Transatlantic Trade | US and Europe – Week of January 18, 2021
A peaceful transition of presidential power occurred in the United States (US) on Wednesday, 20 January, in Washington, D.C., with President Joe Biden now leading the country and calling for unity. Over his first few days, President Biden immediately signed a number of orders, ranging from addressing COVID-19 to climate change and other topics. Prior to the conclusion of the Trump Administration, the US Government imposed its first sanctions related to the Nord Stream 2 pipeline project, as well as censured the People’s Republic of China (“China” or “PRC”) for actions in Xinjiang that it characterized as “genocide”.
In this issue we cover:
US presidential transition
COVID-19 Updates: EU, UK and US
UK-EU trade deal updates
Other notable EU and US developments
EU and US sanctions updates
EU-Latin American potential trade deals
The European Union (EU) also focused on unity this week, seeking to coordinate and improve its vaccination campaigns among Member States. The EU and the United Kingdom (UK) continue to work through implementation of its trade deal, with a post-Brexit financial guarantee requirement causing some concern for shippers. The UK and US reached an agreement on a combined carrier strike group, further cementing the close defense relationship. Meanwhile, the EU is exploring options to address extra-territorial sanctions, such as those imposed by the US, and their impact on EU companies.
US Presidential Transition
President Donald Trump departed Washington early on Wednesday, 20 January, for Florida. As one of his final moves, on Tuesday, 19 January, he signed a number of Executive Orders (E.O.s), including one that would have lifted travel restrictions on visitors from the Schengen region and the UK. However, President-elect Joe Biden quickly noted he would maintain the travel restrictions, once in office.
President Biden was sworn into office at Noon on Wednesday, in a ceremony that was under heavy military protection amid a city essentially locked-down for the inauguration in the aftermath of the 6 January US Capitol Building incident. The largely virtual ceremony was not open to the public and included Members of Congress and one guest. In his inaugural remarks, President Biden sought to bring the nation together, acknowledging there is “Much to repair”, “Much to restore”, “Much to heal”, and “Much to build.” After acknowledging divisions in the United States, similar to those ahead of the US Civil War, President Biden also warned, “Disagreement must not lead to disunion.” He called for unity, adding, “We can make America, once again, the leading force for good in the world.”
COVID-19 Updates | EU, UK, US
By Friday morning, there have been 96.2 million COVID-19 infection cases recorded globally, along with 2.06 million related deaths. The United States accounted for 25.4 million cases of infection and 406,000 related fatalities; the United Kingdom had 3.5 million recorded cases of infection and over 93,000 related deaths. As of 15 January, the EU accounted for nearly 18 million cases of infection and over 425,000 COVID-related deaths.
The European Commission has called for “unity” in Member States’ EU vaccination campaigns, since vaccination rates are not as high as initially anticipated. During a presentation at the European Parliament, Commissioner of Health and Food Safety, Stella Kyriakides stressed, “As a team, it is important to set clear and ambitious targets.” The Commission envisions EU countries vaccinating 80% of health workers and people over the age of 80 in the coming months, with a goal of vaccinating 70% of all adults by summer. With respect to Member States’ criticism over vaccine supplies, the Commission engaged to work with companies to develop a transparent and clear delivery schedule of the different approved vaccines.
The Commission issued a timely follow up Communication for a united EU response for the COVID-19 ahead of an informal video conference of Heads of State and Government, held on 21 January. The Communication provides a list of non-binding recommendations, such as increasing rapid tests and genomic sequencing to identify new virus strains and replacing travel bans with more targeted guidance. The Commission’s approach was discussed during the informal videoconference, in addition to a proposal for a possible introduction of a “vaccine passport” – a controversial proposal by Greece that has been gaining ground by Member States. However, the European Commission ascertained such a proposal is discriminatory, particularly for individuals that chose not to be vaccinated. The Commission is, however, exploring further this month the option to finalize “a common approach on vaccination certificates” that could “be rapidly useable in health systems across the EU and beyond”. EU Leaders also suggested they may consider measures that could restrict non-essential travel in the EU, in an attempt to contain the spread of the virus, particularly on the risks associated with new virus variants.
