Transatlantic Trade Update text overlaid on top of images of US, UK and EU flagsOn 4 May, the EU hosted a virtual international summit to secure approximately US$8.2 billion in pledged funding for research into vaccines and treatments for COVID-19.  While the US government did not participate in the summit (nor did Russia or India), it continues to prioritize securing a vaccine this year.  Meanwhile, the national trend in the US appears to indicate the curve of infections is flattening as the race for a vaccine continues in earnest as US states and local governments move to re-open their economies.  This report reviews transatlantic vaccine collaboration and spotlights some food security concerns, particularly in the US.  Further below is an update on developments regarding the ongoing US- EU and EU-UK trade talks.

Transatlantic Vaccine Collaboration

While the US government did not participate in the EU’s virtual vaccine summit (though China did), the US government continues to prioritize production of a vaccine as part of efforts to re-open the US economy, with an ambitious target of 300 million doses by the end of the year.  On Thursday, 14 May, President Trump tweeted, “Good numbers coming out of States that are opening.  America is getting its life back!  Vaccine work is looking VERY promising, before end of year.  Likewise, other solutions!”

At a Senate Health, Education, Labor and Pensions Committee hearing on Tuesday, 12 May, Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases, testified there are eight COVID-19 vaccine candidates, adding it will not be known until late fall or early winter whether these options are effective.  Some Senators criticized the US COVID-19 testing process, noting millions more tests are needed to ensure Americans feel safe returning to work and schools/universities.  Dr. Fauci cautioned US states against prematurely lifting social and economic restrictions and not adhering to criteria in the Federal Government’s gated re-opening guidance, warning a spike in COVID-19 cases could result.

On Friday, 15 May, President Trump held a press briefing in the Rose Garden at the White House focused on providing a brief update on the re-opening of the American economy, stressing key components of the plan included increased COVID-19 testing and securing an effective vaccine.  He shared scientists at the US National Institute of Health (NIH) started developing a vaccine on 11 January.  The President noted the Administration has cut through red tape to streamline the process for developing and approving a vaccine.  He added over 130 therapies have been approved and more are in the approval pipeline.  President Trump described “Operation Warp Speed,” a massive scientific and logistical project, akin to the Manhattan Project, mobilizing the US government toward developing and producing a COVID-19 vaccine, hopefully before the end of the year.  It will also help develop diagnostics and therapies.  President Trump stated the US Department of Defense is involved, particularly to help with logistical and supply chain needs.

President Trump announced Moncef Slaoui, the former head of GlaxoSmithKline Plc’s vaccines division, and US General Gustave “Gus” Perna, who currently serves as the commanding general of US Army Materiel Command, will lead US efforts to develop a coronavirus vaccine.  The President shared experts throughout the US government have been working to identify over 100 vaccine candidates that have been narrowed down to 14 candidates.  Operation Warp Speed, he said, will invest federal dollars in the manufacturing process to accelerate production of the vaccine, once identified.  President Trump also stressed the US government is working with other countries, saying “ego” is not involved.

On Tuesday, 12 May, the US Department of State issued a fact sheet on transatlantic COVID-19 cooperation.  Notably, cooperation includes developing vaccines and therapeutics, as well as making them accessible and affordable to all.  The fact sheet also touches on trade concerns, such as: (1) sharing best practices as economies re-open; (2) mitigating diminished transportation links and border closures on global supply chains; and (3) maintaining necessary aviation and transportation links to allow essential movement of people and cargo.

After gaining approval from the US Food and Drug Administration (FDA) earlier this month, Gilead Sciences, an American biopharmaceutical company, is growing a network of manufacturing partners to boost production of remdesivir, a COVID-19 therapy, for 127 countries.  Meanwhile, Pfizer, an American multinational pharmaceutical company, is working with BioNTech, a German pharmaceutical company, on four candidate vaccines.  Early clinical tests are ongoing in the US and Germany.  If tests prove successful, the companies expect to ramp up trials and could launch a major study with thousands of trial participants in September.  It remains unclear, however, whether a vaccine will be successful or produced in volume before the end of the year.

