Transatlantic Trade | US and Europe – Week of September 13, 2021
The United States (US), United Kingdom (UK) and Australia announced a new strategic alliance in the Indo-Pacific region this week that reportedly upset the US relationship with France, another strategic ally. Meanwhile, the US and the European Union (EU) combined efforts this week at an Organization for Economic Co-operation and Development (OECD) meeting to address climate change. This week, the UK reaffirmed supply chain priorities with the Association of Southeast Asian Nations (ASEAN) Member States. UK International Trade Secretary Liz Truss also delivered a speech at Policy Exchange this week, outlining Britain’s new trade policy of moving from “defence to offence”. The European Commission President also delivered the State of the Union address to the European Parliament, outlining policy priorities for the bloc this week.
In this issue, we also cover:
COVID-19 highlights among the transatlantic partners;
Notable US, UK, and EU developments; and
A brief UK-EU trade deal update.
On 15 September, European Commission President Ursula von der Leyen stressed during the State of the Union 2021 speech, that the EU will be donating 200 million more COVID-19 vaccines to the developing world. The European Commission announced this week the legal structure to establish the European Health Emergency preparedness and Response Authority (HERA), which will be created to respond to health emergencies. To ensure the swift launch of HERA, envisaged being operational in early 2022, the Authority would be organized as an internal European Commission structure, instead of a standalone Agency, a decision that was not welcomed by the European Parliament.
The US Food & Drug Administration (FDA) is set to hold a virtual meeting of its Vaccines and Related Biological Products Advisory Committee on today (17 September) to discuss the Pfizer/BioNTech supplemental Biologics License Application for boosters to those 16 years of age and older. Ahead of this meeting, a group of scientists – including two FDA regulators, Drs. Phil Krause and Marion Gruber, who recently announced they would be leaving the agency – published a paper in The Lancet on Monday, 13 September, that questions whether the general population needs another dose of the COVID-19 vaccines. The authors observed the vaccines are performing well, amid the Delta coronavirus variant. They also suggested there could be bigger gains from creating booster doses tailored to address circulating variants – similar to how the flu vaccine is formulated – rather than extra doses of the original vaccine.
On 15 September, US Secretary of Commerce Gina Raimondo called for more vaccinations at a meeting with the US Travel and Tourism Advisory Board. She spoke of President Biden’s new vaccination and testing requirements for American workplaces, noting this would affect several travel and tourism industry companies and employees. Secretary Raimondo further added, “[W]e encourage you to think creatively about how to get your customers vaccinated as well.”
On 14 September, UK Prime Minister Boris Johnson set out the British Government’s autumn and winter plan for managing COVID-19. In sum, the Government will continue its focus on vaccines as the first line of defence that is supported by testing. He also explained the Government’s COVID-19 vaccine booster programme.
Notable US Developments
On Wednesday, 15 September, Australia, the US and UK announced “AUKUS”, an enhanced trilateral cooperation that will defend shared interests in the Indo-Pacific region. Among other things, AUKUS will improve the development of joint capabilities and technology sharing and foster deeper integration of security and defense-related science, technology, industrial bases and supply chains. This includes supporting Australia in acquiring nuclear-powered submarines for the Royal Australian Navy, along with cooperating on cyber capabilities, artificial intelligence, quantum technologies, and additional undersea capabilities.
The US Senate reconvened in Washington earlier this week. The US House of Representatives is set to reconvene this coming week, where both chambers of Congress will face a busy schedule that includes addressing the U.S. debt ceiling and funding the Federal Government beyond 30 September to avert a shutdown. Meanwhile, Senator Joe Manchin (D-West Virginia) continues to insist the Democrat’s $3.5 trillion spending package must be pared back, meeting with US President Joe Biden at the White House this week.
Notably, Gazprom announced late last week that the Nord Stream 2 pipeline, which crosses the Baltic Sea from Russia to Germany, was completed on 10 September. Nord Stream 2 submitted the paperwork for the EU certification process (for compliance with the EU’s gas regulations) on 11 June. The EU must certify the pipeline before it is operational; a timeline for the certification remains unclear, albeit it can take up to 10 months.
Despite the pipeline’s completion, a bipartisan group of House lawmakers – led by House Foreign Affairs Committee Ranking Member Michael McCaul (R-Texas) and Representative Marcy Kaptur (D-Ohio) – introduced an amendment to the House’s version of the Fiscal Year (FY) 2022 National Defense Authorization Act (NDAA). The amendment, if approved, would apply mandatory sanctions on foreign entities and individuals responsible for the planning, construction, and operation of the Nord Stream 2 pipeline. Separately, Representative Jodey Arrington (R-Texas) introduced an amendment that would require the Secretaries of State and Defense submit a report describing the financial benefits Russia would obtain through the Nord Stream 2 Pipeline, along with analysis of the completed pipeline on Ukraine, European allies and partners, and the NATO alliance. House lawmakers submitted 827 amendments to the NDAA; the House Rules Committee will meet Monday, 20 September, to grant a rule for structured amendment debate on the House floor. The House of Representatives could begin debate on the measure as soon as this coming Tuesday.