On 18 January, UK Prime Minister Boris Johnson chaired the inaugural meeting of the Build Back Better Council, established for businesses to work with the British Government to fuel COVID-19 economic recovery and future growth plans. The Council is comprised of 30 members representing industries from retail and hospitality, to finance, science and technology. The Prime Minister provided the Council with an update on the current COVID situation, vaccine distribution, as well as plans to rebuild the economy after the crisis has passed. The Council is expected to meet quarterly and more frequently, if warranted. A list of Council members is accessible here.
Among several E.O.s signed Wednesday, 20 January, US President Biden directed a mandatory mask-wearing policy for Federal workforce (including employees and contractors) in Federal buildings or on Federal lands for the next 100 days. This policy does not extend to state or local government employees, but the President is encouraging state and local government officials to adopt similar moves “with the goal of maximizing public compliance”. The order also directs the Secretary of Health & Human Services (HHS) to submit a COVID testing plan for the Federal workforce.
President Biden also sent a letter to World Health Organization (WHO) Secretary-General António Guterres rescinding former President Trump’s move to withdraw the United States from the WHO, which was to be effective 6 July 2021. Another E.O. issued on Wednesday, outlines how the Biden Administration intends to organize domestically to combat COVID-19, as well as provide US leadership on global health and security.
On Thursday, 21 January, President Biden signed another ten orders focused on addressing COVID-19. A National Security Directive signed that day outlines how the US Government will demonstrate global leadership to strengthen the international response to COVID-19. This includes strengthening and reforming the WHO. President Biden tasked his team providing recommendations within 30 days of the date of the Directive on “how the United States can: (1) exercise leadership at the WHO and work with partners to lead and reinvigorate the international COVID-19 response; (2) participate in international efforts to advance global health, health security, and the prevention of future biological catastrophes; and (3) otherwise strengthen and reform the WHO.” The Secretary of State and the Secretary of Health & Human Services were also directed to inform the WHO and Gavi, the Vaccine Alliance, of the United States’ intent to support the Access to COVID-19 Tools (ACT) Accelerator and join the multilateral vaccine distribution facility, known as the COVID-19 Vaccine Global Access (COVAX) Facility. Furthermore, Biden Administration officials are tasked with devising a diplomatic outreach plan for enhancing the United States’ response to the COVID-19 pandemic. On Friday, 22 January, the White House released a fact sheet focused on the Biden Administration’s efforts to “deliver economic relief for American families and businesses amid the COVID-19 crises.”
President Biden also signed an E.O. on Thursday on domestic and international travel. The order requires masks be worn on certain domestic modes of transportation, including on commercial aircrafts, in airports, on public maritime vessels (such as ferries), trains and public transportation. The order also outlines restrictions for international travel, such as requiring proof of a recent negative COVID-19 test prior to entry; and requiring travellers to comply with other applicable Centers for Disease Control and Prevention (CDC) guidelines concerning international travel, including recommended periods of self-quarantine or self-isolation after entry into the United States. The order furthermore directs Biden Administration officials to assess the feasibility of linking COVID-19 vaccination to International Certificates of Vaccination or Prophylaxis (ICVP) and producing electronic versions of ICVPs.
Meanwhile, results from clinical trials of the vaccine developed and produced by Johnson & Johnson’s (“J&J”) Janssen division are expected by the end of this month. The vaccine could become the third experimental COVID vaccine approved by the US Food & Drug Administration for distribution in the United States. Unlike the Pfizer/BioNTech and Moderna vaccines, the J&J vaccine would require only one dose and does not need to be stored at sub-zero temperatures.
UK-EU Trade Deal | Updates
According to media reports, Member States appear to support pushing back the post-Brexit trade deal formal ratification date, currently set for 28 February, to ensure a realistic timeline for scrutiny and the translation of the lengthy document to the 23 EU official languages. The European Parliament also previously expressed a desire to delay the ratification process. The European Commission reportedly stands prepared to provide an extension, likely until April, at the latest; yet, the formal decision remains pending.
On January 20, British transport companies and haulers expressed concerns that EU haulers are not providing shipping services. The post-Brexit financial guarantee requirement set to cover VAT or potential tariffs is a significant burden for EU haulers going to the UK. British freight companies believe this trade barrier is endangering their survival, since they are unable to operate with EU haulers. Experts have estimated that EU haulers’ rejection rate for UK-destined goods has risen around 168 percent as compared to the final months of 2020, amounting to huge loses for these UK companies.
