Transatlantic Trade | US and Europe – Week of March 1, 2021
The European Union (EU) continues to face COVID-19 vaccine production challenges in the bloc, along with increased COVID-19 infection cases driven by the mutating coronavirus. Whereas the United Kingdom (UK) and United States (US) have seen declines in COVID-19 cases, which is allowing for some easing of restrictions. Tension between the EU and UK remains heightened, particularly with respect to customs issues at Ireland/Northern Ireland’s border. Nevertheless, transatlantic partners came together on some sanctions actions this week.
In the US, the Biden Administration moved this week to suspend the duties imposed against UK and EU goods towards negotiating a settlement in the 16-year large civil aircraft dispute with European countries. The US Senate took another step toward confirming Katherine Tai as the next US Trade Representative this week, while Gina Raimondo officially joined President Joe Biden’s Cabinet as his Secretary of Commerce. Biden Administration officials also outlined America’s foreign and trade policy priorities this past week.
In this issue, we also cover:
COVID-19 developments more broadly, with respect to the EU, UK and US;
Updates related to the EU COVID-19 vaccine export control mechanism;
Notable UK, EU and US developments;
A US-UK update and US-EU update;
UK-EU trade deal developments; and
Sanctions developments with respect to Russia, Ukraine, Myanmar/Burma, Iran and Venezuela.
COVID-19 Updates | EU, UK, US
Virus variants are responsible for a surge of COVID-19 infections, with Europe recording one million new cases last week that ended a six-week decline in infections. According to the World Health Organization (WHO), the variant identified in the UK (B.1.1.7) is spreading significantly in Europe. In the Lombardy region of Italy, which bore the brunt of last spring’s surge, intensive care wards are filling up again. The South African (B.1.351) and Brazilian (P.1) variants are also circulating across Europe, with concern that current vaccines may not be effective against the South African variant and reinfections seen with the Brazilian variant.
The UK imposed a lockdown in January after the more transmissible variant began spreading rapidly in December. This, along with increased vaccinations, has resulted in less COVID-19 infection cases. Consequently, the UK is re-opening schools this coming week. Effective Monday, 8 March, UK passengers travelling internationally will need to carry a new form noting their trip is permitted under the stay at home restrictions. If individuals fail to produce a completed form, they could face a £200 fine. As part of the UK Government’s roadmap to re-opening, workplace testing is now available to all businesses, including those with fewer than 50 employees.
The EU continues to struggle with its vaccine rollout, largely due to production problems in the bloc. On Saturday, The Financial Times reported the EU will ask the United States in upcoming talks to authorize the export of millions of doses of AstraZeneca vaccine to the bloc and to ensure the free flow of shipments of key vaccine ingredients needed for European production of COVID-19 vaccines. Meanwhile, the European Medicines Agency (EMA) announced on 3 March that it started the rolling review of the Sputnik V COVID-19 vaccine, developed by Russia’s Gamaleya National Centre of Epidemiology and Microbiology. Following US approval, the EMA is also expected to announce its decision regarding the endorsement of a conditional marketing authorization for the Johnson & Johnson (J&J) COVID-19 vaccine on 11 March. J&J also submitted its application for vaccine approval in the UK at the end of February.
In the United States, where there has been a decline in infection cases, several states are moving forward with easing restrictions. Texas, Mississippi and South Carolina repealed their mask mandates this past week. President Biden called the Texas Governor’s decision “Neanderthal thinking,” and Dr. Anthony Fauci, the nation’s leading infectious disease expert, characterized his decision as “quite risky.” A Centers for Disease Control and Prevention (CDC) report released on Friday reflected that mask mandates contributed to a decrease in COVID-19 cases and deaths, while allowing dining in restaurants led to an increase infections and deaths. The CDC also predicts the UK variant will become the dominant strain in the United States by the end of the month. Meanwhile, about 16 percent of the US population has received at least one dose of a COVID-19 vaccine.
Update: EU COVID-19 Vaccine Export Control Mechanism
This week, the Word Trade Organization’s (WTO) General Council discussed the EU’s export control mechanism. Colombia, Costa Rica, Ecuador, Panama, Paraguay and other countries expressed concern about the mechanism and called on the need to “exercise restraint”, if implementing such measures.
Despite criticism at the WTO and the latest news emerging of Italy blocking the export of 250,000 AstraZeneca vaccine doses destined for Australia, the EU is considering extending the export control mechanism until the end of June 2021. According to media reports, Australian authorities have reached out to the European Commission with a formal request to review Italy’s decision to block the vaccine export. Australian Prime Minister Scott Morrison also acknowledged that he could understand Italy’s decision in light of the increased mortality rates in the country.
