Transatlantic Trade | US and Europe – Week of May 3, 2021
In a surprising announcement last week, the United States (US) reversed course on its position towards the COVID-10 TRIPS Agreement waiver negotiations, saying it would negotiate a waiver at the World Trade Organization (WTO). US Republican lawmakers and the pharmaceutical industry pushed back on the decision, warning it would allow the People’s Republic of China (“China”) to gain access to American innovation. Meanwhile, tension between the United Kingdom (UK) and the European Union (EU) flared this past week over fishery rights with an English Channel island, Jersey. The UK hosted Group of Seven (G7) meetings and focused on climate change, Viet Nam and India. And the European Commission released its long-anticipated proposed regulation related to distortive foreign subsidies, along with its update to the EU’s Industrial Strategy.
In this issue, we also cover:
- COVID-19 highlights among the transatlantic partners;
- Notable UK, US, and EU developments; and
- UK-EU trade deal
COVID-19 Highlights | US, EU, UK
On Wednesday, 5 May, President Biden voiced support for a waiver of the World Trade Organization (WTO) TRIPS Agreement COVID-19 related therapies and vaccines, reversing a long-standing U.S. position in opposition. US Trade Representative Katherine Tai backed talks at the WTO, tweeting, “These extraordinary times and circumstances of call for extraordinary measures.” In a formal statement, she added, “The Administration believes strongly in intellectual property protections, but in service of ending this pandemic, supports the waiver of those protections for COVID-19 vaccines. We will actively participate in text-based negotiations at the World Trade Organization (WTO) needed to make that happen. Those negotiations will take time given the consensus-based nature of the institution and the complexity of the issues involved.” South Africa and India made the initial vaccine waiver proposal at the WTO last October.
While US Democratic lawmakers generally welcomed the Administration’s waiver decision, US Republican lawmakers objected. Notably, House Ways & Means Committee Chairman Richard Neal (D-Massachusetts) did not issue a statement. His counterpart on the Senate Finance Committee, Chairman Ron Wyden (D-Oregon), welcomed the move, saying his office would work with Ambassador Tai as WTO waiver negotiations move forward.
House Ways & Means Committee Ranking Member Kevin Brady (R-Texas) warned:
Looking ahead to the next pandemic, it is dangerous for America to consent to strip away patents on lifesaving COVID vaccines now that cost businesses billions of dollars to develop at a historic pace – and risk rewarding China with access to U.S. innovation for a world pandemic China fueled. The better solution to help our global neighbors is to solve the very real logistical hurdles slowing access to these vaccines, not undermine the incentives to develop them.”
Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) echoed Chairman Brady, warning the Administration’s decision will benefit China. He added, “Not only is the biopharmaceutical industry one of China’s targets for dominance in its Made in China 2025 strategy, but the Department of Justice handed out indictments last summer in connection with the Chinese government’s attempts to steal U.S. COVID research.”
While the White House previously announced the United States would start sharing its stockpile of AstraZeneca vaccines, it has not divulged details on a timeline on decisions or how countries requesting the vaccine will be prioritized. At a State Department press briefing on 30 April, the Department reiterated the Food & Drug Administration has yet to approve the AstraZeneca vaccine before distribution outside of the United States will occur.
Following the US waiver announcement, European Commission President Ursula von der Leyen stressed the EU “is ready to discuss” the COVID-19 vaccine patent waiver proposal at the WTO. The German Government has rejected the US position on the TRIPS waiver, echoing American and German pharmaceutical manufacturers, who have been saying the greatest constraints on vaccine production are not intellectual property (IP) issues but increasing capacity and ensuring quality. Last October, the UK Government argued at the WTO on the waiver proposal, “A waiver to the IP rights set out in the TRIPS Agreement is an extreme measure to address an unproven problem.”
On 3 May, the European Commission proposed in a Recommendation to ease travel restrictions from third countries with a good epidemiological situation and allow citizens vaccinated with an EU-authorized vaccine to visit member states. The Recommendation is now subject to approval by the Council of the EU. The European Commission also published an EU Strategy to address COVID-19 therapeutics, particularly related to the treatment of “long COVID” symptoms.