On January 19, the Task Force for Relations with the United Kingdom’s (UKTF) cessation date was announced and set for 1 March 2021. As the EU-UK Trade and Cooperation Agreement was a success, the EU Commission plans to create a new task force, the “Service for the EU-UK Agreements” to cooperate on the implementation and functioning of the Trade and Cooperation Agreement. Its duration has yet to be determined, but it is expected to be operational until the cooperation between EU and UK is well established. Commission Vice-President Maroš Šefčovič, has been appointed as co-chair of the EU-UK Partnership Council, the main body overseeing the post-Brexit Trade Deal. EU Chief Negotiator Michel Barnier has been appointed as special adviser to European Commission President Ursula von der Leyen, until the EU formal ratification process of the post-Brexit trade deal is completed.
Lindsay Croisdale-Appleby has been named the new Ambassador for the UK’s Mission to the EU, leading the UK’s diplomatic mission in Brussels following the post-Brexit trade deal. This decision was announced after diplomatic tensions between the EU and the UK were escalating, with the UK’s insistence it would treat the EU’s Delegation to the UK as an international organization, which would prevent full diplomatic status to the EU’s Ambassador to the UK, João Vale de Almeida. The European External Action Service (EEAS) clarified that EU’s Delegations across the world are “accorded privileges and immunities equivalent to those of diplomatic missions” and called for “proper diplomatic framework based on reciprocity for our cooperation and for the purpose of the implementation of this agreement.”
Prior to the transition, Acting US Secretary of Defense Christopher Miller and UK Secretary of State for Defence Ben Wallace reportedly signed an agreement to merge some military forces in 2021 to form a combined carrier strike group. British aircraft carrier Queen Elizabeth is set to lead the UK-US combined strike group, which is expected to sail out of Portsmouth, UK, later this year. Ten Marine F-35B Lightning II fighter jets embarked on the Queen Elizabeth in September as part of a training deployment, and is the new norm for US operations with maritime partners. UK Prime Minister Boris Johnson said in November the task force would operate in the Mediterranean Sea, Indian Ocean and East Asia region. He added, “We shall forward-deploy more of our naval assets in the world’s most important regions, protecting the shipping lanes that supply our nation.”
On Thursday, 21 January, the US Customs and Border Protection (USCBP) announced the US and UK had concluded an arrangement to formally recognize one another’s authorized economic operator programs, which should strengthen end-to-end supply chain security. William A. Ferrara, Executive Assistant Commissioner of the USCBP Office of Field Operations, said of the arrangement, “Mutual recognition of the U.S. and UK authorized economic operator programs will mitigate risks, improve information sharing, and eliminate red tape for our partners in the trade community.” According to USCBP, “Under this arrangement, U.S. Customs and Border Protection will accept the validation of UK Authorised Economic Operators (AEO) and grant them approval status in the Customs Trade Partnership Against Terrorism (CTPAT). Her Majesty’s Revenue and Customs will likewise accept the validation of CTPAT members and grant them approval status as AEOs.” CTPAT is a voluntary, public-private partnership through which members of the trade community cooperate with USCBP to protect the supply chain, identify security gaps, and implement specific security measures and best practices.
EU leadership welcomed the inauguration of the new US President; European Council President Charles Michel issued a statement, calling it “an opportunity to rejuvenate our transatlantic relationship, which has greatly suffered in the last four years.” European Commission President Ursula von der Leyen highlighted during a speech at the European Parliament that the Biden Presidency is “resounding proof that, once again, after four long years, Europe has a friend in the White House.” She added, “The United States are back, and Europe stands ready to reconnect with an old and trusted partner to breathe new life into our cherished alliance”.
President von der Leyen specifically called for the establishment of an EU-US Common Technology Council, which would draw up a global digital regulation, to better restrain the “unbridled power held by the big internet giants”. The statement comes after the recent publication of the EU’s Digital Services Act and Digital Markets Act (access our overview here), which brings forward a range of obligations for large tech players. The statement also comes after Germany and France have taken enforcement measures against Big Tech and related services. In Germany, the competence authorities have been granted powers to restrict activities, even imposing restrictions before market abuse takes place. In France, disinformation and hate speech have been targeted as the government moves forward with a bill to include content-moderation obligations for large online platforms, obliging Big Tech firms to be transparent about the measures they take on racism and homophobia.
