Transatlantic Trade | US and Europe – Week of January 25, 2021
Countries on both sides of the Atlantic Ocean are increasingly concerned with the spread of the COVID variants, as they work to ramp up vaccination efforts and impose travel restrictions on those countries where these variants are active. The European Union (EU) signaled this week that it might move forward with a proposal that seeks to improve export transparency on the COVID experimental vaccines produced within its boundaries. Separately, the European Commission is moving forward with efforts to devise a sustainable food systems chapter for its existing and future trade agreements.
In this issue we cover:
COVID-19 updates in the EU, UK and US
UK-EU trade deal updates
Notable UK, EU and US developments
US-UK and US-EU developments
Sanctions updates | G7, EU and UK
This week, the United Kingdom (UK) outlined its agenda for the Group of Seven (G7) Summit; the British Government also continues to urge the United States (US) Government to push forward with concluding a bilateral trade agreement. Meanwhile, US President Joe Biden has spent his first full week in office continuing to sign executive actions, including Executive Orders (E.O.) related to “Buy American” policies and climate change, among others.
COVID-19 Updates | EU, UK, US
In anticipation of the EU’s conditional marketing authorization of the AstraZeneca/Oxford COVID-19 vaccine, news of a shortage of supply to the EU countries created tension between the European Commission and the company. AstraZeneca’s CEO Pascal Soriot addressed the shortfall by stating the company committed to meet the EU demand to its “best effort” and that the delay in supply is due to the contract signature, which took place three months after the UK. Ultimately, discussions around the vaccine supply remain unsolved for now, even after the latest EU’s Vaccine Steering Board meeting on 27 January. In response, the European Commission announced its intention to introduce a vaccine export control mechanism, which would require companies notify the Commission of any vaccines intended to be sold outside of the EU. The details of the mechanism will be unveiled in a legislative proposal that is expected to be published soon. Executive Vice President and Trade Commissioner Valdis Dombrovskis clarified that the measure put forward seeks to address vaccine export transparency, rather than to restrict exports.
According to media reports, European Council President Charles Michel called on the EU to adopt urgent measures to address the limited supply of COVID-19 vaccine in the bloc through an emergency provision in the EU Treaty on the Functioning of the EU, which could put pressure to increase the vaccine production. The proposal was submitted to European Commission President Ursula von der Leyen, who has not formally commented on it.
On 25 January, the European Commission issued an update to its coordinated approach on free movement restrictions, after the informal EU27 leader’s videoconference last week. This update includes a revamp of the existing common color code approach that will include a dark red for high-risk areas, where 14-day infection rates exceed 500 cases per 100,000 residents. The Council announced on 28 January its decision to review the list of third counties – whereby travel restrictions will be gradually lifted – that includes Australia, New Zealand, Rwanda, Singapore, South Korea and Thailand.
In the context of the Code of Practice on Disinformation, on 28 January, the European Commission published the latest set of reports outlining actions taken by the signatory companies (such as Twitter, TikTok, Google, Microsoft, and Facebook) to tackle COVID-19 vaccine disinformation.
In the UK, Prime Minister Boris Johnson addressed the House of Commons on 27 January, providing an update on vaccine distribution and efforts to safeguard the UK against the COVID variants. He noted the following travel restrictions remain in effect: (1) all travel corridors have been temporarily closed and anyone coming to the country is required to have proof of a negative COVID test prior to departure; (2) visitors must complete a Passenger Locator Form before they board and must quarantine on arrival for ten days; and (3) under the stay-at-home regulations, travel abroad for leisure purposes is illegal and being enforced at ports and airports. Prime Minister Johnson also said “all travel from 22 countries where there is a risk of known variants including South Africa, Portugal and South American nations” has been banned.
Novavax reported on Thursday that its COVID-19 vaccine is 89.3% effective, after concluding its late-stage study in the UK. The vaccine was less effective (about 49.4%) in a separate, middle-stage study in South Africa, where yet another COVID variant is spreading. Novavax shared that as a result, it has started work on a modified version of its vaccine to better target the South African variant.
In the United States, a number of Republican Senators have expressed concerns with the $1.9 trillion COVID proposal unveiled by the Biden Administration, arguing it is too large and too soon after the $900 billion December relief package. On Sunday, 24 January, Senator Bernie Sanders (I-Vermont) confirmed Senate Democrats would pass a COVID-19 relief bill as soon as possible through budget reconciliation, which would allow the package to pass with a simple majority vote rather than with the support of 60 senators. This process, however, is not swift, and it remains to be seen how long the Senate impeachment trial will last. Some believe former US President Donald Trump’s impeachment trial (set to start the week of 8 February) may delay Senate consideration of the COVID relief package until March. Meanwhile, a vote in the Senate this week suggests there may not be the necessary two-third support in the upper chamber to convict Trump next month.