Separately, the European Medicines Agency announced it started its “rolling review” process of China’s Sinovac COVID-19 vaccine. This means the committee has started evaluating the first batch of data from laboratory studies (non-clinical data) on the vaccine. A conclusion has not yet been reached on the vaccine’s safety and effectiveness, as much of the evidence is still to be submitted to the committee.
On 5 May, UK Transport Secretary Grant Shapps chaired a G7 meeting with his transport counterparts from the US, Canada, France, Germany, Italy, Japan and the EU Commission to identify common goals and principles that will help develop globally recognised travel standards for when international travel reopens. The UK Government continues to play a leading role in the development of international standards around digital travel certifications, which the US has resisted.
Notable UK Developments
On 1 May, the UK and Viet Nam issued a joint statement on the entry into force of the United Kingdom-Viet Nam Free Trade Agreement (FTA). The UK noted the FTA “serves as a stepping-stone towards the UK’s membership of Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a priority for the UK.”
The UK hosted G7 meetings early in the week in the lead up to its June G7 Leaders Summit. At the G7 Foreign and Development Ministerial Meeting, an agreement was reached by the participants to work together to defend democracy, uphold basic freedoms and human rights and step up support to protect those hardest hit by crises such as COVID-19, climate change and famine. UK Foreign Minister Dominic Raab held meetings with counterparts from the EU, Australia, Italy, Canada and France. Ahead of the G7 Ministerial, Foreign Secretary Raab met with Japan Minister of Foreign Affairs Toshimitsu Motegi to discuss the UK’s application to join CPTPP, tackling climate change and COVID-19 and the UK’s commitment to the Indo-Pacific region.
On 5 May, UK Prime Minister Boris Johnson spoke with German Chancellor Angela Merkel, ahead of the Petersburg Climate Dialogue on 6 May. A summary of the call reflected,
They discussed the importance of all countries making concrete commitments to reduce carbon emissions and supporting developing countries to do the same, including by raising contributions towards climate finance. They resolved to work together on this, including through the G7, and in the run up to the UK-hosted COP26 Summit.”
On 4 May, Prime Minister Johnson and Indian Prime Minister Narendra Modi met virtually and announced a roadmap for a comprehensive strategic partnership. A summary reflected the leaders also “announced their intent to negotiate a comprehensive Free Trade Agreement to unlock the full potential of their trade and commercial relationship, boosting jobs, investment and exports, including consideration of an Interim Trade Agreement to deliver early gains.” Prime Minister Johnson also announced a £1bn new UK-India trade and investment package that will create more than 6,500 new jobs in the United Kingdom.
The UK Government announced this week that it would publish a Levelling Up White Paper later this year that will outline new policy interventions to improve opportunity and boost livelihoods across the country, as the country seeks to recover from the COVID-19 pandemic. A new No10 Cabinet Office Unit will be set up to focus on the White Paper. Prime Minister Johnson appointed Neil O’Brien, Member of Parliament for Harborough, as his Levelling Up Adviser.
Notable US Developments
On 4 May, Ambassador Tai welcomed WTO Director-General Ngozi Okonjo-Iweala’s selection of four new Deputy Directors-General: Ms. Angela Ellard (US), Ms. Anabel Gonzalez (Costa Rica), Ambassador Jean-Marie Paugam (France) and Ambassador Zhang Xiangchen (China). She noted, “For the first time, half of the Deputy Directors-General at the WTO are women and the selection of Angela Ellard from the United States brings a proven negotiator and trade expert to this critical role.” House Ways & Means Committee Republican Leader Brady and Chairman Neal released a joint statement congratulating Ms. Ellard on her appointment. Ms. Ellard recently served as Chief Trade Counsel for Ways and Means Republicans. In a nod toward WTO reform, Chairman Neal stated, “I look forward to working with her, as well as the Director General, to resolve the Committee’s long-standing concerns with the WTO.”
This coming week, Ambassador Tai will appear before the Senate Finance Committee on Wednesday, 12 May. She will testify before the House Ways & Means Committee on Thursday, 13 May. Both hearings will focus on the President’s 2021 trade policy agenda.