Notable US Developments
On Saturday, 6 March, the US Senate approved an amended version of the $1.9 trillion COVID-19 relief package (H.R. 1319) by a party-line vote of 50 to 49 (with one Republican Senator absent). The Senate version of the bill eliminated language that would raise the federal minimum wage to $15 an hour, narrowed eligibility for tax rebate checks and placed additional restrictions on $350 billion in aid to state and local governments. The House of Representatives must now approve the Senate version of the bill before it can become law. President Biden said on Saturday afternoon that he expects stimulus checks to go out this month.
On 3 March, the Senate Finance Committee unanimously approved Katherine Tai’s nomination to serve as the next US Trade Representative, sending the nomination to the Senate floor for a final vote, which has yet to be set. On 1 March, the Office of the US Trade Representative released the 2021 Trade Policy Agenda and 2020 Annual Report. The 2021 Trade Agenda focuses on four priorities: (1) building a stronger industrial and innovation base; (2) building sustainable infrastructure and a clean energy future; (3) building a stronger, caring economy; and (4) advancing racial equity. The 2021 Trade Agenda emphasizes the importance of reinforcing resilient manufacturing supply chains, especially small businesses, to ensure that the United States is better prepared to confront future public health crises. It highlights that the Biden Administration will seek to build consensus through bilateral and multilateral engagement around trade policies that address the climate crisis, bolster sustainable renewable energy supply chains, level the playing field, discourage regulatory arbitrage, and foster innovation and creativity. Additionally, trade policies under the Biden Administration will address opportunities and challenges posed by the digital economy to prepare for any potential future disruptions to the global trading system. The 2020 Annual Report reflected on trade agreements and negotiations, trade enforcement actions, other trade activities and the World Trade Organization (WTO) during the Trump Administration. A fact sheet on the report is available here.
On Wednesday, 3 March, US Secretary of State Antony Blinken gave his first major speech outlining the Biden Administration’s foreign policy. To ensure US foreign policy is addressing American people’s concerns, he said there are three questions kept in mind: (1) What will our foreign policy mean for American workers and their families? (2) What do we need to do around the world to make us stronger here at home? (3) And what do we need to do at home to make us stronger in the world? Secretary Blinken shared the following eight top foreign policy concerns for the Biden Administration:
Stopping COVID-19 and strengthening global health security;
Turning around the economic crisis and building a more stable, inclusive global economy;
Renewing democracy, which he noted is under threat;
Creating a humane and effective immigration system;
Revitalizing ties with allies and partners;
Tackling the climate crisis and drive a green energy revolution;
Securing American leadership in technology; and
Managing the US relationship with the People’s Republic of China (“China” or “PRC”), which he said is the “biggest geopolitical test of the 21st century.”
Also on Wednesday, President Biden released an Interim Strategic Guidance of his vision for US national security and foreign policy. This document provides initial direction to US national security agencies, as the Administration develops a more in-depth National Security Strategy over the next several months.
At a State Department press briefing on Friday, 5 March, the Department’s spokesperson said:
At the March 5 National People’s Congress opening session, NPC Standing Committee Vice Chairman Wang Chen previewed a series of quote-unquote ‘reforms’ to Hong Kong’s electoral system. . . . If implemented, these measures would drastically undermine Hong Kong’s democratic institutions, and they run directly counter to the Basic Law’s clear acknowledgment that Hong Kong elections should progress towards universal suffrage. We call on the PRC to uphold its international obligations and commitments, and to act consistently with Hong Kong’s Basic Law. We’ve said this from the start, that the United States stands together with the people of Hong Kong, the people of Hong Kong who are seeking nothing more than the universal rights to which they are owed and should be guaranteed.”
In response, Chinese Foreign Minister Wang Yi warned the Biden Administration against intruding in China’s internal affairs on Sunday, 7 March. He also urged the US against crossing an “insurmountable red line” of undercutting China’s claim to Taiwan.
This coming week, Special Presidential Envoy for Climate John Kerry will travel to London, Brussels, and Paris from 8-10 March. He is expected to meet with European allies to strengthen global climate ambition heading into President Biden’s Leaders Summit on Climate (22-23 April) and the 26th United Nations (UN) Climate Change Conference of the Parties (COP26) later this year in Scotland.