Other Notable EU Developments
On 19 January 2021, the European Parliament’s plenary adopted a revision of the Regulation on countermeasures in international trade disputes, extending its scope to cover services and intellectual property rights. Due to the US block on the World Trade Organization’s (WTO) Appellate Body, the new measures would allow the EU to act on dispute resolution mechanisms or party cooperation to adjudicate a dispute. European Parliament Rapporteur Marie-Pierre Vedrenne said of the move, “Europe continues to stand by the multilateral system and WTO rules. Yet the international dispute settlement mechanism is still blocked. The EU now has another credible, efficient and ambitious tool at its disposal to bolster its trade policies and ensure its strategic autonomy. We now expect the Commission to swiftly introduce a measure to counteract and deter coercive attempts by third countries.”
The proposed Regulation broadens the trade defense tools currently available for the EU, in line with the principle of “open strategic autonomy”. The proposed regulation is expected to be approved at the EU Ambassador level, before it can be published in the Official Journal of the EU and enter into force in February or early March 2021.
The European Commission published a Communication on 19 January 2021, outlining the EU’s plan to reinforce the open strategic autonomy from a macro-economic perspective. The European economy has proven to be vulnerable to third-party sanctions, such as those from the United States, when contracting with certain countries contrary to the third-party’s interests. In response, the European Commission and European Supervising Authorities are committed to investigating these weaknesses and finding options for addressing these concerns. These measures involves granting European operators autonomy, even when targeted by third-party sanctions that could affect their businesses viability; thereby assuring an uninterrupted cash inflow or financial services rendered to those companies.
The strategy tackles both defending against third-party sanctions and homogenizing EU sanction programs. In this regard, the EU Council addressed the importance of strengthening the Euros’ international role, covering the need to strengthen implementation and enforcement of EU sanctions, as well as measures to counter foreign extra-territorial measures. On the sanctions front, the EU seeks to enhance the implementation of sanction measures in order to be applied in a uniform manner throughout the EU Member States and by EU operators. It also stressed the distortions that circumvention of sanctions by EU companies and their EU foreign subsidiaries create in the Single Market. The creation of a database on Sanction Information Exchange Repository that would share information on sanctions imposed in order to ensure that no EU fund or organization cooperates with targeted individuals or entities was also cited as an option.
The uncertainty that extra-territorial application of sanctions, which can block EU Operations to carry out legal transactions, as suffered in the previous years, has threatened the integrity of the Single Market and reduced the EU’s foreign policy effectiveness. Therefore, the communication tackled the concerns arising from the EU Blocking Statutes’ deficiencies and informed on the adoption of a Commission of experts to cover issues related to sanctions and the technical implementation of the EU Blocking Statute. The Commission will seek to put in place measures and create new tools for clearer procedures and rules. Furthermore, the Commission expressed their intentions on ways to improve the effectiveness of trade instruments, such as INSTEX.
On 15 January, the EU Council announced the adoption of Decision 2021/38 of 15 January establishing the EU’s common approach on end-user certification for small and light arms and weapons and their ammunition. The Decision helps prevent that the targeted arms and weapons end in unintended end-users and end-uses, and is a step forward in the EU’s governing control of exports of military and technological equipment.
Other Notable US Developments
Prior to the transition, on 19 January, Secretary of State Mike Pompeo of the Trump Administration announced “the PRC, under the direction and control of the [Chinese Communist Party], has committed genocide against the predominantly Muslim Uyghurs and other ethnic and religious minority groups in Xinjiang”, since at least March 2017, while adding it is believed the actions are ongoing. He further “directed the U.S. Department of State to continue to investigate and collect relevant information regarding the ongoing atrocities occurring in Xinjiang, and to make this evidence available to appropriate authorities and the international community to the extent allowable by law.”