US Secretary of State Antony Blinken travelled to the UK and Ukraine last week, participating in the G7 Foreign and Development Ministers’ Meeting. While in London, Secretary Blinken met with a number of European officials on the margins of the G7 meeting, including officials from the UK, France, Germany, and the EU High Representative for Foreign Affairs and Security Policy. The Secretary was laying the foundation for the G7 Leaders’ Summit in June, which President Biden has said he would attend. With EU officials, Secretary Blinken discussed the upcoming US-EU Summit in June. The Secretary also discussed Russia, Iran, China, Afghanistan and Africa in these meetings. In his meeting with German Foreign Minister Heiko Maas, Secretary Blinken raised the Administration’s “strong opposition” to the Nord Stream 2 pipeline. Secretary Blinken’s stop in Ukraine focused on Russia’s escalation of tensions, enhanced NATO cooperation, and reforms to strengthen Ukraine’s democratic institutions and international partnerships.
On Monday, 3 May, the Office of the US Trade Representative (USTR) held its first hearing on proposed tariff actions under Section 301 of the Trade Act of 1974 in investigations of digital services taxes (DST) measures adopted by Austria, India, Italy, Spain, Turkey and the United Kingdom. Technology and retail industry representatives expressed support for USTR’s investigations into the DST measures, but generally opposed the proposed duties and urged the Biden Administration to continue pursuing a multilateral agreement at the Organization for Economic Cooperation and Development on DSTs.
Notable EU Developments
On 5 May, the European Commission released its long anticipated Proposal for Regulation on distortive foreign subsidies, building on the June 2020 White Paper. The proposed law would establish tools to better control subsidies stemming from non-EU countries entering the EU’s single market, particularly from China. The EU has been seeking to reduce China’s investor footprint in the single market. The proposed law, which will now be reviewed by the European Parliament and the Council of the EU, introduces three main tools to investigate publically funded projects that include non-EU subsidies. These include: (1) a screening of mergers worth €500 million or above with at least €50 million stemming from a foreign contribution, (2) screening foreign subsidies in public procurement projects exceeding €250 million, and (3) the power of the European Commission to monitor on its own initiative any foreign subsidy cases deemed necessary in the market. Commissioner for the Internal Market Thierry Breton stressed, “Today we are closing a gap in our rule book to make sure that all companies compete on an equal footing and that no one can undermine the level playing field and Europe’s competitiveness with distortive foreign subsidies. This will strengthen Europe’s resilience”.
In addition, the European Commission published its updated Industrial Strategy, building on the open strategic autonomy concept and aiming to strengthen the single market resilience, particularly in relation to supply chains and market surveillance, to address better the EU’s strategic dependencies. The Strategy is accompanied by three working documents: (1) outlining an analysis related to the EU’s strategic dependencies and capacities, (2) on the path towards competitive and clean European steel, and (3) the 2021 Annual Single Market Report. The European Commission provides an in-depth review of six strategic areas of strategic dependencies – (1) raw materials, (2) batteries, (3) active pharmaceutical ingredients, (4) hydrogen, (5) semiconductors, and (6) cloud and edge technologies. The European Commission will also launch further investigations of potential dependencies in products, services and technologies – such as renewables, energy storage and cybersecurity.
Meanwhile, the EU has put the ratification of the EU-China Comprehensive Investment Agreement on hold in response to bilateral sanctions imposed recently. Executive Vice President Valdis Dombrovskis stressed, “[I]n the current situation with the EU sanctions in place against China and Chinese counter sanctions in place, including against members of European Parliament, the environment is not conducive for ratification of the agreement”.
Many EU Member States – including Portugal, France, Germany and Greece, Belgium, Italy, Austria, Slovenia, Slovakia and Poland – have submitted their National Recovery and Resilience Plans to the European Commission for review. The Plans detail envisioned reforms and investments that Members States will undertake as part of the Recovery and Resilience Facility, which includes loans and grants aimed at rebooting the European economy after the negative impacts from the COVID-19 pandemic.
UK-EU Trade Deal Updates
Amid the EU-UK Trade and Cooperation Agreement entering into force, a Franco-British dispute over fisheries rights flared this past week, after Jersey’s Government introducing additional conditions for granting licenses to fishing boats. The European Commission accused the UK of breaching the trade deal by introducing such additional conditions. The UK Government issued a statement on 6 May announcing its support for Jersey and the continuation of discussion with the European Commission to resolve this latest issue.