Transatlantic Trade | US and Europe – Week of July 19, 2021
The European Union (EU) and United Kingdom (UK) countered this week with respect to post-Brexit intents related to Gibraltar and Northern Ireland, raising tension between the trading partners. Separately, the European Commission unveiled a package of legislative proposals this week related to anti-money laundering and countering terrorism financing, while the UK announced a new scheme to improve trading rules with developing countries.
Meanwhile, the United States (US) Congress was in session, with a Senate committee advancing its annual defense authorization bill, a measure that includes provisions related to Russia, among other things. The US and Germany announced an agreement in principle this week that seeks to mitigate American and other allies’ energy security concerns with respect to the pipeline from Russia.
In this issue, we also cover:
COVID-19 highlights among the transatlantic partners;
UK-EU trade deal updates; and
Notable UK, EU, and US
COVID-19 Highlights | EU, US, UK
On 21 July, at the Global Health Summit in Rome, the President of the European Commission announced that the European Union and its Member States (acting together as ‘Team Europe’) would share at least 100 million doses of COVID-19 vaccines via COVAX with low and middle-income countries by the end of 2021. Team Europe has committed to more than 200 million doses donated by the end of the year. COVAX, which is the global initiative to ensure equitable access to COVID-19 vaccines for low-and middle-income countries, has so far delivered 122 million doses to 136 countries.
On Monday, 19 July, US President Joe Biden spoke of the American economy, urging US citizens to get vaccinated, while acknowledging some prices have gone up as demand impacts the global economy and supply chains resulting in increased inflation. That same day, Wall Street ended down over 800 points, amid concerns the Delta variant could slow economic growth, especially if new restrictions are re-imposed in America, including on travel and tourism. COVID cases are rising in all 50 US states, particularly among unvaccinated Americans, as the Delta variant spreads.
This week, the Advisory Committee on Immunization Practices (ACIP), an advisory body to the US Centers for Disease Control and Prevention (CDC), met to discuss the Guillain-Barre syndrome adverse side effects of the Johnson & Johnson (J&J) vaccine. Similar to its decision in April, when it reviewed adverse blood clotting concerns, the ACIP agreed the benefits of J&J’s one-shot COVID-19 vaccine outweighs any potential risks. Meanwhile, amid the spreading Delta variant, the US Department of State, in conjunction with the CDC, elevated its travel warning from Level 3 to Level 4 on Monday, warning Americans against travel to the UK.
That same day, UK Prime Minister Boris Johnson lifted most of England’s remaining pandemic-related restrictions. Mandatory mask-wearing has been lifted, limits on the number of people who can mix indoor or outdoor have ended, and social distancing is now limited to people who have tested positive for the virus.
UK-EU Trade Deal Updates
On 20 July, The European Commission released its proposal to launch post-Brexit negotiations with the UK over Gibraltar by means of a Recommendation for a Council decision. The Commission’s mandate include proposals to remove physical checks and controls on persons and goods and the land border between Spain and Gibraltar, while ensuring the integrity of the Schengen area and the Single Market. The envisaged agreement provides measures in economy and trade, but also remarkably on circulation of persons (i.e. residence permits, asylum, irregular migration, visas and residence permits, security and effective judicial cooperation in criminal matters). Before the Commission begins formal negotiations with the United Kingdom, the Council must adopt the mandate.
Following the release of the proposal, UK Foreign Secretary Dominic Raab rejected it and asked the EU to rethink its approach. He stated the proposal “directly conflicts with the [agreed] framework and seeks to undermine the UK sovereignty over Gibraltar, and cannot form a basis for negotiations”. Gibraltar was not included in the scope of the EU-UK trade agreement.
On 21 July, Lord David Frost, UK Minister for the Brexit, proposed “significant changes” in the post-Brexit Northern Ireland protocol. He called for a standstill period maintaining existing grace periods allowing the flow of goods from Britain to Northern Ireland. He further called for a “new balance” in the arrangement to ensure that goods meeting EU and UK standards to circulate in Northern Ireland. Lord Frost also called for an end of the European Court of Justice policing the relationship between the EU and the UK.
In response, European Commission Vice-President Maroš Šefčovič released a statement, saying the European Union will not agree to a renegotiation of the Protocol with the UK Government. Nevertheless, he said the EU is “ready to continue to create creative solutions, within the framework of the Protocol, in the interest of all communities in Northern Ireland”. As an example, the statement mentions changing rules to ensure long-term supply of medicines from Great Britain to Northern Ireland. The Protocol on Northern Ireland was agreed as part of the Brexit deal as a way to avoid enforcement of the EU single market rules in the border between Northern Ireland and the Republic of Ireland, leaving Northern Ireland inside the EU’s custom union and single market for goods. Nevertheless, the Protocol imposes checks on goods moving between Northern Ireland and the rest of the United Kingdom, in order to protect the EU market from goods that may not be compliant with certain bloc rules.
The senior US Democratic trade lawmaker on the House Ways & Means Committee also issued a statement on the UK’s proposal. Chairman Richard Neal (D-Massachusetts) stressed the Northern Ireland Protocol was negotiated to facilitate trade and to preserve the Good Friday Agreement. He welcomed continued UK and EU engagement, saying,
"I strongly encourage the UK and the EU to work together in a flexible and pragmatic manner in an effort to improve implementation of the Protocol and to make it work more effectively for all affected parties.”