Notable UK Developments
The UK Government also focused this week on developments in the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”). On Monday, 1 March, UK Foreign Secretary Dominic Raab condemned the charge of 47 Hong Kong residents for conspiracy to commit subversion under the National Security Law for Safeguarding National Security in Hong Kong. He said, “It demonstrates in the starkest way the use of the law to stifle any political dissent, rather than restore security which was the claimed intention of the legislation.” He added, “The National Security Law violates the Joint Declaration, and its use in this way contradicts the promises made by the Chinese government, and can only further undermine confidence that it will keep its word on such sensitive issues.”
With the UK hosting the G7 Summit and Italy Hosting the G20 Summit this year, UK Prime Minister Boris Johnson and Italian Prime Minister Mario Draghi spoke on Thursday of “the importance of a coordinated agenda between the two summits to learn lessons from the pandemic, roll out the coronavirus vaccine around the world and [to] prepare for future pandemics.” The leaders also spoke of the role this year’s COP26 will play in preserving and delivering on the Paris Agreement.
At the UN Security Council meeting on South Sudan on 3 March, UK Ambassador Jonathan Allen welcomed the appointment of a unified Cabinet and the endorsed roadmap for implementing transitional justice mechanisms, including the Hybrid Court. However, he noted, “[O]verall progress has been too slow and too limited”, and added, “[O]ne year on from the formation of a transitional government and almost 10 years from the creation of South Sudan, we have sadly little to applaud.”
On Tuesday, 2 March, the UK Government signed a trade partnership agreement with Ghana, supporting a trading relationship worth £1.2bn and reinstating the terms of the economic partnership agreement between the two sides when the UK was part of the EU. UK International Trade Secretary Liz Truss stated,
We can now look forward to deepening and furthering our relationship in future, and working together to secure a broader agreement with the West Africa Region.”
Notable EU Developments
On 26 February, following the request by 12 Member States, the European Commission opened an investigation into the option of extending a set of import restrictions imposed on steel products that are set to expire in June 2021. According to the Commission’s statement, “The request contains evidence suggesting that the safeguard measure continues to be necessary to prevent or remedy serious injury and that Union producers are adjusting.” Stakeholders may respond to the European Commission’s inquiry until 19 March 2021, after which the EC is set to announce its decision on whether to extend restrictions or not.
Separately, the public comment period is open until 17 March 2021 for the European Commission’s initiative that aims to deter or offset coercive action from non-EU states that seek to pressure the EU or its member countries into taking or withdrawing particular policy measures. The Commission proposes to create a dispute resolution mechanism to address non-EU trade pressures on accepting certain regulations, such as the unlawful extra-territorial application of unilateral sanctions by non-EU economic operators. A longer survey-based consultation is expected to follow in the coming weeks.
On 2 March, the EU 27 Trade Minister discussed the recently published Trade Policy Review during an informal meeting. According to a statement issued by German Economy Minister Peter Altmaier, “[O]pening up markets further therefore remains at the heart of trade policy”. He added, the Trade Policy Review should not promote “protectionist tendencies” but rater counteract act them to “enhance the resilience of the European Union”. Franck Riester, France’s Minister Delegate for Foreign Trade and Economic Attractiveness stressed the Trade Policy Review could be used as a tool to boost EU trade defense, as well as green trade policy.
The Portuguese Council Presidency continues to pursue actively an EU-Mercosur trade deal. Portugal’s Minister of Foreign Affairs August Santos Silva is seeking to understand France’s concerns related to the implementation of the Paris Agreement and deforestation of the Amazon in order to move forward with negotiations. At this time, a path forward remains unclear, in light of France’s intentions to veto the deal over its concerns with the Amazon deforestation matter.
On 26 February, EU Heads of State and Government discussed the importance of the EU as a geopolitical actor and the importance of maintaining its cooperation with partners, such as the NATO, in reinforcing the EU’s position and capabilities with regards to military, cybersecurity and other defense sectors, as well as to address other challenges of the region.
On 4 March, EU High Representative Josep Borrell urged South Sudan lawmakers to fulfill their commitments on fighting against human rights abuses. He called for the implementation of a transitional justice system as agreed in the Peace Agreement. The EU also expects closer cooperation with the UN regarding the countries’ humanitarian crisis.
On Thursday, 4 March, the United States and UK released a joint statement announcing a four-month suspension of tariffs related to the ongoing World Trade Organization (WTO) large civilian aircraft dispute. The UK ceased applying retaliatory tariffs in the dispute on 1 January 2021, in an attempt to de-escalate the issue and create space for a negotiated settlement. The US is now suspending for four months its own tariffs to allow space for a negotiated settlement. The statement also reflected this would also allow both sides to address “the challenges posed by new entrants to the civil aviation market from non-market economies, such as China.”