Amid a myriad of executive actions this week, President Biden re-instated a ban on non-US citizens travelling to the United States from Brazil, Ireland, the United Kingdom and 26 other European countries, citing concerns with the spread of COVID variants. This action reversed former President Trump’s 18 January order that lifted the ban.
On Friday, 29 January, preliminary data from Johnson & Johnson’s (“J&J”) phase three trials on its COVID-19 candidate vaccine reflected it is 72% effective in the US, 66% in Latin America and 57% in South Africa, 28 days post-vaccination at preventing moderate to severe COVID-19. J&J stated, “The vaccine candidate was 85 percent effective in preventing severe disease across all regions studied.” A Government Accountability Office report published on Thursday reflected J&J would deliver about two million doses of its vaccine to the US Government, once it receives an emergency use authorization from the US Food & Drug Administration. J&J expects to have seven manufacturing facilities running by the end of the second quarter to ramp up supply of the vaccine.
UK-EU Trade Deal | Updates
Amid the European Parliament’s continued review of the EU-UK Trade and Cooperation Agreement, questions are arising between Members of Parliament on the powers granted to the European Commission particularly regarding rebalancing measures linked to the level playing field provisions (e.g. in case of unauthorized state aid) and the enforcement of the environmental and social standards. The European Parliament is concerned about the limited power it has vis-à-vis such measures and is set to propose having an increased scrutiny role for enforcement of the trade deal.
Meanwhile, UK Secretary of State at the Department of Business, Energy and Industrial Strategy Kwasi Kwarteng announced this week that the controversial review of the post-Brexit workers’ rights, which would have impacted the existing EU employment protections, will not go ahead, despite initial reports from the media. Nevertheless, there will be consultations with business leaders to assess how EU employment rules could change in the post-Brexit environment.
On 23 January, the Prime Minister’s Office announced the G7 leaders would meet in Carbis Bay, Cornwall, from 11-13 June. Guest countries to the Summit will include Australia, India and South Korea. The UK’s goal for the G7 Summit is to “intensify cooperation between the world’s democratic and technologically advanced nations” to “address shared challenges, from beating coronavirus and tackling climate change, to ensuring that people everywhere can benefit from open trade, technological change and scientific discovery.”
The European Commission is planning to create a new chapter on sustainable food systems, which will be included in EU free trade agreements. The Chapter is currently being drafted with the intent of including it in existing and future EU free trade agreements.
EU Member States continue to discuss the EU’s position toward the People’s Republic of China (“China”). Meanwhile, at the virtual Davos World Economic Forum on 26 January, German Chancellor Angela Merkel stated, “I would very much wish to avoid the building of blocs [referencing the Cold War]”, appearing to align with Chinese President’s Xi Jinping’s speech on the need for multilateralism.
On 25 January, China experts and human rights activists wrote an open letter highlighting implications of the Comprehensive Agreement on Investment (CAI) for the EU, spotlighting in particular a “strategic dependency on China”. The letter also addresses China’s alleged breach of international trade treaties, such as imposing punitive sanctions against Australia and other activities in the South China Sea, as well as human right violations “from Hong Kong to Xinjiang”. German Chancellor Merkel nevertheless expressed satisfaction with the CAI’s reciprocity and transparency on Chinese subsidies, along with the opening up of “more predictable access to … state-of-the-art technology” in China.
On 25 January, President Biden signed a “Made in America” E.O. (as part of the “Buy American”/“Buy America” policies). Notably, the order establishes a new Director of Made-in-America at the Office of Management and Budget, a position that will oversee implementation of the order, including closing current loopholes on how domestic content is measured and increasing current domestic content thresholds. The order alone does not make significant changes to actual legal requirements faced by suppliers, but it does indicate more scrutiny of waivers and the potential for new rulemakings tightening requirements further in the near-term. There remains bipartisan support in Washington to focus on promoting American workers and businesses, particularly as part of efforts to rebuild the US economy after the COVID-19 pandemic. A related White House fact sheet on the order is available here.