On Wednesday, 13 May, the Federal Bureau of Investigation (FBI) and Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) warned domestic pharmaceutical companies and research organizations of alleged cyber intrusive efforts by Chinese-related actors.  In particular, they noted increased attempts “to identify and illicitly obtain valuable intellectual property (IP) and public health data related to vaccines, treatments, and testing from networks and personnel affiliated with COVID-19-related research” and warned this could compromise efforts to devise effective COVID-19 treatments.  US officials have reported increased cyberattacks on medical research institutes allegedly by China and Iran since early January.  UK officials have reported similar attacks.

Like the US, the EU has prioritized research and funding for developing a coronavirus vaccine since the outset of the pandemic.  On 4 May, European Commission President Ursula von der Leyen opened the international pledging conference to raise money for coronavirus vaccines, announcing the EU will donate EUR 1 billion.  The event was supported by the World Health Organization (WHO); the Gates Foundation; the Coalition for Epidemic Preparedness Initiative; the Global Fund; Unitaid; the Wellcome Trust; Find, the foundation for diagnostics; the World Bank; and Gavi, the international vaccine organization.  President von der Leyen also pledged to turn the EU’s revamped budget into the “mothership” of economic recovery, vowing to unleash a fund of at least EUR 1 trillion.  She has also promised to shift EUR 675 million of Horizon 2020 funds to meet its COVID-19 pledge.

On 7 May, via a web conference hosted by Friends of Europe, EU Research Commissioner Mariya Gabriel shared she is confident the EU would have a vaccine for COVID-19 by the end of the year.  The Commissioner focused on European vaccine candidates, but she also noted the European Commission is working to streamline its timeline for vaccine development, while ensuring safety requirements are met.  Vaccines usually take several years to develop, but there is belief the recent EU-led international fundraising may help to more quickly develop vaccine candidates.  According to the Commissioner, there are already two European companies that have announced they will begin clinical vaccine trials for the first 200 people in June.  The two companies referenced appear to be BioNTech and CureVac.  As noted above, BioNTech, in partnership with Pfizer, has already begun human testing, with data due in by June on effectiveness of its candidates, while CureVac, also based in Germany, received EUR 80 million from the European Investment Bank and is expected to begin human testing in June.  French company Sanofi also has two potential candidates that will begin trials in the second half of this year.

The European Parliament is also calling for its new research budget to be raised to EUR 120 billion from currently negotiated levels of under EUR 87 billion.  The Commissioner Gabriel’s recent discussion furthermore suggests the Commission will likely defend its original proposed budget figure of EUR 94.1 billion in its redrafted coronavirus recovery budget.

Food Security

The EU’s food and agricultural sector has proven very resilient during the COVID-19 outbreak.  The EU’s Common Agricultural Policy applicable to EU Member States established high standards, quality and security of food.  To ensure these high standards are maintained through the pandemic, the European Commission is in contact with national authorities and closely monitors the situation, while providing assistance where necessary.

In early stages of the pandemic, certain European countries imposed protectionist measures at their borders, which created friction in the intra-EU trading of essential goods in particular, such as food and medical equipment.  The European Commission intervened and proposed guidelines for Member States that permits a multilateral, safe and secure distribution of goods in the EU.  On 16 March, it proposed guidelines for intra-EU border measures, followed by a Communication issued on 23 March that included practical guidance for the continuous flow of goods (such as food) across the EU via “green lanes” (which fast-track screenings at border crossings).

Under the guidance, each Member State designates internal border-crossing points on the trans-European transport network, indicated as a “green lane” for border crossing.  These green lane border crossings are open to all freight vehicles.  Under the guidance, the border crossing is not to exceed 15 minutes and includes simplified procedures for the inspection of vehicles and cargo.  Many companies have warmly welcomed these measures, and despite still facing some minimal problems, it is considered one of the most successful measures proposed by the Commission during the COVID-19 crisis.

