 Vaccine doses. Pfizer/BioNTech also confirmed an agreement with the European Commission to provide an additional 200 million doses by the end of 2021.
On 16 February, Johnson & Johnson (J&J) submitted its formal request to the European Medicines Agency to receive a conditional marketing authorization making it the fourth company producing a COVID-19 vaccine to proceed to this request at the EU level after Pfizer/BioNTech, Moderna and AstraZeneca/Oxford University.
In the United States, the Vaccines and Related Biological Products Advisory Committee (VRBPAC) is set to meet on 26 February to discuss an emergency use authorization (EUA) for the COVID-19 vaccine developed by Janssen Biotech Inc., a division of J&J. If EUA is granted, the United States would have three approved COVID-19 candidate vaccines.
Effective 15 February, all travelers that have been in a high risk destination on the UK’s list of 33 hotspots with COVID variants in circulation (“red list”) will have to enter England through a designated port and have pre-booked a quarantine package to stay at one of the government’s managed quarantine facilities. Those that have not travelled to a red list country must quarantine for 10 days at home and complete two mandatory COVID-19 tests on the second and eighth day after arriving. These quarantine restrictions also carry heavier fines and penalties, such as potential prison sentences of up to 10 years.
Update: EU COVID-19 Vaccine Export Control Mechanism
The EU Commission has thus far approved all requests for vaccine exports, as it seeks to monitor vaccine flows from the bloc. Nevertheless, the bloc has been accused of causing delays in the global vaccine supply chain. Following a disruption related to Moderna’s vaccine, Canadian Prime Minister, Justin Trudeau affirmed that vaccine supplies for Canada from the bloc have been secured, after he spoke with the EU Commission President. This includes vaccines produced by Pfizer/BioNTech and Moderna, when the mechanism became effective on 30 January.
On 15 February, a joint statement issued by the US and Canadian Chambers of Commerce, along with other trade partners and associations, called on the EU Commission to consider automatic vaccine export authorizations. The group expressed concern with the EU’s export control mechanism, saying it may encourage other countries to adopt similar restrictions, potentially disrupting the global vaccine and medical supply chain – which could include access to medical equipment, vaccine manufacturers, logistics providers, companies and citizens.
Countries that reportedly receive vaccines produced in the EU that may be affected by the export restrictions include Australia, Bahrain, Canada, Chile, China, Colombia, Costa Rica, Ecuador, Japan, Kuwait, Malaysia, Mexico, New Zealand, Oman, Panama, Qatar, Saudi Arabia, Singapore, the United Arab Emirates, the United Kingdom and the United States.
UK-EU Trade Deal | Updates
Discussions are ongoing in anticipation of the next Withdrawal Agreement Joint Committee meeting scheduled for 24 February. European Commission Vice President Maroš Šefčovič, stated during an interview this week that an EU-UK agreement on common animal health and food safety standards is a possibility, as talks continue to intensify. Vice President Šefčovič also held meetings with Northern Ireland business leaders and political figures this week on the Northern Ireland Protocol. He participated in the Irish Parliament’s Committee on European Union Affairs, where he called on the need for the European authorities to gain full visibility on the border control posts processes at the Northern Ireland ports. UK authorities, he claimed, have failed to give access to EU officials in its online scrutiny and certification of goods arriving in Northern Ireland, which he said is essential for the EU to be in a position to grant further flexibilities on EU customs checks.
On 17 February, 10 Downing Street announced Lord David Frost, who led the UK’s trade deal with the EU, would be joining Prime Minister Johnson’s Cabinet as a Government’s Minister, serving as London’s representative on the UK-EU Partnership Council and ensuring proper implementation of the UK’s Withdrawal Agreement. On the same day, the UK Government published guidance in connection to the overseas business risks with Ireland. The guidance alludes to “supply chain challenges and non-tariff trading barriers”, which emerged after the end of the transition period on 31 December 2020, noting this could lead to “Consumer Price Index increase by up to 2 percent”.
Notable UK Developments
The UK holds the Presidency of the United Nations Security Council this month and is focusing on international action related to the coronavirus pandemic, climate change and conflict. On 23 February, Prime Minister Johnson will chair a virtual meeting of the UN Security Council on the link between climate change and conflict.
Notable EU Developments
On 18 February 2021, the European Commission published its anticipated Trade Policy Review outlining the EU’s trade strategy. The Open Strategic Autonomy principle is at the center of the new EU trade strategy, aiming to strengthen the EU from an economic and geopolitical perspective. The Open Strategic Autonomy principle is based on three objectives: (i) resilience and competitiveness, (ii) responsibility and fairness, and (iii) assertiveness and rules-based cooperation. The strategy promotes EU openness to contribute to the global economic recovery from the COVID-19 pandemic through supporting green and digital transformations; it encourages reinforced multilateralism through the reform of global trade rules in a fair a sustainable manner.