On 27 January, President Biden signed an E.O. to address climate change domestically and internationally. Among other things, the E.O. initiates the process of developing the United States’ “nationally determined contribution” under the Paris Agreement; and developing a climate finance plan. The President’s actions are intended to achieve a carbon pollution-free power sector by 2035, with the intention of putting the United States on a path to a net-zero economy by 2050. Companies should take note that the E.O. seeks to create jobs in construction, manufacturing, engineering and skilled-trades by directing that federal infrastructure investments should reduce climate pollution and accelerate clean energy and transmission projects. President Biden will also host a Leaders’ Climate Summit on Earth Day (22 April 2021); the United States will reconvene the Major Economies Forum under the Biden Administration. A fact sheet on the E.O. is accessible here.
Reverting to tradition, President Biden’s first foreign official calls last Friday were to his North American counterparts in Canada and Mexico, respectively. On Monday, 25 January, President Biden spoke by phone with German Chancellor Angela Merkel, expressing a desire to deepen the bilateral relationship. According to a White House readout, the leaders “agreed on the importance of global cooperation, including via renewed American commitment to multilateral organizations, on combating climate change, containing COVID-19 and advancing health security, and pursuing a sustainable global economic recovery.” Afghanistan, China, Iran, Russia, Ukraine, and the Western Balkans remain mutual foreign policy concerns. Biden Administration officials have also reached out to their counterparts in Europe and the UK, affirming a US priority on transatlantic relationships.
President Biden spoke with NATO Secretary General Jens Stoltenberg this week, reaffirming a US commitment to the Alliance. A White House readout of the call reflected the President “emphasized the importance of shared values, consultation, and capabilities to strengthen deterrence and counter new and emerging threats, including climate change and global health security.”
President Biden’s call on 26 January with Russian President Vladimir Putin confirmed “both countries’ willingness to extend New START for five years, agreeing to have their teams work urgently to complete the extension by February 5.” President Biden affirmed US support for Ukraine’s sovereignty; he also raised other matters of concern with President Putin, “including the SolarWinds hack, reports of Russia placing bounties on United States soldiers in Afghanistan, interference in the 2020 United States election, and the poisoning of Aleksey Navalny.”
On 27 January, House Foreign Affairs Lead Republican Michael McCaul and House Armed Services Lead Republican Mike Rogers objected to the President’s decision to renew New START, arguing for the Administration to utilize the treaty’s optional extension provision that allows both countries to update the agreement to reflect the changing security environment. In a statement, the Republican leaders observed, “A clean five-year extension gives Putin exactly what he asked for and causes the U.S. to lose critical leverage to bring Russia back to the negotiating table.”
Gina Raimondo, President Biden’s nominee to serve as US Secretary of Commerce, fielded a question related to restrictions on Huawei at her Senate confirmation hearing on Tuesday that had some lawmakers concerned she would not maintain the previous Administration’s restrictions on the Chinese telecommunications company. She testified that she would “review the policy, consult with you, consult with industry, consult with our allies and make an assessment on what is best for American national security.” Meanwhile, White House Press Secretary Jen Psaki clarified the Biden Administration’s approach to the company on Wednesday, saying, “Telecommunications equipment made by untrusted vendors, including Huawei, is a threat to the security of the U.S. and our allies. We’ll ensure that the American telecommunications network do not use equipment from untrusted vendors, and we’ll work with allies to secure their telecommunications networks and make investments to expand the production of telecommunications equipment by trusted U.S. and allied companies.”
On 26 January, Janet Yellen was sworn in as the new US Secretary of the Treasury. The Treasury Department has yet to announce any new sanctions under the Biden Administration. Secretary Yellen spoke with French Economy Minister Bruno Le Maire on Thursday, with the two agreeing to “re-engage actively in the ongoing OECD discussions on international taxation [re: a digital services tax] to forge a timely international accord.”
British Trade Secretary Liz Truss said this week that the majority of a prospective free trade agreement with the United States is complete, urging both sides to push forward and secure a final deal. The Biden Administration, however, continues to prioritize domestic matters over trade negotiations. Moreover, Biden’s nominee to serve as US Trade Representative, Katherine Tai, has yet to undergo the Senate confirmation process.
Secretary Truss added that the UK looks forward to working with the Biden Administration on World Trade Organization (WTO) reform. She observed, “Through the G7, which the UK has presidency of this year, and we want to make real progress in areas like green trade, digital and data trade.”