On 23 April, the EU, UK and US, together with 19 other members[1] of the World Trade Organization (WTO), pledged in a notional joint statement to ensure a well-functioning global food supply chains without any measures or trade barriers to distort international trade in agricultural or agri-food products.  However, protectionist restrictions, processing breakdowns and transport disruptions have combined to disrupt the global food supply chain during the COVID-19 pandemic, despite bountiful harvests and sufficient food reserves in general.  Some nations have also moved to stockpile key food products, such as wheat (Egypt) and rice (Taiwan), and this is driving up global prices.  Poorer countries, such as those in sub-Saharan Africa, are likely to experience acute food shortages and challenges associated with increased prices that they cannot afford.

The US is categorized as a food self-sufficient country[2]; therefore, the fallout has been limited to mostly increased prices on certain food items and fewer options in the grocery stores.  Nevertheless, food security clearly remains an issue of concern in the US.  The labor force typically involved in harvesting some crops in the US is largely dependent on seasonal guest workers (H-2A visa holders).  US border closures, particularly with Mexico, have necessitated temporary policy changes to ensure a workforce for agricultural production and avoid crops rotting in the fields.  The US Departments of Homeland Security and Agriculture announced a temporary final rule on 15 April for certain H-2A requirements to help US farmers and ranchers avoid disruptions in the nation’s food supply chain.  Those H-2A workers already in the US, who perform agricultural labor or services of a temporary or seasonal nature, may now seek employment temporarily outside of their current employer.  In addition, the US Citizenship and Immigration Services temporarily amended its regulations to allow H-2A workers to stay beyond the three-year maximum allowable period of stay in the US.

As workers continue to fall ill with COVID-19, a number of meat processing facilities across the US have closed their doors or reduced output.  These closures, coupled with labor challenges and amid reports of trucking bottlenecks and increased port traffic, collectively affected the US food supply more broadly and contributed to rising food prices for American consumers.  On 28 April, President Trump signed a Defense Production Act (DPA)[3]-related Executive Order (EO) to ensure meat and poultry supply chains remain operational in the US.  He delegated authority to the US Secretary of Agriculture to ensure these businesses continue operations consistent with guidance on safe operations issued by the Centers for Disease Control and Prevention (CDC) and the Occupational Safety and Health Administration (OSHA).  The CDC and OSHA issued interim guidance for protecting food and agricultural workers on 26 April.

On 7 May, President Trump signed another EO to promote American seafood competitiveness and ensure US food supplies.  This order expands sustainable seafood production and streamlines aquaculture regulations and permitting processes, reforms regulations to maximize commercial fishing, and sustains restrictions on seafood imports that do not meet American standards.

Transatlantic countries have also moved to support their domestic food industry by enacting domestic legislation during the COVID-19 crisis.  The European Commission has included direct support to farmers and rural areas through financial instruments (loans or guarantees for operational costs).  The UK enacted a Coronavirus Emergency Bill that supports its domestic food industry and suppliers.  In the US, the US$2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated US$23.5 billion in assistance to American farmers.  Debate is currently underway over a fourth economic stimulus package in Washington; it remains to be seen what level of additional support could be provided for American farmers and ranchers.

As nations re-open their economies, some of the food supply chain challenges may resolve as logistical challenges are overcome and temporary restrictions are lifted.  A post-pandemic world, however, remains months off and a more certain future is dependent on an effective COVID-19 vaccine.

US-EU Trade Talks

The EU is set to discuss its relationship with the US on Friday, 15 May.  This follows a recent letter sent from EU Trade Commissioner Paul Hogan to US Trade Representative Robert Lighthizer broadly outlining areas where the US and EU could cooperate on key issues, as well as a call between the two on Monday, 11 May.  Neither side, however, provided readout of the call.  One of the issues raised in Hogan’s letter is the Airbus-Boeing WTO disputes and the need to move towards mutual de-escalation or settlement on these two WTO cases.

Trade talks between the two sides has largely deteriorated over the past three years, beginning with President Trump’s imposition of tariffs on steel and aluminum imports from the EU.  Although Commissioner Hogan is making an effort to mend the relationship, some EU member states, such as France, fear the Commission will be too lenient on areas such as farming, while others believe efforts should be made to mend relations before President Trump’s re-election campaign moves into a higher gear.