Representative Michael McCaul (R-Texas), top Republican on the House Foreign Affairs Committee who leads the China Task Force, welcomed the genocide designation. Via the China Task Force, Congressman McCaul urged the State Department last year to evaluate the situation in Xinjiang. In a statement, Representative McCaul said, “I hope today’s designation will motivate the nations, businesses, and people of the world to reconsider the ways they entangle themselves with a brutal, communist dictatorship that is guilty of committing genocide against its own people.”
Reports of Russian opposition leader Alexei Navalny’s arrest in Russia, shortly after his return home from receiving medical treatment in Germany following a Novichok poisoning attack this summer, captured the attention of both the outgoing Trump Administration and the Biden Administration. On 17 January, Secretary Pompeo issued a statement condemning the arrest and calling for his release. He added the detention “is the latest in a series of attempts to silence Navalny and other opposition figures and independent voices who are critical of Russian authorities.” Citing human rights violations, Biden’s National Security Advisor Jake Sullivan said last Sunday via Twitter, “Mr. Navalny should be immediately released, and the perpetrators of the outrageous attack on his life must be held accountable.”
Meanwhile, senior US officials reported on Thursday that President Biden has decided to accept Russia’s offer to extend the New START nuclear control pact for the full five years, an agreement that was set to lapse on 5 February. The Trump Administration had sought to secure a shorter-term extension with Russia in its last days, after spending months trying to persuade China to join the treaty.
Despite this extension, President Biden reportedly will order Director of National Intelligence Avril Haines – confirmed by the Senate on 20 January – to provide him a full intelligence assessment on a number of concerns with Russia. Senior officials indicated the assessment would include Russia’s alleged interference in the 2020 election, use of chemical weapons against opposition leader Alexei Navalny, and address reports of bounties on US soldiers in Afghanistan. (US troops levels were down to 2,500 in Afghanistan at the end of President Trump’s term.)
An area of potential US collaboration with transatlantic partners under the Biden Administration is addressing foreign influence, such as from China and Russia, in domestic political processes. On 19 January, the top Democrat on the Senate Finance Committee, Senator Ron Wyden (D-Oregon), sent a letter to the Secretaries of the Treasury and State Departments inquiring of the delay in imposing sanctions on Andriy Telizhenko for his alleged role in a conspiracy to influence the 2020 presidential election. The letter requested a response by 20 January, a turnaround time that may not have been met by the outgoing Secretaries. US lawmakers are expected to continue to focus on perceived foreign influence.
Secretary of State-designate Antony Blinken testified before the Senate Foreign Relations Committee on Tuesday, saying the US would continue to oppose the Nord Stream 2 gas pipeline between Russia and Germany, provide lethal defensive weaponry to Ukraine, recognize Jerusalem as the capital of Israel, and maintain that Juan Guaidó is the legitimate interim president of Venezuela. He also told lawmakers that congressionally-approved sanctions would be “extremely helpful in being able to impose . . . costs and consequences” on Russia.
Meanwhile, trade is not expected to be a top priority for the Biden Administration, as it first focuses on addressing domestic challenges. On his first day in office, President Biden signed a myriad of orders related to climate change, immigration, border security, racial equity and addressing underserved communities. One of his first actions was re-instating the United States’ participation in the Paris Climate Agreement. President Biden also signed an E.O. that establishes parameters for protecting public health and the environment domestically, with a focus on “restoring” science to tackle the climate crisis.
Libya also continues to be a mutual country of concern for the United States, France, Germany, Italy and the United Kingdom. On Thursday, 21 January, the State Department released a joint statement welcoming the Libyan Political Dialogue Forum’s (LPDF) vote in favor of the selection mechanism for a new interim executive authority, which will guide Libya toward national elections on 24 December 2021. The statement further acknowledged and expressed support for the UN Secretary-General’s appointment of Ján Kubiš as Special Envoy of the Secretary-General for Libya, and the appointments of Raisedon Zenenga as the UNSMIL Coordinator and Georgette Gagnon as Resident Coordinator and Humanitarian Coordinator. The five countries also reiterated the ceasefire must be sustained, the UN arms embargo respected and they called for foreign interference (foreign fighters and mercenaries) in Libya to cease.