Notable UK Developments
On 19 July, the UK Government announced consultations related to its new Developing Countries Trading Scheme (DCTS), which seeks to address trading rules with developing countries. The DCTS includes 70 qualifying countries and would seek improvements – such as lower tariffs and simpler rules of origin requirements – for the countries exporting to the UK. The consultation on the DCTS runs for eight weeks and seeks comments from businesses, the public, civil society groups, consumers, associations, partner governments and any other interested stakeholders.
On 22 July, British Foreign Secretary Raab announced new UK sanctions against five individuals involved in serious corruption in Equatorial Guinea, Zimbabwe, Venezuela and Iraq. This action was taken under the UK’s Global Anti-Corruption sanctions regime. The US Government welcomed the UK’s action to counter corruption, noting the US had already sanction four of the individuals and the fifth individual’s US-based assets purchased with corrupt proceeds were successfully forfeited in US courts.
Notable EU Developments
On 20 July, the European Commission presented a package of legislative proposals related to anti-money laundering and countering terrorism financing (AML/CTF) rules. These rules implement the Action Plan for a comprehensive Union policy on preventing money laundering and terrorism fighting, which was adopted on May 2020. The package aims to create a consistent framework to ease compliance for operators subject to AML/CTF rules. It consists of four legislative proposals. First, a Regulation establishing a new EU AML/CTF Authority (1), which should be operational in 2024. The Anti-Money Laundering Authority will be the central authority coordinating national authorities to ensure the private sector correctly and consistently applies EU rules. In addition, the package includes (2) a Regulation on AML/CTF (containing directly-applicable rules, including in the areas of Customer Due Diligence and Beneficial Ownership); and (3) a Directive on AML/CTF (provisions to be transposed into national law, such as rules on national supervisors and financial intelligence units in Member States). Finally, (4) the European Commission has also presented a Revision of the Regulation 2015/847/EU on transfer of funds, which will set the rules to trace transfers of crypto-assets and limit large cash payments to €10,000. The European Parliament and Council will next discuss this legislative package.
Notable US Developments
The Democrat-led Senate procedural vote to start floor debate this week on the infrastructure package failed, after Republicans objected to commencing debate on a bill for which text has yet to be released. A group of 22 Republicans and Democrats reportedly resolved dozens of differences this week in the $579 billion infrastructure framework deal reached with President Biden last month. However, an impasse over funding for transit remains outstanding and may not be resolved until this weekend. Senator Rob Portman (Ohio), the lead Republican negotiator, said of the transit funding issue, “It’s important but if we can’t resolve it, then we could leave that out. I hope not.” Senator Sherrod Brown (D-Ohio), who chairs the Senate Banking, Housing and Urban Affairs Committee that has jurisdiction over transit, told the media, “If we can’t, we do these things in the reconciliation bill.”
The Senate Armed Services Committee marked-up and advanced its Fiscal Year (FY) 2022 National Defense Authorization Act (NDAA; H.R. 6395) this week in a closed session, releasing a 40-page summary of the Committee’s Conference Report on Thursday. Among several policy provisions, the bill would end statutory language that expresses a preference for fixed price contracts. With respect to the Indo-Pacific, the Senate bill would establish Pacific Deterrence Initiative (PDI) to “send a strong signal to [the People’s Republic of China] and any potential adversaries, as well as to our allies and partners, that America is deeply committed to defending our interests in the region.”
To address concerns with Russia, the Senate NDAA would establish mandatory sanctions on Turkey for its acquisition of the Russian S-400 air missile defense system as required by the Countering America’s Adversaries Through Sanctions Act (CAATSA). The bill would also extend the authority for training of Eastern European national security forces in multilateral exercises; authorize full funding for the European Deterrence Initiative; and expand sanctions related to the construction of Russia’s Nord Stream 2 pipeline projects, among other things. The Senate NDAA would also address concerns “over the vulnerability of the defense industrial base, including the ability to attract new performers and an overreliance on manufacturing by foreign adversaries.” Meanwhile, the House Armed Services Committee will begin subcommittee markups on 28 July. Both chambers will have to reconcile differences in their respective measures before a final bill can advance later this year.
On 22 July, the US State Department held a briefing on the new US and Germany joint statement on a path forward for addressing American concerns with the Nord Stream 2 pipeline from Russia to Germany. According to State, while the US Government remains opposed to the pipeline, the Biden Administration “reached a judgment that sanctions would not stop its construction and risked undermining a critical alliance with Germany, as well as with the EU and other European allies.” The new agreement would have Germany utilize its leverage to facilitate an extension of up to 10 years to Ukraine’s gas transit agreement with Russia, including appointing a special envoy to support those negotiations before 1 September. State emphasized Ukraine and Poland were consulted throughout the process to address their concerns with Russia and the pipeline. Meanwhile, questions remain as to whether components of the Berlin-Washington deal can be implemented; US lawmakers already skeptical of Russia will likely challenge the deal. Separately, the White House announced this week that President Biden would welcome Ukraine President Volodymyr Zelenskyy to the White House on 30 August.
Also on 22 July, US Trade Representative Katherine Tai met with the European Parliament’s Committee on International Trade (INTA) Chair Bernd Lange and the European Parliament’s Delegation for Relations with the United States Vice-Chair Miapetra Kumpula-Natri. The Office of the US Trade Representative (USTR) released a summary of the meeting, available here. On 20 July, USTR announced the United States would join the World Trade Organization (WTO) Joint Statement Initiative on Services Domestic Regulation (DR JSI), and support conclusion of the Initiative by the 12th WTO Ministerial Conference (MC12) in November.
Josep Nicolas Bellot also contributed to this article.