Transatlantic Trade | US and Europe – Week of March 29, 2021
United States (US) officials released two major annual publications this week, one focused on human rights and the other focused on trade barriers for American goods and services. The United Kingdom (UK) submitted a roadmap to the European Union (EU) regarding its border controls in Northern Ireland. The two sides also appear to have reached a deal on a post-Brexit financial services regime. The UK also chaired a G7 trade ministerial this week. Last Friday, the Biden Administration indicated it reserves the option to move forward with Section 301 actions in response to Digital Service Taxes adopted or under consideration by US trading partners.
In this issue, we also cover:
- COVID-19 developments more broadly, with respect to the EU, UK, US;
- A brief summary of the G7 Trade Ministerial;
- Notable US, UK, and EU developments; and
- UK-EU trade deal
COVID-19 Updates | EU, UK, US
At the initiative of European Council President Charles Michel, 23 world leaders signed an opinion piece calling for an “all-of-government and all-of-society approach” to tackle future health crises. The piece was also signed by other leaders, such as UK Prime Minister Boris Johnson and World Health Organization (WHO) Director-General Tedros Adhanom Ghebreyesus; it stresses, “nations should work together towards a new international treaty for pandemic preparedness and response”. (The United States was not a signatory)
Diplomatic discussions at the EU-level focused this week on the allocation of 10 million doses of the Pfizer/BioNTech vaccine to Member States in the coming months. The vaccine doses are to be allocated on a pro-rata basis, but the Portuguese Presidency made a proposal to share 3 out of the 10 million doses “in solidarity” with some Member States in acute need. Austrian Chancellor Sebastian Kurz opposed the proposal, since it would leave their country with less COVID-19 vaccine doses. Ultimately, Austria, Czech Republic and Slovenia blocked the compromise proposal. It appears that further discussions may have led to an agreement by the remaining countries to donate 3 million of their doses to help Bulgaria, Croatia, Estonia, Latvia and Slovakia.
The media reported on Wednesday that a mix-up occurred in March at a Baltimore facility producing Johnson & Johnson (J&J) and Astrazeneca COVID-19 vaccines, which reportedly spoiled around 15 million doses of J&J’s vaccine. While J&J is expected to meet its contractual doses to the US Government by the end of April, the production mishap is expected to delay some future shipments and distribution to US states.
In the UK, more than 30 million people have received a first dose of the COVID-19 vaccine. On 1 April, the New Restart Grants scheme launched, providing funding of up to £18,000 to eligible businesses in the UK. The £5 billion of government funding available through the Restart Grants scheme will be delivered by local authorities. On 29 March, the UK Government called on employers of seasonal agricultural workers to help restrict the spread of COVID-19 by registering for free workplace testing.
On Tuesday, 30 March, the Governments of Australia, Canada, the Czech Republic (“Czechia”), Denmark, Estonia, Israel, Japan, Latvia, Lithuania, Norway, the Republic of Korea, Slovenia, the UK and the US issued a joint statement on the COVID-19 origins study convened by the WHO, which was released that day. They voiced, “[S]hared concerns that the international expert study on the source of the SARS-CoV-2 virus was significantly delayed and lacked access to complete, original data and samples.” They further stressed, “Going forward, there must now be a renewed commitment by WHO and all Member States to access, transparency, and timeliness.” The statement further reflected, “It is critical for independent experts to have full access to all pertinent human, animal, and environmental data, research, and personnel involved in the early stages of the outbreak relevant to determining how this pandemic emerged.”
G7 Trade Ministers Meeting
On 31 March 2021, the UK chaired the Group of Seven (G7) Trade Ministers in a first-ever G7 Trade Track to discuss World Trade Organization (WTO) reform, digital trade, health and climate issues. WTO Director-General Ngozi Okonjo-Iweala also joined the meeting, as well as European Commission’s Executive Vice President and Trade Commissioner Valdis Dombrovskis. The latter attempted to advocate for green and digital components as necessary for building a fair and inclusive trade system to rebuild economies. According to the Office of the US Trade Representative (USTR), “Ambassador Tai emphasized the Biden-Harris Administration’s objective to ensure that trade policy focuses on benefitting workers, in addition to businesses and consumers.” The Chair’s Statement reflected, “the impact market-distorting practices, such as harmful industrial subsidies, including those causing excess capacity in some sectors, are having on [G7] economies and chart a way to address these collectively” will be further discussed at future G7 meetings.
Notable US Developments
On Wednesday, 31 March, US President Joe Biden outlined a US$2.25 trillion legislative proposal – the American Jobs Plan (“the Plan”) – that would be spread over eight years to build back better the American economy from the impact of the COVID-19 pandemic. The President called it a “once-in-a generation investment in America” that would create skilled jobs, grow the economy, make the country more competitive globally, promote US national security interests, and position the United States to be competitive with the People’s Republic of China (“PRC” or “China”). Among other things, the Plan would create jobs that pay prevailing wages in safe and healthy workplaces while ensuring workers have a free and fair choice to organize, join a union, and bargain collectively with their employers. A White House fact sheet on the Plan is available here.