Meanwhile, the Biden Administration and EU are pursuing a global pledge to reduce greenhouse gas methane emission by a third by the end 2030 and seeking to bring other large economies into the international pledge on the margin of the upcoming COP26 (November) in Scotland. According to the US Department of the Treasury, the United States joined Canada, the EU, South Korea, Norway, Switzerland, and the UK in co-sponsoring a proposal at a 15 September meeting of the OECD’s Participants to the Arrangement on Officially Supported Export Credits, which seeks to end official export financing support for unabated coal power. The Biden Administration is also examining ways to support global exports related to renewable energy and climate change mitigation.
Notable UK Developments
On 16 September, Prime Minister Boris Johnson welcomed US Speaker of the House of Representatives Nancy Pelosi (D-California) to 10 Downing Street. According to a British Government readout, they discussed the evacuation from Afghanistan, AUKUS, climate change and the upcoming COP26 Summit, and the Northern Ireland Protocol and issues related to its implementation.
On 15 September, the British Government and ASEAN Member States issued a joint statement reaffirming cooperation on economic recovery from the COVID-19 pandemic, UK-ASEAN supply chains, collaboration on digital innovation and technology, developing and investing in infrastructure, and addressing climate change, among other things. The day before, International Trade Secretary Truss set forth Britain’s new trade policy, saying the Government is “building more successful trade routes, especially in digital and services” and it is “driving an exports-led recovery” to bring investments “to every part of the UK”. She explained the UK Government is focused on growing trade “with the fastest-growing parts of the world and to turbocharge trade, particularly in digital and services.” Secretary Truss stated,
[T]he path to economic revival doesn’t lie in retreating and retrenching from the global marketplace, or inexorably growing the size of the state. That would leave us poorer, less free and consigned to decline”.
Notable EU Developments
European Commission President von der Leyen delivered the State of the Union 2021 speech before the European Parliament plenary on 15 September. An array of future policy initiatives foreseen for 2022 – including many future legislative proposals – were announced via her letter of intent. One of the novelties proposed in the context of tech sovereignty relates to an industrial policy plan on semiconductors, translated through a European Chips Act. The future Act envisions creating a “state of the art ecosystem” of microchips companies, so the EU can compete with the US and Chinese semiconductor industry.
A global Gateway Initiative on connectivity was also announced, as means to build “partnerships with countries around the world”. Von der Leyen continued,
We want investments in quality infrastructure, connecting goods, people and services around the world.”
The future scheme will aim to compete with China’s Belt and Road Initiative, as a way to “create links and not dependencies”. Other notable initiatives include a roadmap on security and defence technologies, a legislative proposal on building an EU space-based global secure communication system, a Strategy on International energy engagement, a Joint Communication on a partnership with the Gulf, a legislative proposal to establish a framework of reciprocal access to security-related information between the EU and third countries. The OECD global agreement on re-allocation of taxing rights and the minimum effective taxation were also listed among the key pieces of legislation.
During the State of the Union speech, President von der Leyen called on the US to “step up” its financial support towards climate change so the EU and US could close “the climate finance gap together”, saying such action would be “a strong signal for global climate leadership”. Additionally, President von der Leyen underlined the EU’s intention to ban goods produced with forced labor, following the example of the US, Canada and the UK. This will be done in the context of an ambitious legislative proposal, which will entail mandatory due diligence requirements for companies and governance of their global supply chains, currently expected to be published in late October. A prominent Member of the European Parliament and the leader of the largest political group in the European Parliament, Manfred Weber, stressed the EU should negotiate sectoral deals with the US, particularly in the digital economy, mobility and mechanical engineering sectors.
EU co-legislators have been picking up the debate around the proposed Carbon Border Adjustment Mechanism (CBAM) with debates held at the European Parliament and the Finance Ministers meeting on 11 September, where the OECD Secretary General Mathias Cormann pitched the idea to replicate the success story of the global digital taxation deal to define an inclusive framework on pricing carbon. European Commissioner for Economy Paolo Gentiloni and the OECD Secretary General expect to exchange ideas on this issue – it is however unlikely that this proposal would gather support by the EU27 Member States.
UK-EU Trade Deal Updates
On 14 September, UK Cabinet Minister David Frost announced the UK Government’s decision to introduce a new timeline to postpone controls on EU imports for the second time; it is now expected to be fully in place until 1 July 2022 instead of 1 October. On 16 September, Minister Frost spoke before the House of Commons underlying the UK Government’s intention to “conduct a review of so-called “Retained EU law”, which he explained,
[B]y this, I mean the very many pieces of legislation which we took onto our own statute book through the European Union (Withdrawal) Act of 2018”.