EU-UK Trade Talks

Talks between the EU and the UK over a post-Brexit trade deal resumed on Monday, 11 May, with both sides trying to ascertain by the end of June whether the deadline for negotiating should be extended beyond 31 December 2020.  The UK has already stated it will not agree to an extension, even if the EU requests one.  On 7 May, European Trade Commissioner Phil Hogan told an Irish national broadcaster that there is “no real sign” the UK Government wants negotiations to succeed, suggesting ministers in the UK are prepared to blame the economic fallout on the coronavirus pandemic.  UK Prime Minister Boris Johnson’s official spokesperson rejected this assessment.

Expectations were generally low for this latest round of talks, with several EU officials expecting little to no movement.  The most difficult issue continues to center on the concept of a level playing field.  The EU wants the UK to agree to follow EU regulations on state and environmental standards, while the UK insists on maintaining sovereignty on these issues.  A meeting of EU ambassadors has made it clear that EU capitals are seeking to limit their involvement in the ongoing negotiations.

During the previous round of negotiations, Brussels continued to push for an effective continuation of the Common Fisheries Policy, which would mean retaining the same access to UK waters.  The UK continues to push back on this proposal.  UK Chief Negotiator David Frost confirmed the UK shared its position document ahead of this week’s talks; and both sides insist positions have not changed.  According to the UK, it wants to ensure the fundamentals of its approach on fisheries are properly understood before entertaining any discussions of legal text on the matter.

The UK is also expected to set forth a detailed plan by the end of May for how Northern Ireland’s borders will function after the transition period.  It is not clear, however, if this plan will be made public.  The Northern Ireland Protocol sets out in broad terms how trade would operate across the border with Ireland and across the sea border with the rest of the UK.  EU Chief Negotiator Michel Barnier has made it clear the expected plan will be an indication of the UK’s good-faith effort toward implementing the Protocol; therefore, the Protocol is linked to the success of discussions on future relations between the EU and the UK.  The UK has been consistently clear that it intends to preserve the Good Friday Agreement and the gains made by the peace process.

Following conclusion of the latest round of talks on Friday, both sides criticized the lack of progress.  UK Negotiator Frost warned reaching a deal with the EU by the end of 2020 faces great difficulty.  Both sides believe the other has unrealistic demands; EU Negotiator Barnier noted the bloc is still determined “but not optimistic.”  UK Negotiator Frost issued a statement saying there is a “good understanding” between the negotiators but acknowledging little or no progress has been on the most “significant outstanding issues.”

According to UK Negotiator Frost, the EU is insisting on a “set of novel and unbalanced proposals” regarding competition issues that went well beyond other comparable trade agreements.  He reiterated the UK would not agree to the level playing field that would bind it to EU law and determine its domestic legal regimes.  UK Negotiator Frost further noted the EU’s fisheries and access to coastal waters proposal is incompatible with the UK’s status as a sovereign state.  EU Negotiator Barnier confirmed the EU desires a modern tariff-free access agreement with obligations that allow for open and fair competition.

The UK has promised to publish a draft text next week so their approach to the negotiations is more clearly defined.  UK Negotiator Frost reminded the EU should listen to concerns related to British expats’ treatment on the European continent as part of the implementation of the Withdrawal Agreement governing the terms of the UK’s exit from the bloc.  It remains to be seen whether further progress can be made in the interim and during the next round of talks.

Our teams in Washington DC, Brussels, and London, and continue to track closely the transatlantic trade negotiations and regional developments.  Please reach out to us if you have any issues of particular concern.

[1] Australia, Brazil, Canada, Chile, Colombia, Costa Rica, Hong Kong, Japan, Republic of Korea, Malawi, Mexico, New Zealand, Paraguay, Peru, Qatar, Singapore, Switzerland, Taiwan, Ukraine, and Uruguay.

[2] According to the United Nation’s Food & Agriculture Organization (FAO), food self-sufficient countries produce more food than they consume and easily meet domestic dietary needs.

[3] The DPA is a US law that allows the US government to prioritize domestic manufacturing and production in times of war or national emergencies.  President Trump declared a national emergency with respect to the novel coronavirus in March.