Executive Vice-President and Commissioner for Trade Valdis Dombrovskis stressed
trade policy must fully support the green and digital transformations of our economy and lead global efforts to reform the WTO. It should also give us the tools to defend ourselves when we face unfair trade practices. We are pursuing a course that is open, strategic and assertive, emphasising the EU’s ability to make its own choices and shape the world around it through leadership and engagement, reflecting our strategic interests and values.”
The Annex to the Trade Strategy details the EU’s plans to reform the World Trade Organization, a key priority for the EU, which envisions leading global efforts in its reform. The European Commission’s document argues that WTO reform is only possible if the US and EU converge and cooperate and notes the Biden Administration presents an “opportunity” for the two sides to work together on WTO reform, the digital economy and climate issues.
According to Eurostat indicators, China became the EU’s main trading partner in 2020. Amid the ongoing pandemic, current transatlantic relations with the US and the ongoing Comprehensive Agreement on Investment (CAI) negotiations between the EU and China, exports from the EU to China increased by 2.2 percent and imports went up by 5.6 percent, while EU imports from the US decreased 13.2 percent and exports to US decreased by 8.2 percent.
On 11 February, three EU farmer organizations issued a video opposing the EU-Mercosur free trade agreement, claiming the need to maintain EU standards on agricultural production and highlighting an expected economic downturn that EU products would suffer from the deal. Meanwhile, the bloc’s position remains forthcoming, as EU Member States remain divided, especially regarding protecting the Amazon rain forest.
Notable US Developments
In the United States, the US House of Representatives is set to vote on the $1.9 trillion COVID-19 package next week. Senate Democratic committee leaders have been working with their House Democratic counterparts to align their versions of the bill as much as possible to avoid weeks of back-and-forth in a conference committee. Republicans continue to resist provisions, such as paid federal sick leave, a higher minimum wage and insurance subsidies for laid-off workers, as negotiators try to cut down the size of the $1.9 trillion package. Republicans argue the economic aid pieces of the package are extraneous. Meanwhile, some provisions may be ruled out of order by the Senate Parliamentarian under the Byrd Rule; therefore, be unable to pass through budget reconciliation process.
On 15 February, Secretary Blinken spoke with Turkish Foreign Minister Mevlüt Çavuşoğlu. A State Department readout reflected, “Secretary Blinken urged Turkey not to retain the Russian S-400 surface-to-air missile system. The Secretary also voiced support for ongoing exploratory talks between NATO Allies Turkey and Greece.” That same day, Secretary Blinken and Greek Foreign Minister Nikolaos Dendias discussed “strengthening U.S.-Greece bilateral relations, including through the U.S.-Greece Strategic Dialogue and the 3+1 process with Cyprus and Israel, and close cooperation on defense, energy diversification, and stability in the broader Eastern Mediterranean region.”
On Thursday, 18 February, US Secretary of Defense Lloyd Austin participated in the NATO Defense Ministerial. A Pentagon readout of the first day reflected, Secretary Austin affirmed the Biden Administration’s commitment to revitalizing the US relationship with the NATO Alliance and that the US commitment to Article 5 remains ironclad. While he thanked Allies for the seventh consecutive year of growth in defense spending, Secretary Austin reminded “all Allies agreed to move toward spending two percent of GDP on defense and 20 percent of defense funds on modernization by 2024.” He “welcomed recognition by NATO Allies that China’s growing influence and international policies present challenges to trans-Atlantic security” and the need to work together to address these challenges.
Also on Thursday, the US Department of State issued a statement of concern with the political situation in Georgia, calling on “all parties to exercise restraint and avoid any actions or rhetoric that could escalate tensions or result in violence.” The US Government urged the Georgian Government “to act in line with its Euro-Atlantic aspirations.”
On Friday, 19 February, US Special Presidential Envoy for Climate John Kerry joined UN Secretary-General António Guterres in celebrating the United States’ re-entry into the Paris Agreement during the opening session of the UN Association of the United States of America’s virtual 2021 Global Engagement Summit. In a statement, Secretary Blinken stressed,
We are reengaging the world on all fronts, including at the President’s April 22nd Leaders’ Climate Summit. And further out, we very much looking forward to working with the United Kingdom and other nations around the world to make COP26 a success.”
The US Government provided an update on the SolarWinds hack this week, saying the cyberattack originated from within the United States. At the White House briefing, Deputy National Security Advisor Anne Neuberger added, “[A]n advanced persistent threat actor, likely of Russian origin, was responsible.” The Administration is in the “beginning stages” of understanding the scope and scale of the attack, which compromised nine Federal agencies and approximately 100 private-sector companies, and was disclosed in December.