The UK welcomed the ove, noting the tariff suspension “will help protect jobs on both sides of the Atlantic in industries who have been targeted by these unfair tariffs, particularly Scotch whisky.” International Trade Secretary Truss stated, “Today’s agreement shows that both the UK and the US are determined to work together to build back better and take our trading relationship to new heights.” Scottish Secretary Alister Jack added, “This is great news for the Scottish whisky industry – a cornerstone of Scotland’s economy.”
US President Biden spoke with European Commission President Ursula von der Leyen on Friday, 5 March, underscoring his support for the European Union and commitment to repair and revitalize the US-EU partnership. The leaders also announced both sides would suspend for four months the tariffs related to the WTO large civil aircraft disputes, as both sides work to find a solution to the long-standing situation.
Gina Raimondo was sworn-in as the next US Secretary of Commerce this week, after the Senate confirmed her by a vote of 85-15 on 2 March. That same day, the US Department of Commerce’s International Trade Administration announced it would impose tariffs on about $2 billion work of imports on aluminum alloy sheet from 16 countries. On Thursday, 4 March, in an MSNBC interview, Secretary Raimondo argued that data shows the national security tariffs on steel and aluminum are “effective,” adding there will be a “whole-of-government review of all of these policies and decide what it makes sense to maintain.”
During her Senate confirmation hearing, Ms. Raimondo underscored the Biden Administration’s interest in reviving negotiations with the EU on the Privacy Shield, an agreement that would allow transatlantic data transmissions, after the European Court of Justice decision invalidated the agreement in June 2020. Absent any adequacy decisions from the EU, many companies currently rely on standard contractual clauses to export data from the EU.
UK-EU Trade Deal | Updates
On 3 March, the UK published plans to unilaterally extend grace periods on customs checks at Northern Ireland’s ports for at least six months (until October 2021). UK Cabinet Minister David Frost spoke to European Commission Vice President Šefčovič that same day, underlining “progress still needed to be urgently made to address the direct and often disproportionate impact that aspects of the Protocol are having on the citizens of Northern Ireland.” He explained the UK’s move is a temporary technical step, saying it largely continued measures already in place and would provide more time for businesses such as supermarkets and parcel operators to adapt to and implement the new requirements in the Protocol. Lord Frost noted the “operational measures were well precedented in other international trade arrangements,” adding, “[T]hey were entirely consistent with our intention to discharge our obligations under the Protocol in good faith.”
European Commission Vice President Maroš Šefčovič conveyed the EU’s concerns over the UK’s decision, saying it “amounts to a violation of the relevant substantive provisions of the Protocol on Ireland/Northern Ireland and the good faith obligation under the Withdrawal Agreement”. Vice President Šefčovič insisted this decision undermines the trust and “constructive approach” developed over the last months, saying it becomes “the second time that the UK government is set to breach international law.”
Meanwhile, following last week’s extension of the provisional application date of the EU-UK Trade and Cooperation Agreement until 30 April 2021, and Wednesday’s unilateral announcement by the UK Government, the European Parliament postponed its decision to set a date for the ratification of the trade deal. According to Vice President Šefčovič, the EU stands ready to launch infringement proceedings against the UK “very soon”, in response to the UK’s decision to unilaterally extend grace periods in an attempt to facilitate trade between Northern Ireland and Great Britain. Irish Foreign Minister Simon Coveney stated the UK’s decision is “clearly in breach of the protocol”. While legal action against the UK would not be preferred, Coveney stressed,
If the UK cannot simply be trusted because they take unilateral action in an unexpected way without negotiation, well then the British government leaves the EU with no option and that is not where we want to be”.
WTO Secretary General Ngozi Okonjo-Iweala expressed her intention this week to restore trust, calling for “wide-ranging reforms” to make the WTO an operational body again. She also called for vaccine production and equitable distribution, saying this is crucial for global recovery from the pandemic, while stressing there should be a focus on “people dying in poor countries”.
The Negotiating Group on Rules held meetings in February to discuss fisheries subsidies. Secretary General Okonjo-Iweala called for the WTO to “deliver new fisheries subsidies disciplines as soon as possible in 2021,” urging negotiators to conclude an agreement. Nevertheless, fundamental differences remain among WTO members over preferential treatment for developing countries. Meetings for this working group will reconvene on 15 March; members may meet in a small cluster of meetings to try and bridge diverging views.