On Friday, 26 March, President Biden invited 40 world leaders to his upcoming virtual Leaders Summit on Climate in April, including the leaders of China and Russia. The White House noted as key themes for the 22-23 April Summit:
- Reducing emissions during this decade to keep a limit to warming of 1.5 degree Celsius within reach;
- Mobilizing public and private sector finance to drive the net-zero transition and help vulnerable countries with climate impacts;
- Stressing economic benefits of climate action, including emphasizing job creation in the transition to a clean energy economy; and
- Spurring transformational technologies that can help reduce emissions and adapt to climate change.
NTE Report Released
On 31 March, US Trade Representative Katherine Tai released the released the 2021 National Trade Estimate (NTE) Report, detailing foreign barriers to American exports of goods and services, investment, and electronic commerce. The NTE Report cites examples of barriers, such as non-transparent EU chemical regulations and discriminatory tax measures in Austria, India, Italy, Spain, Turkey, and the UK. The report also details a number of trade challenges with China.
The UK was evaluated as a separate entity for the first time in the NTE Report, since exiting the EU. The report reflected the UK Global Tariff regime is set at 5.7 percent, compared to 7.2 percent under the EU Common Customs Tariff, and includes elimination of duties on 500 goods that previously had EU tariffs of less than 2 percent. The UK was also noted to have retained “high tariffs that affect U.S. exports, such as rates of 26 percent for fish and seafood, 22 percent for trucks, 14 percent for bicycles, 10 percent for passenger vehicles, 10 percent for processed wood products, and 6.5 percent for fertilizers and plastics.” The NTE Report also reflects on the UK’s border controls with the EU and with respect to Northern Ireland.
With respect to the EU, the NTE reflected on American pharmaceutical concerns with several Member State policies affecting market access for pharmaceutical products. The report also noted the United States “faces a proliferation of technical barriers to trade (TBT) in the EU,” citing aspects of the EU’s regulatory process. The United States also expressed concern with initiatives under the European Green Deal.
Digital Service Taxes
On Friday, 26 March, USTR announced the Biden Administration may move forward with Section 301 actions in response to Digital Service Taxes (DSTs) adopted or under consideration by US trading partners originally initiated during the Trump Administration. In January, USTR found that the DSTs adopted by Austria, India, Italy, Spain, Turkey, and the United Kingdom were subject to action under Section 301, citing the laws discriminate against US digital companies, are inconsistent with principles of international taxation, and burden American companies. USTR published notices specific to each country and soliciting public comments on possible trade actions to preserve procedural options before the conclusion of the statutory one-year time period for completing the investigations. Ambassador Tai said of the action, “The United States remains committed to reaching an international consensus through the OECD process on international tax issues. However, until such a consensus is reached, we will maintain our options under the Section 301 process, including, if necessary, the imposition of tariffs.”
Since Brazil, Czechia, the EU, and Indonesia had not adopted or not implemented the DSTs under consideration when the investigations were initiated, USTR terminated those four investigations without further proceedings. USTR warned that if any of these jurisdictions proceeds to adopt or implement a DST, it could initiate another Section 301 investigation.
Human Rights Report Released
On Tuesday, 30 March, Secretary Blinken released the 2020 Country Reports on Human Rights Practices, more commonly known as the Human Rights Report. The 2020 Human Rights Report reflects the unique challenges countries faced with respect to the coronavirus pandemic, with Secretary Blinken noting some countries restricted rights and consolidated power, while other countries sought to inform and protect their citizens. He further stated, “unchecked human rights abuses anywhere can contribute to a sense of impunity everywhere” and explained this is the reason the Biden Administration has placed human rights “front and center in its foreign policy.”
For the second year in a row, the US Government certified to Congress this week that Hong Kong does not warrant differential treatment under US law in the same manner as US laws were applied to Hong Kong before 1 July 1997, when China resumed sovereignty over the territory. In announcing the decision, Secretary Blinken cited human rights concerns and alleged that the PRC has continued efforts “to dismantle Hong Kong’s high degree of autonomy, in violation of its obligations under the Sino-British Joint Declaration and Hong Kong’s Basic Law.”
In response to the United States, along with Canada, Britain and the EU, imposing sanctions against two Chinese officials alleged to be complicit in the mistreatment of the Muslims in the Xinjiang region of China, the PRC announced sanctions on 27 March against two US officials. This includes US Commission on International Religious Freedom (USCIRF) Chair Gayle Manchin, wife of Senator Joe Manchin (D-West Virginia) and Vice Chair Tony Perkins. The sanctions include a travel ban and the prohibition of doing business in the PRC (including Macao SAR and Hong Kong SAR). Secretary Blinken condemned the action as “baseless sanctions.”