The EU Commission, Germany, France and Spain are discussing a potential approach to addressing the Airbus’ subsidy model at the heart of the longstanding WTO dispute decision and related retaliatory tariffs imposed by the US on EU products. To avoid a traditional subsidies scheme, the EU is considering funding Airbus operating through incentives of innovation in the aviation sector through the budget allocated for military spending. Under this format, the EU would leave behind the repayable launch investment programs that caused initial subsidy disputes and would have a defense-spending model approach. This matter is likely to be debated throughout the first semester of 2021, as reflected the EU’s agenda under the item “Action plan on synergies between civil, defense and space industries”.
It remains to be seen how the Biden Administration would view large civil aircraft companies, such as Airbus, receiving EU defense spending funding. US Trade Representative (USTR)-nominee Katherine Tai will go before the Senate Finance Committee next week, where she will likely face questions related to the Biden Administration’s EU and UK trade priorities, including resolving the longstanding Boeing-Airbus dispute. The Office of the US Trade Representative announced last week that it would not implement a new round of tariffs in the Boeing-Airbus aircraft subsidy dispute, adding it is looking forward to resolving the dispute, once the Senate confirms Tai.
On Tuesday, 16 February, US Secretary of the Treasury Janet Yellen spoke with European Commission Executive Vice-President and Commissioner for Trade Dombrovskis; she conveyed her intention “to deepen U.S.-European cooperation on key policy challenges, including ending the pandemic, supporting a strong global economic recovery, fighting income inequality, and forcefully addressing the threat of climate change.” Secretary Yellen reaffirmed the United States would also re-engage in the ongoing OECD discussions on international taxation “to forge a timely international accord.”
Secretary Yellen also spoke with European Central Bank (ECB) President Christine Lagarde on Tuesday about the pandemic, global economic recovery and climate change. She also “commended the ECB’s swift and decisive policy response to the pandemic and discussed policy tools to foster growth and job creation in both Europe and the United States.”
Senate Finance Committee members will likely ask questions related to the US-UK trade agreement at USTR-nominee Tai’s confirmation hearing next week. Bipartisan lawmakers have been pushing the Biden Administration to prioritize concluding the negotiations; Senators may seek a timeline by which Congress could consider a US-UK trade deal.
Sanctions Updates | Russia, Belarus, Myanmar, Iran
Following the controversial Moscow trip that EU High Representative Josep Borrell took last week, EU Members of the European Parliament (MEPs) have questioned his diplomatic skills. Over 70 MEPs signed a letter demanding his resignation for the “humiliating” visit. Upon his return, Borrell proposed further sanctions on Russia, noting Russia’s lack of interest in a partnership with the EU, especially its disregard for calls to release Alexei Navalny from imprisonment. EU Foreign Affairs Ministers will discuss EU-Russia relations at a meeting scheduled for 22 February.
On 12 February, Russian Foreign Minister Sergey Lavrov said that notwithstanding Russia’s willingness to maintain a global-oriented interaction, the country was prepared to cut ties with the EU if sanctions relating to Navalny’s case were adopted. Under the possibility of additional sanctions being imposed, the Russian government has said they are ready to respond, noting sectorial sanctions are a significant risk for the Russian economy.
This downturn in EU-Russian relations also takes place amid the Nord Stream 2 pipeline-US sanctions situation, an issue that the EU and Biden Administration continue to discuss. Meanwhile, the US Congress continues to press the Biden Administration on imposing new US sanctions related to the pipeline. On 12 February, Senators Jim Risch (R-Idaho), Senate Foreign Relations Committee (SFRC) Ranking Member Jim Risch (R-Idaho) and SFRC Europe Subcommittee Chairman Jeanne Shaheen (D-New Hampshire) sent a letter to President Biden supporting full implementation of legislation enacted last year that aims to bring an end to the Nord Stream 2 pipeline project. The Senators warned, “This pipeline would create a potent new geopolitical tool for Russia, allowing it to deprive Ukraine, Slovakia, and other nations of transit fees. It would tie Western Europe to Russian gas, and the political coercion that accompanies it, for the next 40 years. Moreover, the arrival of Russian infrastructure into a NATO country puts all NATO members at risk.” Bipartisan House lawmakers sent a letter on 17 February, echoing the Senate letter and requesting a briefing from the State Department on the Administration’s efforts to implement US sanctions related to the pipeline.
On 16 February, White House Press Secretary Jen Psaki reiterated President Biden’s position on the pipeline project, saying, “It’s a bad deal because it divides Europe, it exposes Ukraine and Central Europe to Russia, Russian manipulation.” She added, “We’re continuing to monitor activity to complete or to certify the pipeline. And if such activity takes place, we’ll make a determination of the applicability of sanctions. Importantly, sanctions are only one among many important tools to ensure energy security. And we’ll — of course, we’ll do this all in partnership with our allies and partners, but our position has not changed on the — on the deal.”