Sanctions Updates | Russia, Belarus, Myanmar, Iran
On 2 March, the United States and EU condemned the Russian Federation’s use of a chemical weapon against and subsequent imprisonment of Russian opposition figure Alexei Navalny. The US Department of the Treasury designated seven Russian government officials, five of whom were previously designated by the EU and UK for their role in Navalny’s poisoning and two whom the EU designated in response to Mr. Navalny’s arrest and imprisonment. The US Department of Commerce added 14 entities to the Entity List based on proliferation activities in support of Russia’s weapons of mass destruction programs and chemical weapons activities. Last week the EU designated four high ranking officials involved in the imprisonment of Navalny. Russia has threatened retaliatory action.
The US Department of State will also amend Section 126.1 of the International Traffic in Arms Regulations to include Russia in the list of countries subject to a policy of denial for exports of defense articles and defense services, with certain exceptions for exports to Russia in support of government space cooperation. Exports in support of commercial space cooperation will be restricted following a six-month transition period. A State Department fact sheet further explains US actions against Russia, available here.
US House Foreign Affairs Committee Ranking Member Michael McCaul (R-Texas) welcomed the sanctions related to Navalny. He also called on “the Biden Administration to ensure the Nord Stream 2 pipeline, [Russian President Vladimir] Putin’s most lucrative Russian malign influence project, is never completed by fully implementing congressionally-mandated sanctions.” Senate Foreign Relations Committee Ranking Member James Risch (R-Idaho) echoed Congressman McCaul, saying,
It is past time the administration implement the mandatory sanctions on the Russian Nord Stream 2 pipeline. . . . Preventing the completion of this project would be more than symbolic; it would have a real impact on the Kremlin’s ability to project malign behavior into Europe.”
UK Ambassador Neil Bush spoke of “deteriorating” human rights in Russia before the OSCE Permanent Council on 4 March. He spotlighted four cases in particular, including Navalny’s situation.
Ambassador Bush also addressed Russia’s illegal occupation of Ukraine’s territory and territorial waters at the OSCE Permanent Council, reiterating the UK will never recognize Russia’s illegal annexation of Crimea in 2014.
On 4 March, the EU decided to renew asset freeze measures for seven individuals accused of abusing their positions and misappropriating Ukrainian state funds; prolonged restrictive measures against one person until 6 September 2021. The EU refrained from extending measures against two individuals.
On 5 March, US Secretary Blinken designated oligarch and former Governor of Ukraine’s Dnipropetrovsk Oblast Ihor Kolomoyskyy due to his alleged involvement in significant corruption in Ukraine. He also expressed “concern about Kolomoyskyy’s current and ongoing efforts to undermine Ukraine’s democratic processes and institutions.”
On 1 March, UK Foreign Secretary Raab issued a statement after increased violence by the military in Myanmar against peaceful protesters over the weekend. He urged,
The international community must do everything it can to bring pressure to bare to halt the violence, release those detained arbitrarily and restore the elected government.”
On 4 March, the US Commerce Department’s Bureau of Industry and Security (BIS) implemented new restrictions on exports and re-exports to Burma, and transfers (in-country) within Burma, of sensitive items subject to the Export Administration Regulations (EAR) in response to the military coup and escalating violence against peaceful protesters. BIS also added to the Entity List four entities – two Burmese military and security services entities responsible for the coup and two commercial entities owned and operated by one designated entity.
On 28 Febrary, Iran rejected the EU’s invitation to participate in an informal summit where the revival of a nuclear deal with Iran, the Joint Comprehensive Plan of Action, could be discussed. The EU, together with the US and the UK, looks forward to reengaging in diplomacy, while Iran claims US sanctions should be lifted before discussions occur, adding they will only answer “action with action”.
In response to the Venezuelan Government’s decision to declare Isabel Brilhante Pedrosa, the EU Ambassador to Venezuela, as persona non grata on 24 February, the EU declared the Venezuelan envoy in the EU, Claudia Salerno Caldera, as persona non grata on 26 February. On 5 March, the UK issued a statement of solidarity, saying the decision to expel the Head of the EU Delegation is “unwarranted and deeply regrettable.”
On 2 March, US Secretary Blinken spoke with Venezuelan Interim President Juan Guaidó. He described US “efforts to work with likeminded allies, including the European Union, Lima Group, Organization of American States, and International Contact Group, to increase multilateral pressure and press for a peaceful, democratic transition.”