Trade Enforcement Actions
On 31 March, the United States International Trade Commission (USITC) determined that US industry is materially injured by imports of common alloy aluminum sheet from Bahrain, Brazil, Croatia, Egypt, Germany, India, Indonesia, Italy, Oman, Romania, Serbia, Slovenia, South Africa, Spain, Taiwan, and Turkey that the US Department of Commerce (“Commerce”) determined is sold in the US at less than fair value and subsidized by the Governments of Bahrain, India, and Turkey. Consequently, Commerce will issue antidumping duty orders on imports of this product from Bahrain, Brazil, Croatia, Egypt, Germany, India, Indonesia, Italy, Oman, Romania, Serbia, Slovenia, South Africa, Spain, Taiwan, and Turkey; and countervailing duty orders on imports of this product from Bahrain, India, and Turkey.
On 1 April, USITC determined US industry is materially injured by imports of seamless carbon and alloy steel standard, line, and pressure pipe from Czechia that is sold in the US at less than fair value. Commerce will issue an antidumping duty order on imports of this product from Czechia.
Readouts of US-European Meetings
US Secretary of Defense spoke with his counterparts in Greece and Turkey this week on diffusing tension in the Eastern Mediterranean region. He welcomed ongoing exploratory talks between NATO Allies Greece and Turkey and the commitment of both governments to this process.
The US-EU Joint Financial Regulatory Forum met on 24-25 March to exchange views as part of their ongoing financial regulatory dialogue. A joint statement released on Monday, 29 March, reflected participants focused on six themes. This included: (1) next steps in the COVID-19 recovery and mitigating financial stability risks, (2) sustainable finance, (3) multilateral and bilateral engagement in banking and insurance, (4) regulatory and supervisory cooperation in capital markets, (5) regulatory and supervisory developments regarding financial innovation, and (6) anti-money laundering and countering the financing of terrorism (AML/CFT) issues. The next Forum is expected to happen this summer.
This week, USTR also provided readout of a 25 March meeting of the Joint Committee established under the US-UK Agreement on Prudential Measures Regarding Insurance and Reinsurance. US and UK officials discussed progress made on implementation of the Agreement, including the removal of collateral and local presence requirements for reinsurers and the provisions on group supervision measures.
Notable UK Developments
On 30 March, UK Chancellor Rishi Sunak and Business Secretary Kwasi Kwarteng wrote an open letter to businesses on the Government’s Plan for Growth. The letter circulated ahead of the second meeting of the Prime Minister’s Build Back Better Business Council, a forum that the Government engages with business to drive forward the Plan for Growth. In the letter, the UK officials noted, “Our Plan for Growth sets our path to invest in infrastructure, skills and innovation to build back better, whilst harnessing the strengths, resilience and creative spirit we’ve seen from businesses over the past year, so we can level up opportunity and prosperity across the country, eliminate our contribution to climate change and forge ahead as a truly Global Britain.” A 10 Downing readout of the Build Back Better Business Council meeting is available here.
This week, the UK Government announced it will host a Global Investment Summit (GIS) later this year. The one-day meeting in October is expected to catalyse investments by attracting hundreds of the world’s leading businesses and investment A-listers to London and Windsor Castle. The event is expected to spotlight the UK as a global hub for green technology and finance, ahead of COP26 in November.
On 1 April, the National Living Wage and National Minimum Wage uplift came into effect, giving millions of UK workers pay increases. This year, the age threshold was lowered from 25 to 23 years old.
This week, the UK Foreign Secretary and the Gibraltar Chief Minister issued a statement at the conclusion of the UK-Gibraltar Joint Ministerial Council that took place on 29 March. They outlined shared approaches to issues as negotiations commence to flesh out a treaty from a framework agreed to with Spain at the end of last year. The statement noted, “The UK and Gibraltar envisage that the model in the framework will be underpinned by agreement on other areas, including law enforcement and criminal justice.” It also reflected, “The treaty should ensure fluid and open movement of people and goods between Gibraltar and the EU.”
Notable EU Development
On 30 March 2021, the EU imposed definitive anti-dumping duties on imports of aluminum extrusions from China. The duties, which resulted after an investigation launched last year, range between 21.1 percent to a 32.1 percent rate on aluminum extrusions coming from China. According to the European Commission, “The investigation found that unfair trade practices (dumping) by Chinese exporters caused significant damage to EU industry, and that measures to tackle such practices are necessary and in the interest of the EU”.
UK-EU Trade Deal | Updates
At the EU’s request, the UK submitted a roadmap to the European Commission on Thursday outlining its implementing plan for border control checks in Northern Ireland. The two parties expected to discuss at the technical level the UK plan in the coming weeks. UK Cabinet Office Minister David Frost and Commission Vice-President Maroš Šefčovič are also expected to meet within the next two weeks in the context of the EU-UK Joint Committee.
In other developments, the EU and UK reached a Memorandum of Understanding (MoU) on 26 March on the post-Brexit financial services regime. A Joint UK-EU Financial Regulatory Forum will be created to monitor and discuss future financial services issues. The MoU is the first step to set up a formal regulatory cooperation framework in financial services and gives grounds for the EU to resume its assessment for the equivalence decision with regard to the UK’s financial services rules. Procedural steps by both the UK and EU will now be undertaken before the MoU can formally be signed.
 The G7 countries include Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. EU representatives also attend.