The Biden Administration may release an overdue report to Congress on Friday, 19 February, that lists entities that assisted in construction of the Nord Stream 2 pipeline. Despite bipartisan support in Congress to stop the pipeline’s construction, reports indicate the list will likely hold off on naming German entities and instead focus on a small number of Russia-linked entities. While the Biden Administration may be seeking to ease bilateral relations with Germany, some note the Administration risks alienating Ukraine, Poland and the Baltic states.
On 11 February, in a 642 to 29 vote, with 21 abstentions, EU MEPs called for the suspension of the launch of the Ostrovets nuclear plant in Belarus, expressing concerns related to the plants’ compliance with international standards and security. On 16 February, Belarus police reportedly carried over 20 raids targeting journalist, human right advocates and trade union members’ homes and offices as part of a mass government investigation related to protests over the last few months against Alexander Lukashenko. The raids resulted in the detention of thousands of demonstrators, who will be investigated for the “organization and preparation of actions that grossly violate public order.” The international community, including the Commissioner for Human Rights and the Council of Europe, condemned the crackdown and called for the protection of the rights of freedom of speech, association and assembly.
On Thursday, 18 February, the US Government imposed visa restrictions on 43 Belarusian individuals believed to be responsible for undermining Belarusian democracy, denying these individuals entry into the United States. According to the State Department,
these individuals include: high-ranking justice sector officials; law enforcement leaders and rank-and-file personnel who detained and abused peaceful demonstrators; judges and prosecutors involved in sentencing peaceful protesters and journalists to prison terms; and academic administrators who threatened students for participation in peaceful protests.”
On 17 February, Canadian Minister of Foreign Affairs Marc Garneau and UK Foreign Secretary Dominic Raab issued a joint statement on the situation in Belarus and called on Belarusian authorities to cease persecuting human rights organisations, independent journalists and civil society actors. The leaders further noted,
We have previously responded to these grave violations of human rights with sanctions targeting those directly responsible, including Lukashenko himself, and we continue to support work to implement the recommendations of the Organization for Security and Co-operation in Europe’s Moscow Mechanism report.”
Meanwhile, former Belarusian leader and head of the opposition, Viktor Babariko, who was arrested in June 2020, appeared in court on 17 February under charges of money laundering. He is facing up to 15 years in prison. His team published Babariko’s words to his supporters, stating, “despite everything … people have sacrificed their well-being, freedom and even their lives”.
On 18 February, the UK announced additional sanctions, in tandem with Canada, related to the military coup in Myanmar. The UK Government will enforce immediate asset freezes and travel bans against three members of the Myanmar military regime for serious human rights violations. These sanctions are in addition to the sanctions against 16 individuals from the Myanmar military already listed by the UK. Earlier in the week, UK Foreign Minister Raab condemned charges the Myanmar military regime brought against Aung San Suu Kyi, saying they are politically motivated “and the latest example of the Myanmar military undermining democratically elected politicians.” He called for Aung San Suu Kyi and other arbitrarily detained elected politicians to be released immediately.
Following the EU’s condemnation of the military coup in Myanmar and a coordinated call with the UN on the situation, EU reporters and stakeholders are urging the bloc to join the United States’ swift response and similarly impose sanctions on those responsible for the coup, especially against the military, its personnel and related business sectors. EU human rights advocates and observers said they look forward to the outcome of the EU Leaders meeting on 22 February that will decide on what measures the bloc will take.
Following a virtual US, UK, France and German foreign ministers call on Thursday, the three European leaders (“E3”) and Secretary Blinken issued a joint statement. Iran was a major topic of discussion, with the E3 and the United States affirming their shared objective of Iran’s return to full compliance with its commitments under the Joint Comprehensive Plan of Action (JCPOA). Secretary Blinken echoed President Biden, saying, “if Iran comes back into strict compliance with its commitments under the JCPOA, the United States will do the same and is prepared to engage in discussions with Iran toward that end.” Meanwhile, US sanctions imposed during the Trump Administration against Iran remain in place. Other topics on the agenda included Yemen, Iraq, Syria, ISIS, Myanmar, NATO, climate change, the COVID-19 pandemic and China. Regarding the latter, the transatlantic leaders “agreed to closely coordinate to address the global challenges posed by China.”
House Foreign Affairs Committee Lead Republican Kevin McCaul (Texas) issued a statement of concern on Thursday, after the Biden Administration suggested a willingness to re-engage Iran. He said,
It is concerning the Biden Administration is already making concessions in an apparent attempt to re-enter the flawed Iran deal. The Trump Administration created leverage for President Biden on Iran – we should not squander that progress. . . . The Biden Administration must prioritize bipartisanship and stick to their assurance not to re-enter the deal until Iran comes back into full compliance with the JCPOA.”