Sanctions Updates | EU, US
On January 19, MEPs condemned and expressed concern over Alexei Navalny’s arrest in Russia, calling for the EU to impose sanctions against Russian officials involved in his jailing. EU Member States argued the bloc must act upon such human rights abuses and the politicizing of the Russian justice system. In particular, some EU Member States called for other Member States to cease collaborations with Russia in regards to Nord Stream 2 pipeline project, as an additional censuring measure. On 21 January, the EU Parliament voted in favor of tightening sanctions against Russia, Russian oligarchs and officials involved in the jailing of Alexei Navalny, stressing the need to “significantly strengthen the EU’s restrictive measures vis-à-vis Russia”.
On 18 January, the German Economy Ministry said the United States had informed it of its intention to impose sanctions on the Russian-led Nord Stream 2 gas pipeline, expressing regret over the decision. In response to pending US sanctions, German Chancellor Angela Merkel said, “I find these extraterritorial sanctions to be a measure that is not OK from my point of view.” Germany appears to have maintained its stance of supporting the pipeline project, despite the arrest of Russian opposition leader Alexei Navalny. Chancellor Merkel also expressed a desire to discuss the future of the Nord Stream 2 pipeline and possibly forthcoming related US sanctions with President Biden and his administration.
The US Government, under the Trump Administration, announced the following restrictions:
On 19 January, the Department of State imposed sanctions on the Russia-based entity KVT-RUS and identified the vessel FORTUNA as blocked property. KVT-RUS was sanctioned pursuant to Section 232 of the Countering America’s Adversaries Through Sanctions Act (CAATSA) “for knowingly selling, leasing, or providing to the Russian Federation goods, services, technology, information, or support for the construction of Russian energy export pipelines.”
House Foreign Affairs Committee Ranking Member McCaul welcomed the initial designations in a statement, reiterating his support for taking additional action under the CAATSA and the Protecting European Energy Security Act, as amended, to stop the pipeline’s construction. He added the pipeline would “make our European allies and partners more vulnerable to the Putin regime’s coercion and Russian efforts to weaponize their energy resources.”
On 15 January, the State Department designated six mainland PRC and Hong Kong SAR officials in connection with the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Administrative Region, pursuant to E.O. 13936, “The President’s Executive Order on Hong Kong Normalization.”
On 19 January, the Treasury Department designated three individuals, fourteen entities, and six vessels for their ties to a network attempting to evade United States sanctions on Venezuela’s oil sector.
On 15 January, Treasury designated the Cuban Ministry of Interior and the Minister of Interior, Lazaro Alberto Álvarez Casas, for serious human rights abuse under the US Global Magnitsky sanctions regime.
EU-Latin American Potential Trade Deals
On January 20, in remarks before the EU Parliament, EU High Representative Josep Borrell stressed the importance of closing outstanding trade negotiations with Latin America. While some EU Member States – such as Spain, Portugal, Italy, and Sweden – support resuming negotiations, France has exhibited resistance.
EU High Representative Borrell spotlighted the importance and longevity of diplomatic and trade relations between the European Union and the Latin American countries, arguing for the need to maintain these relationships. These intentions are reflected in the EU’s interest in entering into, or modernizing agreements with Mexico, Chile and the South American regional trading bloc, Mercosur.
Mercosur’s full members include Argentina, Brazil, Paraguay and Uruguay. Venezuela is also a full member, but its membership was suspended on 1 December 2016. Bolivia, Chile, Colombia, Ecuador, Guyana, Peru and Suriname are associate members of the regional trading bloc.
Portugal intends to close a trade agreement with Mercosur during its six-month Council Presidency term. This initiative follows the EU’s attempt to become closer to Latin American partners. Nevertheless, a path for a final deal is not clear, as some EU Member States expressed major concerns last year. For example, alleging Brazils’ failure to meet its climate commitments under the Paris Agreement has prevented a break through on trade negotiations with that country.
During the week of 17 January, the ninth round of negotiations between the EU and Chile took place as the partners seek to enhance their current trade relationship with a potential trade deal. The deal could further facilitate Chilean exports, especially since at least 10 percent of Chilean products are currently exported to the EU without preferential treatment. Furthermore, a trade agreement would provide a formal exchange of market access, allowing the EU to increase services exports and participate in public tenders in Chile.
Frank Samolis, Matthew Kirk and Wolfgang Maschek contributed insights to this report.