The UK’s Department of International Trade (DIT) spotlighted the release of a new report produced by US-UK trade association British American Business (BAB). The 19-page report – “Making a Difference” – notes three priority areas where the British Government can work with small and medium enterprises (SMEs) “to encourage greater transatlantic trade and investment as part of its ongoing work to support SMEs across the UK”. This includes: (1) lowering barriers to trade and investment by aligning standards and regulations; (2) resolving trade disputes and enabling easier business travel across the Atlantic; and (3) boosting on-the-ground, practical support to businesses, such as sourcing trusted suppliers or navigating complex tax requirements. With respect to the ongoing bilateral trade negotiations, DIT noted, “both sides have now reached broad agreement on a small and medium-sized enterprise (SME) chapter”. DIT added, “A UK-US SME chapter will provide additional support by boosting transparency and making it easier for SMEs to trade, for example by establishing new measures on information sharing.”
On 26 January, Portuguese Foreign Minister Santos Silva said to EU lawmakers that, in Portugal’s six-month Presidency term, he would seek to “re-launch transatlantic dialogue and consultation by taking advantage of the new momentum offered by the Biden administration in the United States”. He commented on the importance of strengthening EU partnerships, while maintaining its strategic autonomy, saying, “strengthening the European pillar of NATO, not weakening our strong link with the US and Canada, but the opposite”. Minister Santos Silva clarified the EU’s autonomy did not imply breaking consolidated alliances, but “having a sense of geopolitical balance and seeking to lead, not only by example, but also by action”.
As part of the EU’s trade policy agenda, the EU seeks to work together with its partners, especially the US, in an effort to open the procurement market. In light of President Biden’s “Buy American” Executive Order, EU Member states accelerated the work on the establishment of an international procurement instrument. Executive Vice President and Trade Commissioner Dombrovskis stated, “We have already been in discussion with the Portuguese presidency that we actually have to accelerate the work on this international procurement instrument”. Thus, the EU intents to engage “constructively with the United States on this matter and more broadly, we look forward to cooperating on a positive trade agenda”.
Sanctions Updates | G7, EU, UK
Thus far, neither the US, UK nor EU have taken any action against Russian officials in response to the arrest of opposition leader Alexei Navalny. On 26 January, the Foreign Ministers of the G7 countries and the High Representative of the European Union issued a joint statement condemning “the politically motivated arrest and detention” of Navalny. The statement further expressed concern over the “detention of thousands of peaceful protesters and journalists,” and called on “Russia to adhere to its national and international obligations and release those detained arbitrarily for exercising their right of peaceful assembly on 23 January.” The leaders further called for the release of Navalny and the others detained; further urged Russian authorities to “investigate and credibly explain” the use of a chemical weapon (Novichok) against Navalny in August 2020, citing Russia’s obligations under the Chemical Weapons Convention.
On 25 January, the EU refrained from imposing sanctions on Russian officials involved in the detention of Navalny. German Foreign Minister Heiko Maas told reporters that the issue is still open, saying it is subject to the Russian court’s pending decision and on “whether Alexei Navalny is set free after 30 days”. In view of the escalating situation, EU High Representative Josep Borrell announced his intention to travel next week to Moscow, saying he would insist on the release of Navalny and other detained protestors.
The UK Foreign Office indicated this week that it was keeping open the option to impose sanctions related to Navalny’s detention. Some Members of Parliament called for sanctions against eight prominent and wealthy Russians (also known as oligarchs) in the House of Commons on Wednesday. Last week, a colleague of Navalny’s in London released a list of eight influential Russians that Navalny said should face sanctions in the UK, where these individuals have considerable assets. In an interview with The Guardian that published on Wednesday, former world chess champion and Russian opposition figure Garry Kasparov also urged Prime Minister Johnson to impose economic sanctions on those Russian oligarchs allegedly close to President Putin.
On Monday, German Foreign Minister Maas said of the EU sanctions debate regarding Turkey, “We did not decide to sanction Turkey today”. The EU postponed its decision in light of “positive developments” that have taken place recently. Sanctions were discussed at the 11 December 2020 EU Summit as a possible solution to prevent further conflicts and hostilities between Turkey and Eastern Mediterranean countries, which significantly escalated in the region last year.
The EU’s decision follows Turkish Foreign Affairs Minister Mevlüt Çavuşoğlu’s communication to EU leaders calling for the EU to refrain from imposing sanctions, as they would “ruin everything”. The Minister noted the EU-Turkish commitments on visa liberalization, modernization of the customs union, and reenergizing the accession process, which remains frozen. He also addressed Turkey’s priorities, such as “a judicial reform strategy [and] other reforms that are needed for Turkey, for democracy, for the economy”.
 The G7 is comprised of Canada, France, Germany, Italy, Japan, the UK and US, along with the EU.